Hongkong Land Holdings

[postage paid]

This is a good operational and financial move by HK Land.

For the stock, I think all the way up to 0.5 P/RNAV should be quite straightforward. But where it will get hard is actually setting up the fund and property management business from scratch.
 
Capitaland and Mapletree have about 20 years of headstart to get where they are today.

Hi postage paid,

If the Jardines continue to execute more value accretive moves like the one it just did, there is no reason that 0.5x NAV is the ceiling.

HKL has plenty of property management experience as they manage their own Central commercial properties. For example, they will also manage their sister Mandarin Oriental International's One Causeway Bay (ex Excelsior hotel) once it becomes operational this year.

Fund Mgt is indeed the tricky part. HKL's current top 2 hires (both new) were from Mapletree Investments, so that is a good start. One could also easily poach more of your competitors' talent but unfortunately, you still can't replicate your competitors' track record and reputation to fund raise from LPs. Nonetheless, I think the Saipans have scale and so if they want to change, they will. It is only a matter of generations , which they have gone through quite a couple and their 999year leases still have plenty of years to run down. 

Hi Weijian,
I agree 0.5 P/NAV is not the ceiling, but the trip to 0.5 will be easier, faster and more within management's influence than the trip above that.
 
Capland China trust and Link REIT sit about 0.55 to 0.6 and these are proxies for HK/ China property owners with the right capital structure. If these re-rate, then HK land will re-rate too. But this part is outside of the company's influence. Capitaland's choice to list a new REIT in china with a complicated ownership structure (i.e financial engineering), and only 2 properties instead of selling externally or waiting to sell to Capitaland China Trust likely indicates this will be unlikely in the next year.

I also agree HK land has property management experience. I should have stated that it is property and fund management experience for others, as this involves a sales and fundraising skill set that needs to be developed within the company and also relationships that need to be developed with the people with the funds (i.e. why let HK land manage, instead of an often incumbent competitor). With the political realities today, I dont see the pool of funds available for investing in China increasing.

It is an attractive investment at current valuation, but will become less attractive once the low fruit has been picked.