Bank of America Merrill Lynch: Maintains "buy" rating on HANG LUNG PPT (00101) with a target price of 10.4 Hong Kong dollars.

Bank of America Securities released a research report stating that it reiterates a "buy" rating on HANG LUNG PPT (00101) with a target price of 10.4 Hong Kong dollars. The bank expects that core profit for the financial year 2026 will slightly decrease by 1%, mainly due to the growth in mainland retail rents and improvement in property profits (following a loss in the financial year 2025) offset by a decrease in office rental income and significantly reduced capitalized interest. With the recovery of the Hong Kong residential market supporting property sales this year, the bank believes that Hang Lung has the opportunity to cancel its "scrip dividend" plan in the first half of 2026, although the management has not committed to a specific timeline. Hang Lung's current trading dividend yield is 5.5%, representing a discount of around 60% to net asset value, making it attractive in the bank's view. Earnings per share forecasts for the financial years 2026 to 2027 have been slightly adjusted downwards by 1% based on the decrease in office rental prices. Management pointed out that despite the unfavorable comparison due to different Chinese New Year timing in 2026 compared to 2025, mainland China tenant sales in January were roughly on par. Luxury retail sales are expected to recover from a 1% decline in the financial year 2025 to a low to mid-single digit growth in the financial year 2026, while non-luxury categories are expected to perform better. It is predicted that Shanghai Portman Hang Lung Plaza (GG66) will achieve stable 3% rental growth based on fundamental rents, while retail growth at Shanghai Hang Lung Plaza (Plaza 66) will improve from a 1% year-on-year decline in the second half of 2025 to a 4% year-on-year growth in the financial year 2026. Operating costs are expected to remain within a reasonable range, fluctuating by about a dozen percentage points. Management emphasized new measures to enhance the performance of non-luxury tenants in Wuhan and introduce new sports and leisure facilities in Shenyang to increase foot traffic. The pre-leasing rate at Hangzhou Hang Lung Plaza (Westlake 66) is encouraging at 91%, with an expected opening rate of 80% and 90% in the second and third quarters of 2026, respectively.