Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
In October, Hongkong Land released in a strategic review that the group will most likely no longer pay attention to investing in the build-to-sell segment throughout Asia. Rather, the team is assumed to begin reusing capital from the segment into brand-new integrated business property options as it finishes all continuing projects.
Resources pointed out by Bloomberg said that Hongkong Land is wanting to divest MCL Land at a costs to its book value of $1.1 billion. Although this is less than Hongkong Land’s net investment for Singapore development real properties of US$ 1.362 billion ($ 1.83 billion) showed as of end-June, it presents approximately 8% of the group’s total capital recycling target of US$ 10 billion and around 14% of its US$ 6 billion capital recycling target for development real properties, according to JP Morgan.
In November, MCL Land launched the 552-unit Nava Grove in Pine Grove, District 21. A joint project with Sinarmas Land, the 99-year leasehold condo attained 65% sales on launch weekend at an average price of $2,448 psf.
In any case, the study house accentuate that selling MCL Land above book value might be “a little bit challenging”, given existing market conditions and that it “would most likely not be surprised if the firm ends up dealing with MCL Land at a little below account value” to suit its capital recycling targets. Alternatively, the group might get its period reselling its development property ventures and diminishing its land bank.
An upcoming plan, expected to be opened next year, is a brand-new 500-unit nonpublic non commercial project at Clementi Avenue 1. MCL Land and joint project companion CSC Land Group defeated five more to win the location with a bid of $633.45 million ($ 1,250 psf per story ratio) last November.
JP Morgan has preserved its “neutral” score on Hongkong Land, with a target price of US$ 4.10. “We believe HKL’s present assessments are fair, and therefore we stay Neutral, but we can turn much more positive if Hongkong Land shows its capacity to perform value-accretive deals.”
Recently, Bloomberg announced that Asian real estate group Hongkong Land Holdings is thinking about selling its 100%- managed Singapore property development subsidiary, MCL Land. The step, if correct, would be in line with the former’s strategy to stop acquiring development properties, says JP Morgan in an equity study information.
