Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
Sources cited by Bloomberg claimed that Hongkong Land is aiming to unload MCL Land at a costs to its account worth of $1.1 billion. While this is less than Hongkong Land’s net financial investment for Singapore growth real properties of US$ 1.362 billion ($ 1.83 billion) documented since end-June, it represents about 8% of the group’s total capital reprocessing target of US$ 10 billion and about 14% of its US$ 6 billion capital recycling target for development real estates, according to JP Morgan.
An upcoming venture, expected to be debuted next year, is a new 500-unit nonpublic residential project at Clementi Avenue 1. MCL Land and joint venture partner CSC Land Team beat five more to win the spot with a bid 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 mutual development with Sinarmas Land, the 99-year leasehold condo accomplished 65% sales on launch weekend at an average price of $2,448 psf.
JP Morgan has preserved its “neutral” rating on Hongkong Land, with a target cost of US$ 4.10. “We assume HKL’s existing valuations are decent, and thus we keep Neutral, but we could turn much more beneficial if Hongkong Land shows its capability to execute value-accretive arrangements.”
Regardless, the study house highlights that selling MCL Land over book value could be “a little bit complicated”, granted existing market issues and that it “would definitely not be stunned if the company winds up disposing of MCL Land at slightly listed below book value” to suit its capital recycling targets. Alternatively, the group may get its moment reselling its development real estate ventures and diminishing its land bank.
In October, Hongkong Land released in a vital assessment that the group will most likely no longer concentrate on purchasing the build-to-sell segment throughout Asia. Rather, the team is expected to begin reusing funds from the segment into new incorporated retail property opportunities as it completes all existing projects.
Last week, Bloomberg announced that Asian real estate group Hongkong Land Holdings is thinking about selling its 100%- owned Singapore real property development subsidiary, MCL Land. The move, if real, would be in channel with the previous’s method to discontinue investing in development properties, claims JP Morgan in an equity research report.
