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Hong Kong Property Developers - shares thread

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I haven't bought yet - since SHKP has stayed above $90

 

HK16 ... update

 

hk165yrs.png

 

But it may slide to expected support in the high $80s soon.

 

HK16: $90.10 / Change: -2.50 / Percent Change: -2.70%

Open: 91.00 / High: 91.25 / Low: 90.00

Volume: 5,896,080

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Impact of New 15% Stamp tax for Non-Permanent residents...

Mid-day, on day one:

 

Well, the Hang Seng Index is down, but not by much

21,490.80 -54.77 / -0.25%

 

Property stocks have taken a much bigger hit

HK:01 : 111.60 -6.20 / -5.26% : Cheung Kong

HK:10 : $45.50 -0.35 / -0.76% : Hang Lung (mostly in China)

HK:12 : $52.30 -4.60 / -8.08% : Henderson Land (big land bank)

HK:16 : 105.40 -6.40 / -5.72% : Sun Hung Kai

HK:17 : $12.00 -0.90 / -6.98% : New World Dev'l

=====

 

The Value of Land : Can One Own too much Land?

(Based on article in today's SCMP, Money Post, pg.5)

Price of HK Developers after stripping out their non-property assets

 

PROP. DEVELOPER----- : Price* change/ %Chg : Earns. : PER : BkVal. : PtoBk. : ROE

===

HK01 / Cheung Kong---- : 111.60 -6.20 / -5.26% : 24.80 : 4.50 : 155.00 : 72.0% : 16.07%

HK12 / Henderson Land : $52.30 -4.60 / -8.08% : 10.88 : 4.81 : 142.25 : 36.8% : 07.57%

HK16 / Sun Hung Kai---- : 105.40 -6.40 / -5.72% : 17.25 : 6.11 : 139.75 : 75.4% : 12.31%

HK17 / New World Dev'l. : $12.00 -0.90 / -6.98% : $3.12 : 3.85 : $28.66 : 41.9% : 10.97%

====================

 

I have adjusted the above figures to reflect this morning's price drop.

And in calculating Price-to-Book Value ("PtoBk", above), they subtract out from price and bok value,

the value of Non-property holdings, such as huge holdings that HK12 has in HK and China Gas,

and in HK Ferry, Miramar Hotels (which taken together are worth HK$72.6 billion.)

 

Other holdings of other developers:

=====

HK01 : Hutchinson Whampoa, CK Life Sciences

HK16 : SmarTone Telecommunications

HK17 : New World Development Store

 

According to the SCMP:

HK12 has a lower ROE because it has money tied up in "unproductive" land investments, generating a lower return. I agree with that to a point. But you also need to look at the return on Equity, taking the equity at Market Value (which I do not think they have done), and consider what sort of future returns HK12 might make on its land holdings, and not get to carried away with one or two years earnings.

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WHEELOCK : Not such a hotshot - article from SCMP

 

Peter Woo spent HK$434mn on Wheelock shares between Aug.2011 and Oct.2012

 

Holdco Discounts

Company====== : Sym# : Price : Underly : Disc.

Shun Tak--------- : XXXXX : $10.00 : 38 % : 28 %

Henderson Land : XXXXX : $10.00 : 45 % : 19 %

New World Dev'l : XXXXX : $10.00 : 60 % : 19 %

PCCW------------ : XXXXX : $10.00 : 92 % : 36 %

Wheelock-------- : XXXXX : $10.00 : 94 % : 28 %

First Pacific------ : XXXXX : $10.00 :100% : 41 %

==========

 

Company====== : Sym# : Pricehk$ : MktCap

Wheelock------- : XXXXX : $38.90 : $ 79.0 bn :

HK Wharf-------- : XXXXX : $10.00 : $ XX.X bn : x XX% : $92.3bn

Wheelock Prop. : XXXXX : $10.00 : $ XX.X bn : x XX% : $10.9bn

Other business. : XXXXX : Private-: $ 10.0 bn : x100% : $10.0bn

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It was quite a good article (IMHO) and provides a good explanation for having a holdco discount. One the interesting things to watch is how these holdco discounts expand and contract overtime - possibly making for good trading opportunities.

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MIRRORING in stock prices

 

I find it strange, but you sometimes find incredibly sysmetrical mirroring in stock prices

 

Here is an example:

 

HK-12 : Henderson Land ... update

 

89038262.gif

 

If the mirroring continues, then a sharp drop may be next.

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===Old Comment===

Let's kick this off with the Mystery of the Day : What's happening with HK-12 today ??

 

Henderson Land is taking a very big "hit" today

$47.65 -$7.10 / -12.97%

Not sure why yet - I will investigate

=== Unquote ===

 

We know the reason now (Bonus Shares).

But it seems that Lee Shau Kee was a big buyer, mopping up

 

6.6 million shares from May 28 to June 3, worth HK$369 mn.

 

And also:

 

44.96 mn shares worth HK$2.47 Billion (!!) since results were released in the last week of March.

 

===

/more-GeoExpat: http://hongkong.geoe...read265938.html

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From AX / Posted by OffThePeak :

1 / OTP:
==
HK;HSI / Hang Seng Index ... Approaching key support near 20,000

Chart: http://img835.imageshack.us/img835/8321/7uv.png

 

7uv.png

It isn't just Bernanke who is spooking the markets.
As the WSJ put it: "The past week's spike in Chinese interbank rates...
show that the Chinese have decided to call time on one of the graetest credit expansions in history."

2 / Lucane:
==
I am not a trader / hedge fund manager. Can you explain to me what is meant by support level? I am assuming that it is a level where traders assume many stop-losses / puts / calls are set, is that the case? Is there any factual data out that suggests where the support levels are, or is it just guessing / psychology?

3 / OTP:
==
20,000 or so, is a level where you would expect the price slide to stop, or reverse.

If support at that level does not hold, it may then fall to the next lower support level

I identify them based on Trendlines and Moving averages

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IMPORTANT SUPPORT LEVELS:

 

HK-01 : Cheung Kong: $95 - to be tested soon? ... update

dby.png

 

HK-16 : Sun Hung Kai Prop's: Channel broken. Next test $85 ... update

ze.gif

 

HK-10 : Hang Lung Group: Support at $36 may be threatened ... update

idu.gif

 

HK-12 : Henderson Land: If Channel breaks, next big support: $34 ... update

6fv.gif

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INSIDERS Buying: between 17 to 21 June

.

HK-410 / Soho China : +HK$108 mn

.

HK-54 / Hopewell : +HK$56 mn

.

HK-12 / Henderson : +HK$9.1 mn = 195k shs at $46.56 : Lee, S.K.

.

HK-16 / SHK Properties : +HK$200 mn = 2.03mn at $98.30 : Kwok, Thomas (owns 16.1%)

.

HK-20 / Wheelock : +HK$3.0 mn = 74k shs at $40.40 : Woo, Peter (owns 60.2%)

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COOL Opportunity?: "Buy Developers while home prices are falling" - SCMP


Article by Tara Loader Wilkinson suggests specific HK developer shares



Nicole Wong (Prop. analyst at CLSA): "bearish on most HK real estate":

===========

+ Believes investors should postpone buying physical property: retail, office, or resi.

+ Rising rates could cause prices to fall by 15 percent over next 18 months

+ Supply could increase by 40pct, from 16,000 units to 23,000 by year-end

+ "We prefer the developers themselves" (to physical property)

+ BUY rating on: HK Land, Wharf, Swire Props., Hysan Dev'l



Joyce Kwok (Prop. analyst at Credit Suisse): "maintain market weight"

==========

+ Results from developers have been "fairly healthy... despite challenges:

+ Developer share prices are "deeply discounted... could trigger repurchases."

+ Share buybacks may be a catalyst to a revaluation

+ China may allow more cities easy access to Hong Kong, cud add 1mn+ visitors

+ Those with prime shopping malls (like Wharf) could benefit

+ Retail rentals could rise by another 8%, helping Wharf and Hysan

+ TOP PICKS: Henderson Land, New World Devl, Sun Hung Kai Props

+ ALSO : Wharf, Hysan


=== ===


Personally, I think it is still too early to buy the developers,

and most of the charts look like the stocks are "rolling over"


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HK:101 / HANG LUNG Group ... All Data : 10-years

 

5sjw.png

 

597d.png

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NOTES - Rivalry fuels fears over price cuts / SCMP article by Sandy-Li

======

 

Developers are being forced by competition to offer steeper price cuts

 

+ Fears of a sharp price correction are spooking stock punters

+ Cheung Kong (HK-1) has been singled out as one of the most resilient - up 7% this year

+ Cullinan's discounts of "almost 20 percent"* have "marked the beginning of the discounted sale of unsold units",

: says Susanna Leung at CLSA: "Home prices will come under growing pressure of downward adjustment."

+ Failure of SHKP to achieve impressive sales "could have an immediate downwards impact on property prices"

+ "Developers are testing the market and finding the floor prices"... She could not rule out a price war

+ Leung forecast home prices would fall 15 percent by year end

+ Joyce Kwock (Credit Suisse) : HK developers NAVs will fall 6-10 percent, if HK property prices fall by 20 percent;

: that sort of fall might cause stock prices to trade at a discount to NAV of 28 to 48 percent

+ Andrew Lawrence (CIMB Securities) expects property prices to fall "up to 15 percent in 2014",

: and a further 15-20 percent in 2015 - He prefers co's with a faster churn model, shorter land bank duration,

: and a smaller exposure to the HK Property market. He likes CK, HK-1

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For may part, I am hoping that we see prices of HK property fall enough to make them attractive buying again. It will hurt my balance sheet in the short term but help it in the longer term.

 

Given the strength of household balance sheets in HK generally, a 30% fall from current levels (as forecast by CIMB) will require a big jump in supply. It could happen, but I am doubtful rather than hopeful. Given that I expect (a complete guess) it to be at least a couple of years before we hit bottom, I'm actually considering paying off a mortgage to improve my cash flow instead of just sitting on cash?

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Sino Land / HK-83 ... update

 

qox.gif

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Key Test coming for Bellwether HK property stock ?

 

Henderson Land / HK:12 ... update

 

xpbq.png

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Property stocks Cheap?, article in the SCMP

 

"Stocks viewed as cutting through the talk of gloom"

 

Analysts see promise in the shares of some HK developers,

with the negative factors priced in

 

"Deep discounts... may be under-estimating the resilience of the physical market and the valuation."

 

+ Bocom Int'l sees 20% gains in: Cheung Kong, Henderson Land, Wheelock

 

+ Jefferies likes: Cheung Kong, and New World

 

BNP Paribas thinks property sector NAV's could fall by: 9 - 21 percent if:

 

1/ Assumed home prices fell by 40 percent

2/ Interest rates rise by 200 percent

3/ 20 percent fall in investment property rentals

 

Cheung Kong (HK-1) is one of the most popular because:

"NAV is least effected, with only 21 percent exposure to the HK market"

 

Others:

+ Kerry Properties : 35 percent

+ New World : 44 percent

 

Most effected:

+ Sino Land : 70 percent

 

Discounts to NAV:
================== : - Price - : - N.A.V. - : Discount : 2008-disc.
HK-01 / Cheung Kong- : $120.30 : $182.30 : 35 Pct. -- : 34 Pct.
HK-16 / SHK Properties : $ 96.40 : $172.00 : 44 Pct. -- : 55 Pct.
HK-83 / Sino Land------ : $ 10.24 : $ 17.35 : 41 Pct. -- : 64 Pct.
HK-17 / New World----- : $ 09.66 : $ 19.30 : 50 Pct. -- : 72 Pct.
New World : "has 44 percent of its properties in the resilient luxury sector in HK and Kowloon"
(Note: I question some of these assumptions, such as:
the idea that CK is better off with more properties in China.
The China market is vulnerable too !
Tom Holland says: "A healthy China would set interest rates at 10 percent".
Most property stocks are now testing their 2013 Lows.
It makes sense to wait, to see if support will hold. Perhaps not.)

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HK Property shares - "on the edge of the precipice?"

 

Here's:

Henderson Land / HK-12 ... update

 

uap.gif

 

A break, followed by a fast rebound, is also possible

 

OTHER stocks to monitor:

============

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MIND THE GAP (duplicate post - for the record here)


(1)

Developers are enjoying the Rosy Scenario


+ 430 homes were sold last weekend

+ Some 2,000 homes are about to be released


1. Monte Vest - : Tai Po ------- : 1,350 flats

2. Riva---------- : Tuen Mun----- : 778 flats

3. The Avenue- : Wanchai ------ : 179 flats

4. Double Cove : Ma On Shan-- : 176 flats

5. ChathamGate : Hung Hom--- : 031 flats

6. Long Beach - : Tai Kok Tsui-- : 020 flats

7. Dunbar Place : Ho Man Tin--- : 012 flats


Centaline says the number of NEW flat sales rose 150 per cent year on year in the last quarter to 3,880,

with their value jumping 270 per cent to HK$41.2 billion.


The secondhand market has been quiet, mainly because the agents are pushing new properties so hard, thanks to the higher commissions. And buyers seem to be confused by all the discounts they see advertised, and are doing a poor job of assessing relative value.


(2)

And yet the share prices of most (not all) developers have been trending down recently. Even allowing for some margin compression (lower net prices and higher construction costs), I have some difficulty in reconciling the share price movements with the primary sales data. Perhaps the share market is pricing in heavier discounts to come?


(3)

The stock market is looking forward.


But there may be a growing gap between Bearish expectations, and stable reality - And at some point, that gap may narrow suddenly, perhaps resolving itself with share prices rising.


REMEMBER this?:

Aug 1 — "Government cooling measures to rein in Hong Kong's property market are finally taking a toll on the city's powerful developers and industry watchers forecast prices could drop by up to 15 per cent in the second half of this year."

(post #2, on the New Property, "Developer's Game - Cut Prices" thread on AX)


There was certainly no 15 per cent drop in the second half

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Henderson Land / HK12 : http://tinyurl.com/All-HK12

===========

"I had a look the NAVs of a non-random selection of HK listed property companies.

Of the large ones, Henderson stood out. NAV as per last interim report was HK$88.13 per share. Current share price is $42.45 - 52% below NAV. While there is a good chance that NAV will show as being lower when the annual results are released, that is a huge discount (even allowing for the land banking element). Some of the smaller companies have even larger discounts. "

Disclosure: I hold Henderson. - TraineeInvestor


Yeah.

I get that contrarian concept. And if the widely "expected" 20-30% dip in property prices never comes, your timing could great. Personally, I would rather wait for a test of likely chart support at near $37.50, and see how the news flow looks.




If that support goes, then the deeper correction that has been widely predicted, may in fact happen.

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HONG KONG PROPERTY Developers - per JP Morgan

 

VALUATIONS - and Discounts to NAV

 

Biggest Discounts (see more below)

 

Company-------- : -Symbol- : $Price: Targ : Ups Nav : Disc. : P/E yld. P/B

Kerry Properties : 0683.HK : 25.40 29.80 : 17% 59.6 -57% : 10.2 3.3 0.48

Great Eagle------ : 0041.HK : 27.10 26.00 : - 4% 62.5 -57% : 10.4 2.4 0.33

New World Dev. : 0017.HK : $9.97 11.10 : 11% 20.6 -52% : 08.9 4.2 0.44

SunHungK Prop : 0016.HK : 94.10 113.0 : 20% 176. -46% : 11.8 3.6 0.65

Hysan Develop.. : 0014.HK : 32.95 36.20 : 10% 58.4 -44% : 16.5 3.5 0.59

Wharf Holdings . : 0004.HK : 52.90 66.00 : 25% 93.4 -43% : 12.0 3.3 0.61

 

=============

 

Why are companies not buying back shares?

None of the Hong Kong property companies are actively managing their capital. One of the developers’ most common arguments is that they will need to preserve capital to prepare themselves for a speedy response to any potential investment opportunities. We think this is why we are seeing only major shareholders buying the company’s shares, but not any major corporate buybacks. However, is this really justifiable?

 

Buying land is not necessarily more accretive than buying back shares. Buying back shares can enhance both book value per share and ROE when developers are trading at a steep discount to book value. The same amount of capital should be deployed to property development unless it can generate an equivalent return and book value enhancement. Our analysis suggests developers would require at least a 40% margin in order to justify them not buying back their shares. The only exception is Cheung Kong, which has a pretty light hurdle rate of a required margin of 22%.

 

Will developers think economically? We believe the answer is "No". Gearing is one concern which we think limits the ability to buy back shares or purchase land in the case of NWD and Kerry Properties. Otherwise, either developers believe they can achieve such a margin in the long term if land prices are actually falling, or managements do not mind if their companies continue to trade at a discount to book. Cheung Kong is the company we expect to face the least pressures from shareholders for active capital management as it has been managing it quite well, and a required development margin of 22% is not that difficult to achieve.

 

Table 2: Hong Kong property: Valuation summary

 

Company-------- : -Symbol- : $Price: Targ : Ups Nav : Disc.: P/E : yield : P/B

Cheung Kong--- : 0001.HK : 126.3 154.0 : 22% 189. -33% : 09.4 : 2.8% 0.74

HendersonLand : 0012.HK : 43.60 45.30 : 04% 76.2 -43% : 14.7 : 2.4% 0.53

Kerry Properties : 0683.HK : 25.40 29.80 : 17% 59.6 -57% : 10.2 : 3.3% 0.48

New World Dev. : 0017.HK : $9.97 11.10 : 11% 20.6 -52% : 08.9 : 4.2% 0.44

Sino Land ------- : 0083.HK : 10.94 10.00 : - 9% 18.7 -42% : 16.4 : 4.6% 0.59

SunHungK Prop : 0016.HK : 94.10 113.0 : 20% 176. -46% : 11.8 : 3.6% 0.65

Great Eagle------ : 0041.HK : 27.10 26.00 : - 4% 62.5 -57% : 10.4 : 2.4% 0.33

Hang Lung Grp . : 0010.HK : 36.25 36.00 : - 1% 48.2 -25% : 16.8 : 2.2% 0.68

Hang Lung Prop. : 0101.HK : 21.25 25.00 : 18% 31.7 -33% : 19.3 : 3.6% 0.76

Hysan Develop.. : 0014. HK : 32.95 36.20 : 10% 58.4 -44% : 16.5 : 3.5% 0.59

Swire Properties : 1972. HK : 21.45 25.00 : 17% 33.2 -35% : 21.6 : 2.6% 0.63

Wharf Holdings .. : 0004.HK : 52.90 66.00 : 25% 93.4 -43% : 12.0 : 3.3% 0.61

Champion REIT* : 2778.HK : $3.47 $3.50 : +1% 03.5 -01% : 20.7 : 5.3% 0.44

Fortune REIT* --- : FRT.SP- : $5.96 $7.90 : 33% 07.9 -25% : 18.6 : 6.5% 0.54

Link REIT* -OW-- : 0823.HK : 36.05 44.80 : 24% 44.8 -19% : 21.8 : 4.6% 1.00

HK Land (in US$) : HKLD.SI : $6.50 07.30 : 12% 10.2 -36% : 18.5 : 2.8% 0.58

===================

--------------------------------- :: Developer Ave : 14% === -42% : 11.4 : 3.2% 0.64

--------------------------------- :: Investors' Ave. : 16% === -38% : 17.0 : 3.1% 0.62

--------------------------------- :: REIT Average. : 21% === -17% : 21.3 : 4.9% 0.86

===================

Price PT Potential NAV Disc. to P/E Div Yield P/BV

Stock 7-Mar-14 Jun/Dec-14 upside Dec-14 Dec-14 FY14E FY14E FY14E

Rating code (HK$) (HK$) (%) (HK$) NAV (%) (x) (%) (x)

==

PDF:

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=11&cad=rja&uact=8&ved=0CCoQFjAAOAo&url=https%3A%2F%2Fmarkets.jpmorgan.com%2Fresearch%2Femail%2Fb2ke1g44%2FGPS-1341005-0&ei=M6UqU-uCG4bAkgX-n4G4CA&usg=AFQjCNGozlBk5bRiYYgB_3MOzyqmpkEHVQ&bvm=bv.62922401,d.dGI

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In the shorter term they should be buying back all the shares they can - with discounts as big as they are, it's the nearest thing to free money they are likely to see anytime soon.

 

However, for developers, size matters. A bigger balance sheet means they can take on bigger projects and get cheaper debt. There's also something of an ego element involved here (IMHO).

 

While I'm feeling a bit of pain at the moment, at some point the market is pricing is too much negative new for the property sector? There are decent yields, huge discounts to NAV and plenty of strong balance sheets to choose from.

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Yes, they are looking cheap on a discount to NAV basis

 

Have you followed the link to read the report?

There are some charts in there showing the Discount over time, and it is near the bottom of the LT historical range

(I mean, the ratio is showing close to the widest discounts - cheapest valuations . It is near, but not quite 2x s.d's

away from the mean, and turns are usually just over 2x standard deviations from mean valuation.)

 

To put it another way, when the average Discount EXCEEDS 50%, it is usually a turning point.

 

The Latest report shows: - 42%, so maybe prices could fall another 15% or so to hit 50% plus.

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Yes, i read the report - thanks for posting. It is very useful.

 

Henderson's results came out yesterday.

Latest NAV $82.77. Share price $40.50. Discount: 51%.

Dividend was increased by 10% over last year. Good pipeline of projects for the next few years. I probably won't buy any more on market but will take up my full entitlement under the dividend reinvestment plan.

 

Some of the smaller developers are trading at much bigger discounts to NAV.

 

Tai Cheung (HK:88) is at a huge discount to NAV (if the hotel is valued at market), offers a 5+% yield and has a large net cash position. Like most small developers, profits will be very uneven because of the timing of the comparatively smaller number of developments. I have had a few shares for a few years now.

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TI :

"Henderson's results came out yesterday.

 

Latest NAV $82.77. Share price $40.50. Discount: 51%.

Dividend was increased by 10% over last year. Good pipeline of projects for the next few years. I probably won't buy any more on market but will take up my full entitlement under the dividend reinvestment plan."

 

Buying HK-12 at/near $40, is buying at a very interesting juncture

 

HK-12 / Henderson Land ... update-5yrs : 1-year

 

HK12_zps232c934c.gif

 

The longer term chart ( 10-years ) suggests to me that the price of HK-12 may fall a bit further, such as $35-37

 

HK12-LT_zps357d4808.gif

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