Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
Sources pointed out by Bloomberg said that Hongkong Land is wanting to divest MCL Land at a fee to its book worth of $1.1 billion. While this is less than Hongkong Land’s net investment for Singapore project real properties of US$ 1.362 billion ($ 1.83 billion) reported since end-June, it represents approximately 8% of the team’s total funding recycling 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, anticipated to be opened next year, is a brand-new 500-unit exclusive residential project at Clementi Avenue 1. MCL Land and joint project companion CSC Land Team beat 5 others to win the spot with a proposal of $633.45 million ($ 1,250 psf per plot ratio) last November.
JP Morgan has maintained its “neutral” score on Hongkong Land, with a target price of US$ 4.10. “We believe HKL’s present evaluations are fair, and thus we keep Neutral, however we might convert much more positive if Hongkong Land shows its capability to perform value-accretive arrangements.”
In any case, the study house accentuate that selling MCL Land over book price might be “a little bit demanding”, provided existing market conditions and that it “would not be stunned if the company ends up disposing of MCL Land at a little below account value” to meet its capital recycling targets. Alternatively, the group might take its period selling its development property ventures and depleting its land bank.
Last week, Bloomberg disclosed that Asian real estate group Hongkong Land Holdings is thinking about offering its 100%- managed Singapore real estate development subsidiary, MCL Land. The action, if real, would be in line with the former’s strategy to discontinue obtaining development properties, claims JP Morgan in an equity research report.
In October, Hongkong Land announced in a strategic review that the group will no longer pay attention to purchasing the build-to-sell segment throughout Asia. Rather, the group is assumed to start reusing capital from the segment into brand-new integrated commercial property options as it finishes all continuing projects.
In November, MCL Land released the 552-unit Nava Grove in Pine Grove, District 21. A joint project with Sinarmas Land, the 99-year leasehold condo accomplished 65% sales on launch weekend at an average price of $2,448 psf.
