Morgan Stanley has released a research report indicating that Kerry Properties (00683) will continue to face short-term earnings pressure, with limited potential for positive surprises until the recognition of revenue from the Jinling Huating project in Huangpu District, Shanghai. The bank believes the group's new strategy of shifting towards the mass market should accelerate asset turnover, although profit margins may take a longer period to recover.

The report also highlights that pre-opening expenses for new investment properties in China could exert pressure on investment property profit margins. Additionally, while the group's debt ratio has improved and dividends remain stable, the near-term recognition of development property revenue is constrained.

Consequently, Morgan Stanley has revised its valuation basis for the company, widening the discount to net asset value (NAV) from 60% to 65%. The target price for Kerry Properties has been reduced from HK$25 to HK$22, while maintaining a "Market Perform" rating. To reflect adjustments in renewal rents for retail and office properties, occupancy rates, and interest rates, as well as updates to development property revenue recognition and completion schedules, along with land bank replenishment plans between 2026 and 2028, the bank has adjusted its basic net profit forecasts for Kerry Properties for the years 2026 to 2028, raising the 2026 estimate by 8.1% while lowering the 2027 and 2028 estimates by 2.3% and 3%, respectively.