20180903-中国银河国际证券-信德集团-00242.HK-1H18_RESULTS_A_NON-EVENT__ON_TRACK_TO_DELIEVER_STRONG_REVENUE_BOOKING_IN_2H_3页_1mb

Shun Tak 1H18 Results Summary

Core Content

Shun Tak (0242.HK) reported its first-half 2018 (1H18) results, which were described as uninspiring due to limited revenue contributions from its property business. However, the company remains on track for strong earnings growth in 2018 and beyond, driven by the anticipated revenue booking from the Nova Grand project and a significant disposal gain from its stake in Nova Mall.

Key Financial Highlights

• Net Profit (1H18): HK$307m, a 56.1% YoY drop
• Property Revenue (1H18): HK$405m, a 80.3% YoY decline
• Disposal Gain: Expected to be booked in 2H18, amounting to HK$1.3bn pre-tax profit
• Market Cap: US$1,171m
• Free Float: 36.8%
• PBR (Price-to-Book Ratio): 0.34x (2018E), indicating a deep discount relative to book value

Main Points and Views

1. Uninspiring 1H18 Performance

• The company's 1H18 results were weak due to limited revenue from the property business.
• The property segment contributed only HK$405m in revenue, down 80.3% YoY.

2. Strong Outlook for 2H18 and Beyond

• Nova Grand Project: A key driver for future revenue, with 15% of the project's revenue expected to be booked in 2H18.
• Property Development Revenue: Expected to remain robust in 2019 and 2020 as more units are sold.
• Earnings Growth: Strong momentum is anticipated in 2019 and 2020, with projected EBIT of HK$4,971m and Net Profit of HK$3,726m for 2019E.

3. Dividend Policy and Special Dividend Potential

• The 2018E dividend yield is expected to be 6.87%, with a 20%-25% pay-out ratio.
• The final dividend will take the full-year profit into account and is not expected to be affected by the skipped interim dividend.
• A special dividend is possible due to strong earnings growth and the one-off nature of the disposal gain.

4. Share Buybacks and Market Confidence

• Management mentioned the possibility of share buybacks post-results, as the black-out period has ended.
• The company has already repurchased 16.98m shares YTD at prices between HK$3-HK$3.2, representing 1.5% of free float.

5. Strategic Shift for Smoother Revenue Contributions

• Shun Tak aims to ensure a smoother revenue contribution from its property business over the next five to six years.
• This includes contributions from Macau, mainland China, and Singapore, reducing volatility and supporting share price recovery.

Financial Projections

Analyst Insights

• The PBR of 0.34x in 2018E suggests the company is undervalued.
• The re-rating story remains intact due to the potential for strong earnings growth and the one-off disposal gain.
• The analyst briefing emphasized the company's focus on dividend sustainability and capital return through buybacks and special dividends.

Conclusion

Despite a weak 1H18 performance, Shun Tak is positioned for strong earnings growth in the remainder of 2018 and the upcoming years, primarily due to the Nova Grand project and the disposal gain. The company is also exploring share buybacks and may consider a special dividend, which could support its re-rating potential and dividend yield. The dividend policy is expected to remain stable, with the final dividend reflecting full-year profits.