APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

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<a href="https://www.smartkarma.com/entities/51" target="_blank" data-smartkarma-citation="entities:51:1">Wharf Holdings Ltd (4 HK)</a> went ex-entitlement on the 16th of November and adjusted by HK$46.10 per share for <a href="https://www.smartkarma.com/entities/26031" target="_blank" data-smartkarma-citation="entities:26031:1">Wharf Real Estate Investment (1997 HK)</a> (REIC). We think that the market is underestimating the value of REIC and, as a result, pricing the NAV of <a href="https://www.smartkarma.com/entities/52" target="_blank" data-smartkarma-citation="entities:52:1">Wheelock &amp; Co Ltd (20 HK)</a> at a discount that is too wide.For readers who need to understand a little more about the spin-off or the holdco itself, we recommend reading <a href="https://www.smartkarma.com/profiles/840" target="_blank" data-smartkarma-citation="accounts:840">David Blennerhassett</a> 's previous insights:<ul><li>
<a href="https://www.smartkarma.com/insights/wheelock-evaluating-wharf-s-proposed-ip-in-specie" target="_blank" data-smartkarma-citation="insights:9314">Wheelock – Evaluating Wharf’s</a>…</li></ul>

Wharf Holdings Ltd (4 HK) went ex-entitlement on the 16th of November and adjusted by HK$46.10 per share for Wharf Real Estate Investment (1997 HK) (REIC). We think that the market is underestimating the value of REIC and, as a result, pricing the NAV of Wheelock &amp; Co Ltd (20 HK) at a discount that is too wide.For readers who need to understand a little more about the spin-off or the holdco itself, we recommend reading David Blennerhassett 's previous insights:
Wheelock – Evaluating Wharf’s…

Wharf's Spin-Off Presents an Opportunity in Wheelock

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

We revise our rating for Wharf from narrow moat to no-moat due to the demerger. The firm spun off its moaty Hong Kong, or HK, investment property portfolio into a separately listed entity. After the demerger, Wharf mostly holds assets in China with the core being five mixed-use IFS complexes, along with a portfolio of development projects. Wharf is now a China-focused property developer, with earnings from China accounting for 70% to 80% of the total, splitting between investment and development properties. We adjust our fair value estimate from HKD 65 to HKD 23, reflecting the effect of the spin-off. Our fair value estimate of HKD 23 implies a price/earnings ratio of 12 times and price/book of 0.5 times. Our valuation is based on a cost of equity of 10%, due to average systematic risk to equity and a country risk premium of 1%, resulting in a weighted average cost of capital, or WACC, of 8.8%. We expect average return on invested capital to be 150 basis points below its WACC during the next five years.Analyst: Phillip Zhong

We revise our rating for Wharf from narrow moat to no-moat due to the demerger. The firm spun off its moaty Hong Kong, or HK, investment property portfolio into a separately listed entity. After the demerger, Wharf mostly holds assets in China with the core being five mixed-use IFS complexes, along with a portfolio of development projects. Wharf is now a China-focused property developer, with earnings from China accounting for 70% to 80% of the total, splitting between investment and development properties. We adjust our fair value estimate from HKD 65 to HKD 23, reflecting the effect of the spin-off. Our fair value estimate of HKD 23 implies a price/earnings ratio of 12 times and price/book of 0.5 times. Our valuation is based on a cost of equity of 10%, due to average systematic risk to equity and a country risk premium of 1%, resulting in a weighted average cost of capital, or WACC, of 8.8%. We expect average return on invested capital to be 150 basis points below its WACC during the next five years.Analyst: Phillip Zhong

Investment Properties in China Will Power Growth for Wharf, but Other Initiatives Unclear

Hong Kong

Wharf Real Estate Investment Company Limited provides real estate investment services. The Company develops, invests, and operates residential and commercial properties. Wharf Real Estate Investment operates business in Hong Kong.

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Wharf Real Estate Investment C (1997 HK)

Wharf's Spin-Off Presents an Opportunity in Wheelock

Wharf Holdings Ltd (4 HK) went ex-entitlement on the 16th of November and adjusted by HK$46.10 per share for Wharf Real Estate Investment (1997 HK)...

Zhen Zhou, Toh

Investment Properties in China Will Power Growth for Wharf, but Other Initiatives Unclear

We revise our rating for Wharf from narrow moat to no-moat due to the demerger. The firm spun off its moaty Hong Kong, or HK, investment property...

Morningstar, Inc.

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