Hongkong Land: Mildly Positive on the Luxury Retail Expansion Plan; USD 6.10 Fair Value Unchanged

We are positive on narrow-moat Hongkong Land’s USD 400 million retail expansion plan that will strengthen its positioning as a key luxury retail destination in Hong Kong and meet luxury tenants’ demand for additional retail space. However, we expect a limited impact on overall near-term earnings, and we maintain our fair value estimate of USD 6.10 per share. The share price was largely flat during the June 27 morning trading session despite the announcement of the plan. We believe Hongkong Land’s share price will remain under pressure in the near term given the challenging office and retail market in Hong Kong, as well as the higher-for-longer interest-rate environment.