Core Viewpoint - Swire Properties reported a 15% year-on-year increase in basic profit to HKD 4.42 billion for the first half of 2025, despite a 4% decrease in recurring profit attributable to shareholders due to declining rental income from office properties in Hong Kong [2][3] Group 1: Financial Performance - Basic profit for the first half of 2025 increased by 15% to HKD 4.42 billion [2] - Recurring profit attributable to shareholders decreased by 4% from HKD 3.57 billion in the first half of 2024 to HKD 3.42 billion in the first half of 2025 [2] - Total rental income from office properties in Hong Kong fell by 5% to HKD 2.455 billion [3] Group 2: Market Conditions - The Hong Kong office market is expected to remain sluggish in the second half of the year due to intense competition and unstable demand growth [3] - The overall occupancy rate of Swire Properties' office portfolio in Hong Kong is 88% [3] - Retail properties in Hong Kong showed a slight decline in rental income, down 2% to approximately HKD 1.169 billion, while the occupancy rate for major shopping centers reached 100% [3] Group 3: Strategic Focus - Swire Properties continues to focus on its HKD 100 billion investment plan, with 67% of the funds already committed [4] - The company has made significant progress in its investment in mainland China, with 92% of the planned HKD 50 billion investment already implemented [4] - Future projects include expanding residential properties in Hong Kong and increasing total floor area in mainland China [5]

Group 1: Core Business Performance - The Hong Kong office market is facing significant challenges, with a vacancy rate rising to 13.6% in the first half of 2025, indicating an oversupply situation [2] - The rental rate for the company's Hong Kong office properties has declined from 93% at the end of 2024 to 91% by the end of Q2 2025, with specific declines of 1% for Taikoo Place and 3% for Taikoo Square [2] - Rental rates for the two core properties have decreased by 14% and 15% respectively, reflecting competitive market conditions [2] Group 2: Retail Market Performance - In contrast to the office sector, the company's retail properties have shown stable growth, with key projects maintaining a 100% occupancy rate [4] - Notable sales growth was observed in Shanghai's Taikoo Hui, which increased by 13.5%, and Beijing's Sanlitun Taikoo Li, which grew by 6.8% [4] - The performance disparity among retail projects is influenced by local economic conditions and operational factors, necessitating targeted strategies for maintaining retail business stability [4] Group 3: Future Development Projects - Several new projects, including Beijing Taikoo Place and Xi'an Taikoo Li, are under construction and are expected to be completed between 2026 and 2027, which will provide new growth momentum for the company [5]

Core Viewpoint - The company reported strong retail performance in its shopping centers, with most locations showing year-on-year growth in retail sales for the first half of 2025, indicating a robust recovery in the retail sector [1][2]. Group 1: Retail Performance - Shanghai Xinyi Taikoo Hui saw a retail sales increase of 13.5% year-on-year, while Beijing Sanlitun Taikoo Li grew by 6.8% [1]. - Chengdu Taikoo Li and Shanghai Qiantan Taikoo Li reported retail sales growth of 4% and 0.2% respectively, with Beijing Yiti Port remaining flat and Guangzhou Taikoo Hui declining by 2.1%, a significant improvement from a 10.7% decline in 2024 [1]. - The overall trend indicates that major shopping centers are benefiting from the continued entry of luxury brands, which is expected to further enhance retail sales and rental income in the coming years [1]. Group 2: Hong Kong Market Insights - Hong Kong shopping centers maintained full occupancy with a slight improvement in retail sales growth, contrasting with street shops affected by tourist spending [2]. - Taikoo Place, Taikoo City Centre, and Cityplaza reported retail sales growth of 1.4%, 2%, and a decline of 3.3% respectively, with a consistent 100% occupancy rate for six consecutive quarters [2]. - The Hong Kong office market remains under pressure due to historical rent reductions, with new supply continuing to impact rental rates, although new lease rates have not seen significant declines [2]. Group 3: Investment Outlook - The company’s assets are primarily located in prime shopping districts, providing a strong competitive advantage and operational capabilities that enhance project performance [2]. - Projected net profit growth for the company is estimated at 449%, 54%, and 37% for 2025 to 2027, with dividends expected to grow at 5% annually [2]. - The current estimated net present value per share is HKD 23.92, with a projected dividend yield of 5.6% for 2025, maintaining a "recommended" rating [2].

Group 1: Company Performance - The company reported Q1 retail sales growth in its mainland shopping centers, with Shanghai Xinya Taikoo Hui, Beijing Sanlitun Taikoo Li, and Shanghai Qiantan Taikoo Li showing increases of 10.1%, 6%, and 1.5% year-on-year respectively [1] - Retail sales in Chengdu Taikoo Li, Guangzhou Taikoo Hui, and Beijing Yintai Center declined by 2.9%, 2.5%, and 0.4% year-on-year, but the decline was significantly narrower compared to 2024 [1] - The improvement in retail sales is attributed to the introduction of more luxury brands following renovations completed at the beginning of 2025, particularly benefiting Shanghai Xinya Taikoo Hui [1] Group 2: Market Trends - Hong Kong shopping centers maintained full occupancy with a slight improvement in retail sales growth, with Taikoo City Centre, Taikoo Place, and Citygate Outlets showing year-on-year growth rates of +2.9%, -5%, and -5.8% respectively [2] - The overall rental rate for Hong Kong office buildings remained under pressure due to market oversupply, with a Q1 occupancy rate of 89%, consistent with the end of 2024 [2] - In mainland office projects, Guangzhou Taikoo Hui and Beijing Yintai Center saw occupancy rates increase by 1 percentage point to 91% and 84% respectively, while Shanghai Xinya Taikoo Hui's rate decreased by 2 percentage points to 94% [2] Group 3: Investment Outlook - The company is characterized as a commercial real estate firm that generates stable cash flow through holding assets with a competitive edge [3] - Q1 performance in mainland shopping centers aligns with expectations, driven by the company's strong leasing and renovation capabilities [3] - Projected net profit growth for the company is 449%, 54%, and 37% for the years 2025 to 2027, with a consistent annual dividend growth of 5% [3]

Investment Rating - The report maintains a "Recommended" rating for Swire Properties (1972.HK) with a target price of HKD 21.55 [2][8]. Core Insights - The company's Q1 performance met expectations, with improvements in the operation of shopping centers in mainland China. Retail sales in key locations such as Shanghai and Beijing showed positive growth, while declines in other areas were significantly reduced compared to 2024 [2][8]. - The report highlights the strong competitive advantage of Swire Properties due to its prime location shopping centers and robust leasing capabilities, which are expected to drive rental income growth in the coming years [8]. Financial Summary - Total revenue projections for 2024A, 2025E, 2026E, and 2027E are HKD 14,428 million, HKD 14,616 million, HKD 14,995 million, and HKD 18,638 million respectively, with growth rates of -2.1%, 1.3%, 2.6%, and 24.3% [4]. - The net profit attributable to shareholders is forecasted to be -HKD 766 million in 2024, increasing to HKD 2,676 million in 2025, HKD 4,132 million in 2026, and HKD 5,671 million in 2027, with growth rates of -129.0%, 449.3%, 54.4%, and 37.2% respectively [4]. - Earnings per share (EPS) are projected to be -HKD 0.13 in 2024, HKD 0.46 in 2025, HKD 0.72 in 2026, and HKD 0.98 in 2027 [4]. Market Performance - The report notes that Swire Properties' shopping centers in Hong Kong maintained full occupancy, with slight improvements in retail sales growth compared to the previous year [8]. - The overall rental market for office spaces in Hong Kong remains under pressure due to oversupply, with an occupancy rate of 89% in Q1 [8]. Investment Recommendation - Swire Properties is characterized as a commercial real estate company that generates stable cash flow through holding assets with a competitive moat. The expected growth in net profit and consistent dividend growth of 5% annually supports the investment thesis [8].

Group 1 - Morgan Stanley maintains a target price of HKD 16 for Swire Properties and a "Market Perform" rating [1] - In Q1 2025, rental performance for Swire Properties in Hong Kong showed flat rental rates for Taikoo Place, with a rental adjustment rate of -16% year-on-year [1] - Retail performance in Hong Kong for Q1 2025 indicated a 5% year-on-year decrease in retail sales at Taikoo Place and a 5.8% decrease at Cityplaza, while Taikoo City Centre saw a 2.9% increase [1] Group 2 - In mainland China, all six retail malls recorded quarter-on-quarter improvements in retail sales for Q1 2025 [1] - Positive growth was observed in Shanghai and Beijing, while Guangzhou and Chengdu experienced declines [1]