Morgan Stanley-Hong Kong Property Apr-24 HK Retail Sales Worse than Expect...-108469053.pdf
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MIndusHongKongProperty|AsiaPacificApr-24HKRetailSalesWorsethanExpectedMorganStanleyAsiaLimited+PraveenKChoudharyEquityAnalystPraveen.Choudhary@morganstanley.com+8522848-5068JeffreyMak,CFAEquityAnalystJeffrey.Mak@morganstanley.com+8522239-7044HongKongPropertyAsiaPacificIndustryViewIn-LineRetailsalesdeclinesteepened(-15%YoY)andworsethanourandmarketestimatedraggedbyfewerChinesevisitations,continuedimpactofoutboundspending,ahighbase(consumptionvouchers)andbadweather.WeexpectMaytoshowa13%YoYdecline.Preferresidentialoverretail.tryVIiewMorStockswithretailexposure–WharfREIC,LinkREITandHysan–haveunderperformedtheHangSengIndexby18-30pptYTD.RetailsalesgrowthturnednegativeinMarch,andourexpectationofweaksalesin2Q(-14%YoY)couldresultinnear-termpressureonthesestocks.WeprefertheresidentialsegmentandrankSHKPandSinoLandaboveretailandofficelandlords.WerecentlydowngradedHysantoEWgivenslowingretailmomentum,highofficeexposureanddividendnotbeingsupportedbycashflow.gyanISyanItwlytrweIeltiyIRsRcIryrMyItwrMiyIoMywoIyhIgSCRKAHoaI(-15%YoY,-5%MoM,-25%vs.April2018):M4M24retailsaleswasdown5%YoY(-23%vs.4M18).lgLgt(ItwrMiyIoMywoI13w.wyt()I.MrEwoIMaeIyyVo)IMaeI0MygMoywInihro/IryrMyweIgSC2A4oaI(-28%YoY,-11%MoM,-43%vs.April2018):M4M24luxuryretailsalesdropped7.8%YoY(-38%vs.4M18).eltiyIIIIyayiawIoMyworIGrew11%YoYandaccountedfor8.2%oftotalretailsales(March2024:7.8%).MThisreflectsimpactofbadweatherinApril.$tiyyianIey.arApril2024retailsaleswereweakerthanourestimateof-10%YoYandmarketestimateof-6%YoY.Chinesevisitationdroppedto61%of2018"slevelinApril(itwas67%vs.2018inMarch).Retailsaleswerealsodraggedbybadweatherduringthemonth.Moreover,April2023wasahighbaseduetoconsumptionvouchers(firstbatchofHK$3Kperresident).Bycategory,luxury(-29%YoY),clothing/footware(-24%YoY),departmentstores(-22%YoY),andfood,alcoholicdrinksandtobacco(-12%)recordedthesteepestdecline.Supermarketswererelativelyresilient(-3%YoY).Withinconsumerdurablegoods,motorvehiclesandpartsincreasedby58.5%drivenbyfront-loadingspendinggivenEVtaxreductions.8M(IRsRcItwrMiyIoMywoIygyeIewyiawI52aIPyPrIChinesevisitationpickedupto69%of2018"slevelinMay(itwas61%vs.2018inApril).ThisisoffsetbydecliningHKresidentdeparturesat109%of2018inMay(at104%vs.2018inApril).MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.May31,202403:07PMGMTMIdea2KeyChartsExhibit1:Totalretailsalestrend(CNY-smoothed)-50%-40%-30%-20%-10%0%10%20%30%40%50%010,00020,00030,00040,00050,00060,000Jan