FY17 results mostly in line; final dividend +6.5% to HK$0.33/share
Share price of NWD fell as much as 4% following its FY17 resultsannouncement despite FY17 results/dividend hike were indeed in line with ourexpectation. We believe some investors may be disappointed about their paceof farmland conversion in FY17 with just 1 projects converted involving just121,100 sf GFA, as opposed to peers such as SHKP and Henderson Landwhere they have converted much higher floor space over the period. In ourview, given the concentration in geography with close to 70% of its farmlandreserve in Yuen Long, we believe NWD is likely to continue with its balancedapproach in landbank replenishment via government land sale, redevelopmentof old buildings and farmland conversion. More to follow after the analystbriefing at 4:30pm HKT today.
FY17 underlying profit +3.5% YoY to HK$7,133mn; in line with expectation
NWD reported FY17 consolidated revenue -5% YoY to HK$56,629mn, draggedmostly by a 9% YoY decline in property sales revenue. Nevertheless, blendedgross margin expanded by 1.1 percentage points to 32.2%, boosted by higherproperty development margin. In the absence of disposal gains, headline profitdropped by 11% YoY to HK$7,676mn. By excluding revaluation gains and oneoffgains, core profit +3.5% YoY to HK$7,133mn, slightly ahead of ourHK$7,101mn estimate. Net gearing improved to 38% in FY17 from 40% inFY16. A final dividend of HK$0.33/share （+6.5% YoY） was declared in FY17,bringing full-year dividend to HK$0.46/share （+4.6% YoY）。
One successful farmland conversion concluded in FY17 with 121,100 sf GFA
NWD has the second largest farmland reserve among Hong Kong developersat 17mn sf. In FY17, NWD has successfully concluded one farmlandconversion in Yuen Long with 121,100 sf GFA （FY16: 2 successful conversionswith 40,413 sf attributable GFA）。 Over the same period, NWD has acquired 3projects via government tenders （1.9mn sf GFA） and 2 projects viaredevelopment of old buildings （attributable GFA of 213,700 sf）。 Landbankreplenished via farmland conversion contributed just 5% of total landbankadded during the year.