Hysan Development's net profit jumped 17% to HKD10b

Redevelopment plan for 2 properties now underway.

According to Maybank Kim Eng, HD announced better-than-expected FY12A results after morning trading session yesterday. Reported net profit rose 17% to HKD10b on top of FV gains in IP of HKD8.2b (+14.4% YoY). 

Here's more:

Core net profit rose 24% YoY to HKD1.62b, 6% higher than mean consensus of HKD1.53b and was higher than top-end of consensus range of HKD1.44-1.61b. Revenue grew 29% to HKD2.5b, thanks to the opening of Hysan Place (rental contribution of HKD431m) in August 2012. 

Excluding the contribution from the new development, the like-for-like revenue growth was 6.9%. Book value rose 19.2% to HKD58.1b, or at HKD54.7 per share, translating into a P/B of 0.72x. Second interim dividend of HKD0.78 (FY11A: HKD0.64) was recommended. 

HD announced the redevelopment plan of Sunning Plaza (office with GFA of 277k sq ft, completed in 1982) and Sunning Court (residential usage with GFA of 98k sq ft, completed in 1982) into a mixed-use office and retail complex to be completed by 2018.

The total GFA will increase by 25% from 375k to 460-470k sq ft, subject to approval. The projects have spot rents of HKD30-40 psf of GFA. The management did not disclose the cost, while we estimate a capex of HKD2.1b, assuming a development costs of HKD4,500 psf of GFA.

The redevelopment offers a longer-term growth prospect to HD, in our view, but the counter lacks short-term catalysts. 

Share price of HD enjoyed a strong rally of 55% since end-2011, versus 24% growth in Hang Seng Index. It is trading at 34.3% discount to post-results  mean consensus RNAV of HKD60.16 (range: HKD51.9-66.0) per share, which is fair comparing with the stock’s long-term average of c40%.