SHKP Earnings: Latest Budget to Lift Home-Buying Sentiment, but High-Interest Rates Remain a Hurdle

Sun Hung Kai Properties’, or SHKP’s, first-half fiscal 2024 (ending June) results aligned with our expectations. While management expects the uncertain economic environment and high borrowing costs in Hong Kong to weigh on home-buying sentiment in the near term, they believe the recent relaxation of property cooling measures, rising home rents, and US interest rate cuts will benefit the residential market. SHKP’s move to cut the interim dividend by 24% to HKD 0.95 per share before the announcement of the Hong Kong government's budget appears conservative. For the final dividend, management guided a payout ratio of 50%, which we estimate to be 12% lower than fiscal 2023. This still implies a decent fiscal 2024 dividend yield of 5.4% based on its last closing price of HKD 78. Although we like the company’s portfolio of high-quality investment properties in Hong Kong, we prefer Henderson Land, trading at a more attractive 7.8% dividend yield.