Citigroup: Maintains "Buy" rating on Hang Lung Properties (00101) with earnings meeting expectations.

Citibank released a research report stating that they maintain a "buy" rating on HANG LUNG PPT (00101) with a target price of 7.05 Hong Kong dollars. HANG LUNG PPT's mid-term dividend per share is 0.12 yuan, and the company continues to offer a dividend option. The implied mid-term dividend payment ratio is 36% (32% in the first half of 2024). HANG LUNG PPT's basic profit in the first half of this year decreased by 8.5% year-on-year to 1.587 billion yuan, which is in line with expectations and accounts for 53% of the bank's current fiscal year estimate (56% in the first half of 2024). The decline in profit is mainly due to a decrease in rental income (down 3% year-on-year), increased losses in property development and hotel business, and a 11% year-on-year growth in net financing costs due to an expansion in debt size, despite a decrease in average financing costs. The bank pointed out that overall rental income decreased by 3% year-on-year with a stable profit margin. Overall rental income decreased by 3% (6% in the 2024 fiscal year) to 4.678 billion yuan, accounting for 51% of the bank's full-year estimate. Rental operating profit decreased by 3% year-on-year (-9% in the 2024 fiscal year) to 3.3 billion yuan, with a rental profit margin of 71.5% (71.5%/71.1% in the first half/full year of 2024). Citibank also mentioned that HANG LUNG PPT's rental income in Hong Kong decreased by 4% year-on-year (9% in the 2024 fiscal year), retail income in Hong Kong decreased by 7%, tenant sales decreased by 2%, mainly due to lower rents from major tenants who renewed their leases in March 2024. Office rental income in Hong Kong decreased by 1%, with an occupancy rate of 87%. The bank stated that they are monitoring HANG LUNG PPT for more disclosure on dividend prospects, and market focus may be on retail sales/rental expectations in mainland China, pre-leasing progress of the West Lake 66 project in Hangzhou, capital expenditure plans, and fund management.