Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
Recently, Bloomberg announced that Asian real estate group Hongkong Land Holdings is considering offering its 100%- managed Singapore real estate development subsidiary, MCL Land. The action, if true, would be in channel with the former’s strategy to discontinue obtaining development properties, states JP Morgan in an equity research record.
Sources pointed out by Bloomberg said that Hongkong Land is aiming to divest MCL Land at a costs to its account value of $1.1 billion. While this is less than Hongkong Land’s net investment for Singapore development properties of US$ 1.362 billion ($ 1.83 billion) reported since end-June, it represents approximately 8% of the team’s total funding reprocessing target of US$ 10 billion and around 14% of its US$ 6 billion capital reusing target for development properties, according to JP Morgan.
An upcoming venture, expected to be opened next year, is a brand-new 500-unit exclusive housing development at Clementi Avenue 1. MCL Land and joint project partner CSC Land Team beat five more to win the site with a quote of $633.45 million ($ 1,250 psf per story ratio) last November.
Regardless, the research house highlights that selling MCL Land above account value may be “a bit challenging”, given present market problems and that it “would not be stunned if the firm winds up dealing with MCL Land at slightly below book worth” to match its capital recycling targets. Alternatively, the group might take its time selling its development real estate projects and diminishing its land bank.
JP Morgan has preserved its “neutral” ranking on Hongkong Land, with a target rate of US$ 4.10. “We believe HKL’s current valuations are fair, and therefore we stay Neutral, however we might change a lot more beneficial if Hongkong Land shows its ability to carry out value-accretive arrangements.”
In November, MCL Land kicked off the 552-unit Nava Grove in Pine Grove, District 21. A mutual property with Sinarmas Land, the 99-year leasehold condo achieved 65% sales on launch weekend at an average price of $2,448 psf.
In October, Hongkong Land publicized in a strategic evaluation that the group will no longer pay attention to purchasing the build-to-sell sector throughout Asia. Rather, the group is expected to begin recycling funds from the segment into new combined commercial property prospects as it finalizes all occurring projects.
