Swire Pacific underlying profit jumps 12% YoY to HK$4.83bn

Diversified businesses delivering stability.

Swire Pacific reported solid interim results, and should continue to be stable thanks to its diversified business.

According to a research note from Jefferies, being the major earnings contributors, Property and Beverage delivered robust performance to smooth out the sector headwinds in Marine and Trading & Industrials.

With solid interim results, Swire's 1H15 underlying profit came in at HK$4.83bn, +12% YoY. An interim dividend of HK$1.12/sh for "A" shares was declared, +2% YoY.

Financial position remains healthy, though gearing edged up 0.4ppt to 22.8% due to expenditures on offshore support vessels under construction and CAPEX in the Aviation, Beverage and Trading & Industrial Divisions. 1H15 underlying profit accounted for 40% of Jefferies' full year estimates.

Here's more from Jefferies:

Property and Beverages remained the key contributors: Due to increased rental income in both the office and retail portfolios coupled with higher property sales in HK, underlying profit of the property segment saw 5% growth YoY.

It highlighted the robust performance of office portfolio in HK, partly due to stronger demand for office space from mainland Chinese companies. Beverage continued its momentum with 9% growth in sales volume, which drove 13% growth in profit. Management expects the overall outlook of Beverage to remain positive, despite that margins in China will be under pressure due to higher labor costs.

Aviation boosted by lower fuel cost: Aviation profit surged 198% YoY, attributable to the strong performance of Cathay (293 HK, Hold), as a result of stable passenger and cargo demand coupled with lower fuel cost in 1H15. Cathay recorded 4.6x YoY growth in net income, while HAECO (44 HK, NC) continued to report weak results.

Marine and Trading & Industrials dragged down overall performance: Marine suffered from the low oil price as exploration and production companies reduced spending and renegotiated existing contractual day rates to reduce costs in producing fields.

With weak demand amid a low oil price, coupled with a one-off impairment charge of HK$140mn, Marine suffered loss of HK$156mn. T&I's profit declined 42% YoY, mainly dragged down by Taikoo Motors and Akzo Nobel Swire Paints. It highlighted that performance of T&I will be affected by the cost of new business development.