Company Update: Offering Cadenza for sale
Novotel Hotel in Jordan has been closed to make way for demolition. It will be redeveloped into a residential/commercial project with GFA of 0.256m sf with projection completed targeted for 2025. In Sep-21, CSI Properties sold a 49% stake in redevelopment to a Canadian fund and another minority partner for HK$1.715bn. This not only brings in hefty disposal gains of HK$743m but also diversifies the investment risk.
CSI Properties sold two units at 60%-owned Dukes Place at Jardine’s Lookout for HK$391m or HK$68,600psf on average in 1HFY22. Elsewhere, three apartments of Infinity at 8-12Peak Road have been sold for c.HK$1bn since Sep 21.
CSI Properties is offering Cadenza in Sheung Shui for sale. This newly completed luxury house development contains six luxurious villas with GFA of 33,100sf. Since the government announced its plan to develop the Northern Metropolis, market sentiment there has improved. This should facilitate the sale of Cadenza.
The company has sold retail shops in San Po Kong for HK$170m with estimated disposal gains of >HK$20m to be recognised in 2HFY22. Elsewhere, CSI Properties sold two office floors at 2-4 Shelly Street recently.
With a GFA of 32,000sf, FOCO, a commercial development at 48 Cochrane Street in Central, is close to completion. Pre-leasing is proceeding smoothly with a substantial portion of floors already pre-leased to F&B outlets.
Consolidated net debt stood at HK$8.58bn in Sep21, down from Mar-21’s HK$10.4bn, thanks to proceeds from the stake disposal of Novotel Hotel redevelopment. This represented 31% of total assets. Its off-balance sheet debt increased to HK$8.42bn from Mar-21’s HK$6.91bn.
Since Apr-21, the company has repurchased 97.5m shares for HK$24.1m or HK$0.247/sh on average. This signaled its strong hidden value and supported its share price.
Meanwhile, the stock is trading at an 83% discount to our appraised current NAV. Such a low valuation should limit any downside risk on share prices. Based on our target discount of 75% to our Dec-22 NAV, we set our TP at HK$0.335, and hence have a BUY call on CSI Properties.