Key Takeaways:
Wharf REIC lifted its dividend payout ratio to 90% from 65%, raising the first interim dividend 42% to HK$0.94 per share.
Citi said the sale of Wheelock Place in Singapore at a 12% premium to book value will aid debt reduction and lower financing costs for the Hong Kong landlord.
Underlying net profit rose 6% to HK$3.31 billion in the first half, with underlying earnings per share at HK$1.09. Revenue slipped 1% to HK$6.34 billion. After a HK$3.55 billion investment property revaluation deficit, a non-cash valuation charge, the company posted a net loss of HK$176 million, narrowed from HK$2.41 billion a year earlier, with a loss per share of HK$0.06.
The stock, down 5.4% at midday, reversed to close up 22.8% at HK$32.4, with turnover of 3.26 million shares worth HK$86.1 million. Net debt fell to HK$29.2 billion, with gearing at a record-low 15.9%. Further deleveraging is expected after the Wheelock Place sale closes.
The board's decision to lift the payout ratio from 65% to 90% of recurrent core underlying net profit implies a 38% increase in base dividends, the company said. The first interim dividend of HK$0.94 compares with HK$0.66 in the same period last year.
Management pointed to improving domestic demand and a tourism-driven retail and hotel recovery. Harbour City delivered above-market retail sales growth, while portfolio office occupancy rose to 93%, reinforcing Wharf REIC's position in Hong Kong's core commercial property market.
Wharf REIC, which holds flagship assets including Harbour City and landmark office towers in central districts, trades with a market capitalization of about HK$80.7 billion. The most recent analyst rating on the stock is a Buy with a HK$29.20 price target.
The higher payout reflects management's confidence in stable cash flows from its core Hong Kong portfolio, a draw for income-focused investors. Investors will watch the full-year results and completion of the Wheelock Place sale for further balance-sheet deleveraging.
This article is for informational purposes only and does not constitute investment advice.
