Bank of America Securities raises Wharf Holdings' target price to 29 yuan, rating "Neutral"

Bank of America Securities published a research report indicating that Wharf Holdings (00004.HK) is expected to see an increase in luxury residential profits this year, supported by several new projects, including the Longxiang Road project, No. 1 Plantation Road on The Peak, and Chengdu IFS serviced apartments, with more new projects set to debut in the next two to three years. The bank forecasts a 19% year-on-year increase in core net profit this year, due to an upward revision of the estimated net asset value (NAV) per share, raising the target price by 4% to HKD 29. The current price of the stock is at a 64% discount to NAV, indicating a low valuation, but the target dividend payout ratio in the lower 30% range suggests that this year's dividend yield is expected to be only 2%, maintaining a "Neutral" rating.

The report mentioned that Wharf Holdings' core profit is HKD 4.1 billion, a year-on-year increase of 47%, and 12% higher than expected, mainly due to a narrowing of property development impairments. Wharf recorded a surplus of HKD 10 billion in its listed equity investment portfolio and plans to sell HKD 9.7 billion in investments in the fiscal year 2025, along with an additional HKD 2 billion in the first two months of 2026. As a result, its net debt of HKD 6.5 billion at the end of June has turned into net cash of HKD 2 billion by the end of December. The book value increased by 2% over six months to HKD 48.01 per share.

The bank revised its earnings per share estimates for the fiscal years 2026 to 2028, mainly due to changes in the timing of property development revenue recognition. The bank added that rental income fell by 3% last year, and EBIT decreased by 4%, but sales from mainland tenants rebounded in the first two months of this year. Management guidance indicates that rental income is expected to remain flat this year