Sun Hung Kai Properties raises sales target to $36b for next year

The group hit sales of $44b in FY17, exceeding its $33b target.

Sun Hung Kai Properties is capitalising on the residential sales momentum in Hong Kong. According to UOB Kay Hian, the group achieved contracted sales of HK$44.7b in FY17, which far exceeds the full-year target of HK$33b.

SHKP completed eight projects with 4.1m sf of attributable GFA in FY17 (FY16: 3.2m sf) and expects to complete 3m sf of residential GFA pa in the next three years. Profit from property sales (including associates & JVs) increased 1.8% yoy to HK$11,917m.

Property sales in Hong Kong achieved better margins for the year (up 6.3ppt yoy to 32.8%) delivering a profit of HK$9,936m with contributions mostly from sales of residential units in Grand YOHO, Park YOHO, The Wings IIIB, Twin Regency and remaining units from The Cullinan and Ultima. SHKP has contracted property sales of HK$30.9b that have not yet been recognised.

Here's more from UOB Kay Hian:

Hong Kong sales target next year raised to HK$36b (from HK$33b). Sales Upcoming residential launches over the next nine months in Hong Kong include Wings at Sea in LOHAS Park, Tseung Kwan O, Victoria Harbour in North Point, Cullinan West II at MTR Nam Cheong Station, Babington Hill in Mid-levels, St. Barths in Ma On Shan, St. Moritz inKau To and first phases of two premium residential projects located in Pak Shek Kok, Tai Po and Tuen Mun respectively.

Key beneficiary of farmland conversion. Management noted the settlement of the premium for converting farmland in Shap Sz Heung (nearly 4.8mn sf of GFA) into residential use recently. The site requires substantial additional infrastructure expenditure and will be developed over eight years. Management alluded to policy shift towards speedier farmland conversions.

Watch out for Chief Executive Ms Carrie Lam's Oct 11 policy address, especially the details on Starter Homes and policy changes on farmland conversions. SHKP has over 28m sf of agricultural land. Based on an ex-gratia compensation rate about of HK$1,100/sf for agricultural land, we estimate SHKP’s agricultural landbank to be worth at least HK$30.8b.

China property update. Profit from property sales in China was HK$1,950m, down 2.9% yoy with major contributions from Shanghai Cullinan, Shanghai Arch, The Woodland in Zhongshan, Jovo Town in Chengdu, Top Plaza East Tower and GCC in Guangzhou.

They completed 5.2m sf in attributable GFA (FY16: 1.6m sf) that included 4.4m sf of residential GFA. Around HK$6.6b property sales has yet to be recognised. Upcoming launches in the next nine months include Grand Waterfront Phase 2A in Dongguan, The Arch Suites in Chengdu and TODTOWN Phase 1 in Shanghai. Management set a HK$5b sales target for China next year.