Morningstar

Wharf Real Estate Investment Co Ltd 01997

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Stock XHKG Rating as of
HK$28.35 +0.35 (1.25%)
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As of Delayed Price Closed

Company Report

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Wharf REIC's Growth Underpinned by Strong Luxury Portfolio in Harbour City Mall

Xinfu Lee, Kathy Chan

Wharf Real Estate Investment Co., or Wharf REIC's, flagship properties are Harbour City and Time Square. They are well-known destinations for locals and tourists alike. Historically, the two properties collectively account for around 8%-10% of total retail sales in the city. As the company intends to hold Hong Kong investment properties exclusively, the China operation is progressively scaled down. Murray Hotel was added to the Hong Kong portfolio in mid-2018, but given the corporate mandate and the current real estate environment, Wharf REIC is unlikely to make significant acquisitions in the near term, in our view. Its rental revenue growth is limited to reversion of the existing assets. While asset enhancement opportunities exist for Times Square, the biggest driver is the state of retail sales in Hong Kong.

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Price vs Fair Value

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01997 is trading at a 886% premium.
Price
HK$28.35
Fair Value
HK$69.00
Uncertainty
Medium
1-Star Price
HK$96.86
5-Star Price
HK$26.50
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

The company's flagship assets successfully weathered previous retail downturn in Hong Kong, reflective of their desirability for leading retailers.

Bears

The flagship assets have seen tremendous growth over the past decade, but with the changing behavior of mainland tourists, the golden age for Hong Kong retail is in the past, in our view.

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Trading Information

Previous Close Price
HK$28.00
Day Range
HK$27.30–28.55
52-Week Range
HK$18.00–30.60
Bid/Ask
HK$28.20 / HK$28.35
Market Cap
HK$86.08 Bil
Volume/Avg
5.1 Mil / 4.6 Mil

Key Statistics

Price/Earnings (Normalized)
13.19
Price/Sales
6.45
Dividend Yield (Trailing)
4.41%
Dividend Yield (Forward)
4.52%
Total Yield
4.41%

Company Profile

Wharf spun off Wharf Real Estate Investment Co in November 2017. It is a leading property investor with a focus in prime retail assets in Hong Kong. Rental income from two flagship assets Harbour City and Times Square account for around 80% of revenue. The balance is made up of The Murray hotel, a suburban mall in Plaza Hollywood, two offices in Central CBD. The group also holds two malls in Singapore and a mixed-development in Suzhou. Wharf was originally a shipping company but transformed into a property developer and investor in the 1960s by redeveloping its unused industrial assets, many located in city-center and waterfront locations. The Harbour City site was previously wharfs, and the Times Square site was a tram depot in the 1970s. Wheelock holds a 45% stake in Wharf REIC.
Sector
Real Estate
Industry
Real Estate Services
Stock Style Box
Large Value
Total Number of Employees
2,900
Website
https://www.wharfreic.com

Competitors

Valuation

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Metric
01997
00016
00012
Price/Earnings (Normalized)
 13.1910.9914.15
Price/Book Value
 0.460.430.40
Price/Sales
 6.453.644.42
Price/Cash Flow
 12.8210.4422.87
Price/Earnings
01997
00016
00012

Financial Strength

Metric
01997
00016
00012
Quick Ratio
 0.110.370.43
Current Ratio
 0.173.762.15
Interest Coverage
 2.279.075.46
Quick Ratio
01997
00016
00012

Profitability

Metric
01997
00016
00012
Return on Assets (Normalized)
 2.49%2.89%1.69%
Return on Equity (Normalized)
 3.20%3.89%2.80%
Return on Invested Capital (Normalized)
 3.21%3.52%2.34%
Return on Assets
01997
00016
00012

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