Friday, July 27, 2012
HK Land: kicked off the 1H12 reporting season for the HK property sector with better than expected results. Underlying net profit came in at US$318m, 7% higher than Nomura’s forecast US$299m. Interim DPS was unchanged at US$0.06/sh. Although underlying earnings fell 13% y-y, this was largely expected, given the absence of residential completions in 1H. More important, the key metrics for HK Land’s commercial portfolio were all positive. Net rental income rose 4.6% y-y to HK$358.1m. Vacancy of its Central office portfolio improved from 3.6% as of 1Q12 to 3.1% at 2Q12. Rental reversions remain positive with average office rents at HK$89.3psf in the 1H12 vs HK$85.6psf in 1H11. Revaluations of its commercial portfolio also remained positive at ~ 1.1%. This helped to boost HK Land’s BVPS by 1.8% to US$10.77. HK Land’s retail portfolio remained fully let with average retail rents rising to HK$165.3psf from 2011’s average of HK$148.3psf. Nomura believes the stock will react positively to the results. Notes HKL’s current 0.55x P/B is lower than its long run avg of 0.73x. Reiterates Buy with TP US$6.70.