[ET Net News Agency, 7 June 2018] HSBC Global Research initiated coverage on Wharf REIC
(W-REIC)(01997) with a "hold" rating, and with a target price of HK$57.6.
The research house said W-REIC has a portfolio of six prime commercial properties in
Hong Kong, including two of the city's leading shopping malls - Harbour City and Times
Square. It sees the company as a proxy for Hong Kong retail - it has 68% exposure to the
retail segment and 9.2% market share in terms of retail sales.
HSBC likes its asset quality and expects earnings to grow in line with the gradual
improvement in Hong Kong's shopping environment. However, it does not see material upside
as the share price largely reflects the recovery in retail sales since 2016 and the
re-rating following the corporate restructuring in 2017.
HSBC expects W-REIC's overall rental revenue to grow at a more moderate CAGR of 3.9%
over 2017-20 to HK$15bn. It estimated 2017-20 core profit will grow at a 2.5% CAGR to
HK$10bn. Based on a 65% pay-out of recurring profit from investment properties and hotels
in Hong Kong, it offers a 3.3% yield in 2018, one of the highest among peers, which should
support the share price. (KL)