What's changed
SHKP is set to kick start another round of mass residential launches with its 960-unit The Wings Phase IIIA in Tseung Kwan O being the first up, followed by The Wings Phase IIIB (324 units) and Area 55A in Tung Chung (2,000 units). We estimate The Wings IIIA, if fully sold, will generate a further HK$1.7bn development profit for the group, which has already locked in approximately HK$2bn of development profit for FY15E.
Implications
Although SHKP appears to have been relatively quiet in the mass market since 2Q1, we think its property sales momentum has never slowed – but shifted to a number of high-margin luxury residential properties and commercial premises that have sold and achieved good results in the past few months. SHKP’s share price performance has been in line with many of its developer peers in the past three months, but it remains an underperformer over a longer time horizon (underperforming the MSCI-HK by 2% over the past 12 months). With the 960-unit Wings Phase IIIA set to launch, we believe its share price performance is also set to accelerate. We have fine-tuned our FY14E/FY15E/FY16E EPS by -3.9%/+3.4%/+1.3% after factoring in the latest property sales progress.
Valuation
At HK$117.30, SHKP is trading at a 29% discount to our revised FY15E NAV estimate of HK$164.83 (up 1% after factoring in the latest land acquisitions and higher-than-expected selling prices of a couple of commercial properties). SHKP is due to report its FY2014 result on Sep 12. We look for more guidance on its property completion and sales schedule. We retain our Buy rating and revise our 12-month target price to HK$123.60 (up from HK$122.40), still based on a 25% discount to FY15E NAV.
Key risks
Lower-than-expected property price and rental growth.