Citi: Significantly lowers the target price for Hysan Development to HKD 15.69, rating downgraded to "Sell."

Citigroup published a research report indicating that Hysan Development's retail income and core rent for the first half of the year are 15% and 22% higher, respectively, compared to the first half of 2023. However, the bank believes that the upward potential driven by asset enhancement initiatives has already manifested through flagship expansion and tenant upgrades from 2024 to 2025. The gap between the 17% growth in tenant sales and the 1% increase in retail rent in the first half also reflects a diminishing profit upside. The capital recycling plan is progressing smoothly, but with a debt ratio of 49%, further deleveraging may be necessary to maintain stable per-share dividends. The bank believes the favorable factors for retail are generally reflected, and given Hysan's challenges in office properties, uncertainties surrounding Lee Gardens Phase 8, and limited balance sheet flexibility, it has downgraded its rating from "Buy" to "Sell," increasing the target net asset value discount from the original 45% to 65%. The target price has been significantly reduced by 35.4% from HK$24.3 to HK$15.69, corresponding to a target yield of 7%.