As at 4.00pm on Apr 25, shares in HKL have surged 10.2% for the day to trade at US$4.65. Ytd, the stock is trading 5.0% higher. It has a 52-week high of US$5.00.
DBS likes the stock for its position as a premium landlord in key gateway cities across Asia. In October 2024, the company unveiled its new corporate strategy, aiming to simplify its business with a focus on investment properties (IP) in Asia's gateway cities. The company expects to expand IP asset under management (AUM) to US$100 billion by 2035.
The group has since then announced its first major asset recycling deal. It proposed to divest the top nine office
floors and selected retail space at One Exchange Square to Hong Kong Exchange (HKEX) for HK$6.3 billion ($1.07 billion).
See more: Hongkong Land to sell 147,025 sq ft of One Exchange Square to HKEX for HK$6.3 bil
See also: CGSI, Maybank raise OUE REIT’s TP slightly on ‘steady’ commercial assets
HKEX will use the 147,025 sq ft office premises as its permanent headquarters. Based on passing rents of HK$184 million for FY2024, exit yield is estimated at slightly below 3%, which is attractive taking into account ongoing office market headwinds, according to the analysts.
The analysts see the partial divestment of One Exchange Square as a move to not only help unlock the company's NAV but also provide capital to buy back its shares, which are attractively valued. "This, coupled with growing dividends, should provide further upside on stock price," they add.
