Hong Kong Land

UOBKayhian on 7 Mar 2014


FY14F PE (x): 19.0
FY15F PE (x): 17.6

In line with expectations. Hongkong Land’s (HKL) underlying net profit grew 20% yoy to
US$935m in 2013, 3% above consensus but 1% below ours. Any discrepancies are
likely to relate to residential development profit. Management raised final dividend by
9% yoy to US$0.12, and hence full-year dividend was up by 6% yoy to US$0.18,
equivalent to a reasonable 45% payout.

Maintain HOLD. Trading at 34% discount to NAV vs historical mean of 24%, share price
has priced in a 20% fall in office capital value, which seems adequate for 2014 barring
unforeseeable events. While residential developments have started to make meaningful
contributions to profits, we do not see any room for a re-rating, given HKL is still new to
many of the residential markets, including China where competition is keen. We expect
share prices to remain range-bound, responding to newsflow, particularly with relation to
the Hong Kong commercial sector which still accounts for 65% of NAV. Maintain HOLD
and target price of US$5.88. Entry price is US$5.30.