[ET Net News Agency, 2 November 2018] HSBC Global Research lowered its target price for
Wharf REIC (01997) to HK$54.4 from HK$59.3, and maintained its "hold" rating.
The research house said Hong Kong retail sales growth in September decelerated
significantly to 2.4% from 9.4% in August. While the share price performance of landlords
have tended to be more resilient than developers when the market is volatile, it may not
be applicable when the underlying retail market deteriorates significantly.
Looking ahead, the company is likely to receive less turnover rent from its trophy
projects Harbour City and Times Square, which was one of the key reasons for its pleasant
surprise in 1H results.
HSBC noted that the company's turnover rent increased to 13% of retail revenue in 1H
2018, up from 8% in 2017. It expects the ratio to retreat and back to low single-digit in
2019-20. It lowered its 2019-20 earnings by 5% to 7% to reflect lower rental assumptions
for the retail properties in Hong Kong. (KL)