Shenwan Hongyuan Securities·2025-12-12 06:40Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][6][7]. Core Insights - The company focuses on high-end commercial properties, actively adjusting operations to improve performance. It has established itself as a benchmark in luxury retail, particularly in key urban areas [6][8]. - Revenue for 2024 is projected at HKD 11.2 billion, reflecting a year-on-year growth of 9%. The company has a stable financial outlook with a dividend payout ratio of 80% [6][7]. - The company’s investment properties (IP) are expected to contribute significantly to cash flow stability, with a focus on high-end markets and a gradual recovery in luxury retail [6][8]. Financial Data and Profit Forecast - Revenue and profit forecasts for the company from 2023 to 2027 are as follows: - Revenue: HKD 10.3 billion (2023), HKD 11.2 billion (2024), HKD 9.9 billion (2025E), HKD 10.1 billion (2026E), HKD 10.4 billion (2027E) [5]. - Net profit attributable to ordinary shareholders: HKD 3.97 billion (2023), HKD 2.15 billion (2024), HKD 2.52 billion (2025E), HKD 2.55 billion (2026E), HKD 2.64 billion (2027E) [5]. - Earnings per share: HKD 0.79 (2023), HKD 0.43 (2024), HKD 0.50 (2025E), HKD 0.50 (2026E), HKD 0.52 (2027E) [5]. - Return on equity (ROE): 3.0% (2023), 1.6% (2024), 1.9% (2025E), 1.9% (2026E), 2.0% (2027E) [5]. Business Structure - The company’s revenue structure is primarily derived from property leasing, which accounts for over 90% of total income. The revenue breakdown for 2024 is as follows: Mainland property leasing (64%), Hong Kong property leasing (30%), property sales (3%), and hotels (3%) [30][32]. - The company operates 10 investment properties in Mainland China and 24 in Hong Kong, with a total floor area of 2.27 million square meters in Mainland China [32][48]. Investment Properties - The company’s investment properties are positioned in high-end markets, with a focus on luxury retail. The rental income from Mainland properties is projected to be HKD 6.5 billion in 2024, with a year-on-year decline of 5% [6][48]. - The company is actively adjusting its retail offerings, with improvements in tenant sales observed since Q3 2024, indicating a potential stabilization in rental income [6][8]. Financial Health and Dividends - The company maintains a healthy financial position with a net debt ratio of 33.5% and a financing cost of 3.9%, which is at a historical low [6][7]. - The dividend payout has been consistent, with an 80% payout ratio, and is expected to return to a primarily cash-based distribution model in the future [6][7]. Target Price and Valuation - The target price for the company is set at HKD 11.7, with a projected price-to-earnings (PE) ratio of 18 for 2025 and 17 for 2027 [6][7].