Things Look Grim For Sun Hung Kai Properties Limited (HKG:16) After Today's Downgrade

The analysts covering Sun Hung Kai Properties Limited (HKG:16) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Sun Hung Kai Properties from its 14 analysts is for revenues of HK$80b in 2024 which, if met, would be a decent 13% increase on its sales over the past 12 months. Statutory earnings per share are presumed to rise 7.9% to HK$8.90. Previously, the analysts had been modelling revenues of HK$92b and earnings per share (EPS) of HK$10.53 in 2024. Indeed, we can see that the analysts are a lot more bearish about Sun Hung Kai Properties' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Sun Hung Kai Properties

The consensus price target fell 9.6% to HK$109, with the weaker earnings outlook clearly leading analyst valuation estimates.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Sun Hung Kai Properties is forecast to grow faster in the future than it has in the past, with revenues expected to display 13% annualised growth until the end of 2024. If achieved, this would be a much better result than the 2.5% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 9.5% per year. Not only are Sun Hung Kai Properties' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Sun Hung Kai Properties. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Sun Hung Kai Properties.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that Sun Hung Kai Properties could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.