Takeaways from virtual property conference
? Despite the recent Covid-19 outbreak in China, WHL’s management is
optimistic about the ongoing positive rental reversion trend of its IFS malls.
? Future landbanking of development property (DP) projects in China, if any,
would only be made on a very selective basis.
? Management believes that its luxury DP sales in HK could recover only after
HK’s borders with China reopen. We reiterate our Hold with a TP of HK$27.3.
Optimistic about rental reversion trend of IFS malls
? WHL’s management is glad to see a mom rebound in retail sales of its malls in China
in May 22, after retail sales reached a trough in Apr 22 due to lockdowns in multiple
cities during the Covid-19 outbreak.
? The positive rental reversion trend in its IFS malls does not seem to be derailed by the
Covid-19 outbreak that has only affected short-term performance of the malls. Yet, the
amount of rent concessions of non-IFS malls in Shanghai has yet to be finalised.
? Its future investments in investment properties (IP) in China will depend on several
criteria, including location (Tier-1 cities or prime Tier-2 cities), future demand for retail
and the potential growth of middle class in target locations.
Resumption of China DP landbanking only on a very selective basis
? WHL has not replenished its development property (DP) land bank in China since
2H18. Management thinks that its resumption of replenishment of DP land bank would
only be on a very selective basis.
? In our view, despite provisions made for China DP in recent years, WHL is now in a
favourable position to resume land banking via tender or auction, given that quite a
number of Chinese developers are struggling with liquidity problems with no budget for
landbanking.
Recovery of HK DP sales depends on timing of borders reopening
? DP sales in HK would continue to be under pressure until HK’s borders reopen with
China. Key bookings in 1H22F would come from sales of apartments and car park
spaces at Mount Nicholson.
? Its future land banking would continue to be luxury-focused and hence participation in
projects in the Northern Metropolis (NM) looks unlikely.
Keeping a majority of long-term equity investments
? Management made some transactions in its equity investment portfolios in the past six
months and is keeping most of its holdings as long-term investments.
? WHL’s investment portfolio consists of stocks in two industries, namely property (HK
property stocks) and technology (“CME2 portfolio”), plus investment in Greentown
China (3900 HK, Add).
Payout ratio to be maintained; reiterate Hold
? Management reiterates DPS guidance of 30% of annual underlying net profit and
expects the fluctuation of DPS in recent years to diminish after HK’s borders reopen.
? We reiterate our Hold rating for WHL with a TP of HK$27.3, based on a 45% discount
to NAV of HK$49.6.
? Key downside risks include slower retail sales growth in its China IP and more
provisions for China DP. Acquisition of NAV-accretive HK DP projects is a key upside
risk.