[ET Net News Agency, 12 December 2018] HSBC Global Research initiated coverage on Swire
Pacific (00019) with a "hold" rating and a target price of HK$91.
The research house believes Swire is protected on the downside due to an earnings
turnaround after a two-year down cycle. After a 45% and 5% YoY decline in underlying
profit in 2016 and 2017, the group recorded a rebound of 40% increase in 1H 2018.
HSBC expects underlying profit to further increase by a CAGR of 33% in 2018-20. DPS
should gradually rise from 2017's trough of HK$2.10 to HK$3.50 in 2019.
HSBC expects the aviation segment (14% of NAV), which has previously been a drag, to
bottom out in 2018. The beverage segment (14% of NAV), is estimated to deliver stable
earnings after tripling earnings in 2017 due to the realignment of mainland China
franchises and expansion in the US. It expects the property segment (69% of NAV) to remain
resilient, benefiting from rent growth and retail sales recovery. The marine segment (1%
of NAV), however, is likely to suffer losses due to the challenging operating environment.
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