SINGAPORE (May 4): DBS says Hongkong Land could trade up to US$8.51 as the Jardine group developer benefit from ongoing tight market supply.
Over the past three months, its share price has appreciated 14% amid the improving office market in Central. Meanwhile, the stock is trading 32% below DBS’s assessed current NAV.
“Valuation is by no means expensive from an historical viewpoint,” says analyst Jeff Yau in a Thursday report.
Yau says the vacancy of Hongkong Land's Central office portfolio stayed low at 2.4% in March.
Positive reversionary growth continued to push up its average office rents which stood at HK$103 psf ($18.34 psf) in 2016.
Retail portfolio remained fully occupied as of March but base rent reversions, which were largely positive in 2016, has turned neutral as expected.
Looking ahead, the tender of the Murray Road car park building site will close on May 12.
“We expect this tender to draw tremendous interest from developers as well as China-based financial institutions,” says Yau, “Any encouraging tender results could prompt a revaluation of office assets in Central and re-rating of office landlords with heavy exposure there.”
Meanwhile, Hongkong Land’s Singapore office portfolio registered mildly negative rental reversions due to a supply glut although portfolio vacancy remained low at 0.3% in March 2017.
As for the residential segment, sales at the Sol Acres EC and Lake Grande condo have been progressing satisfactorily while the substantially-sold Lakeville project was completed in 1Q17.
In China, the group recorded contracted sales of US$287 million ($401 million), up 48% y-o-y but down 36% q-o-q.
Shares of Hongkong Land are down 6 cent at US$7.69.
