Henderson Land Earnings: Removal of Property Cooling Measures to Boost Property Sales

Henderson Land’s fiscal 2023 earnings per share, or EPS, of HKD 1.91 was slightly below our expectations due to lower gross margin and fair value losses on its investment properties. That said, the group kept its full-year dividend per share unchanged at HKD 1.80, in line with our expectation. The removal of property cooling measures in Hong Kong in March 2024 has been a huge positive for the group, and management said it sold 946 residential units in the three weeks since then, which is 60% of its total sales in 2023. Management will focus on sales volume for 2024, with plans to launch 12 development projects during the year. It also expects housing prices to remain soft, given the huge stock of unsold housing units in the market. Management’s views are in line with our views, and we expect home prices in Hong Kong to remain soft in the near term and bottom out in the second half of 2024 following expected rate cuts in the US. We retain our fair value estimate of HKD 34 per share after rolling our model and fine-tuning our assumptions. Our 2024 EPS forecast is lifted by 8% due to higher property sales in Hong Kong, while our 2025-26 EPS estimates remain largely unchanged. Henderson Land remains our preferred pick for Hong Kong residential developers as it trades at an attractive 7.8% dividend yield in 2024. We think the risk of a dividend cut is low, given the group's strong recurring income base.