20131202-富瑞金融香港公司-Hong_Kong_Property_Staying_in_the_Range_Until_More_Clarity_24页_1mb

Hong Kong Property Market Summary

Core Content

This document provides an analysis of the Hong Kong property market, focusing on the current sales performance, sector valuation, and key company-specific factors affecting developers and property landlords. It highlights the potential for a price correction and the impact of policy changes, along with the performance of specific developers and the role of external catalysts such as the spinoff of Kerry Logistics.

Main Points

• Market Valuation and Performance: The sector valuation has discounted a certain extent of bearishness, with the expectation of a potential home price correction of >20% due to increased selling pressure from the secondary market ahead of interest rate hikes. Hong Kong developers have outperformed China developers by ~5% since November 2013.

• Centa-City Leading Index (CCL): The index grew by 0.2% YoW to 120.39, up 4.1% YTD. Sales performance varied by district, with New Territories West and East gaining 0.5% and 1% YoW, respectively, while HK Island saw a 0.1% drop. Midland had lower flat visit reservations on weekends.

• Weekend Sales: Developers sold 530 units over the weekend, compared to 40 units the previous week. Strong demand was observed for projects like The Avenue and The Visionary, which saw 220 and 278 units sold, respectively, due to lower prices than market prices.

• Sales Performance of Major Developers: Sales performance was mixed after the new Sales Ordinance was implemented. New World had the best sales lock-in, while Cheung Kong faced slippage due to pending presale approvals. The report advises investors to monitor the sales outlook as it is dependent on market demand.

• Kerry Logistics Spinoff: The spinoff of Kerry Logistics is a catalyst for Kerry Properties, reducing gearing and having a minimal impact on NAV. Despite the divestment of a good asset, the company is expected to be more efficient in capital utilization. Kerry has locked in 91% of its 2013 contract sales target.

• Diversified Universe: The Hong Kong property sector is favored over China due to policy overhang. Each developer has stock-specific catalysts, such as Cheung Kong's divestment from Hutchison, New World's re-rating story, and Kerry's spinoff. Cheung Kong, New World, and Wharf are highlighted for their diversified strategies and resilient portfolios.

• Valuation and Performance Comparison: The report includes a detailed comparison of share price performance, NAV discounts, and P/B ratios for major developers and landlords. Cheung Kong, New World, and Wharf are recommended with "Buy" ratings, while Kerry and SHKP are advised to be "Hold".

• NAV Sensitivity: The report outlines the potential impact of home price drops and cap rate expansions on NAV. Cheung Kong is expected to have the least impact at -4.4%, while others like Kerry and Sino Land face -9.6% to -9.8% impacts.

• GAV Breakdown: The GAV (Gross Asset Value) is broken down by property types and regions. Sino Land has the highest China allocation, while Cheung Kong and Henderson have HK as the largest component.

Key Information

• Expected Price Correction: A home price correction of >20% is anticipated when selling pressure emerges from the secondary market ahead of interest rate hikes.
• Sales Performance: Developers have strong sales despite price cuts, with New Territories West and East showing the best performance. The Avenue and The Visionary were the most successful projects.
• Kerry Logistics Spinoff: This spinoff reduces gearing and has a minimal impact on NAV. It is expected to improve capital utilization.
• Company-Specific Catalysts: Developers have varied catalysts that support their stock performance, including divestment, re-rating, and logistics spinoff.
• Investor Recommendations: Cheung Kong, New World, and Wharf are recommended for their diversified strategies and resilient portfolios.
• Market Risks: Key risks include unexpected liquidity outflow, unexpected rate hikes, and unexpected policies.

Summary Table

Note: Prices and market data are in HKD, and the data is as of Dec 2, 2013.