NWD reported better-than-expected underlying profit on acceleratedChina sales bookings. The 8% increase in interim DPS surprised tothe upside, and management expects a further uptick upon fullcontributions from Victoria Dockside. China land banking was also afocus. After securing a new dea in Shenzhen, management expectsto continue a relatively fast pace, with a c.HK$20 bn capexbudgeted. Raising 12-month PT to HK$11.75 （from HK$11.40）。Maintain Neutral.
Results highlights
1H FY18 underlying profit was HK$4.2 bn, vs. n our HK$3.7 bn in1HFY17 （excluding one-offs）， largely due tostronger-than-expected China development property （DP） sales,partly driven by faster-than-expected property sales bookings inChina amid higher gross profit margins of 46%, up 10pp yoy. Thehigher sales resulted in China DP segment profit of HK$4.0 bn,or 49% of the group’s total.
BVPS was up 7% hoh to HK$20.33, partly helped by an HK$7 bnpositive revaluation in the HK office segment.
Interim DPS surprised, rising 8% yoy to HK14. Managementexplained the increase was due to its plan to ramp up cashreturns amid the phased completions of Victoria Dockside （onlya partia contribution from the office segment during the period）。
Hong Kong
NWD achieved HK$7.1 bn of contracted sales for the fisca yearto February, or 71% of the HK$10 bn full-year target.
The company’s early adoption of HKFRS 15 did not lead to asignificant difference in booked profit as guided by management, and looking ahead, NWD has secured HK$11+ bn of presold proceedsto be recognized in the next 18 months.
In the medium term, with new and ful contributions from n Victoria Dockside（mid-CY19 ful openings） and other China investment properties, management aimsto raise renta contributions to 50% of attributable operating profit within theproperty segment （1H18: c.17%）。
China
Management expects an accelerated pace of completions in China, targeting 1.4 mnsqm GFA in FY18, up 11% yoy, while maintaining a gross profit margin of 40+% forthe year. NWD achieved HK$8.6 bn of contracted sales for the fisca year to-date,c.54% of the full-year target.
Of the c.1.8mn sq m GFA of non-core projects, NWD is focusing on monetizing thethree projects in Beijing, Dalian and Tianjin.
In January 2018, NWD signed a strategic cooperation agreement with the ShenzhenLo Wu government to gain access to a c.840k sq m land parce in the prime districtfor future urban renewa development; however, there was limited disclosure on theeconomics of the dea at the moment.
NWD guides for an HK$20 bn land banking capex target, including a portion ofShenzhen Lo Wu’s outstanding costs.
We revise our underlying FY18/19/20E EPS by +3.5%/+5.9%/+2.8%, with a new12-month NAV-based target price of HK$11.75 （from HK$11.40）。 Excluding certain one-offgains relating to asset disposals in FY18, our FY18E EPS revision is -25.2%. MaintainNeutral. Key risks: Better-than-expected China sales; abrupt change in governmentpolicies.