HSBC Cuts Henderson Land To Neutral, Lowers Target Price To HK$31

HSBC cut Henderson Land Development (00012) to Neutral from Buy and lowered its target price to HK$31 from HK$33, citing weaker momentum in Hong Kong's residential market and rising risks tied to lease renewals for mainland investment properties, according to ETNet. The bank said Henderson Land remains a key beneficiary of Hong Kong's urban redevelopment pilot scheme that allows 20% extra gross floor area and of proposed tax incentives aimed at attracting global fund managers, given its exposure to core Central office assets. HSBC also said hawkish remarks by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium added to rate concerns. It noted that on August 27, a leading Hong Kong commercial bank raised its three- to five-year fixed mortgage rate by 20 basis points to 2.93%, further narrowing the positive spread versus average rental yields of 3%. It added that the latest batch of Kai Tak Marina Phase 2 was priced 4% below the average selling price of the previous batch launched four months earlier, which it sees as an early sign of softer home prices, although resilient leasing demand should help cushion the downside. The bank said several key mainland investment-property land leases will expire within the next 18 years, including the commercial portion of Beijing World Financial Center as early as 2034. It estimated that renewing these leases for another 20 years could cost RMB 6 billion and reduce net asset value by HK$1.5 per share. HSBC expects the new urban redevelopment scheme to eventually generate HK$6.6 billion in profit for Henderson Land from projects that might otherwise remain undeveloped.