Maintaining Buy on strong sales execution track record; target price HK$133While FY15 earnings declined YoY, this was well within expectations given thatdelays in certain projects led to fewer residential deliveries. With residentialcompletion to exceed 3mn sf per annum in the next three years (vs. just 1mn sfcompleted in FY15), we expect earnings growth to accelerate ahead.Meanwhile, SHKP achieved strong contracted sales of HK$32bn in FY15 (28%ahead of target), reflecting its strong sales execution capability. Looking ahead,we expect this strong sales momentum to continue on a strong launchpipeline. Valuation is attractive following the recent sell-down, trading at a 40%discount to NAV vs. a historical average of 23%. Buy.
Core net profit -7% YoY to HK$19,825mn on fewer residential deliveriesSHKP reported FY15 revenue -11% YoY to HK$66,783mn, dragged by amarked 47% YoY decline in residential delivery to HK$17,676mn. Nevertheless,rental revenue and hotel revenue remained solid with 7%/5% YoY growth toHK$16,053mn/HK$4,136mn, respectively. Excluding fair value gains and othernon-recurring items, underlying profit fell by 7% YoY to HK$19,825mn(reflecting fewer residential deliveries). A final dividend of HK$2.4/share wasdeclared (unchanged YoY), bringing the full-year dividend to HK$3.35/share.Strong project launch pipeline to drive strong sales momentum aheadAccording to Centaline, SHKP was ranked first in the residential sales leaguetable in Hong Kong, with total sales of HK$26bn in FY15 (HK$32bn includingoffice projects, namely W50 and One Harbour Square). Following thesuccessful launch of Century Link II in Tung Chung recently, upcomingprojects scheduled for launch in the next nine months include King’s Hill in SaiYing Pun (71,000sf), Park Vista Phase 1 in Yuen Long (747,000sf), Grand YOHOPhase 1 in Yuen Long (801,000sf), Tseung Kwan O Town Lot No.118(483,000sf) and Tuen Mun Town Lot 509 (141,000sf).
Target price based on 20% discount to our revised NAV of HK$166.3/shareOur target price is based on a 20% discount to our revised NAV estimate ofHK$166.3/share (HK$177.6/share), which has factored in US$:Rmbdepreciation to 6.9. Our target discount is in line with SHKP’s historical NAVdiscount of 23%, which we believe is appropriate given the strong salesexecution track record regardless of market conditions. Key risks: externaleconomic shocks, liquidity outflow, rate hike and government measures.