(Stocks Discussion) SGX: Hongkong Land Holdings Limited (SGX: H78)? - Seedly
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Anonymous

Asked on 21 May 2019

(Stocks Discussion) SGX: Hongkong Land Holdings Limited (SGX: H78)?

Discuss anything about Hongkong Land Holdings Limited SGX: H78 share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment in Hongkong Land Holdings Limited SGX: H78

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Tracy Lim
Tracy Lim
Level 5. Genius
Answered on 21 May 2019

TL;DR: Hongkong Land’s properties are mainly in Hong Kong, with some percentage of other properties in Singapore and other parts of Southeast Asia. Their P/E ratio is 6.48 - is it cheap?

Business overview

Hongkong Land is a major listed property investment, management and development group. The Group owns and manages more than 850,000 sq. m. of prime office and luxury retail property in key Asian cities, principally in Hong Kong, Singapore, Beijing and Jakarta.

Share price

Credits: Yahoo Finance

Share price of HKL is USD$6.80 (as at time of writing on 21 May 2019).

Revenue portfolio

Group assets are made up of 88% Investment Properties and 12% Development Properties.

Hong Kong Central Portfolio remains the Group’s largest profit contributor, generating 84% of the operating profit contributed by the Group’s Investment Properties. Average rental psf in Hong Kong increased by 4.12% compared to last year.

Singapore’s investment properties generate 11% of the Group’s operating profits with contributions marginally increasing from last year.

The operating profit contribution from mainland China Development Properties was down by 8% from the previous year mainly due to fewer completions in the Group’s joint venture developments.

Financials

*Do note that figures are in USD.

  • Dividend per share for FY2018 is US¢22.00 per share, an increase from US¢20.00 a year ago. This means that at the current price of US$6.80, the dividend yield is 3.24%.

  • We look at their underlying business performance figures rather than their total, which includes non-trading items.

  • Debt as a percentage of current assets is high but that’s because their assets are mainly in the form of investment properties and fixed assets (i.e non-current assets), thus Debt/Total Assets is a better metric to use for HKL.

  • For P/E ratio, we take the current price and earnings per share of the total (underlying + non-trading items). Non-trading items are listed in the figure below.

Vacancy of Investment properties

Higher profits expected from properties in China, and expected to offset lower contributions from other markets.

SWOT Analysis

Strengths

  • Strong fundamentals. You can take a look at the strength of their portfolio and growth over the years. Growth and increase in dividends.

Not forgetting that they are developing more properties which will increase revenue.

Weaknesses

  • Development of properties, if slow or not completed on time will mean revenue forgone.

Opportunities

  • Having properties in these key cities/countries give them a high opportunity for rental growth, especially when their portfolio is made up of mostly Hong Kong properties and some percentage of Singapore properties, both of which are land-scarce and thus can yield high rental income. This is seen from the increase in average psf rental

Threats/risks

  • Market risks

  • Leasing risks: in Hong Kong, areas subject to renewal of lease amount to 26% and 44% for office and retail respectively.

  • Foreign exchange risks: Exposure in different markets will mean that they are subject to foreign currency risks.

  • Other risks include political risks, regulatory changes etc

Conclusion

Overall, HKL has strong fundamentals with an increased dividend per share. Furthermore, developing more properties would mean high revenue. However, they are also subject to many risks as well.

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