Henderson Land Earnings: Lowering Valuation by 6% on Lower Margins; Attractive Dividend Yield of 8%

Henderson Land’s 2024 results were within our expectations. The group’s net profit fell 32% year on year to HKD 6.3 billion, driven by a higher attributable share of fair value loss on its completed investment properties and investment properties under development. Excluding the fair value changes, the group’s underlying profit rose 1% year on year. Dividend per share for 2024 is unchanged at HKD 1.80, in line with our expectation. The group is looking to launch 13 projects in 2025 and is optimistic that home sales will improve, especially in the second half of the year, given a more favorable interest-rate environment. However, we lower our fair value estimate to HKD 32 per share from HKD 34 after rolling our model and fine-tuning our assumptions. Our 2025-27 EPS forecasts are lowered by 2%-8% after cutting our margin assumptions, as we expect pricing pressure to remain in the near term given high supply in the residential market. Henderson Land remains our preferred pick for Hong Kong residential developers as it trades at an attractive 2025 dividend yield of 7.8%. We do not expect the passing of the founder Lee Shau Kee to have a huge impact on the business, as he had handed over the reins to his two sons in 2019.