Result preview: Dragged by lower development profit booking
- Profit expected to fall on lower development earnings
- Interim DPS expected to stay flat
- China retail rental portfolio is a bright spot
Sun Hung Kai Properties (SHKP) will announce its interim results for FY22 on 24 Feb. We forecast the company’s underlying profit to fall 29% to HK$12.5bn mainly on lower development earnings. Despite lower earnings, we estimate interim DPS to stay flat at HK$ 1.25.
Development profit should more than halve to HK$5.7bn, mainly from selling Wetland Seasons Park Ph 2&3 in Tin Shui Wai and Regency Bay in Tuen Mun. Both projects should be lucrative with operating margins of >40%. Rental earnings should rise 3% thanks to improved contributions from China retail property portfolio. Hotel operations should show improvement but remain in the red in 1HFY22.
Key things to watch out for include the company’s outlook of residential, office and retail sectors in Hong Kong amid the recent COVID resurgence, dividend paid, agricultural land conversion, pre-leasing progress of new investment properties in China, amongst others.