Challenging First Half for Hongkong Land, Another USD 500 Million Share Buyback Announced

Narrow-moat Hongkong Land’s first-half result was challenging, as expected, with the positive news being another USD 500 million share buyback program. The timeline of the new buyback is long dated to the end of 2023 and management does not expect the share buyback to have an impact on further investments and its existing dividend policy. Pressure on investment properties continued in the first half and our revised rent assumptions see our fair value estimate decline slightly to USD 7.30 per share from USD 7.40. Our fair value represents a price/book of 0.5 times, in line with its 10-year historical average and so we see Hongkong Land’s share price as undervalued, trading at 0.33 times book. We continue to expect a gradual reopening of borders to be a positive catalyst for the real estate sector in Hong Kong but the tangible impact to Hongkong Land may only be seen in 2023. First-half dividend of USD 0.06 per share is unchanged against the same period last year and we continue to expect full-year dividend to be unchanged at USD 0.22 per share, representing a dividend yield of 4.2% at the current share price of USD 5.26.