Swire Properties: Third-Quarter Operating Update Is Within Expectations

We maintain our fair value estimate of HKD 31 for narrow-moat Swire Properties following the company’s in-line third-quarter operating update. While the weak office market in Hong Kong and the high interest-rate environment have weighed on the share price's performance, we think shares are attractive with a 50% discount to our fair value estimate, as of the Nov. 3 close price, for investors willing to look past the current downturn. Our long-term view is unchanged and we continue to expect the Swire Properties’ flagship assets to benefit from the company’s development master plan, which gradually improves the overall attractiveness of the neighborhood. In the near term, we anticipate further tourism recovery to support the retail segment in the fourth quarter, partly offsetting the weakness in the office assets.