Nomura on Kerry Properties

1H17 a strong beat with further dividend surprise
Core profit +98% y-y, interim DPS +50% y-y Kerry Properties announced its 1H17 interim results on 21 August, with core profit coming in at a strong line-by-line beat at +98% y-y to HKD2,833 mn, 29% above Nomura estimates. More importantly, interim DPS rose 50% y-y to HKD0.45. Strength is shown across HK and China property sales; HK and China rentals, hotels operations and others.

Expecting a stronger 2H17
We expect an even stronger 2H17 than the already-strong 1H17. We expect a much higher margin for the property sales profit from both HK and China; and we expect the robust momentum for the property rental profit to continue.

Consensus too low
On the other hand, consensus is too low, whether for the core EPS or DPS. Our FY17F EPS and DPS forecasts are 14% and 37% higher than the consensus, while we already consider our numbers on the conservative side. A combination of: (1) interim dividend surprise; (2) positive guidance for 2H17F booking; (3) an expected wave of consensus numbers upgrade should excite the market post-results. To recall, when Kerry Prop first delivered a dividend surprise in Mar-17, the market responded positively with 1D/1W/1M post-result share price +4%/+6%/+17%, outperforming its peers significantly in the same period.

TP revised to HKD34.6, reiterate as sector top pick
The stock is trading at a 59% discount to revised NAV of HKD67.8 and at 5.4% FY17F dividend yield, and we reiterate this deep-discounted stock as one of the sector top picks. We revise our FY17-19F underlying profit by +7%/+1%/+8%, respectively, as we update the completion schedule for both HK and China. Our new TP is HKD34.6 (with 24% potential upside), which is based on a 49% discount to our end-2017F NAV of HKD67.8.