Citi: Downgrades HYSAN DEV (00014) rating to "Sell" and cuts target price to HKD 15.69.

Citigroup released a research report stating that the favorable factors for retail have been largely reflected. HYSAN DEV (00014) is facing challenges in office buildings, uncertainties regarding the development of Lee Garden Eight, and limited balance sheet flexibility. As a result, the rating has been downgraded from "Buy" to "Sell," and the target net asset value (NAV) discount has been expanded from the original 45% to 65%. The target price has been significantly reduced by 35.4% from HKD 24.3 to HKD 15.69, corresponding to a target yield of 7%. Hysan's retail income and core rental income in the first half of the year were 15% and 22% higher, respectively, compared to the first half of 2023. However, the bank believes that the upward potential driven by asset enhancement projects has already been realized through flagship expansion and tenant upgrades in 2024 to 2025. The gap between the 17% growth in tenant sales and the 1% growth in retail rents during the first half of the year also reflects that the profit upside is weakening. The bank stated that Hysan's capital recycling plan is progressing smoothly, but with a debt ratio of 49%, it may need to further deleverage to maintain stable per-share dividends.