Company Update: Strong project launch pipeline
In 1HFY22, Sino Land achieved contracted sales of HK$6.5bn in Hong Kong. The bulk came from the sale of La Marina (Wong Chuk Hang Station Package 2), an equally owned joint venture with Kerry Properties. Since its initial launch in Aug 21, about 483 units have been presold for c.HK$11.7bn or HK$35,700psf on average.
Inventory sales of One SOHO in Mong Kok and Silversands in Ma On Shan are progressing well with >58% and >67% of their respective units being taken up. Elsewhere, about 47% of 1,437 units at Grand Victoria in Cheung Sha Wan has been presold for >HK$9bn since its initial launch in Mar-21. In Dec-21, Sino Land increased its stake in this project to 29.25% after acquiring a 6.75% stake from its project partner, Shimao Group (813 HK). Silversands, Grand Victoria and St. George’s Mansions are scheduled for completion in FY23 while One SOHO and La Marina are slated for completion in FY24.
In 1HFY22, Sino Land handed over >90% of its units at Mayfair by the Sea 8 in Tai Po, which has been virtually sold out. High-margin Grand Central in Kwun Tong should continue to contribute to the company’s near-term development earnings.
Sino Land has obtained the pre-sale consent for One Central Place in Central, a joint venture with URA, which contains 121 units with a GFA of 84,261sf. Given its close proximity to the CBD, this residential development should be well sought after when it goes on sale in 1Q22. Other projects earmarked for pre-sale in 2022 are strategically located adjacent to MTR stations with strong transportation connectivity. Ph 1A of Kam Sheung Road Station Package One (715 units) is pending sales approval. Lohas Park Package 11 and Wong Chuk Hang Station Package 4 are expected to be released into the market in 2H22.
Prior to the recent spread of Omicron, retail tenant sales recovered in 1HFY22. Rental relief was substantially reduced and decline on rental renewal has been stabilising. Sino Land also revamped the trade mix of Tuen Mun Town Plaza with the introduction of beauty zone. On the other hand, office leasing remains challenging with negative rental reversion working its way through the company’s office portfolio.
Despite sequential improvements led by staycation demand and improved F&B business, Conrad Hotel should remain in the red. Singapore hotels fare better aided by the government’s relaxation of travel restrictions. The Fullerton Ocean Park Hotel Hong Kong plans to have a soft opening in 1H22.
Despite the acquisition of 20% stake in a residential/commercial site in Singapore, we estimate Sino Land still sits on a net cash holding of c.HK$38bn. This places the company in an advantageous position in land banking. Focus remains in Hong Kong and the Greater Bay Area.
The stock is trading at a 59% discount to our appraised current NAV. Excluding the net cash holding, the remaining stub is trading at a 74% discount. Valuation is by no means expensive. Successful presales should help lock in future development profit, suggesting high earnings visibility. The planned project launch should attract market interest given their well-chosen locations. BUY with HK$12.0 TP, based on 50% discount to Dec-2022 NAV estimate.