The article "After the Performance" summarizes the latest target prices and views of major banks after Sun Hung Kai Properties announced its earnings

AASTOCKS
2026.02.27 02:52

SHK PPT (00016.HK) opened flat this morning and continued to rise, reaching a high of HKD 144.9 during the day, up 6.3% at one point, currently up 4.9% at HKD 143. Citigroup indicated that SHK PPT is expected to record HKD 17.5 billion in sales in the first half of the 2026 fiscal year, plus HKD 9 billion from the "Horizon Bay Phase II," with total annual sales likely to exceed HKD 35 billion, surpassing the company's original target of HKD 30 billion. The bank noted that SHK PPT's dividend is expected to grow by 3% in the first half of the 2026 fiscal year, and decided to raise its dividend forecast for the fiscal years 2026 to 2028 to HKD 3.88, 4.15, and 4.50 per share. Based on improved earnings and dividend prospects, Citigroup maintains a "Buy" rating and "Preferred" status, significantly raising the target price from HKD 105 to HKD 168, narrowing the discount to net asset value to 20%.

SHK PPT announced its interim results for the period ending last December 26 after the market closed yesterday, with revenue of HKD 52.705 billion, a year-on-year increase of 32%. Net profit was HKD 10.247 billion, up 36.2% year-on-year; earnings per share were HKD 3.54. An interim dividend of HKD 0.98 per share was declared, compared to HKD 0.95 in the same period last year. After excluding the impact of fair value changes in investment properties, the underlying profit attributable to shareholders increased by 16.7% year-on-year to HKD 12.213 billion, with an underlying earnings per share of HKD 4.21. During the period, the group's profit from property sales was HKD 4.885 billion, a year-on-year increase of 94.9%. Based on equity interests, the total contract sales recorded by the group during the period were approximately HKD 18.9 billion. Total rental income during the period remained flat year-on-year at HKD 12.285 billion, while net rental income decreased by 1% year-on-year to HKD 8.95 billion.

During the period, the group's property investment portfolio in Hong Kong continued to provide substantial and stable recurring income. Including contributions from joint ventures and associates, the group's total rental income remained flat year-on-year at HKD 8.797 billion, while the overall occupancy rate remained at a high level. As of the end of last year, the group's net debt ratio was 13.5%, and the interest coverage ratio was 8.7 times.

【Interim Dividend Increase, Anticipating Gross Margin Rise】

Citigroup stated that SHK PPT benefits from a rebound in profit margins and expects earnings per share and dividends to achieve a 7% average annual growth until the 2028 fiscal year. Citigroup raised its earnings forecast based on five main factors: first, Hong Kong sales are expected to exceed HKD 35 billion in the 2026 fiscal year; second, operating profit margins are expected to rebound to around 15% in the second half of the 2026 fiscal year and exceed 20% in the 2027 to 2028 fiscal years; third, there is a large amount of unrecognized sales, including approximately HKD 22 billion in Hong Kong (profit margin 15-20%) and approximately HKD 4 billion in mainland China (profit margin around 30%); fourth, interim rental income is expected to benefit from an expansion in floor area, an increase in office occupancy rates, and retail rents stabilizing by the end of 2026; fifth, the debt ratio is expected to further decrease to 13%, providing ample room for new investments. The company also reiterated that there is no need for any financing arrangements that would dilute equity JP Morgan pointed out that New World Development's profit for the first half of the 2026 fiscal year grew by 17% year-on-year, far exceeding the expected increase of 4%, mainly benefiting from strong performance in mainland China development projects. Notably, the company raised its interim dividend by 3% for the first time in three years, indicating management's confidence in the outlook. Meanwhile, the net debt ratio improved further from 15.1% to 13.5%. With the profit margin of Hong Kong real estate projects expected to rebound from 8% to mid-double digits, New World Development's profit growth could reach an average of 6% over the next three years, with further upside potential if sales momentum remains strong. Among Hong Kong developers, New World Development has the most visible profit growth. Additionally, the company has approximately HKD 200 billion in saleable resources, allowing it to fully capitalize on the market recovery, and its valuation premium is expected to continue, supported by its scarcity. Citigroup noted that the Hong Kong property market has moved from the "early recovery" phase to the "expansion phase," and therefore expects New World Development's net asset discount to gradually narrow from the current 34% to 22%, consistent with the average level during past industry expansion phases. Based on this, Citigroup set a target price for New World Development at HKD 162, implying a further upside of 19%.

Morgan Stanley stated that New World Development's profit margin for Hong Kong real estate projects in the first half of the 2026 fiscal year fell from 12.2% in the 2025 fiscal year to 7.6%, indicating pressure on profit margins, but believes it has bottomed out and expects a significant rebound in profit margins to around 15% in the second half of the 2026 fiscal year. The firm indicated that New World Development's current valuation is attractive, with a projected price-to-book ratio of 0.6 times and a long-term dividend yield of 2.8%. Although the dividend yield is not particularly high, the stock is still seen as a representative target for the recovery of Hong Kong property prices and the Hong Kong stock market. In other words, if investors are optimistic about the continued warming of the Hong Kong real estate and stock markets, New World Development's stock performance will become an important reference indicator.

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The table below lists the investment ratings and target prices for New World Development (00016.HK) from five brokerages:

Brokerage│Investment Rating│Target Price

Citigroup│Buy│105 HKD->168 HKD

Goldman Sachs│Buy│159 HKD->164 HKD

JP Morgan│Overweight│162 HKD

Citi│Outperform│110 HKD->148 HKD

Morgan Stanley│Overweight│120 HKD

Brokerage│Viewpoint

Citigroup│Strong asset turnover improves profit margins, ideal earnings performance leads to increased dividends

Goldman Sachs│Local property sales exceeded expectations, surprise increase in interim dividend per share

JP Morgan│Interim profit growth exceeds expectations, further improvement in net debt ratio, net asset value expected to drop to 22%

Citi│Increase in interim dividend releases positive signals. Market sentiment improves, net asset value expected to drop to 30%

Morgan Stanley│Surprise increase in dividend per share, although profit margin for local property sales has decreased, it is expected to have bottomed out

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