Hongkong Land’s potential divestment of MCL Land in line with strategy: JP Morgan
In October, Hongkong Land publicized in a strategic review that the group may no longer concentrate on purchasing the build-to-sell segment across Asia. Rather, the group is expected to start reusing capital from the segment right into new incorporated business estate options as it finalizes all existing projects.
Recently, Bloomberg announced that Asian real estate group Hongkong Land Holdings is considering selling its 100%- owned Singapore property development subsidiary, MCL Land. The action, if real, would be in channel with the former’s strategy to stop acquiring development properties, says JP Morgan in an equity research study information.
Regardless, the research house accentuate that selling MCL Land above account price might be “a little bit demanding”, provided present market problems and that it “would most likely not be surprised if the business ends up dealing with MCL Land at slightly listed below book value” to meet its capital recycling targets. Alternatively, the group may take its time offering its development property ventures and diminishing its land bank.
In November, MCL Land launched the 552-unit Nava Grove in Pine Grove, District 21. A joint property with Sinarmas Land, the 99-year leasehold condo accomplished 65% sales on launch weekend at an average price of $2,448 psf.
JP Morgan has maintained its “neutral” rating on Hongkong Land, with a target cost of US$ 4.10. “We assume HKL’s current assessments are decent, and therefore we stay Neutral, yet we could convert much more beneficial if Hongkong Land indicates its ability to carry out value-accretive offers.”
An upcoming project, anticipated to be debuted next year, is a new 500-unit exclusive residential development at Clementi Avenue 1. MCL Land and joint venture partner CSC Land Group defeated 5 more to win the site with a bid of $633.45 million ($ 1,250 psf per story ratio) last November.
Sources cited by Bloomberg claimed that Hongkong Land is looking to unload MCL Land at a costs to its account worth of $1.1 billion. While this is lower than Hongkong Land’s net investment for Singapore growth properties of US$ 1.362 billion ($ 1.83 billion) showed since end-June, it presents about 8% of the group’s total capital recycling target of US$ 10 billion and about 14% of its US$ 6 billion capital recycling target for innovation real properties, according to JP Morgan.
