Friday, November 19, 2010

Hongkong Land

Hongkong Land: Citi upgrades to Buy vs Hold, raises TP to US$9.37 vs US$5.50. Expect growth momentum for Central office rentals to continue in 2011 & 2012 due to tight office supply in core districts. Note that grp is the most leveraged play on HK Central office properties, while its NAV is the most sensitive to any change in HK office capital values…

Lifts NAV to US$10.41/share vs US$6.88/share, and roll over valuations to FY11, factoring in higher 2011 prices for HK office (+20%), retail (+10%), residential (+10%-15%). Lower cap rates for central office & retail properties, by 50-100 bps to 4.0% & raises FY10-FY12 earnings estimates by 1.0%-10%. Note that grp trades at 31% discount to NAV, close to 28% historical average discount.

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