Result first take: New around of share buyback
- Underlying interim earnings up 8%, ahead of our forecast due to larger-than-expected residential profit booking
- Gross rental income marginally lower
- Announced additional round of US$500m share buyback program
Underlying profit up 8% to US$425m on higher development income.
Interim DPS remained flat at US$0.06.
Higher profit contributions from property development, mainly from more sales completions in 1H22.
Gross rental receipts posted a 3% decline, due to reduced office and retail income.
Reversionary growth for its central office portfolio remained negative, given lower market rents. Vacancies rose to 5.4% and 5.1% in Jun 22 from Dec 21’s 5.2% and 4.9% on a physical and committed basis, respectively.
LANDMARK’s retail portfolio in Central negative base rental reversions with temporary rental support provided in 1H22, reflecting the adverse impact on its tenant sales due to COVID resurgence.
Footfall and tenant sales in the Beijing and Macau retail portfolios were negatively impacted by pandemic-related restrictions.
In China, the company attained attributable contracted sales of US$419m, down 69%, reflecting weak market sentiment in the China residential market.
In Singapore, Hongkong Land’s attributable contracted sales amounted to US$270m, up 57%. Piccadilly Grand – which was launched in May 22 – received a strong response.
Construction work was also impacted by the pandemic, particularly in Shanghai. The West Bund project was delayed by over two months. The completion of Galaxy Midtown will be deferred to early 2023 from late 2022. This would impact project delivery and hence result in a slippage in booking residential profit.
The company secured an interest of 34% in a residential site in the Xuhui district in Shanghai. Adjacent to the mixed-use West Bund project, the project offers an attributable developable area of 18,700sm to the company. Upon completion, six high-rise apartment blocks with >470 premium residential units will be on offer.
The company also acquired an interest of 49% in a residential site in Singapore, with a developable area of 599,000sf, providing 683 units upon completion.
Net debt increased to US$6.1bn in Jun 22 from Dec 22’s US$5.1bn, due to lower sales proceeds,land acquisitions, and share buybacks. This represented 18% of the company’s shareholder fund.
YTD, Hongkong Land has repurchased 59.7m shares from the market. This brought the cumulative number of shares repurchased since it announced its share buyback programme in Sep 21, to 96.1m.
While this round of share buyback has come close to an end, Hongkong Land has earmarked another US$500m for a new round of share buyback program which should last until end of 2023. This should drive its share price performance in near term.