Goldman Sachs raises Swire Pacific's target price to HKD 102.1, with increased dividends bringing surprises

Goldman Sachs published a research report indicating that Swire Pacific (00019.HK) announced its full-year results for the year ending December last year, with a slightly positive surprise being the group's increase in final dividends, which grew by 19% year-on-year to HKD 2.5. Together with the interim dividend, the total dividend for the fiscal year 2025 is HKD 3.8, representing a year-on-year growth of 13%. Goldman Sachs speculated that this may also be partly due to its HKD 6 billion share buyback plan, which will end in May 2025, with no further buybacks planned thereafter. When asked whether another share buyback plan would be considered, management did not rule out this possibility and mentioned that liquidity and public shareholding levels are among the considerations.

Goldman Sachs noted that management was cautiously optimistic about its business outlook during the earnings briefing and expected its three core sectors to perform well amid macro uncertainties. Swire Properties (01972.HK) has five leasing projects under construction in mainland China, which are expected to be gradually launched from the fiscal years 2026 to 2028; along with accelerating the sales of its residential property portfolio, the company anticipates its contribution to the group's profits will grow at an average annual compound growth rate of 11% during this period. In Hong Kong, the signs of recovery in the residential and office market since the second half of fiscal year 2025 are encouraging.

In terms of the beverage business, management believes that the fundamentals will improve, especially in mainland China. However, Cathay Pacific plans to utilize the new third runway at Hong Kong International Airport in fiscal year 2026 to expand passenger and cargo capacity. In other words, the recent conflicts in the Middle East and soaring oil prices may pose downside risks to its profit growth.

In light of Goldman Sachs' latest forecasts for Swire Properties and other businesses, the bank has adjusted its earnings forecasts for Swire Pacific for the next two years, with changes ranging from a decline of 9% to an increase of 2%. The target price has been raised from HKD 96.8 to HKD 102.1. The "Buy" rating for Swire Pacific and Swire Properties is maintained