Company Reports

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire area.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire area.

Swire Properties' first-half recurring underlying profit rose 36% year on year, reflecting the sale of two luxury houses in Hong Kong and stronger retail rental income in mainland China and Hong Kong. Interim dividend increased 6% to HKD 0.37 per share.

Swire Properties' first-quarter operating update shows retail mall tenant sales growing year on year across its Hong Kong and mainland China mall portfolio. However, rental reversion for the Hong Kong office portfolio remains negative, despite improved leasing activity.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire area.

Swire Properties' 2025 recurring underlying profit declined 3% to HKD 6.3 billion as the Hong Kong office market remained soft and the Miami Brickell City Centre mall ceased to contribute after its disposal in mid-2025. Dividends per share grew 5% to HKD 1.15.

We are revising our estimates for Swire Properties' and Swire Pacific's property trading business ahead of the companies' full-year earnings.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire area.

Swire Properties' Hong Kong office occupancy rose by 1 percentage point quarter on quarter to 89% as of end-September, while headline rents remained stable. The Hong Kong retail portfolio stayed fully let, with year-to-September sales showing improvement over the first half.

Swire Properties' first-half recurring underlying profit declined 4% year on year, as weakness in the Hong Kong office market remained a drag, partly offset by a slight improvement in mainland China retail rents driven by tenant mix optimization. The interim dividend rose 3.5% to HKD 0.35 per share.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire area.

Swire Properties has announced the sale of its 75% interest in Brickell City Centre retail asset to Simon Property, which owns the remaining 25%. The total consideration is up to USD 549 million, including a contingent component of USD 36 million tied to the cost of works on shared facilities.

We maintain our fair value estimate of HKD 22 for narrow-moat Swire Properties, as the company’s resilient first-quarter operations, despite market challenges, were within our expectations. For the Hong Kong office portfolio, end-March occupancy, including Two Taikoo Place and Six Pacific Place, which opened during the current downturn in 2022 and 2024, respectively, was 89%, unchanged from end-2024. Pacific Place and Taikoo Place office clusters reported negative 16% and negative 14% rental reversions, respectively, as leases continue to be renewed at lower market rents compared with the previous lease cycle. However, headline rents have stabilized at fourth-quarter 2024 levels. For the retail portfolio, Hong Kong malls remain fully leased, while occupancy for mainland China malls continues to be well above 90%. Declines in tenant sales generally narrowed compared with 2024, with select malls seeing year-on-year sales improvement as they benefit from tenant mix optimization.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire areas.

Narrow-moat Swire Properties’ 2024 results were within expectations. Recurring underlying profit declined by 11% to HKD 6.5 billion due to weaker Hong Kong office rental income and higher finance costs. Despite a drop in core profits, dividends per share, or DPS, grew by 5% to HKD 1.10, in line with the company’s commitment to a mid-single-digit annual dividend growth.

Swire Properties has over 50 years of history in Hong Kong, and it has been characterized by patience and transformation. The company's modus operandi is to acquire assets in less-than-prime areas. Over a span of several decades, the company gradually builds, manages, upgrades, expands, and eventually transforms the entire areas.

Narrow-moat Swire Properties’ guidance for 2024 recurring underlying profit attributable to shareholders of HKD 6.5 billion is in line with our forecast, but the company expects to record a loss attributable to shareholders of HKD 0.8 billion due to a larger fair value loss for investment properties compared with last year. We think a weaker property valuation is no surprise as Hong Kong office rents remain weak, while the elevated interest rates could imply capitalization-rate expansion pressure. That said, the noncash fair value losses do not affect our discounted cash-flow-derived valuation.

We maintain our fair value estimate of HKD 22.50 per share for narrow-moat-rated Swire Properties after its in-line third quarter operating performance. We see lingering pressure in the company’s Hong Kong office assets given weak leasing demand and elevated citywide vacancy rates, while retail assets across Hong Kong and China suffer from subdued tenant sales. That said, we continue to see long-term value in Swire Properties’ HKD 100 billion investment plan for 2022-32, of which 30% is planned for its development master plan in Hong Kong to continuously expand and improve the attractiveness of its Pacific Place and Taikoo Place asset clusters. Swire Properties is the top pick within our Hong Kong landlord coverage, as we think the 25% discount to our valuation and the estimated 6.7% 2024 dividend yield are attractive. Coupled with the ongoing share buyback program, we believe the firm stands out under the current interest rate cut cycle.

We maintain the fair value estimates of Swire Properties, CapitaLand Investment, Mapletree Pan Asia Commercial Trust, or MPACT, and Link REIT after visiting their office and retail assets in Shanghai. We think China’s slowing economic growth remains a key headwind for consumer spending and business expansion. For retail malls, we note that vacancy rates for Shanghai downtown retail districts remain healthy at 5.4% as of third-quarter 2024, according to Cushman & Wakefield. This should provide some support for market rents that are being weighed down by weak retail sales performance and supply of new retail malls, albeit in the secondary retail areas. On the other hand, office rents remain soft in Shanghai given the elevated central business district vacancy rate of 16.6% as of third-quarter 2024, according to Cushman & Wakefield. While the Chinese government is looking to revive its economy with a series of policy stimulus efforts, we think that business owners and consumers may still exercise caution until they are convinced of a durable economic recovery. For landlords and REITs with mainland China exposure, our preferred pick is Swire Properties that is trading at a 29% discount to our fair value. Swire Properties remains steadfast in its long-term plan to invest in China, allocating half its HKD 100 billion investment plan to China. We expect these projects to start contributing from 2026, with the bulk of it coming from 2027.

Narrow-moat Swire Properties’ first-half results are in line with our expectations. Recurring underlying profit declined by 8% year on year, given weakness across Hong Kong office and retail properties, partly offset by the full period contribution of Taikoo Li Chengdu and rental improvement in Taikoo Li Sanlitun in Beijing, given tenant mix improvement. We have updated the handover timing of residential properties in Hong Kong, leading to a 6% reduction in our 2026 adjusted net income forecast, offset by higher earnings in 2028.