Real Estate Operations Supportive of Henderson Land's First-Half Result

Henderson Land’s first-half result was within our expectations. While underlying profit, excluding fair value changes, declined by 34% to HKD 5.14 billion, a number of one-off items skewed the result. The real estate operations performed well with property development revenue 41% higher against the same period last year at HKD 8.5 billion, mainly due to higher completions in mainland China. Investment properties have also stabilised with rental income flat on last year at HKD 4.3 billion. The key negative was subsidiary Hong Kong and China Gas, or HKCG, as gas demand was weak and higher gas costs reduced operating margin. Profit contribution was 18% lower compared with the same period last year, but the dividend flowing back to Henderson Land was unchanged against last year at HKD 930 million. The first-half dividend of HKD 0.50 was in line with the same period last year. We leave our estimates and fair value estimate of HKD 49 per share unchanged.