Hongkong Land

Hongkong Land > Add

CGS-CIMB, July 26

July 27 close: US$7.23

Target price: US$9.50

HONGKONG Land (HKL) posted a solid performance in investment properties, registering a 9 per cent y-o-y growth in rental income in H1 2018 to US$484 million. However, due to fewer property sales bookings from associates and joint ventures in China, core net profit dipped 3.1 per cent to US$455 million in the first half this year. An interim DPS of US$0.06 was declared, unchanged from last year.

The group's central office average rent rose 2 per cent in H1 2018. Retail portfolio also remained fully occupied, with retail average rent up 3 per cent.

Despite the mildly negative rental reversions in Singapore, HKL managed to maintain the average office rent at S$9.10 per sq ft per month, unchanged since H1 2017. Management expects the rental reversions to turn positive in the second half of this year.

Having secured five projects in various countries, we are of the view that HKL's diversified landbanking will drive earnings growth.

We think HKL has a stable growth outlook. It is now trading at a 47 per cent discount to NAV, which offers sufficient downside protection for investors. Key risks include faster-than-

expected rate hike in the US, and slowdown in the HK or China economy.

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