[ET Net News Agency, 5 September 2019] UBS Global Research lowered its target price for
Hysan Development (00014) to HK$31.1 from HK$43 and maintained its "neutral" rating.
The research house is concerned about potential increases in the office/retail vacancy
rates in 2020, as leases in 20%/18% of the areas are due to expire.
Together with softening spot rent growth and a lack of new investment property (IP)
completions, UBS estimated Hysan will only report weak recurring earnings growth of 1%/3%
in 2020/2021; much lower than the 6% in 2019.
UBS estimated KPMG's (its anchor tenant in Hysan Place) potential relocation alone could
increase the vacancy rate of Hysan's overall office portfolio by 3-4ppt, compared with its
1H vacancy level of 3%. Together with the falling spot rent (4-5% decline in 2020-21), UBS
forecast Hysan's official rental income could decline by a 2% CAGR during 2019-21. (KL)