Swire Properties: Third-Quarter Operations in Line; Continue to See Long-Term Value

We maintain our fair value estimate of HKD 22.50 per share for narrow-moat-rated Swire Properties after its in-line third quarter operating performance. We see lingering pressure in the company’s Hong Kong office assets given weak leasing demand and elevated citywide vacancy rates, while retail assets across Hong Kong and China suffer from subdued tenant sales. That said, we continue to see long-term value in Swire Properties’ HKD 100 billion investment plan for 2022-32, of which 30% is planned for its development master plan in Hong Kong to continuously expand and improve the attractiveness of its Pacific Place and Taikoo Place asset clusters. Swire Properties is the top pick within our Hong Kong landlord coverage, as we think the 25% discount to our valuation and the estimated 6.7% 2024 dividend yield are attractive. Coupled with the ongoing share buyback program, we believe the firm stands out under the current interest rate cut cycle.