In 1H25, core NP rose 15% YoY (in-line), and revenue lifted 7% YoY (slightly below expectations). Core biz shopping mall operation delivered resilient 19% revenue growth with 6ppts GPM expansion, bringing its GP contribution to a new high of 68%. Non-owner VAS/owner VAS revenue fell -35/33% YoY; while basic PM grew 9% YoY, a bit slower due to the proactive exit of low-quality projects to secure future GP margins and collection rates. The Company cut FY25 revenue growth guidance to single-digit (from double-digit), but maintained core NP growth guidance at double-digit which indicates margin improvement. The Company declared a 100% dividend payout which represents a dividend yield of 5.1%. The company’s share price dropped 9% yesterday (27 Aug), which in our view offers a good entry point given its above-peer growth, diversified layout and attractive dividend yield as a SOE. We trim TP by 3% to HK$43.86 (22x 2025E P/E) reflecting the earnings revision. Maintain BUY.
Shopping mall: superior operational capability reaffirmed. Despite the challenging macro environment in 1H25, total retail sales rose 21% YoY with SSSG at 9.7% YoY, much better than peers. This translated into 17% YoY rental income growth, while portfolio revenue still expanded 19% YoY (despite 57% fewer new openings in 1H25: 3 vs 1H24: 7), reflecting higher rental commission rates. The outperforming performance reaffirmed the Company's exceptional capabilities in: 1) capturing consumption trends, 2) tenant sourcing, and 3) membership operations, in our view. Notably, segment GP margin expanded 6.2ppts YoY, bringing the gross profit contribution to a record-high of 68%.
Residential segment weighed by VAS weakness. In 1H25, non-owner VAS revenue fell 35% YoY due to developers' business contraction. Community VAS declined 33% YoY as the company exited low-efficiency biz, which marks a new exploration phase for growth drivers. Basic PM revenue grew 9% YoY, with managed-GFA growth slowing to 6% (vs 12%/23% in 1H24/FY24). Net new managed-GFA added was 7.4mn sqm (vs 27.8mn/42.9mn in 1H24/FY24), constrained by: 1) fewer parentco. deliveries, 2) intensified third-party competition, and 3) proactive exit of low- quality projects to protect future gross margins and collection rates.
100% dividend payout. Following the 100% dividend payout in FY23/FY24, the Company reinstated this practice in 1H25 with a 60% base dividend (up from 36% in 1H24) and a 40% special dividend. This implies an attractive dividend yield of 5.1%, which is appealing compared to SOE peers.
Maintain Buy. We trim our TP by 3% to HK$43.86 (22x 2025E P/E) to reflect earnings forecast revisions. The Company’s share price retreated 9% yesterday, which is a good entry point in our view, given the company's: 1) above-peer NP growth, 2) diversified biz layout, and 3) attractive dividend yield among SOE peers. Risks: 1) worse-than-expected economic slowdown; 2) slower-than-expected third-party expansion; and 3) impairment risks.