Listed Real Estate Asia, KT Capital Group

Jacob Cheng

Listed Real Estate Asia

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

<ul>
<li>We are turning bearish on Hang Lung Properties.   Given China’s economic slowdown, we think luxury spending in China will take longer than expected</li>
<li>In addition, the property slowdown and housing prices decline will lead to a negative wealth effect, which will further impact luxury consumption</li>
<li>If RMB is to strengthen, more Chinese will travel to spend overseas.  HLP P/B valuation is almost historical low, but can stay cheap as a “value trap”</li>
</ul>


We are turning bearish on Hang Lung Properties.   Given China’s economic slowdown, we think luxury spending in China will take longer than expected
In addition, the property slowdown and housing prices decline will lead to a negative wealth effect, which will further impact luxury consumption
If RMB is to strengthen, more Chinese will travel to spend overseas.  HLP P/B valuation is almost historical low, but can stay cheap as a “value trap”


Turning Bearish: Hang Lung Properties Going Through a Perfect Storm

<ul>
<li>Through operating luxury shopping malls in China, Hang Lung Properties is the only HK-listed stock that provides exposure to the China luxury consumption story.  It is trading at attractive valuation.</li>
<li>Major concerns are 1) leakage of retail sales after re-opening and 2) impact on luxury consumption from negative wealth effect.  Most of the risks are priced in at current valuation.</li>
<li>Short-Term, China consumption will recover post-COVID as consumer sentiment rebounds.  Long-term, the structural story of China consumption remains intact, supported by growing middle class and increasing disposable income and savings.</li>
</ul>


Through operating luxury shopping malls in China, Hang Lung Properties is the only HK-listed stock that provides exposure to the China luxury consumption story.  It is trading at attractive valuation.
Major concerns are 1) leakage of retail sales after re-opening and 2) impact on luxury consumption from negative wealth effect.  Most of the risks are priced in at current valuation.
Short-Term, China consumption will recover post-COVID as consumer sentiment rebounds.  Long-term, the structural story of China consumption remains intact, supported by growing middle class and increasing disposable income and savings.


Hang Lung Properties (101 HK): The Only Play on China Luxury Consumption and at a Macro Sweet Spot

<ul>
<li>HLP malls, which focus on China luxury retail consumption, is facing headwind from slowing China economy and weaker consumption</li>
<li>The retail sales in its malls slowed down and recorded -13% yoy growth for 1H 2024.  Dividend cut was a negative surprise</li>
<li>However, market is forward looking and stock valuation is too cheap to ignore, we recommend long-term investors can look at this name</li>
</ul>


HLP malls, which focus on China luxury retail consumption, is facing headwind from slowing China economy and weaker consumption
The retail sales in its malls slowed down and recorded -13% yoy growth for 1H 2024.  Dividend cut was a negative surprise
However, market is forward looking and stock valuation is too cheap to ignore, we recommend long-term investors can look at this name


Hang Lung Properties 101 HK: Dragged by China Slowing Luxury Retail, but Stock Too Cheap to Ignore

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>There is an increasing likelihood that the duty-free quota of mainland tourists visiting Hong Kong will rise to Rmb30,000 from Rmb5,000. This will benefit many retail-related sectors.</li>
<li>
<a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">Luk Fook Holdings (590 HK)</a> is the best play among jewellery retailers given it has 65% of revenue from Hong Kong. <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International (178 HK)</a> is the cosmetics play.</li>
<li>Property investors including <a href="https://www.smartkarma.com/entities/wharf-holdings-ltd" target="_blank" data-smartkarma-citation="entities:51:1" rel="noopener">Wharf Holdings (4 HK)</a> and <a href="https://www.smartkarma.com/entities/hysan-development-co" target="_blank" data-smartkarma-citation="entities:14169:1" rel="noopener">Hysan Development Co (14 HK)</a> will gain from the shopping malls in major tourist areas in Hong Kong.</li>
</ul>


There is an increasing likelihood that the duty-free quota of mainland tourists visiting Hong Kong will rise to Rmb30,000 from Rmb5,000. This will benefit many retail-related sectors.

Luk Fook Holdings (590 HK) is the best play among jewellery retailers given it has 65% of revenue from Hong Kong. Sa Sa International (178 HK) is the cosmetics play.
Property investors including Wharf Holdings (4 HK) and Hysan Development Co (14 HK) will gain from the shopping malls in major tourist areas in Hong Kong.


Increasing HK Duty Free Quota: The Beneficaries

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. </li>
<li>That would be That is Special Stamp Duty, Buyer's Stamp Duty, New Residential Stamp Duty. "Measures no longer necessary given the current economic and market conditions."</li>
<li>This should cause people to get excited short-term about property developers.</li>
</ul>


RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. 
That would be That is Special Stamp Duty, Buyer's Stamp Duty, New Residential Stamp Duty. "Measures no longer necessary given the current economic and market conditions."
This should cause people to get excited short-term about property developers.


Hong Kong To Scrap All "Spicy Measures" (Property Cooling Measures)

Hong Kong

Hang Lung Properties Limited, through its subsidiaries, invests in, develops, and manages properties. The Company also manages parking lots. Hang Lung Properties serves customers in Hong Kong.

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Hang Lung Properties (101 HK)

Turning Bearish: Hang Lung Properties Going Through a Perfect Storm

We think HLP is facing a perfect storm with China's economic slowdown, weaker luxury spending, and negative wealth effect from home price decline. ...

Jacob Cheng