Sun Hung Kai Properties Ltd.

We expect SHKP's rental and hotel incomes to drop slightly next year, given the continuous social unrest affecting tourism and consumer spending in Hong Kong. This is somewhat offset by the significant amount of unrecognized sales of about HK$46.5 billion from Hong Kong and another HK$4.7 billion from China, which will provide earnings visibility and headroom. Much of the farmland plots the developer owns have been idle and conversion rate has been slow. We have not included them in saleable resources. In addition, we expect limited impact from "farmland donations." Under initiatives such as "Land Sharing Scheme," SHKP will lose some land bank, but it could also enjoy faster conversions. SHKP does not include its farmland in land reserve. The

...We expect Sun Hung Kai Properties Ltd. (SHKP) to weather uncertainties clouding the Hong Kong residential and rental market. Although SHKP derives about 90% of its revenues in Hong Kong, it is in a better position to face the prevailing downturn. This is thanks to its balanced portfolio across retail, office rental, and development segments (see chart 1). It also has no significant reliance on tourist spending. Staggered lease maturities (which are usually three years) also limits sensitivity to spot rent drop. We expect SHKP's rental and hotel incomes to drop slightly next year, given the continuous social unrest affecting tourism and consumer spending in Hong Kong. This is somewhat offset by the significant amount of unrecognized sales of about HK$46.5 billion from Hong Kong and another HK$4.7 billion from China, which will provide earnings visibility and headroom....

Full Report