20180612-中国银河国际证券-Property_-_Overall_Property_Corporate_Day_takeaways_–_HK_property_11页_643kb

Summary of Hong Kong Property Market Analysis

Core Content

This report provides an overview of the Hong Kong property market, highlighting key companies and their performance, strategies, and outlook. It also includes valuation metrics and insights from a corporate day event held on 7 June 2018.

Main Points

Market Outlook

• The Hong Kong property market is expected to benefit from increased mainland tourist arrivals and the opening of the HK-Zhuhai-Macau bridge and high-speed railway in 2H18.
• The retail market is recovering, with strong performance in high-end categories such as jewellery, cosmetics, and healthcare.
• The office market remains solid, with tight central vacancies and rising rents in decentralised areas like TST and Island East.
• Developers remain optimistic about the residential market despite rising interest rates, due to strong local and mainland demand, limited supply, and robust balance sheets.

Key Companies and Their Highlights

Sino Land Co Ltd

• Target Price (TP): HK$18.20 (up from HK$13.94)
• Valuation Metrics:
  • P/E (Dec-18F): 12.05
  • P/BV (Dec-18F): 0.62
  • Dividend Yield (Dec-18F): 4.13%
• Key Points:
  • Proactive in landbanking over the past 18 months.
  • Expected to launch four projects in 2018-2019.
  • Management prefers joint ventures for landbanking to diversify risk.
  • Maintains stable dividend payments despite earnings volatility.

Sun Hung Kai Properties Ltd

• Target Price (TP): HK$180.0 (up from HK$127.3)
• Valuation Metrics:
  • P/E (Dec-18F): 10.82
  • P/BV (Dec-18F): 0.70
  • Dividend Yield (Dec-18F): 3.97%
• Key Points:
  • Largest developer in Hong Kong with 21m sf of development property and 29m sf of investment property.
  • Positive on the Kai Tak project due to its unique MTR access and sea view.
  • Double-digit retail sales growth in 2018.
  • Has small farmland holdings undergoing negotiations.

Wharf REIC

• Target Price (TP): HK$68.00 (up from HK$60.20)
• Valuation Metrics:
  • P/E (Dec-18F): 19.40
  • P/BV (Dec-18F): 0.87
  • Dividend Yield (Dec-18F): 3.32%
• Key Points:
  • Harbour City is a "must-go" mall for mainland visitors.
  • Management expects high-single-digit rental reversion for Harbour City and mid-single-digit for Times Square.
  • Occupancy costs are expected to decline as retail sales recover.
  • Interested in acquiring large-scale commercial assets in city centre.

Key Valuation Metrics

Analysts

• Raymond Cheng, CFA
  • Tel: (852) 2539 1324
  • Email: raymond.cheng@cgs-cimb.com
• Jeffrey Mak
  • Tel: (852) 2539 1328
  • Email: jeffrey.mak@cgs-cimb.com

Summary Valuation Metrics

• P/E (x): Expected to decline slightly over the next few years for most companies.
• P/BV (x): Generally low, indicating potential undervaluation.
• Dividend Yield (%): Varies from 2.6% to 6.2%, with some companies showing an upward trend.
• Key Risks: Faster-than-expected US rate hikes could impact the sector negatively.

Conclusion

The report recommends a "Overweight" rating for the Hong Kong property sector, with a preference for retail landlords like Wharf REIC and Hysan, and developers like SHKP, HLD, and Sino Land. REITs are neutral due to sensitivity to US interest rates. The overall outlook is positive, driven by increased mainland demand and infrastructure developments.