Street Calls of the Week
Investing.com - UBS has downgraded Sun Hung Kai Properties (HK:0016) (OTC:SUHJY) from Buy to Neutral with a price target of HK$96.00, citing balanced risk-reward after the stock’s recent rally. The $34.8 billion market cap property developer has shown strong momentum, trading near its 52-week high of $12.70, according to InvestingPro data.
The Hong Kong property developer’s shares have risen nearly 31% year-to-date, benefiting from recovery in residential market transactions, according to UBS. While the current dividend yield stands at 5.52%, with an impressive 34-year streak of consecutive dividend payments as highlighted by InvestingPro, UBS views limited upside potential for dividend per share in fiscal year 2026.
UBS noted that while some investors might point to Sun Hung Kai’s price-to-book ratio of 0.45 or high net asset value (NAV) discount, Hong Kong residential assets account for only 20% of the company’s gross asset value. The company maintains robust financial health with a current ratio of 3.36, indicating strong liquidity.
The research firm explained that without capital recycling for investment property or changes to shareholder return policy, NAV discount narrowing appears less likely for the property developer.
UBS identified potential downside protection from the successful launch of Cullinan Sky Phase 2, noting that recent secondary transactions for Phase 1 suggest a 7-17% price appreciation potential.
In other recent news, S&P Global Ratings has revised its outlook on Sun Hung Kai Properties to stable from negative. The rating agency has affirmed its ’A+’ ratings for the company. S&P anticipates that Sun Hung Kai Properties will use cash proceeds from property sales and rental income to reduce its adjusted debt. The company is expected to decrease its debt by HK$4 billion to HK$5 billion annually from fiscal 2026 to fiscal 2028. These developments reflect a positive shift in the company’s financial strategy and debt management. The revised outlook suggests improved financial stability for Sun Hung Kai Properties in the coming years.
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