For May, retail sales in HK climbed 8.8% YoY to HK$36.0b. While this is the lowest pace of growth since Sep 2009 (excluding seasonal distortions during Jan and Feb each year due to Chinese New Year), we believe that Fortune will continue to have good positive rental reversions this year, especially as suburban malls are more defensive than luxury retail spaces. In volume terms, luxury goods saw sales contract 2.9% while supermarket sales rose 9.1%. Since we initiated coverage on 14 Mar, Fortune’s share price has climbed 17.5% to a one-year high and we think further upside is possible. 2Q12 will be the first quarter to see full contributions from two properties acquired in mid-Feb. Fortune is trading at a P/B of 0.6x and an estimated FY12 dividend yield of 6.8%. We maintain our BUY rating and our fair value of HK$5.22.
Retail rents climbed in Apr
The HK private retail rent and price indexes set new records in Apr, the third consecutive highs starting from Feb. Compared to the Mar figures, the rent index and the price index were up 1.4% and 2.9% respectively. New Territories, where the majority of Fortune’s malls are located, saw average private retail rents climb a respectable 15.2% YoY in Apr.Retail sales grew slower in May
For May, retail sales in HK climbed 8.8% YoY to HK$36.0b. While this is the lowest pace of growth since Sep 2009 (excluding seasonal distortions during Jan and Feb each year due to Chinese New Year), we believe that Fortune will continue to have good positive rental reversions this year. China’s slowdown is manifesting itself in the decline in HK luxury sales - jewellery, watches and clocks, and valuable gifts saw a 2.9% YoY decline in sales volume in May.
Supermarket sales beat luxury sales
In contrast, supermarket sales climbed 9.1% by volume. Last month, two dairy companies in China, Inner Mongolia Yili Industrial Group and Bright Dairy & Food Co., recalled their products from the market due to contamination. As food safety continues to remain a concern, grocery purchases by Mainlanders in HK should continue to be resilient, thus helping to support suburban shopping malls such as those owned by Fortune. Suburban shopping malls also see a lot of non-discretionary purchases by local HK residents.
Maintain BUY
Fortune’s stock price has climbed 17.5% to a one-year high since we initiated coverage on 14 Mar and we think further upside is possible. 2Q12 will be the first quarter to see full contributions from Belvedere Square and Provident Square, which were acquired in mid-Feb. Fortune is trading at a P/B of 0.6x (NAV per unit of HK$7.81) and an estimated FY12 dividend yield of 6.8%. We maintain our BUY rating and our fair value of HK$5.22.
No comments:
Post a Comment