Takeaways from virtual property conference
? Management reiterated its FY22F sales target of HK$7bn on the back of the
warming up of HK property sales and improving sentiment in China.
? Management expected to see positive growth in China IP income this year as
the occupancy of office and service apartments is likely to remain stable.
? Management is committed to FY22F DPS of not less than HK$1.35, the
same as FY21 after excluding the special dividend. Reiterate Add.
FY22F sales target HK$7bn unchanged
? Management kept its HK$7bn FY22F sales target (HK$4bn in HK and HK$3bn in
China) unchanged despite the negative impact of the Covid-19 outbreak.
? Management believes the Hong Kong residential market is gradually warming up after
the relaxation of social distancing, based on the recent increase in sales in the primary
and secondary markets and strong domestic demand.
? For the China DP market, management sees market sentiment improving slowly
among homebuyers in Jun compared to Apr and May this year, thanks to the
supportive policies implemented by the government. Also, projects in Shanghai
resumed construction and management believes it can make up for the delays.
Expects to see positive growth in China IP income in FY22F
? Management is confident it can record revenue growth in the overall IP portfolio in
China this year.
? Although China’s economy was hit by Covid-19 lockdowns in 1H22, occupancy rates
in the offices and service apartments in Kerry’s portfolio remained stable as Kerry
offered rental concession to tenants.
? As for retail income growth, Kerry’s management said this hinges on the recovery of
the retail market in Shanghai, where it saw ‘revenge spending’ on luxury products in
the past two weeks. Kerry also provided rental concessions to retail tenants.
? Management projects flattish rental reversion for office space in China.
? Management did not see corporations terminating office leasing agreements after the
lockdown measures in Shanghai but some occurred at its service apartments.
? For its HK retail portfolio, management believes the consumption vouchers scheme
will help boost sales at Megabox.
Management has committed to FY22F DPS not less than HK$1.35
? Management is committed to declaring FY22F DPS of not less than HK$1.35,
unchanged from FY21 after excluding the special dividend.
? To lower its gearing ratio, Kerry disposed of two warehouses to CR Group for a
consideration of HK$4.6bn in late-May as it did not see any redevelopment
opportunities in the near term.
? Kerry will continue to look for mid- to high-end residential sites in HK in good locations
(e.g. near MTR stations). In China, management said it aims to participate in the
auctions for 6 adjacent plots (Batch 2) in Shanghai Huangpu.
Reiterate Add with TP of HK$28.90
? We retain our Add rating and unchanged TP of HK$28.90, still based on a 55% NAV
discount to NAV, supported by its commitment to grow its IP portfolio. Kerry currently
trades at a 69% discount to NAV. Potential re-rating catalysts include better-thanexpected rental reversions in HK and China.
? Key downside risks include a prolonged Covid-19 outbreak in HK and extended
weakness in the China DP market.