Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
Recently, Bloomberg disclosed that Asian real estate group Hongkong Land Holdings is taking into consideration offering its 100%- owned Singapore real property development subsidiary, MCL Land. The action, if correct, would remain in channel with the previous’s method to stop investing in development properties, states JP Morgan in an equity research information.
Resources mentioned by Bloomberg stated that Hongkong Land is aiming to divest MCL Land at a costs to its account value of $1.1 billion. While this is lower than Hongkong Land’s net investment for Singapore project real properties of US$ 1.362 billion ($ 1.83 billion) documented as of end-June, it represents approximately 8% of the team’s overall funding recycling target of US$ 10 billion and around 14% of its US$ 6 billion capital reusing target for property development properties, according to JP Morgan.
Regardless, the research study house highlights that selling MCL Land above book worth could be “a bit demanding”, given current market issues and that it “would definitely not be surprised if the firm winds up dealing with MCL Land at slightly below book worth” to meet its capital recycling targets. Alternatively, the group might take its period reselling its development property ventures and diminishing its land bank.
An upcoming plan, expected to be opened next year, is a new 500-unit private housing development at Clementi Avenue 1. MCL Land and joint venture partner CSC Land Group beat 5 more to win the location with a quote of $633.45 million ($ 1,250 psf per plot ratio) last November.
In November, MCL Land kicked off the 552-unit Nava Grove in Pine Grove, District 21. A mutual property with Sinarmas Land, the 99-year leasehold condominium achieved 65% sales on launch weekend at an average price of $2,448 psf.
In October, Hongkong Land announced in a strategic review that the group will no longer pay attention to investing in the build-to-sell segment throughout Asia. Instead, the group is expected to start reclaiming capital from the segment into brand-new combined business property opportunities as it completes all occurring projects.
JP Morgan has actually preserved its “neutral” rating on Hongkong Land, with a target rate of US$ 4.10. “We think HKL’s present valuations are decent, and hence we keep Neutral, but we could convert a lot more positive if Hongkong Land shows its capability to carry out value-accretive offers.”
