Sun Hung Kai Properties Limited (HKG:16) last week reported its latest half-yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were in line with forecasts, at HK$39b, although statutory earnings per share came in 13% below what analysts expected, at HK$4.63 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Sun Hung Kai Properties after the latest results.
Taking into account the latest results, the current consensus from Sun Hung Kai Properties's 13 analysts is for revenues of HK$98.1b in 2020, which would reflect a meaningful 13% increase on its sales over the past 12 months. Statutory earnings per share are forecast to fall 19% to HK$11.16 in the same period. Before this earnings report, analysts had been forecasting revenues of HK$103.0b and earnings per share (EPS) of HK$11.57 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a minor downgrade to earnings per share estimates.
Analysts made no major changes to their price target of HK$137, suggesting the downgrades are not expected to have a long-term impact on Sun Hung Kai Properties's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Sun Hung Kai Properties analyst has a price target of HK$166 per share, while the most pessimistic values it at HK$103. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Sun Hung Kai Properties's performance in recent years. It's clear from the latest estimates that Sun Hung Kai Properties's rate of growth is expected to accelerate meaningfully, with forecast 13% revenue growth noticeably faster than its historical growth of 2.2%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. So it's clear that despite the acceleration in growth, Sun Hung Kai Properties is expected to grow meaningfully slower than the market average.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sun Hung Kai Properties. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at HK$137, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Sun Hung Kai Properties going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Sun Hung Kai Properties's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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