Goldman Sachs lifted its target price for Hysan Development (00014) to HK$29.5 from HK$29.3, and maintained its "sell" rating.
The research house said Hysan's retail tenant sales (ex-Apple Store) was -5% yoy in 2016, but Hysan noted seeing signs of improvement in 2H 2016. That said, amid 23% occupancy cost ratio, Hysan's retail rental reversion has already hit negative territory in 2H 2016 and management expects mid-single-digit to low-teens percent of negative reversion in 2017.
While Lee Garden Three may add revenue upon completion, Goldman believes this will likely kick in by 2018. Overall, Goldman thinks discretionary retail trades may continue to see challenges amid negative currency impact and slower local macro environment.
Goldman fine-tuned its FY2017 and FY2018 EPS by +2.6% and +2.8%.