What surprised usSHKP FY15 underlying profit dropped 7.4% yoy to HK$19,825mn(HK$7.07/shr, down 11.1% yoy) on fewer property completions. Keytakeaways: 1) property rental and sale profits rose 7.6% and fell 30.2% yoy,respectively, to HK$15,352mn and HK$7,332mn; 2) China contracted salesimproved in 2H FY15, though the HK$5.8bn full-year result still fell short ofthe HK$7.0bn full-year target, while HK sales of HK$32bn exceeded theHK$25bn budget significantly, though most of these sales were not readyfor booking until FY16. We fine-tune our FY16 and FY17 EPS estimates by -1.3% and -2.0%, respectively, to factor in the new completion schedule,and introduce our FY18 EPS forecast of HK$9.30.
What to do with the stock
At the result briefing, management remained upbeat on its earningsoutlook, noting it has secured HK$32bn of contract sales (incl. HK$6bnpresales since end-FY15), of which over HK$26bn was from HK. SHKP’sefforts to accelerate presales momentum in the past 12 months havestarted to bear fruit, with a substantial portion of its FY16 completionsalready presold (GS estimate: 60%). On the rental side, management saidit continues to achieve positive rental reversion at both its office and retailpremises, despite headwinds in the broader retail market. At the currentprice of HK$99.20, SHKP is at a 44.1% discount to our FY16E NAV, 0.63XHK$156.8 BVPS and 12.2X FY16E EPS. Retain Buy rating and HK$150.812m TP, based on a 15% NAV discount. Key risks: Abrupt economicdownturn, unexpected policy changes, unforeseen interest rate moves.