To take a step back, in previous reports and analyses done by The Edge Singapore, a disconnect is evident between asset-heavy companies such as developers, and their net asset values (NAVs). One way to narrow the P/NAV ratio is for the developer to have a more liquid balance sheet. When Hongkong Land's current group CEO, Michael Smith, came on board, he articulated a new strategy in a circular dated Oct 29, 2024.
The property group had stated: "We will also be open to selectively recycling assets into REITs and other third-party capital vehicles. Overall, this new strategy will see up to US$10 billion of existing capital recycled over the next 10 years, generating cash for new investments and enhanced shareholder returns. An estimated US$6 billion in proceeds will be generated from the wind-down of the build-to-sell segment. A further US$4 billion will come from the recycling of selected IP assets."
In Singapore, the build-to-sell segment includes unlisted MCL Land. Last year, reports circulated, including from Bloomberg, that Hongkond Land was planning to divest MCL Land for as much as US$1 billion.
With its share price outperforming the STI and the US rate cuts, analysts are wondering whether Hongkong Land is ready to either divest of MCL Land, or to list a REIT, or both. In Singapore, Hongkong Land holds a one-third stake in One Raffles Quay and Marina Bay Financial Centre.
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"HKL is working actively in hiving off MCL Land," says an analyst.
