Hang Lung Group (10) H2 2012 earnings summary

Executive summary

• Non-core asset sales captured ~40% premium to June 30 balance-sheet values; further disposals expected to be limited, with completed Hong Kong apartments a possible exception.

• Mainland rental growth is expected to reach the mid-to-high teens, supported by new center contributions; Hong Kong retail rental growth is forecast to resemble the prior year.

Financial highlights

• Mainland retail sales were high-single-digit higher in H2 than H1; Hong Kong retail rent grew faster than other portfolio categories.

• The board proposed a modest dividend increase, primarily reflecting proceeds and profits from non-core asset disposals; management reiterated a prudent, stable and progressive policy.

Outlook and guidance

• Mainland rental growth is expected to remain similar to 2012 on a like-for-like basis, with total mainland rent potentially up mid-to-high teens as Forum 66 operates for a full year and Center 66 contributes 3–4 months.

• Hong Kong retail rental growth is expected to be broadly similar to the prior year.

• Center 66 in Wuxi was expected to open in September, with deposits received for about half its space and leasing discussions bringing commitments close to 70%–80%.

• New projects aim to exceed initial yield-on-cost estimates of 4%–5%; high-end residential may be added alongside commercial developments to support capital recycling.