Hang Lung Properties Earnings: In Line; Lifting Uncertainty Rating to High on Retail Headwinds

Trends within no-moat-rated Hang Lung Properties’ results were in line with our expectations. Underlying net profit declined by 25% year on year as the company’s malls were negatively affected by China’s weak economy and the consumption downgrade trend. Consequently, the 2024 dividend per share was cut by 33% to HKD 0.52. We expect weaker tenant sales to continue weighing on turnover rents, while higher marketing costs will be incurred to attract foot traffic as competition from new supply intensifies. These will put pressure on the gross margin. We have also adjusted the opening timing of Westlake 66 in Hangzhou, based on the latest progress. We assume higher interest expenses as we expect increased debt levels given higher capital expenditure. Overall, we cut our 2025-27 adjusted net income forecasts by 8%-12% and lower our fair value estimate to HKD 9 per share from HKD 10.