We forecast 2012e recurring net profit of HKD8.0bn, down 9% y-o-y. Strong growth from the properties and marine businesses is offset by a substantially lower contribution from Cathay Pacific. This recurring forecast excludes one-off gains (property revaluation surpluses and sale of investment properties) . Our 2012e recurring forecast is 5% below consensus, although this may be partly due to a different classification of one-off items.
The result is due to be released on 14 March. Within the note, we also lower our recurring net profit forecasts by 2-8% to reflect primarily previous downgrades for Cathay Pacific. Prospects for unlisted businesses key area of interest. Given the separately listed Swire Properties and Cathay Pacific, at the result we will be keen to see evidence of the parent’s ability to grow its non-property and non-aviation businesses. In particular, the strength of the rebound in its marine busi ness; the performance of its Coca-Cola bottling business in mainland China; and any plans for investments in new areas.
Downgrade to Neutral, target price to HKD106 (from HKD102). We raise our appraised valuation to HKD141/share (from HKD136) due largely to a previous increase in the target price for Swire Properties. We set our target price at an unchanged 25% discount to our appraised valuation. At our new target of HKD106, Swire Pacific offers only 7% potential return (including 2012e DPS), thus we downgrade to Neutral from Overweight