Hang Lung Properties' Full-Year Results Resilient; Borders Reopening to Kickstart Recovery

Our fair value estimate of Hang Lung Properties remains at HKD 22, with our long-term view largely unchanged as the company exits the pandemic following the easing of travel restrictions in China and Hong Kong. The group’s 2022 results were resilient despite various COVID-19-related headwinds disrupting businesses and affecting consumer sentiments. Full-year revenue of HKD 10.3 billion was a slight miss to our HKD 10.8 billion forecast due to weaker performance from its China leasing portfolio that saw a 7% depreciation in the Chinese yuan and the reintroduction of local pandemic containment measures in the second half of 2022 causing business disruption and lower foot traffic. Nevertheless, with China and Hong Kong joining the rest of the world to substantially ease travel restrictions, we think the worst is over for the group and expect it to benefit from the recovering domestic consumption and business outlook, which should lead to improving leasing and rental performances for its China and Hong Kong retail and office portfolio. We think the group is undervalued based on current prices and like it for its high-quality China leasing portfolio that we believe will strongly emerge from the pandemic to drive the group’s earnings.