Henderson Land's net profit jumped 18% YoY to HKD20.2b

Steady sales momentum likely to stay ahead, says analyst.

According to Maybank Kim Eng, HL’s reported FY12A net profit rose 18% YoY to HKD20.2b. Excluding fair value gains on investment properties, underlying net profit rose 28% YoY to HKD7.1b, 2% below its HKD7.25b forecast and 5% below the mean consensus estimate of HKD7.47b, due to lower-than-expected net rental income growth of 17% YoY vs our 20% expectation. 

Here's more:

A final DPS of HKD0.74 (FY11A: HKD0.70) was recommended, vs the expected HKD0.73, bringing full-year DPS to HKD1.06, up 6% YoY. HL also recommends a 1-for-10 bonus issue.  

We keep our RNAV estimate largely unchanged and apply a same target discount of 30% (0.5SD below mean) to reflect the risk of slower asset churns on HL’s urban development and farmland conversions.

Nevertheless, with its focus on small and medium-sized units, we anticipate steady contracted sales momentum, especially from its mass-market projects, The Reach in Yuen Long and Double Cove in Ma On Shan.

Besides, strong rental income from its HK/China investment properties (44% of gross property assets) and listed vehicle (market value: 53% of the group’s total property assets) should provide a steady source of funds for the group’s development business.

It is currently trading at an attractive 41% discount to our new RNAV of HKD84.77/share, after recent 20% share price correction.