Henderson Land surges 7% as 1H profit jumps 66%

Henderson Land reported 1H26 underlying profit of HKD5.071 billion, up 66% from a year earlier, beating broker estimates on a HKD1.6 billion farmland resumption gain.

"The results strengthen our confidence in the earnings rebound," Citi said in a report, raising its target price to HKD34.6 from HKD34.2 while keeping a Buy rating.

The gain came from a HKD1.6 billion pre-tax farmland resumption payment, versus HKD240 million a year earlier, plus HKD1.7 billion in pre-tax profit from Hong Kong development properties, up from HKD70 million. Contracted sales reached HKD18.1 billion, up 188% year on year, already surpassing the full-year target of 2,600 units. Group attributable EBIT rebounded 45% to HKD7 billion as Hong Kong development revenue tripled to HKD13.3 billion and the segment margin recovered to 18.3% from 2.1%. Contribution from HK & China Gas rose 10% to RMB2.1 billion, supported by rising sustainable aviation fuel output after its Malaysian plant starts operations by end-2025.

Shares rose 7.1% to HKD30.18, breaking above their 100-day and 250-day moving averages on turnover of HKD345 million. The government's accelerated resumption of farmland in the Northern Metropolis is expected to provide additional earnings and cash flow, with the Central Harbourfront project set to contribute from the second half of 2027.

Goldman Sachs said the results far exceeded both its and market expectations, reiterating a Buy rating with a 12-month target of HKD41, equivalent to a 40% discount to projected 2026 net asset value. The stock trades at about a 59% discount to that net asset value, with a 0.4x price-to-book ratio and a 4.5% dividend yield. CLSA, which kept a Hold rating, cut its target to HKD27.5 from HKD30.6, while UBS maintained a Sell rating with a target of HKD22.7.

Henderson Land kept its interim dividend at HKD0.5 per share. Net gearing, including shareholder loans, declined to 42% as of June, with net debt falling HKD5.5 billion half on half. Management guided for full-year development property margin to improve to the high teens and said it had no intention to slash prices to clear inventory. Hong Kong attributable rental income rose 3% to HKD3.5 billion, with positive rental reversions at the International Finance Centre office towers and tenant sales at IFC Mall up more than 40%.

The results show the developer is converting its Northern Metropolis farmland holdings into cash faster than expected, with 3.65 million square feet in San Tin and 2.21 million square feet in Hung Shui Kiu still held. Investors will watch second-half contracted sales and the pace of further resumption payments, which management did not quantify during the results briefing.

This article is for informational purposes only and does not constitute investment advice.