BOCOM INTL: Maintains "Buy" Rating on SHK PPT (00016) with Target Price Adjusted to HKD 96.1

BOCOM INTL released a research report, maintaining a "buy" rating for SHK PPT (00016) due to the following reasons: 1) The latest stamp duty and mortgage policy adjustments will significantly reduce the purchasing cost for small and medium units, and the company has sufficient salable sources targeting the mid-end market; 2) Rent increases and a gradual recovery in the tourism industry will drive consumption at the company's mid-to-high-end shopping centers and tenant capacity. Based on the latest estimation, the forecast for net asset value per share is lowered to 192.2 Hong Kong dollars (previously 200.2 Hong Kong dollars), based on a 50% discount on net asset value (previously 45%), with the target price adjusted from 110.1 Hong Kong dollars to 96.1 Hong Kong dollars. Key points of BOCOM INTL: Stable performance expected for the fiscal year 2024: Due to the low base of property delivery in Hong Kong last year and the recovery of other businesses, the bank expects a 8.9% year-on-year increase in revenue to about 77.5 billion Hong Kong dollars in 2024. Due to market adjustments, the bank expects property development gross margin to decrease to around 35%, with an overall gross margin decreasing by about 2-3 percentage points to 45% year-on-year. Therefore, the bank expects core net profit to decrease by about 7% year-on-year to 22.3 billion Hong Kong dollars. Additionally, the bank believes that the company's expected full-year dividend payout ratio will be closer to the upper limit of 40-50%, with the bank expecting a 22% year-on-year decrease in full-year dividends to around 3.85 Hong Kong dollars. Rental income could reach 20 billion Hong Kong dollars, stabilization in various businesses: Rental income in the first half of fiscal year 2024 increased by 1.7% year-on-year to 8.94 billion Hong Kong dollars, with the retail sector recording a 3.5% year-on-year growth. The bank believes that the retail portfolio in Hong Kong will continue to grow in the second half of fiscal year 2024, along with rental income growth in the mainland, resulting in estimated rental income of 20 billion Hong Kong dollars for the fiscal year 2024. Additionally, benefiting from customs clearance and a rebound in tourist arrivals, along with a low base in the previous year, the bank expects a significant increase in hotel income. Furthermore, apart from the telecommunications business, the bank believes that all other business lines will experience moderate growth. Adjusted revenue and profit forecasts: The bank has lowered its revenue, profit, and gross margin forecasts for fiscal years 2024/25/26 to reflect the decline in development profit margins and the impact of slowing sales in the fiscal year 2024. The bank has respectively reduced core profit forecasts by 11.3%/10.2%/8.2% for fiscal years 2024/25/26, mainly due to the decline in development profit margins and the increase in interest costs in a high interest rate environment.