Hong Kong Property Companies

 Quick notes on 3 HK property cos:

Link REIT

  - Yield 4.55% (at HKD 63, year ending March 2020 results), 100% payout ratio, mostly 50 year property leases

  - Neighbourhood shopping centers, a bit like FCT in Sg.  Largely unaffected by economy/covid.

  - Good LT track record growing assets without raising cash from shareholders, but yield too low for me, esp with 100% payout ratio.

Wharf REIC:

  - Yield 6.3% (at HKD 32.10, end Dec 2019 results), only 50% of CFO paid out, mostly freehold property. 

  - 75% operating profit from one mall: Harbour City.  Overall high exposure to luxury/tourism: 81% rental from leather, fashion or jewellery. 

  - Luxury brands are reducing their footprint in HK: eg: LV closing their Times Square store after Wharf refused a rent reduction.  Aug 19: (pre-covid) Prada's Causeway Bay landlord "willing to cut rent by 44%" after Prada leaves.

  - If Wharf's 2019 rents fall by 40%, CFO is down roughly 50%.  I think the market is pricing this in.

HK Land:

  - 65% of 2019 operating profit from investment properties portfolio, 35% from development.  Development is lumpy, so ignore it now.  Conservative estimate 515m operating profit (excl D&A (not clear?) and change in properties' values) from investment properties in 2019.  Or USD 22c/share.

  - Dividend is also 22c/share (in 2019 and 2018), thats a 5.6% yield (@ USD 3.89/share).  Mgt said they intend to keep it constant.

  - For investment properties: 83% operating profit from HK central, 11% from Sg.  Mostly office (banking/legal).

  - Stock is cheap based on recurring income from Investment Properties alone.  Their development are is highly leveraged, but lets them expand their portfolio without raising more capital.  So cheap value with some growth.  Worth looking further.