DBS Group Research has kept its "buy" call on Hongkong Land, but with its target price of US$7.20 under review for now.
In its Sept 19 note, DBS says that net proceeds from the sale will help reduce Hongkong Land's gearing by 2.3 percentage points to 14%.
In addition, Hongkong Land will increase its ongoing share buyback programme by another US$150 million, which is seen to be accretive to its NAV of US$13.62 as at end June.
MCL Land is in the midst of developing six projects in Singapore and Malaysia, mostly sold.
To date, Hongkong Land has recycled US$2 billion in capital, which is at around half its 2027 target of US$4 billion.
The disposal includes US$1.2 billion from its build-to-sell inventory wind-down and US$0.8 billion from the sale of investment property.
"Despite the sale, Singapore remains a strategic market for Hongkong Land. The company continues to focus on expanding its prime commercial portfolio in this key gateway city," says DBS.
See also: RHB raises DBS target price to $57.10 after bank’s stock hits new high
DBS notes that Hongkong Land is now trading at a 40% discount to its appraised NAV.
"The expanded buyback programme should offer near-term support to the share price, while ongoing capital recycling efforts remain a key catalyst," adds DBS.
