Xiaomo: Maintaining Taikoo Properties' (01972) “Accumulation” Rating Target Price of HK$30

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that Swire Properties (01972) is still one of the top choices due to its impressive track record of increasing profits and percentage dividends in deliveries. Value-enhanced capital recovery can also provide upward risk. The valuation is still not expensive, with 52% net asset value discount and 5.2% dividend yield. Motong maintains an “gain” rating on the stock, with a target price of HK$30.

According to the report, Swire Properties' performance for the first half of 2026 shows that all major divisions are on the right track. The bank predicts continued profit growth of more than 30% year-on-year in the 2026 fiscal year due to property development and delivery. Although property development deliveries should be normalized from FY2027, the bank still expects a year-on-year unit percentage increase in the 2027/28 fiscal year. The forecast total rental income attributable to fiscal year 2025 to fiscal year 2028 is driven by a compound annual growth rate of over 10% in retail sales in mainland China, but offset by a decline in the low percentage of units in Hong Kong office buildings. Notably, the occupied completed floor area should increase from 10.6 million square feet in FY2025 to 19.3 million square feet from FY2028, providing a good buffer for profit growth.

The bank said that the company's retail sales in mainland China recorded a year-on-year increase of more than 10% this year. In terms of retail sales in mainland China, good momentum will continue to drive growth. Tenant sales improved 23% year-on-year in the first half of 2026, mainly due to strong growth in Taikoo Hui in Shanghai and Taikoo Li in Sanlitun, Beijing. However, even excluding these two malls, tenant sales increased by an average of 10% year over year. The base figure will be higher in the second half of 2026, but an overall year-on-year increase of more than 10% and a high percentage increase in the number of units excluding outliers is still expected.

With steady tenant sales and positive rental returns, total rental income attributable increased 14% year over year in the first half of 2026, and the bank expects a continuous increase of more than 10% year over year in the second half of 2026. Retail in mainland China will continue to be a growth driver for Swire due to its rich channel for opening shopping malls. Projects scheduled to be completed in the second half of 2026 include Taikoo Li Phase II in Qiantan, Shanghai, and Taikoo Li in Xi'an, Taikoo Li in Guangzhou, and Taikoo Hui Phase III in Guangzhou should also be gradually opened from 2027. As a result, the bank anticipates a year-on-year increase of more than 10% in the 2027 and 2028 fiscal years, driven by positive rental returns and new shopping malls.

In terms of office buildings in Hong Kong, Motong pointed out that Pacific Place took the lead in recovering. Despite negative rent returns on books, total rental income due remained flat year on year in the first half of 2026, which is a surprising positive. This is likely due to improved occupancy rates. It is encouraging that management sees strong leasing momentum and improving spot rents at Pacific Place. As a result, the bank believes that rental returns at Pacific Place may stabilize in the 2027 fiscal year. Although management commented that Taikoo Place would remain resilient, the bank took a slightly more cautious stance because it believed competition for new supplies in West Kowloon was likely to remain intense. As a result, Motong maintained its forecast for the 2026-28 fiscal year to decline in the percentage of low units per year in rental income.