[ET Net News Agency, 27 November 2019] Goldman Sachs lowered its target price for
Wheelock and Co (00020) to HK$59 from HK$75 and maintained its "buy" rating.
The research house calculated that dividends received from Wheelock's two listed
subsidiaries (Wharf/Wharf REIC) amount to HK$5-6bn each year. The group also generates an
additional HK$4-6bn DP (development property) profit in HK/Singapore each year, thereby
adding up to HK$10+bn in FCF.
Comparing this to its current HK$3bn dividend on a 20-25% payout, Goldman believes there
is much scope for the group to increase its dividend over time, and/or continue expanding
its landbank or buying more Wharf or Wharf REIC shares in the open market as it has been
doing in the last 2-3 years.
One drawback from the existing two-layered structure between Wheelock and Wharf/Wharf
REIC is less financial flexibility if the group wants to pursue sizeable projects, in
which case, the different group companies would need to co-invest together, or uplift
cashflow to Wheelock in the form of dividends - this would result in cash leakage to
minority shareholders, Goldman noted. (KL)