Sun Hung Kai Properties Ltd.

Overview Key strengths Key risks Leading market positions in residential development and commercial leasing businesses in Hong Kong. Property development margins will likely decline amid a softening residential property market in Hong Kong Robust recurring income and cash flow from a sizable and diversified leasing portfolio that accounts for about half of earnings. Limited geographic diversity with more than 70% of profit coming from Hong Kong. Consistently strong liquidity and good rental income to interest coverage. We estimate SHKP's consolidated rental revenue will grow 3%-8% in fiscals 2024 and 2025, compared with a 3% decline in fiscal 2023. The decline was mainly in the mainland China portfolio, which was hit by rental relief and depreciation of the Chinese renminbi. We

...Continued portfolio additions and a recovery in Hong Kong's retail rents will drive Sun Hung Kai Properties Ltd.'s (SHKP) rental income growth in fiscals 2024 and 2025. We estimate SHKP's consolidated rental revenue will grow 3%-8% in fiscals 2024 and 2025, compared with a 3% decline in fiscal 2023. The decline was mainly in the mainland China portfolio, which was hit by rental relief and depreciation of the Chinese renminbi. We forecast consolidated rental revenue from mainland China will rebound to HK$5.5 billion- HK$6.0 billion over the next two years, compared with HK$4.8 billion in fiscal 2023 and HK$5.6 billion in fiscal 2022. This is due to subsiding rental reliefs and full-year contributions from new additions in offices and malls, such as Shanghai Three ITC and Nanjing IFC Mall. SHKP's recurring income base in China will continue to grow, given its pipeline of more than 8 million square feet (sq. ft.) of offices and malls to be completed through fiscal 2026. Consolidated retail...

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