SHKP's revenue fell 12.7% amid weak property sales

Here's how it plans to bounce back.

SHKP reported an interim net profit of HKD22.5b, up 7% YoY, on the back of a 12.7% revenue drop due to a 33% decline in property sales.

Here's more:

Excluding revaluation gains in investment properties of HKD12b (1H12A: HKD9.5b), core net profit fell 2% to HKD11.5b, accounting for 53% of our original estimates, and better than our expectations.

The underlying net profit decline was also less severe than the mean consensus expectation of a 13% drop. Interim DPS was flat YoY at HKD0.95. 

We believe that SHKP will turn more aggressive in landbank acquisitions in HK and purchase land from various sources including auctions,
JVs and farmland conversions owing to its healthy balance sheet and the pickup in HK and China property sales.

Its Net debt rose 7% from Jun 2012 to HKD60.6b, while net gearing remained at a similar level of 16.5% as SHKP’s equity rose 6%.

We expect that SHKP should be able to achieve HK and China contracted sales of HKD28b and HKD10b in FY6/13, respectively, despite it has adopted a prudent approach to its sales target (reduced by 9% from HKD35b to HKD32b). YTD, it already achieved HKD25.2b in contracted sales, while we expect that the 2 new projects in HK will fetch HKD8b in sales in 2013.