CICC has released a research note indicating that it has revised down its forecast for HANG LUNG PPT (00101) underlying net profit attributable to shareholders for fiscal 2026 and 2027 by 6% and 6%, to HK$3.02 billion and HK$3.10 billion (representing a year-on-year decline of 6% and growth of 3%, respectively). This adjustment is based on a lowered assumption for the interest capitalization rate and prudent impairment provisions for property sales in the first half of fiscal 2026. However, the bank notes that this revision is non-cash in nature and does not alter the trend of a slight improvement in the company's dividend-paying capacity.
CICC retains its Outperform rating on the stock and a target price of HK$9.50. This target implies a 5.5% dividend yield for fiscal 2026, a 15 times price-to-earnings ratio on core earnings for that year, and a 30% upside potential. The bank observes that the stock is currently trading at a 7.1% expected dividend yield and a 12.6 times price-to-earnings ratio for fiscal 2026, which is near the +1 standard deviation level since 2010, highlighting its value as a dividend stock.
First Half Fiscal 2026 Results Slightly Below Expectations
HANG LUNG PPT released its results for the first half of fiscal 2026. Property rental income increased by 5% year-on-year to HK$4.92 billion, while operating profit grew by 4% to HK$3.47 billion, both in line with the bank's estimates. However, due to a HK$120 million impairment provision booked for the property sales business, the overall underlying net profit attributable to shareholders fell by 10% year-on-year to HK$1.44 billion, slightly below expectations. The company declared an interim dividend of 12 HK cents, unchanged from the previous year and consistent with the bank's forecast.
Mainland Shopping Malls Expected to Maintain Positive Performance
Benefiting from continuous and proactive brand mix adjustments, enhanced operational quality, market share concentration among top players, and the strong trend in gold sales early in the year, the company's mainland shopping malls saw a 17% year-on-year increase in retail sales and a 6% rise in rental income in RMB during the first half. Management has guided for a high single-digit year-on-year growth target for retail sales in the second half during the results briefing. CICC believes this guidance offers some visibility given the current market environment and the company's renovation and adjustment trends, though rental income growth is expected to continue lagging behind retail sales growth. For other leasing properties, the bank expects mainland office properties to continue facing pressure, similar to recent years, while the Hong Kong property portfolio is anticipated to remain relatively stable.
Improved Dividend Capacity and Optimized Financial Statements
The company reported a payout ratio of 100% and 102% for fiscal 2024 and 2025, respectively, based on net profit from property leasing and hotels excluding capitalized interest. CICC estimates that on the same basis, profit grew by 6.4% year-on-year in the first half of fiscal 2026, and expects this trend of slight growth to continue for the full fiscal year 2026. This improvement in dividend capacity underpins a fixed per-share dividend. The company has been actively selling residential properties to generate cash, achieving property sales proceeds of HK$1.5 billion or more in both fiscal 2025 and the first half of fiscal 2026. Combined with a scrip dividend policy, this has driven the net debt ratio to decline continuously, reaching 31.6% in the first half of fiscal 2026.
Risk Factors: Mall retail sales falling short of expectations, and office business pressures exceeding forecasts.
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