Damo: Henderson Land (00012)'s profit recovery in the first half of the year is expected to maintain the “increase in holdings” rating, target price of HK$31

The Zhitong Finance App learned that Morgan Stanley released a research report saying that Henderson Land (00012) will soon announce its first half results. The profit for the first half of the year was about HK$3.9 billion, an increase of 27% over the previous year. It mainly benefited from the high-margin project “Tianyu” sales of the West Mid-Levels Beautiful Terrace reconstruction project and the rental income of The Henderson in Central China. The bank expects the dividend to remain unchanged at HK$0.5 per share in the first half of the year and around HK$1.26 for the whole year, which is equivalent to a sustainable dividend rate of 4.6%. Damo maintains Hengdi's “gain” rating, with a target price of HK$31, based on a comprehensive valuation method with a 40% net asset value discount. The bank believes that the current price of Henderson Land is equivalent to 0.4 times the predicted market account ratio and 4.6% dividend rate, which is attractive for valuations in an environment where residential prices are rebounding.

Damo pointed out that the conversion process of Hengdi farmland is expected to accelerate, which will support earnings and cash flow per share in the second half of the year, and help reduce liabilities. About 117 hectares of land in the Xintian District were taken back in June. It is expected that more than HK$2 billion in recovery revenue will be recorded in the second half of the year, compared to HK$240 million and HK$599 million for the first half of the year and the full year, respectively. The bank expects that overall rental income in Hong Kong could increase in the number of units in the year-on-year period, driven by the increase in the contribution of The Henderson leasing, the improvement in retail sales in IFC shopping malls, and the narrowing of negative office rent pullbacks; rental income in mainland China in the first half of the year was affected by the weak performance of office buildings and retail properties, and a year-on-year decline may be recorded.