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Tuesday, Swire Pacific (OTC:SWRAY) Limited (19:HK) (OTC: SWRAY) received a Sell rating from UBS analysts, accompanied by a price target of HK$59.90. According to InvestingPro data, the stock currently trades at $8.34, near its 52-week low of $7.49, with an Overall Financial Health score rated as "GOOD." The Hong Kong-based conglomerate, known for its diversified business interests, is currently trading at a 19% discount to its stub value. This valuation excludes the market capitalizations of its two listed companies, Swire Properties and Cathay Pacific. The stock trades at notably low multiples, with a P/E ratio of 0.53 and a Price/Book ratio of 0.31, suggesting potential value opportunities. Get more detailed valuation insights with an InvestingPro subscription.
The UBS analysts noted that the discount is influenced by an ongoing share buyback program. They anticipate that once the current round of buybacks concludes in May, the discount will increase to a mean of 30% in 2025. The analysts suggest that the potential cessation of future buybacks could be a factor in this expected widening of the discount.
Swire Pacific's underlying listed stocks, Swire Properties and Cathay Pacific, offer higher dividend yields between 7.5-8.0%, compared to Swire Pacific's 5.3%. While Swire Pacific's current dividend yield stands at 3.39%, InvestingPro data reveals an impressive 33-year track record of consistent dividend payments, demonstrating long-term commitment to shareholder returns.
Furthermore, the analysts project that the increased supply of office spaces in Hong Kong and luxury malls in mainland China could exert downward pressure on rents in 2025, potentially impacting Swire Pacific's property earnings. According to UBS, Swire Properties is expected to contribute 56% to Swire Pacific's earnings in 2024, with aviation (including Cathay and HAECO) accounting for 45%, beverages 16%, and a smaller portion coming from new ventures such as healthcare. Recent financial data shows revenue of $10.6 billion in the last twelve months, with analysts forecasting a 17% decline in sales for the current year.
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