About a year ago Macquarie Research cuts its earnings forecast for Hang Lung Properties for 2005 by 16 per cent to $2.98 billion because the sale of its Hong Kong projects would be spread over a longer period than expected. However, it raised forecasts for 2006 by 2 per cent to $4.75 billion and 2007 by 7 per cent to $5.7 billion.
The sales schedule of Hang Lung's Hong Kong developments covered three to four years instead of two to three years, as previously assumed.
The strong response to Sun Hung Kai Properties' The Arch, above Kowloon Station, should benefit future sales of neighbour The Harbourside, a project of 1,162 flats. The market price of surrounding developments should increase, leading Macquarie to raise its estimated selling price for The Harbourside from $10,000 per square foot to $12,000 per sq ft.
The company's Shanghai office tower the Grand Gateway, which was 80 per cent pre-leased, was scheduled to be completed in July last year and contributions from rent should flow earlier than expected.
The broker had an 'outperform' recommendation on the stock and maintained its net asset valuation at $17.90 and a 12-month price target of $14.30 - from a price on April 21, 2005, of $11.60 - based on rising home prices, rising commercial rents in Hong Kong and China and new ventures in China.
At the end of August last year the company announced a 48.3 per cent rise in net profit for the year to June 2005 to $6.84 billion. Excluding revaluation gains, earnings were up a more modest 23 per cent to $2.54 billion.
In February Hang Lung Properties announced an increase in a net profit for the six months to December last year to $1.61 from $1.6 billion a year earlier. Excluding gains from revaluation of its investment properties, its interim profit fell 45 per cent compared with the period a year ago.
The counter closed on Friday at $14.95.