These 2 factors will disappoint SHKP's market

Earnings forecast for FY13 now down by 16%.

According to Nomura, SHKP reported 1HFY13 underlying net profit of HKD11.5bn. Although this was 7% and 10%, respectively, ahead of Nomura and consensus estimates, it believes the market may be disappointed by: (i) the cut in its FY13 contract sales guidance from HKD35bn to HKD32bn and (ii) slippage of 0.856mn sf of completion from FY13 to FY14.

Here's more:

Both NWD and SHKP have recently made cuts to their Hong Kong contract sales guidance; we believe this should remind investors of the challenges faced by developers as they draw from the shrinking pool of potential home buyers. 

Reflecting these two revelations, we cut our FY13F earnings by 16%, but we raise FY14F and FY15F earnings by 5% and 9%, respectively. On the NAV front, we raise our forward NAV estimate by 1% to HKD182.5 to reflect better rental performance.

Keeping our target discount unchanged at 30%, we raise our TP marginally from HKD127 to HKD128. With a potential upside of only 7%, there is no change in our Neutral rating. 

At HKD120, SHKP currently trades at a 30% discount to our spot NAV and 0.86x trailing P/B. Although this is wider than SHKP’s long run NAV discount of 10% and historical P/B of 1.17x, we believe this reflects the increased weighting of rental properties.