Morningstar | H78 Updated Forecasts and Estimates from 11 Sep 2018
Hongkong Land Holdings reported underlying earnings of USD 455 million, down 3% year on year. The most important segment, Hong Kong investment property portfolio, saw rental income and operating profit up 9% and 5% year on year, slightly below our estimate, due to some margin compression. Less booking from development properties resulted in overall earnings lower for the interim period. The company announced an interim dividend of USD 0.06 per share, unchanged from a year ago, and in line with our projection. We maintain our fair value estimate of USD 7.90 per share, along with the company's narrow moat and stable moat trend ratings.For investment properties, the company's main portfolio in Hong Kong saw continued positive reversion across both office and retail segments. The office portfolio saw average lease rate increasing 5% and 2% from first-half and second-half 2017, respectively. The retail portfolio saw lease rates up 3% from a year ago. The Singapore portfolio saw slightly negative rental reversions with average lease rate unchanged and slightly higher occupancy rate. The ramping up of WF Central in Beijing should provide a small boost to rental revenue for the full year.
For development properties in China, lower completion resulted in lower earnings contribution. Contract sales were USD 650 million during the period, roughly half of sales in 2017. The company expects to see higher development revenue in the second half due to project completions. The sold but not booked amount increased to USD 1.5 billion from USD 1 billion at end of 2017.
Net gearing was largely unchanged at the end of the period, but this is expected to move above 10% due to several announced projects to enlarge the company's portfolio. During the period, the company acquired five new projects, including a 235,000 square meter commercial site in central Nanjing, an en-bloc redevelopment residential project in Singapore, as well as three unspecified projects in Bangkok, Jakarta, and Manila. The continued portfolio expansion is in line with management's earlier statement that it will pursue investment opportunities across the region, seemingly diversifying away from Hong Kong. It will be interesting to see if the company intends to participate in the upcoming auction of the city's central waterfront site, consisting of the General Post Office and Star Ferry Car Park, adjacent to the company's established core portfolio in the city.
Hongkong Land Holdings is a member of the Jardine Matheson Group. Co. is a property investment, management and development group in Asia. Co. owns and manages almost 800,000 sq. m. of office and retail property in Asian cities, principally in Hong Kong and Singapore. Co. has two operating segments: Commercial Property and Residential Property.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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