Is This "Grade A" Hong Kong Property Stock Undervalued?
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- เผยแพร่เมื่อ 18 มิ.ย. 2024
- We reveal one 'Grade A' Hong Kong property developer that's been dragged down by the China property crisis. Interestingly, this company has minimal exposure to China and actually generates most of its income from Hong Kong and Singapore. We break down its business model, discuss its risks, and explain why we think it will likely emerge stronger after the crisis.
The stock is currently undervalued and paying a 6% yield. Is this an opportunity to pick a blue chip Hong Kong developer for cheap while you are being 'paid to wait'? We share this and more in our latest episode.
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00:00 Introduction
00:59 Business model
07:47 Can it ride through the property crisis?
12:53 Risks
18:15 Valuation
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You should apply your knowledge on HK Land to other HK property plays with similar portfolios for comparison and to expand your buying options. Most of them like Swire Properties, SHK, New World, Hang Lung and Shui On Land are listed in HK, and also trade at low P/Bs and offer good dividend yields.
Nice review. Can I say the last building added to their portfolio is Singapore MBFC back in 2012?
Appreciate that you guys read our comments and granted our wish in revealing an example of HK property company. And nice new office btw!
Our pleasure! We love the new office too!
Thanks for this great content FYI ....some pretty lack depth report did a quite negavtive report on HKL ( simply wall st ) recently - trying to sound "alarm" on HKL balance sheet concerns will impact future dividend & cash flow by simplistically compare $5.5b debt vs $1.14b cash on hand , may hv contributed to this recent share price weakness . That report failed miserably to show
(1) the shareholder equities/funds is > $33b !! This make HKL gearing abt 17% which is among lowest even vs any top
tier property players.
(2) also they plucked some figure saying $2.88b debt due next 12 mths vs data source fr this video show only $1b due
2023+2024 (24mths). Also mgnt had reported they have > $3.3b commited standby unused loan facility in their 1H23
result announcement which was carelessly "missed" by the other report.
Thanks for the detailed analysis! Just curious why are Rusmin and Adam not interested in HKL?
Thank you for the great analysis!
Glad you liked it!
This is gem type of research summary. Please do more of this contrarian analysis
Just an additional peer comparison then it would be perfect!
Thanks! We'll think about it!
Thanks for the insightful analysis. Would you be able to do an update based on HongKong Land latest FY23 financials? Much appreciated!
Excellent analysis and review. Thank you.
You're most welcome!
Based on Hongkong Land's 2022 Annual Report, the company's asset are divided by the following locations: Hong Kong (66%), Chinese Mainland & Macau (20%), Southeast Asia (14%).
At a P/B ratio of 0.25, investors are essentially getting the Hong Kong Investment Properties for free. (Note: This is an oversimplification though.)
Can you do Jardines and Swire Pacific analysis? Even some Singaporean ones will be good. Thanks
Learnt a lot from this video. Thank you very much for sharing your knowledge and research on HKL.
You're most welcome! Glad it was helpful!
thank you!!!
Thanks for the sharing, digging all info all the way back to 2008! While u guys have shared great companies, and how u value several great examples, will U consider sharing a video on how u allocate your portfolio or how many numbers of stocks u have, and the weightage allocation 🤓😇
Thanks for the suggestion! We'll consider this!
What is view of Wilmar, Dairy Farm
great stuff guys, thanks!
Our pleasure!
why do you guys think etfs like CLR or CFA dont hold this stock? CFA has Link REIT though.. Any ideas or comments?
Can you guys give an opinion on LINK Reit
Brilliant work guys. I am watching from Argentina
¡Hola!
Thank you Adam, rusmin and victor for sharing! Appreciate your efforts!
Can i clarify the point about asset write down as mentioned by rusmin? I understand that this will be treated as a loss in income statement. When we evaluate the biz profitability, do we treat the it as extraordinary item and likewise adjust it if its a asset valuation gain since its just paper loss/gain? Also, does the above apply the same way regardless its freehold or leasehold property?
Thank you for your time!
Yes, we typically remove it so we can evaluate the business based on its ongoing operations which is a better reflection of its performance.
I got kinda burned on HKL, but I've been buying more tranches recently. I still like the dividend.
Looks pretty good, but share price continue to drop. It was around USD3.50 when this video released, now USD 3.17, dropped 10%.
Are there any other similar public listed companies?
Very good analysis. Would hope for a comparison analysis with Swire Properties which is very similar regarding valuation. Thank you.
Thank you! We'll think about it!
think the analysis neglected to mention the stock is quoted in USD, so there is also a forex risk
Yes, we mentioned this near the end.
What this analysis is missing is the issue that there is no clear govt policy on what happens to freehold propeprty post 2047 when HK basic law may be revamped and HK returns fully to China's fold. This gives 24yrs dividends discounted to present value following which these properties and land goes back to Chinese govt as with other parts of China where only the govt own land and all land is leased.
Most their Hong Kong assets are 999 years with the exception of Exchange Square which can be extended for another 75 years. However, if you believe there's a risk that China will seize their assets after 2047, then better to avoid.
There is a “new” CBD area in HK. How will that impact the rental ?
Yes, this trend is evident in the current Hong Kong office vacancy rate, which stands at 15.1% as of August 2023. This is the reason Rusmin emphasized that rental pressures will persist until there is a shift in China's macroeconomic landscape. At the same time, the preference for high-quality office spaces remains strong, and Hongkong Land has a vacancy rate of 6.9%, surpassing industry standards. While prime office locations like Central are still in high demand, this is coming at the cost of reduced rental rates.
Link reit also low price now.
these so called paper losses - under what scenarios do they crystallise? i wouldn't just say paper losses and wave it off. unlike that dumb cfo at temasek.
The losses are relating to Investment Properties revaluations...
Meaning, these "losses" will only crystallise if Hongkong Land chooses to sell its Investment Properties. However, these valuations are done periodically by external valuation professionals for the company's financial reporting, so the actual selling/market price may be different.
You should reexamine the way you decide something is dumb when you dont even understand the terminology.
It makes you appear... dumb.
HK Land is headquartered in HK, but listed its shares in London and Singapore. This arrangement speaks a lot about a company's underlying agenda. For sure, if there is a physical war breakout, its assets will be first to cease under the recent national security law😂
On a separate note, China is now demanding antique back from British Museum. Next, who knows about assets acquired during the unequal treaty signed during Opium Wars.
Hongkong Land
Thank you very much guys, i learned a lot from this video.
I understand clearly how to research a company with these analysis. Is an eye opening for me. Thanks again.💪💪🫶🏼
Glad it was helpful!