Company Update: Sold Central Park in Beijing
- Expediting inventory sales of OMA by the Sea with price incentives
- Sold Central Park in Beijing
- Landmark East records stable occupancy but continues to see negative reversionary growth
- Awaiting catalysts; HOLD with HK$3.07 TP
Wing Tai Properties has sold six units at OMA by the Sea in Tuen Mun for c.HK$65m since it slashed prices by more than 10% in Dec- 23. Completed in 2022, this 70%-owned residential project is 92% sold. Inventory sales of OMA by the Sea should dominate the company’s near-term development earnings.
Foundation works of two joint venture residential projects, one in Fanling and the other in Shatin, are underway with project completion expected in 2026.
Occupancy at Landmark East in Kwun Tong remain stable at 90-91% currently, which compares favourably with that of the overall Kowloon East office market. Spot rate is slightly lower at HK$24- 25psf. About 30% of leases are due for expiry in 2024. Reversionary growth is expected to stay mildly negative at 5%. Shui Hing Centre in Kowloon Bay remains 88% let with neutral rental reversion. The company’s London commercial portfolio should see largely steady income contribution but lower asset valuation due to cap rate expansion.
Le Cap/La Vetta in Kau To and Lanson Place Waterfront Suites in Sai Wan Ho contribute steady income on stable occupancy. We do not rule out the possibility of the company monetising these residential developments when opportunities avail in the future.
In 2H23, Wing Tai Properties disposed of 33 residential units at Central Park in Beijing for c.HK$400m with estimated after-tax profit of c.HK$40m. We see the disposal as positive to the company as this property has been suffering from deteriorating occupancy in recent years.
Superstructure works of Gage Street/Graham Street redevelopment, a 50/50 jv with CSI Properties, are well underway. The office tower and hotel building are scheduled for completion in late 2025 and 2026 respectively.
With capex budget of c.HK$200m, renovation works at Lanson Place Causeway Bay hotel is scheduled to be completed in Mar-24. This would boost its competitiveness making it better positioned to tap the recovering demand from tourists following the border reopening.
The stock is trading at an 81% discount to our assessed current NAV, against its 10-year average of 72%. While the current valuation is inexpensive from a historical perspective, we do not foresee any near-term catalysts that would narrow the discount to NAV. Maintain HOLD with TP of HK$3.07. This is based on target discount of 79% (1.5SD below its 10-year average) to our Dec-24 NAV estimate.