Sun Hung Kai Properties - Riding on favourable market cycles
- Launch of Cullinan Sky Ph 2 and Sierra Sea Ph 2A has drawn strong buyer interest
- Replenishing residential land bank via multiple channels at favourable costs
- Rich project launch pipeline to tap residential demand
- BUY with HKD122TP
Strong contracted sales. In 1HFY26, SHKP achieved contracted sales of >HKD17bn in Hong Kong. Key contributors included Cullinan Sky Ph 2 in Kai Tak and NOVO Land Ph 3A in Tuen Mun. The balance came primarily from sales of completed projects. Continued strata-titled sales of rental property, Dynasty Court in Mid-levels, also contributed. SHKP started to offer Cullinan Sky Ph 2 in Nov-25 for public sale and tender, and has since sold 207 units for >HKD4.4bn. This represented 35% of total 584 units. ASP of HKD34,000psf had made the project profitable. In China, SHKP achieved contracted sales of Rmb1.3bn, mainly from Hangzhou IFC Residences, in 1HFY26.
Rich project launch pipeline. SHKP launched Sierra Sea Phase 2A in January 2026 and market response was enthusiastic. Within a short period, the company sold 703 units for >HKD4.3bn, representing 97% of the total. Sierra Sea Phase 2A comprises 727 residential units. The company has also obtained pre-sale consent for Sierra Sea Phase 2B, which will provide 775 units. We expect this phase to be equally well received by homebuyers when offered for sale. SHKP will continue to sell the newly completed Cullinan Harbour in Kai Tak by tender. Its projects in Tsuen Wan and Kwu Tung are also slated for sale in 2026.
Accretive land banking to drive future growth. SHKP has been proactively replenishing its land bank for residential development, capitalising on softer land prices. In 2025, the company acquired six residential lots through various channels, including public tender and land-use conversion.
In Sep-25, a consortium equally owned by SHKP and Kerry Properties converted its Kerry Hung Kai Godown in Cheung Sha Wan from industrial into residential use following a land premium payment of HKD797m or HKD1,729psf. This development will provide c.1,000 units with GFA of 0.46msf.
In Nov-25, SHKP outbid five other developers to secure the development rights for Tuen Mun Area 16 Ph 1. Adjacent to the planned A16 Station of the Tuen Mun South Extension, the project is expected to provide approximately 1,280 units with a total GFA of 0.6msf upon scheduled completion in 2031. The Tuen Mun South Extension is currently under construction and is anticipated to commence operations in 2030. Under the agreement, SHKP will pay MTRC an undisclosed land sum and share 29% of development profits with the railway operator. MTRC will be responsible for the land premium payment, which will be settled in two instalments. The total development cost is estimated at HKD6bn.
In Dec-25, SHKP expanded the total GFA of its residential project in Kwu Tung (Lot No. 2579 in DD92) by 1.07 msf after paying a land premium of approximately HKD1.4bn, equivalent to HKD1,300 psf. Back in 2018, the company had first converted the site from agricultural to residential use, securing a GFA of 162,000 sq ft following a land premium payment of HKD534m. At that time, about 90 houses were planned for the site. With the construction of Kwu Tung Station, SHKP has repositioned the project as a mid-to-high density residential development, maximizing its potential through the additional land premium payment. The development now provides around 2,600 units with a total GFA of approximately 1.24 msf. The total land premium amounts to HKD1.93bn, or HKD1,561 per sq ft. Based on current selling prices of comparable projects, we estimate the project to deliver a pre-tax earnings margin of over 30%.
With comfortable gearing of 15%, SHKP is well placed to pursue more value accretive land acquisitions for long-term growth.
BUY with higher TP of HK122. In the past one month, SHKP shares rose 15%, outperforming the broad market by 12ppts amidst signs of improvement in the residential market. The stock is currently trading at 52% discount to our assessed current NAV, against its 10-year average of 55%. The company has a proven track record of creating shareholder value, underpinned by its excellent execution and quality assets. We believe the stock should be a core holding for those investors seeking exposure to a recovery in the residential property market. Upcoming residential launches are likely to receive a favourable response, providing upside on the stock. The recent string of accretive land banking should brighten its earnings outlook, supporting long-term share price appreciation. By assigning a target discount of 50% (c.0.5SD above 10-year average) to our Dec-26 NAV estimate, we derive a TP of HKD122. BUY
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