Sun Hung Kai Properties 0016

[winston]

SING TAO DAILY

-- A town house built by Sun Hung Kai Properties (0016.HK: Quote, Profile, Research) at The Peak has been sold for HK$285 million -- or HK$57,000 per sq ft, which is a record for Hong Kong and Asia. It was a unit in the prime estate Severn 8, where only one unit was left for sale.

[winston]

SHK Prop 16 HK

Last Thursday, Shareholders bought back 442k shares for $56.5mn to 42.45%.

[winston]

Vested.

ACTION Buy
Sun Hung Kai Properties (0016.HK) [HK$114.30] Return Potential 30%

Approaching the inflection point; add to Conviction Buy, lift TP

Source of opportunity
SHKP's share price has declined 31% ytd amid
1) concern over a macro slowdown,
2) uncertainty arising from management change, and
3) expectation of an interest rate hike. We think concern over a rate hike is overdone and note the property market consolidation has been mild so far.

We also believe the market has overlooked potential opportunities arising from the end of the Kwok brothers' power struggle. With its discount to NAV at the high end of its midcycle historical range, we believe share price weakness offers investors a good entry point.

We raise our NAV-based 12m TP by 4% to HK$148.30 and add the stock to our Conviction Buy list (from Neutral).

Catalyst
Despite macroeconomic slowdown concerns, we expect the housing price correction in the next few months to be limited, which we think will support a recovery in SHKP's stock price. In addition, our scenario analysis suggests that SHKP's share price already reflects about a 10% drop in property prices.

Several major primary launches have achieved solid volumes recently, which should be positive for SHKP, as this suggests that there is sufficient demand to absorb additional launches. While we think SHKP's key project Cullinan will be launched in 4Q, we expect management to step up efforts to dispose of aging HK rental assets in the near term. We think this would reduce investor concerns over uncertainty regarding the recent management reshuffling.

Valuation
We raise our Jun-09E NAV by 3.9% to HK$164.82 after incorporating our higher rental and capital value growth estimates for SHKP's prime residential and commercial projects in FY09. At HK$114.30, the share price stands at a 31% discount to our forward NAV estimate, vs. the historical average of 10.8%.

[winston]

Vested. GS can really move market...
Their Conviction Buy on SHKP today move the stock by 3.5% and the calls eg. 2437 is up 53% !

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STOCK ALERT - Hong Kong's Sun Hung Kai Props sharply higher on broker upgrade

HONG KONG (XFN-ASIA) - Sun Hung Kai Properties Ltd shares were sharply higher following an upgrade to "buy" from "neutral" by Goldman Sachs.

At 10:32 am, the stock was up 3.50 hkd or 3.06 pct at 117.80, while the Hang Seng index was flat.

Goldman raised its target price on Hong Kong's leading property developer by 3.9 pct to 148.3 and included the stock in its "conviction buy" list, citing undervaluation.

Goldman noted that the stock had fallen 31 pct since the beginning of the year amid worries about a slowdown in economic growth and potential interest rate hikes.

It said a feud in the controlling Kwok family, that also led to some selling pressure on the stock recently, appears to have dissipated, at least for the time being.

[winston]

Most expensive flat in Asia sold in HK

HONG KONG - A luxury flat in Hong Kong has sold for HK$225 million (US$28.8 million), the most expensive apartment per square foot ever sold in Asia, a report said on Wednesday.
The 80th floor penthouse, located in a new complex called The Arch, which has a private swimming pool and a spectacular view of Hong Kong's Victoria Harbour was sold for HK$41,000 per square foot

The 80th floor penthouse with a private swimming pool and spectacular view of Hong Kong's Victoria Harbour sold for HK$41,000 per square foot, a report in the Sing Tao Daily said, citing an unnamed real estate source.

The 5,497-square-foot (511-square-metre) flat, with its own roof-top terrace, is located in a new complex called The Arch, in Hong Kong's Kowloon area.

The Arch is close to a yet-to-be-completed office tower, the International Commerce Centre.

The new tower is attracting multinational firms away from the central business district, where rocketing property prices have scared away even the world's richest firms.

The flat's price beat the record of HK$39,800 per square foot set last November for a larger apartment on Hong Kong island, according to the report.

Hong Kong's property market has boomed in recent years, following a major crash during the Asian financial crisis in the later 1990s. -- AFP

[winston]

Kwok breaks silence on SHKP family feud
Katherine Ng; Wednesday, June 25, 2008

Walter Kwok Ping-sheung, the eldest brother at the heart of controversy surrounding property giant Sun Hung Kai Properties (0016), has finally broken his silence over the issues dogging the company.

In his first personal appearance since being ousted as SHKP chairman and chief executive on May 28, Kwok made an effort to mend his relationship with his family by putting recent events down to misunderstandings.

"The company has grown bigger and numbers of investments are on the rise. It's normal to have more conflicts among the management," he was reported as saying yesterday.

His ties with matriarch Kwong Siu-hing and with his two brothers remain strong, and more communication could have solved the problem, he said.

"I maintain a good relationship with my mother and we are having lunch regularly once or twice a week.

"Most of the time she stands by my decisions, on the IFC [International Finance Center] and ICC [International Commerce Center] developments for example," the eldest Kwok said.

He dismissed rumors that disagreements with his younger brothers, Thomas Kwok Ping-kwong and Raymond Kwok Ping- luen, stemmed from the influence of his confidante Ida Tong. "I have been the chairman for 18 years, any influence would not happen just now. She [Tong] is a good friend of mine for more than 20 years. We, among a few other friends, always meet together to discuss economic and political issues," he said.

Kwok also said he has no hard feelings over his new role as an SHKP independent non-executive director. "I will adjust to it and keep on monitoring the operations of the company as a non-executive director," he said.

Kwok added that he has no intention of dividing the family wealth: "I will not sell my stake [in the company] or start up my own business, it's totally a misunderstanding."

SHKP was founded by his late father under the SHKP Foundation, and Kwok said he has never thought of changing the setup.

[winston]

Vested. From UOB-Kay Hian:-

Already hitting the floor

Based on the past down cycles, Sun Hung Kai Properties’ (SHKP) share price has already fallen below the floor level, as long as residential prices do not decline by more than 20% from here. On the other hand, for investors expecting Hong Kong residential prices to come down by more than 30%, SHKP is still expensive despite the pullback.

As the family rift has come to an end (at least for the time being) management may take some steps to mend investors’ confidence on the Group’s corporate governance.

Sector has been under pressure.

Property developers have been sold down due to
a) the overall weak sentiment in the stock market and
b) downward adjustment on the expectations of residential price movement going forward, prompted by the continuing stock market weakness and rising mortgage rates.
The question is whether share price has adequately factored in the bad news.

Three past down cycles as reference. In order to arrive at an objective answer to this question, we made reference to the valuation of SHKP in the past down cycles. We have identified three such downturns:
1) from Mar 94 to Sep 95,
2) Jun 99 to Jun 00 and
3) Sept 00 to Jun 03.
We left out the down cycles started in 1997 and 2001 as stock valuation fell to an irrational level due to shocks from exceptional events.

Understandably, valuation tends to come down more when residential price decline is sharper. Hence, the discount to NAV widened to 40% in the down cycle started in Sep 00 while it only reached 22% in the downturn from Jun 99.

Street aware of modest profit growth. With the delay in the launch of The Cullinan, SHKP has been selling down its non-core properties, including luxury units such as Hillsborough Court Blk D and Pacific View, and office space such as Millennium P3, to bridge the profit gap. Including HK$500m of disposal gains, we estimate SHKP’s FY08 net profit to grow modestly by 5.3% to HK$12,099m, a tad shy of HK$12.5b among consensus.

Future profits depend on The Cullinan. In our opinion, although SHKP has missed the best time to sell The Cullinan, given its location (right next to ICC) and unchallenged harbour view, we do not think it is overly-ambitious to expect average selling price to reach HK$20,000psf given The Arch nearby is fetching HK$16,500psf in the secondary market at present. This means The
Cullinan alone could bring in pretax profit of at least HK$18b, on a development margin of 80%. Suffice to say, profit levels in the next two years will depend very much on when The Cullinan will be sold and booked.

A balanced asset portfolio. A combination of efforts to build up the rental portfolio and slow landbank replenishment in recent years, only 29% of SHKP’s NAV is exposed to residential properties for sale with over 50% in other Hong Kong assets (mainly rental properties) that generate recurrent income. Likewise in China, SHKP adopts a balanced strategy. Of the 50m sf
landbank, 70% will be developed as high-end residential units and serviced apartments, accounting for 40% of its China NAV. While the Group has started to generate income on its mainland residential projects, we do not expect notable contributions from China till the two major Shanghai
commercial developments are completed in 2010.

Revised target price of HK$133.68. Our NAV of HK$151.91 already takes into account a 10% drop in residential prices from the current level that we expect will materialise within the next three months. Based on the average 12% discount to NAV that SHKP has traded at since 1990, our target price is HK$133.68.

In terms of sensitivity, every 10% correction in residential value will reduce NAV by about 5%. This means even if residential prices were to fall by 20% from now, SHKP would still be trading on a relatively wide 21% discount to NAV. As the family rift has come to an end (at least for the time being), management may take some steps to mend investors’ confidence on the Group’s corporate governance.

[winston]

Vested.

SHKP set to cash in on Mid-Levels slack
Friday, June 27, 2008

Sun Hung Kai Properties (0016) plans to launch sales of more units in tower four of its luxury Hillsborough Court project in the Mid-Levels in the coming two weeks.

The developer will offer two-bedroom units in Royal Tower, with prices set at between HK$18,000 and HK$19,000 per square foot, 5 percent higher than prices for its first batch, according to Sun Hung Kai Real Estate Agency executive director Victor Lui Ting.

"The prices were reasonably set. We can hardly find other comparables because there are no other new projects launched in the district," Midland Realty sales director Patrick Fung said yesterday.

Morgan Stanley predicts Hong Kong's housing market will grow at a slower pace in the next 12 months.

"Our previous asset price forecast in March 2008 is for a 15 percent residential price increase over a 12-month period in Hong Kong," Morgan Stanley said in a report.

"We expect overall residential prices to rise by about 4.2 percent as a base-case scenario over the next 12 months."

ALFRED LIU

[winston]

HK's Sun Hung Kai Properties reaps 2 bln hkd from non-core assets sale - report
HONG KONG (XFN-ASIA) - Sun Hung Kai Properties Ltd (SHKP) has generated some 2 bln hkd from sale of non-core assets so far this year, as the company tries to boost earnings amid a sharp decline in the number of new housing units offered for sale this year, the South China Morning Post reported.

The newspaper cited Victor Lui, executive director of SHKP unit Sun Hung Kai Real Estate Agency, as saying that the revenue came from sale of units at two separate luxury housing projects in Tai Tam and Mid-Levels, as well as the third phase of its commercial project in Kwun Tong.

SHKP's sale of non-core assets comes after it announced in March that completion of three housing projects, involving combined gross floor area of 2.69 mln sq feet, has been delayed.

[winston]

Vested.

STOCK ALERT - Hong Kong's Sun Hung Kai sharply higher on broker upgrade

HONG KONG (XFN-ASIA) - Sun Hung Kai Properties Ltd was sharply higher after Credit Suisse upgraded its rating on the property developer to "outperform" from "neutral".

At 11.44 am, the stock was up 3.8 hkd or 3.62 pct at 108.7.

Credit Suisse noted that Sun Hung Kai's recent share price correction has more than discounted the weakness in the local property market.

It raised its 2008, 2009 and 2010 earnings per shares (EPS) forecasts for Sun Hung Kai by one pct, 26 pct and 27 pct respectively, to 4.83 hkd, 7.11 hkd and 8.11 hkd.

But it cut the target price on the stock to 130 hkd from 140, based on its average discount to net asset value of 10 pct .