Sun Hung Kai Properties' net profit dived 20.5% to HK$8.4b

Unexpectedly lower contributions were cited.

Sun Hung Kai Properties's (SHKP) 1HFY15 earnings missed both Barclays' and consensus expectations.

According to a research note from Barclays, 1HFY15 underlying net profit fell 20.5% y/y to HK$8,463mn, 12% shy of Barclays' and Bloomberg consensus forecast of HK$9.7bn.

The report said the miss can be attributed to lower than expected contributions from both Hong Kong and China property development, which fell 59% y/y.

By comparison, SHKP’s rental performance continued to positively surprise with net rentals rising 8.1% y/y, exceeding Barclays' forecast by 5%.

Here's more from Barclays:

Relative to our full-year earnings forecast of HK$21.6bn, 1H earnings only reached 39%.

Although SHKP has realized some HK$25bn in contract sales since July 2014, as many of the projects will not be completed until FY2016, 2H earnings will depend on SHKP’s ability to dispose of more Cullinan units and other non-core assets, in our view.

With today’s HKMA announcement of a seventh round of macro-prudential measures likely to depress home buying sentiment, SHKP may have to offer more incentives in order to drive leftover sales.

With 16% downside potential to our HK$103.70 price target, we maintain our UW rating on SHKP.