The Zhitong Finance App learned that Goldman Sachs released a research report saying that in response to limited room for dividend increases and uncertainty about the Lee Garden Phase VIII office pre-leasing situation, the Hysan Development (00014) rating was downgraded from “neutral” to “sale”, and the target price was lowered from HK$24.9 to HK$16. Goldman Sachs pointed out that since Hysan Development cut its dividend by 25% in 2023, its dividend was barely covered by cash profits. Considering that the current net debt ratio taking into account perpetual bonds is 49.2%, which is far higher than the 10% to 30% of its peers, it believes there is limited room for dividend increases in the next two to three years. The company's dividend distribution ratios from 2026 to 2028 are predicted to reach 138%, 97% and 88%, respectively.
In terms of Lee Garden Phase 8, the 850,000-square-foot office building of the project will open in the fourth quarter. Goldman Sachs indicated that management had limited progress on pre-leasing. Previously, there were rumors in the market that Zhongan Bank had leased 45,000 square feet, with an average monthly lease of 50 yuan per square foot. It is predicted that the occupancy rate of the project's office buildings will reach about 30%, 50% and 80% respectively from 2026 to 2028, corresponding rental income of 34 million yuan, 188 million yuan and 286 million yuan. Compared with the total capital expenditure of about 30 billion yuan, the expected return on costs and returns of only 1% by 2028 will drag down the Group's return on equity.