Last September Hongkong Land had announced a US$500 million buy back programme by end of 2022.
“Continued share buybacks should support the share price,” writes Yau in his March 4 note, where he reiterated his “buy” call, but with slightly trimmed target price of US$6.61 from US$6.64 previously.
He notes that Hongkong Land is now trading at a discount of 53% to his appraised current net asset value. Prior to the buyback programme, the company was traded below a third of that level.
However, Hongkong Land’s retail rental income this current FY2022 will continue to be affected by the pandemic.
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“On the other hand, office market downturn in Central showed signs of bottoming out prior to this recent Covid outbreak,” writes Yau, referring to the crown jewels of the company: a clutch of prime office and retail properties in Hong Kong.
He is optimistic that Hongkong Land’s Central office portfolio is set to benefit from “flight-to-quality” demand, although he warns that further deterioration in leasing demand for both Hong Kong and Singapore will be a drag on the company’s earnings.
CGS-CIMB, meanwhile, has observed that Hongkong Land has sped up its landbanking activities in China while other mainland Chinese developers remain restrained.
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In FY2021 alone, Hongkong Land has acquired nine projects for development in China, write analysts Raymond Cheng, Will Chu and Steven Mak in their March 5 report.
Including West Bund project in Shanghai, it had 12 investment properties projects in China to be completed between FY2023 and FY2026.
These 12 projects have a planned gross floor area of 1.1 million sqm and when completed will help Hongkong Land build a stronger recurring income base, they note.
Meanwhile, due to a slower recovery of office rents in Hong Kong and Singapore, the CGS-CIMB analysts have trimmed their target price to US$6.1 from US$6.30, while keeping their “add” call.
Photo: Red John / Unsplash
