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Investment Thesis

Building a better future

BUY with HK$39.7TP. The stock is trading 62% below our appraised current NAV with dividend yield of 5.2% for FY21. We see room for further share price appreciation given improving earnings quality and strong development income visibility. However, uncertain policy outlook, however, remains the key overhang on the sector. 

Development earnings well assured Thanks to smooth project pre-sales, New World had a net order book of HK$30.9bn in Hong Kong and Rmb10.7bn in China as of Dec20. This points to high visibility of future development earnings. 

Fitter and stronger. Rental portfolio expansion in Hong Kong and China should enhance the company’s recurrent income, thus improving earnings quality. Continued non-core asset disposals helps to optimise its business portfolio and boost its war chest for new acquisitions to propel future growth. 

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Fitter and stronger. Rental portfolio expansion in Hong Kong and China should enhance the company’s recurrent income, thus improving earnings quality. Continued non-core asset disposals helps to optimise its business portfolio and boost its war chest for new acquisitions to propel future growth. 

Valuation: Our target price is derived from assigning a 55% discount to our Dec-2021 NAV estimate.

Where we differ: We are more positive on the company’s long-term growth led by an expanding recurring income base. 

Key Risks to Our View: Any deterioration in residential demand in Hong Kong and China could drag the company’s earnings and share price performance. Any further drop in leasing demand for office and retail properties could impact its earnings and valuations. Any unexpected housing/land policy change could trigger a sector wide de-rating.