Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
Last week, Bloomberg reported that Asian real estate group Hongkong Land Holdings is taking into consideration selling its 100%- acquired Singapore property development subsidiary, MCL Land. The move, if true, would certainly be in line with the previous’s strategy to cease investing in development properties, states JP Morgan in an equity study record.
In October, Hongkong Land disclosed in a vital review that the group may no longer pay attention to purchasing the build-to-sell segment throughout Asia. Rather, the group is assumed to begin reusing funds from the segment into new combined commercial property prospects as it finalizes all continuing projects.
JP Morgan has actually preserved its “neutral” rating on Hongkong Land, with a target cost of US$ 4.10. “We think HKL’s current assessments are fair, and hence we remain Neutral, yet we can transform a lot more positive if Hongkong Land indicates its capability to carry out value-accretive agreements.”
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Sources cited by Bloomberg stated that Hongkong Land is seeking to divest MCL Land at a fee to its book worth of $1.1 billion. Whilst this is lower than Hongkong Land’s net financial investment for Singapore development properties of US$ 1.362 billion ($ 1.83 billion) reported since end-June, it stands for approximately 8% of the group’s complete capital reprocessing target of US$ 10 billion and around 14% of its US$ 6 billion capital recycling target for property development real properties, according to JP Morgan.
In any case, the study house highlights that selling MCL Land above book value might be “a bit difficult”, granted present market conditions and that it “would definitely not be stunned if the firm ends up dealing with MCL Land at somewhat listed below book worth” to meet its capital recycling targets. Alternatively, the group might take its moment reselling its development property ventures and diminishing its land bank.
An upcoming venture, anticipated to be debuted next year, is a new 500-unit exclusive housing development at Clementi Avenue 1. MCL Land and joint venture partner CSC Land Group beat 5 others to win the spot with a quote of $633.45 million ($ 1,250 psf per story ratio) last November.
In November, MCL Land introduced the 552-unit Nava Grove in Pine Grove, District 21. A joint development with Sinarmas Land, the 99-year leasehold condo attained 65% sales on launch weekend at an average price of $2,448 psf.
