Sun Hung Kai Properties 0016

[winston]

20090114 Macquarie Sun Hung Kai Properties
Good sales; already priced-in

Event
We revisit the investment profile of SHKP following the positive price move of 7% (14% outperformance to HSI) over the last month. We retain our Underperform rating given the undemanding valuation against the historical track record over the past bear markets.

Impact
Good ramp up of property sales but already priced-in: SHKP has improved its secured profit for FY09 over the past two months as it initiated three project launches that have generated positive responses. It lifted its secured profit to 65% from 7% in October 2008. We consider the current share price has already factored in the improvement.

Limited China contribution: Given the current market conditions in China, we expect SHKP to generate limited contribution form China, no matter if it is development sales or rental income. In other words, its earnings base remains highly reliant on the Hong Kong contribution.

Risk to our call: In our view, the key risk lies on the better than expected positive response to its planned property launches in Hong Kong. The upcoming launch of the Cullinan, scheduled to be after Chinese New Year (early February 2009), is likely to be a key barometer of market response to HK luxury residential.

Earnings revision
We raised our FY09 forecast by 2% but made insignificant changes to our FY10 and FY11 forecasts. Our earnings revision for FY09 is mainly to reflect the higher than expected development sales from the recent project launches.

Price catalyst
12-month price target: HK$50.90 based on a 45% discount to NAV methodology.

Catalyst: Stronger than expected response to its project launches over the next few months.

Action and recommendation
We reiterate our Underperform rating on SHKP and marginally revised down our valuation by 1% to HK$92.6/share and our target by 2% to HK$50.9/share based on an unchanged 45% target NAV discount. We think the improvement of its FY09 secured profit and the overall recovery of primary and secondary volumes has triggered the uptrend of SHKP. At the current share price, it is now trading at an unattractive valuation of 28% NAV discount and 15.8x FY09 PER.

\We believe it is too early to position into SHKP for a substantial recovery of the HK residential sector given that the economic macro data is likely to disappoint and HK physical prices and volumes will likely remain volatile over the next few months. We see a potential 23% downside on SHKP from current level.

[winston]

SHKP braces for declines by Alfred Liu

Sun Hung Kai Properties (0016) is expected to report on Wednesday a flat core profit for the six months ended December 31.

HSBC analysts estimate that interim core earnings of SHKP will drop 10 percent to HK$5.6 billion, while earnings per share, excluding investment property revaluation change, will fall 12 percent to HK$2.18.

Most of the firm's property earnings would come from the sale of Peak One in November last year, according to Credit Suisse.

Analyst Cusson Leung said sales proceeds of HK$4 billion are expected from Peak One.

The broker estimates SHKP will book only a HK$21 million profit from Harbour Place, jointly developed with New World Development (0017), Twenty-four units in the project were sold.

It expects rental income to rise 7 percent, but growth is expected to decelerate sharply in the second half. Assuming a 5 percent decline in the value of the investment properties, the interim income should be more than offset by an estimated HK$6.64 billion revaluation deficit.

Analysts expect luxury residential project The Cullinan at Kowloon Station to be the firm's earnings driver in the second half.

"While we still have a cautious view toward the underlying [SAR] residential market and the long-term growth of SHKP, we think the stock is starting to look attractive in terms of valuation," said HSBC analyst Louisa Fok.

The broker has raised the firm's earnings per share in 2009 and 2010 by 15 percent and 3 percent, respectively, due to its sale performance of The Cullinan.

[winston]

SHKP underlying profit for first half drops 27pc by AlfredLiu

Sun Hung Kai Properties (0016) said its interim underlying profit dropped 27 percent to HK$4.54 billion - worse than analysts' expectations - on lower property income booked.

Net profit for the six months ended December 31, after including the effect of reduced values on investment properties, dived 95 percent to HK$692 million.

An interim dividend of 80 HK cents was declared, unchanged from a year earlier. The firm reported a decrease in fair value of investment properties net of related deferred taxation of HK$3.81 billion, compared to a gain of HK$7.46 billion the previous year.

Profit from property sales dropped 52 percent to HK$1.78 billion, while net rental income rose 24 percent to HK$3.52 billion. SHKP said it has met 90 percent of its property sales target - generating HK$16 billion during the current fiscal year. However, part of the earnings could not be booked for the first-half results.

Sun Hung Kai Real Estate Agency executive director Victor Lui Ting said the firm aims to generate HK$17 billion from sales of 2,500 flats in calendar 2009, with contributions from projects such as The Cullinan, The Latitude and a development at Tuen Mun Lot 465. Property sales in the second half are expected to come mainly from La Grove and The Cullinan.

"Short-term volatility of property prices will be sustained, given the unfavorable market conditions, but we are confident of the Hong Kong property market," said SHKP vice chairman Thomas Kwok Ping-kwong. Asked if former chairman Walter Kwok Ping-sheung attended the board meeting yesterday, he said: "He is in Beijing attending a conference."

Vice chairman Raymond Kwok Ping-luen said the company has no fundraising needs.

The company has no plans to lay off staff or cut salaries. Staff who earned below HK$15,000 a month had their pay raised by 3 percent from January.

SHKP's Hong Kong land bank now stands at 42.6 million square feet. It made no major acquisitions in the first half.

Asked if the firm plans to buy cheap land, Raymond Kwok said unlike the stock market, land prices have not plunged. The land bank is for use over four to five years and negotiations about land premiums take time, said executive director Thomas Chan.

[winston]

DJ MARKET TALK: HSBC Cuts SHKP To Underweight From Overweight

1107 [Dow Jones] STOCK CALL: HSBC downgrades Sun Hung Kai Properties (0016.HK) to Underweight from Overweight, keeps target at HK$69.70. Says supply overhang could weigh on price performance. HSBC estimates 13,157 units of new homes may hit market near term, exerting downward pressure on upcoming project launches.

Says recent pick-up in new home sales driven by more realistic pricing of new projects, but believes developers still lack pricing power. Notes SHKP up 43% over past month, outperforming HSI by 13%. Tips current valuation vulnerable to potential disappointment from upcoming project launch. SHKP up 1.4% at HK$78.85; HSI up 1.7%

[winston]

Not vested.

DJ MARKET TALK: Citi Raises SHK Properties Target 38% To HK$75.33

0858 [Dow Jones] STOCK CALL: Citigroup raises SHK Properties (0016.HK) target price to HK$75.33 from HK$54.48 due to higher NAV estimate of HK$88.62/share as year-to-date increases in HK residential property prices, transaction volumes "have been a positive surprise to us."

Still, keeps Sell call as improved property market outlook already priced in, with stock only trading at 5.0% NAV discount. Adds, "don't get too carried away by liquidity," as while continued strong liquidity, momentum could bring prices back to March 2008 levels in near term, without corresponding recovery in economic fundamentals, transaction volumes will likely slow down remarkably, lead to share underperformance on 12-month view. SHKP ended +0.4% at HK$84.20 yesterday.

[winston]

DJ MARKET TALK: MS Tips Sun Hung Kai Best All-Around HK Ppty Play

1410 [Dow Jones] STOCK CALL: Morgan Stanley tips Sun Hung Kai Properties (0016.HK) best all-around play on HK property market. Says earlier-than-expected recovery in office market, especially capital values, to provide NAV support.

Notes SHKP's current net gearing 17%-18%; financial position likely to remain strong, especially with rest of proceeds from residential projects Peak One, Cullinan to roll in end of this year, early 2010. Keeps Overweight rating, target HK$102. SHKP +2.3% at HK$99 midday.

[winston]

Hong Kong's top property developer Sun Hung Kai Properties (0016.HK) was the biggest percentage gainer on the main index, rising 5.4 percent to HK$112.60 after Deutsche Bank raised its rating on the stock to hold from sell on expectations that the luxury residential market will outperform.

[winston]

Sun Hung Kai Second-Half Underlying Profit Rises 32% on Rentals
By Chia-Peck Wong

Sept. 15 (Bloomberg) -- Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, posted a 32 percent gain in second-half underlying profit on higher apartment sales and rental income.

Net income excluding property revaluations rose to HK$7.88 billion ($1.02 billion) for the six months ended June 30, from HK$5.99 billion a year earlier, according to figures derived from fiscal full-year results the Hong Kong-based builder reported today. The company can’t confirm the derived second- half profit figure.

Sun Hung Kai sold more luxury apartments including those at the Cullinan, to be Hong Kong’s tallest residential building. The builder sold more units during its second half, when prices rose 19 percent, making up for the previous six months, when values fell 22 percent. Home prices may rise 30 percent this year and 5 percent in 2010, JPMorgan Chase & Co. said last month.

Home prices in Hong Kong have risen 26 percent this year, according to the Centa-City Leading Index, a weekly measure of residential values developed by Centaline Property Agency Ltd. and the City University of Hong Kong.

“There’s not much speculation in the market,” Raymond Kwok, vice chairman of Sun Hung Kai, said at the same briefing, adding that prices for non-luxury homes in Hong Kong are still 30 percent lower than their peak levels in 1997.

http://www.bloomberg.com/apps/news?pid= ... v_lRk2c.5U

[winston]

Not vested.

UPDATE 1-Sun Hung Kai cautiously optimistic about 2010

* Cautiously optimistic on Hong Kong residential market
* Sees China sales of HK$3 bln for 2009/10
* Attempts to allay fears of bubble in Hong Kong market (Adds quotes)

HONG KONG, Dec 3 (Reuters) - Sun Hung Kai Properties <0016.HK>, Asia's largest property developer by market value, is "cautiously optimistic" about the Hong Kong residential market in the coming year, executives said on Thursday.

Hong Kong's residential prices have risen by around 30 percent since the beginning of the year, industry figures showed, with analysts expecting prices to trend higher with the global and domestic economies on the mend.

"All I can say is we are cautiously optimistic and it's hard to give any figures today," Thomas Kwok, a vice chairman of Sun Hung Kai, told a news conference in Hong Kong.

"Hong Kong's market is a little unique as it depends on the global economic recovery. I believe we'll see quite good growth in residential prices," Kwok said after the company held a shareholders' meeting.

The company, Hong Kong's largest developer that competes with other firms such as Henderson Land <0012.HK>, tried to allay fears of a property bubble forming in Hong Kong.

"Residential prices in Hong Kong are reasonable now, especially since mass market residential prices are still around 30 percent lower than (the peak) in 1997," Raymond Kwok, another vice chairman, said.

In September, the company set a modest apartment sales target of HK$23 billion ($2.9 billion) for 2009/10, against a target of HK$20 billion for 2008/09 and actual sales of HK$25 billion for that year.

Executives said on Thursday they expected sales in China to hit about HK$3 billion for the fiscal year ending June 2010.

For the full year ended June, its underlying profit, which excludes gains from the revaluation of investment properties, was HK$12.42 billion, against HK$12.19 billion a year ago, the developer said.

On Thursday, Sun Hung Kai's share price rose 0.09 percent, lagging the main Hang Seng index's <.HSI> 0.6 percent gain.

But its shares have risen about 80 percent since the beginning of this year, outperforming the Hang Seng index's over 50 percent advance.


Source: Reuters

[winston]

The two brothers arrested by the ICAC ?