11 October 2017
New World Development (17 HK) EQUITIES REMD
Initiate at Buy: Returning to triumph Hong Kong
We expect NWD to transform itself into a developer with a INITIATE AT BUY balanced portfolio of income streams Completion of Victoria Dockside not only strengthens its rental TARGET PRICE (HKD) PREVIOUS TARGET (HKD) income but has other positive implications 14.20 - Initiate Buy with target price of HKD14.20, implying 24% upside SHARE PRICE (HKD) UPSIDE/DOWNSIDE and 4.2% FY18e dividend yield; NWD is our conviction pick 11.50 +23.5% (as of 06 Oct 2017) Re-rating process is under way. New World Development (NWD) is a leading MARKET DATA property company in Hong Kong that is transforming itself into an integrated Market cap (HKDm) 113,123 Free float 56% developer with a balanced mix of property sales and rental business. The company Market cap (USDm) 14,492 BBG 17 HK 3m ADTV (USDm) 27 RIC 0017.HK has scaled up its property sales over the past few years, and its rental business will likely be the next segment to see a strong pick-up. Investors’ concerns about its high FINANCIALS AND RATIOS (HKD) Year to 06/2017a 06/2018e 06/2019e 06/2020e gearing vs peers should dissipate; we view this risk as manageable given higher HSBC EPS 0.75 0.84 0.94 1.11 expected rental income. We estimate the company can deliver: 1) a FY17-20e HSBC EPS (prev) - - - - Change (%) - - - - earnings CAGR of 14%, to HKD10.6bn, vs a sector average of 5%; 2) a 107% jump Consensus EPS 0.78 0.79 0.86 0.90 in rental income, from HKD2.4bn in FY17 to HKD5.0bn in FY19e; and 3) a 15% PE (x) 15.4 13.6 12.2 10.4 Dividend yield (%) 4.0 4.2 4.6 4.9 dividend rise to HKD0.53/share in FY19e. The stock is trading at an attractive NAV EV/EBITDA (x) 10.7 7.8 7.6 7.0 discount of 53% and 0.59x FY17 PB multiple. ROE (%) 3.9 4.2 4.6 5.4
More than a new landmark in Hong Kong – Victoria Dockside. The completion of 52-WEEK PRICE (HKD)
the Victoria Dockside should drive a new re-rating, in our view. This 3m sqft 15.00 commercial complex is scheduled to be completed in phases between end-2017 and 11.20 mid-2019. We believe investors underestimate its contribution and value. It not only 7.40 significantly strengthens NWD’s rental income but also brings: 1) higher dividend 10/16 04/17 10/17 payment capacity; 2) lower earnings volatility, given higher recurrent income; and 3) Target price: 14.20 High: 11.50 Low: 8.16 Current: 11.50
a stronger balance sheet for future acquisitions. Source: Thomson Reuters IBES, HSBC estimates
Resilient property sales in Hong Kong and China, and farmland reserves in Hong Raymond Liu* Kong are potential positives. The company’s strategy of faster asset turnover in Hong Analyst Kong and China is bearing fruit, in our view. In Hong Kong, we estimate contracted sales The Hongkong and Shanghai Banking Corporation Limited raymond.w.m.liu@hsbc.com.hk to stay at cHKD12-16bn p.a. in the next 2-3 years, ranking in the top five in terms of +852 2996 6743
sales value. More upside could come from the farmland reserves of over 17m sqft. It Michelle Kwok* may strengthen NWD’s medium-term visibility upon successful conversion to residential Head of Real Estate Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited use. In mainland China, we estimate contracted sales to remain at cRMB16-22bn p.a. [email protected] with an EBIT margin above 30% in coming years. +852 2996 6918
Ganesh Siva* Initiate at Buy with a target price of HKD14.20, based on a 42% target discount Associate (0.25SD above the mean) applied to our NAV estimate of HKD24.30/share. The Bangalore
target discount is based on our 8-factor valuation framework, which includes business diversification, strengthening rental income, and policy risks. Key downside * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations risks to our estimates and rating include property regulations in Hong Kong and China, and insufficient land bank replenishment. Our FY18-19e earnings estimates MiFID II – Research: Is your access agreed? CONTACT us today are 10% and 9% above consensus, respectively.
Disclaimer & Disclosures Issuer of report: The Hongkong and Shanghai Banking Corporation Limited This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at: https://www.research.hsbc.com
EQUITIES ● REMD 11 October 2017
Financials & valuation: New World Development Buy
Financial statements New World Development: NAV breakdown Year to 06/2017a 06/2018e 06/2019e 06/2020e Particulars (HKDm) HKD/ % of total Profit & loss summary (HKDm) Share asset Property Development 25,968 36,328 35,324 39,162 HK Development properties 31,862 3.3 11% Property Investment 2,411 3,478 4,994 5,315 HK Investment properties Hotels & Other Business 28,250 30,298 31,704 32,358 Office 40,660 4.3 14% Cost of Sales (38,413) (49,216) (50,953) (54,284) Retail 45,291 4.7 16% Gross Profit 18,216 20,888 21,068 22,550 Residential 7,344 0.8 3% Selling & Admin. Expenses (8,786) (9,049) (9,321) (10,066) Others 2,121 0.2 1% Other Gains 957 726 627 677 China - Development properties 63,724 6.7 22% Net Interest Expense (446) (267) (274) (140) China - Investment properties Share of Profit from Asso. 3,925 3,666 3,963 5,044 Office 5,096 0.5 2% Non-operating Profit/Loss 1,364 10,000 0 0 Retail 14,470 1.5 5% PBT 15,230 25,964 16,064 18,065 Residential and others 1,436 0.2 1% Taxation (4,756) (5,602) (5,572) (6,264) Hotels 28,296 3.0 10% Minority Interests (2,799) (2,285) (1,461) (1,227) Listed sub & asso at market value Net Profit 7,676 18,076 9,031 10,575 NWS Holdings (659 HK)(61%) 37,834 4.0 Core Profit 7,133 8,076 9,031 10,575 New World Dept Store (825 HK)(72%) 1,923 0.2 Financial investments (ex. Investments under NWS) 5,314 0.6 Cash flow summary (HKDm) GAV 285,371 29.8 100% Cash flow from operations 14,449 29,029 9,448 8,821 Net debt (68,114) (7.1) Capex (945) (11,661) (1,317) (1,242) Est. NAV 217,257 22.7 Changes in investments (6,309) (3,666) (3,963) (5,044) Farmland 15,303 1.7 New shares issued 3,634 0 0 0 Est. NAV including Farmland 232,560 24.3 Dividends paid (4,077) (4,399) (4,591) (5,069) Others 5,269 (8,355) 12,804 2,812 Source: HSBC estimates Net change in cash 12,021 948 12,381 278 ESG metrics Cash at beginning 54,965 66,986 67,933 80,314 Cash at end 66,986 67,933 80,314 80,592 Environmental Indicators Governance Indicators Balance sheet summary (HKDm) GHG Intensity (kg/USD) 0.004 No. of board members 14 Shareholders’ funds 186,091 196,102 196,579 197,041 Energy Intensity (kWh/USD) 0.006 Average board experience (years) 15 Long-term liabilities 125,895 126,549 124,332 121,126 CO2 reduction policy Yes Female board members (%) 14 Minority interests 34,853 37,139 38,600 39,827 Board members Independence (%) 0 Deferred tax and others 10,716 10,930 11,149 11,372 Social Indicators Total capital employed 357,556 370,719 370,660 369,365 Employee costs as % of sales n/a Fixed assets 138,283 152,678 156,940 161,068 Employee turnover (%) 22 Other assets 119,792 124,888 130,484 137,385 Diversity policy n/a Current assets 178,850 169,595 175,037 168,899 Source: Company data, HSBC Total assets 436,926 447,161 462,460 467,352 NWD (discount)/premium to NAV Ratio, growth and per share analysis 100% Year to 06/2017a 06/2018e 06/2019e 06/2020e y-o-y % change 60% Revenue -5% 24% 3% 7% 20% Operating profit -36% 21% -2% 6% PBT -19% 70% -38% 12% -20% Reported EPS -15% 135% -50% 17% HSBC EPS 21% 13% 12% 17% -60% Ratios (%) -100% ROIC ex-exceptional 5% 6% 7% 7% Jan-00 Feb-02 Mar-04 Apr-06 May-08 Jun-10 Jul-12 Aug-14 Sep-16 NAV discount Mean +1SD -1SD ROAE ex-exceptional 3% 4% 4% 5% ROAA ex-exceptionals 1% 2% 2% 2% Operating margin 18% 18% 17% 17% Source: Thomson Reuters Datastream, HSBC estimates Core profit margin 13% 12% 13% 14% Interest cover ex-exceptional (x) 2.0 3.8 1.9 2.0 Price relative Net debt/equity 43% 36% 36% 37% Per share data (HKD) Reported EPS (fully diluted) 0.80 1.89 0.94 1.11 12.20 12.20 HSBC EPS (fully diluted) 0.75 0.84 0.94 1.11 DPS 0.46 0.48 0.53 0.56 11.20 11.20 BVPS 19.48 20.50 20.55 20.60 10.20 10.20 9.20 9.20 8.20 8.20 7.20 7.20 6.20 6.20 5.20 5.20 01/15 07/15 12/15 06/16 12/16 06/17 New World Development Co Rel to HANG SENG INDEX
Source: HSBC Note: Priced at close of 06 Oct 2017
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EQUITIES ● REMD 11 October 2017
Contents
Investment summary 4
Investment positives 12
Valuation and risks 23
Financial analysis 33
Corporate profile 39
Disclosure appendix 41
Disclaimer 44
3 EQUITIES ● REMD 11 October 2017
Investment summary
We believe the re-rating process of NWD is under way, and the next stage will be driven by the company’s Hong Kong rental segment Completion of Victoria Dockside not only significantly strengthens its rental income but also has multiple positive implications We expect New World to be one of the key beneficiaries of farmland conversion as it has reserves of over 17m sqft of farmland
Re-rating process is under way – initiate at Buy
We initiate coverage of New World Development with a Buy rating and a target price of HKD14.20/share. The company was founded in 1970 with a principal focus on four business areas: property development, infrastructure and services, retail, and hotels & serviced apartments.
Our Buy rating rests on the re-rating process of the company – NWD transforming itself into an integrated developer with a balanced mix of property sales and rental business. Over the past few years, the company scaled up its property development business by increasing asset turnover and streamlining non-core businesses for better capital recycling. The Hong Kong rental segment will be the next segment to see a strong pick-up, in our view.
The completion of the New World Centre redevelopment project, now called Victoria Dockside, should drive a new round of re-rating, in our view. This 3m sqft commercial complex is scheduled to be completed in phases starting from end-2017 and fully open in mid-2019. The completion not only significantly strengthens the company’s rental income but also has other positive implications. These include: 1) higher dividend payment capacity; 2) lower earnings volatility, given higher recurrent income; and 3) a stronger balance sheet for future acquisitions.
Fig 1. Roadmap of New World Development’s re-rating process
Annual operating profit (HKD bn) HK rental business 24 Market cap (USD bn) Completion of Victoria Resources optimisation, Dockside, TST 22 including a privatisation of 20 China property business NW China Land 18 Faster asset turnover 16 HK property business 14 Accelerated land purchase 12 10 8 6 4 2 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 Jan-14 Apr-15 Jul-16 Oct-17 Jan-19 Apr-20
Source: Company data, Bloomberg, HSBC estimates
4 EQUITIES ● REMD 11 October 2017
Prepare for multiple changes
We expect NWD to deliver: 1) a FY17-20e earnings CAGR of 14.0%; 2) significant growth of 107% in rental income from HKD2.4bn in FY17 to HKD5.0bn in FY19e; and 3) a dividend uplift of 15% to HKD0.53/share in FY19e, equivalent to a dividend yield of 4.6%. We believe investors have yet to fully appreciate the improvement of the overall business in terms of execution capabilities. We believe its relatively high net gearing versus sector peers overshadows the positives, as investors were cautious on the Hong Kong real estate sector over the past few years.
In the next 12-24 months, we anticipate several changes in NWD’s operational and financial performance. These include:
Property sales performance to grow steadily Contracted sales in China to grow from RMB16.2bn in FY17 to RMB18.1bn in FY19e vs an average of RMB17.3bn in FY14-17.
Contracted sales in Hong Kong to remain resilient at the HKD10bn level in coming years and remain at HKD12-13bn in FY18-19e, compared to HKD15.6bn in FY17.
Rental income to jump materially Overall rental income to grow 107% from HKD2.4bn in FY17 to HKD5.0bn in FY19e, primarily driven by the full-year contribution of Victoria Dockside. Contribution of recurrent rental income to overall EBIT to grow from 12% in FY17 to 30% in FY19e.
Financial position to improve significantly Net gearing to improve from 43% in FY17 to 36% in FY19e. Ratio of rental income to dividend to increase from 44% in FY17 to 96% in FY19e.
Fig 2. Contribution of recurrent rental income to reach c30% in FY19e 22 40% 19 35% 16 30% 13 25% 10 20% 7 15% 4 10% 1 5% -2 0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e Recurrent rental income (HKD bn, LHS) Property development business (HKD bn, LHS) Others (HKD bn, LHS) % of net recurrent rental income to total (RHS)
Source: Company data, HSBC estimates
5 EQUITIES ● REMD 11 October 2017
Property sales in Hong Kong on a new scale. NWD has ramped up its business since 2010 and is now ranked in the top five developers in terms of contracted sales value. We estimate contracted sales to stay above the HKD10bn level and reach HKD12-13bn in FY18-19e, compared to only HKD7bn p.a. in FY09-13. Upcoming key launches include Fleur Pavilia in North Point and the Tai Wai Station residential project in Shatin.
Potential NAV accretion of HKD2.70/share via farmland reserves. We view NWD one of the key beneficiaries on farmland conversion, given its solid track record (Fig. 5), as the HKSAR Government is considering developers’ farmland reserves as a viable way to increase land supply. The scale of NWD’s farmland reserves is triple the size of its residential land bank in Hong Kong. We estimate its NAV accretion could reach HKD2.70/share if the company can replenish its land bank via conversion in a sustainable manner.
China property business being a solid earnings contributor. The group’s strategy of optimising its business in second- and third-tier cities and allocating more resources in first-tier and 1.5 tier cities is showing solid progress, in our view. Looking ahead, we expect contracted sales to steadily grow from RMB16.2bn, achieved in FY17, to RMB22.1bn in FY19e.
Fig 3. Contracted sales in Hong Kong Fig 4. Overall rental income (HKDbn) (HKDbn)
25 FY14-17 6 HKD15.0bn p.a 5.3 5.0 20 5 15.8 15.6 4
Thousands 3.5 15 13.1 12.3 FY09-13 3 2.4 HKD6.7bn p.a 10 2
5 1
0 0 FY09 FY11 FY13 FY15 FY17 FY19e FY09 FY11 FY13 FY15 FY17 FY19e
Source: Company data, HSBC estimates Source: Company data, HSBC estimates
Fig 5. Farmland reserves owned by NWD exceeds 17m sqft 50 44.9 45 40 35 30 28.0 25 20 17.4
15 10.0 10 5 0 Henderson Land Sun Hung Kai New World Dev CK Properties 2009 2010 2011 2012 2013 2014 2015 2016 1H17
Source: Company data
6 EQUITIES ● REMD 11 October 2017
Our FY18-19e earnings estimates are +10% and +9% above consensus, respectively We expect NWD’s core net profit to grow 13% from HKD7.1bn in FY17 to HKD8.1bn in FY18e, reaching HKD9.0bn in FY19e. Our FY18-19e estimates are 10% and 9% above consensus, respectively, mainly due to: 1) higher rental assumptions at the Victoria Dockside project; and 2) higher sales and gross margin assumptions on NWD’s China property development business.
Target price of HKD14.20 Our valuation is based on a target discount of 42% (0.25SD above the mean) applied to our NAV estimate of HKD24.30/share. We apply the same NAV valuation matrix to major Hong Kong developers we cover, such as Sun Hung Kai Properties (16 HK, HKD129.9, TP HKD156.4, Buy) and CK Asset (1113 HK, HKD65.2, TP HKD79.0, Buy). We believe a material increase in recurrent rental income and diversification via its defensive service and infrastructure business can help the company to offset the cyclicality of the property business. Key catalysts Key share price catalysts: 1) accelerated land bank replenishment in Hong Kong, including farmland conversion; 2) asset disposals; 3) higher dividend payments; 4) lower cost of borrowings; and 5) share buybacks.
Fig 6. SWOT analysis Strength Weakness - Good execution in the property development - Relatively high net gearing of over 40% across peers business - High interest expense - Incremental strong cash flow from the completion of Victoria Dockside - One of the developers with a sizable farmland reserve - Diversified land bank in China - Diversification and resilient cash flow from its subsidiary NWS Holdings Opportunities Threats - An increase in land supply in Hong Kong - Risks of policy regulations in Hong Kong and China - Hawkish rate hikes in Hong Kong - Macro uncertainties Source: HSBC estimates
Macro view: a gradual form of tightening, not hawkish rate hikes HSBC’s Hong Kong banking equity research teams and economics research teams have discussed the macro interest rate risks and concluded that these are known and manageable. We believe interest rate ‘normalisation’ should remove the biggest overhang on the sector and investors should focus on company fundamentals, which can, in turn, lead to investment upside.
HSBC’s view is that we expect the Fed’s disinvestment programme to act as a gradual form of tightening and, as such, slightly reducing the need for rate hikes, even amid stronger growth or an uptick in inflation. HSBC’s Hong Kong banking equity research analysts believe the market is underestimating how long it will take for the excess liquidity in Hong Kong created by US quantitative easing to run off; the team’s view is that it will take 18-24 months to normalise.
HSBC’s Chief US economist believes the next 25bp Fed rate hike will not be until December 2017, and we expect only one 25bp rise in 2018. The FOMC formally announced it will start shrinking its USD4.5trn balance sheet in October. We anticipate that the quantitative tightening program – a reversal of the quantitative easing (QE) put in place after the 2008/2009 financial crisis – will start slowly, last for about three years, and will reverse about one-third, or USD1.3trn, of the total securities purchases made during successive rounds of QE. For details refer to FOMC Multi-asset Reaction – Hello quantitative tightening, 20 September 2017.
7 EQUITIES ● REMD 11 October 2017
Key downside risks These include: 1) a disappointing sales performance at the Tai Wai residential project; 2) slower-than-expected land bank replenishment and at a greater cost; 3) macro uncertainties and property regulations in Hong Kong and China; and 4) hawkish interest rate hikes.
Fig 7. NAV discount for New World Fig 8. NAV discount for Hong Kong Development developers
60% 40%
40% 20% 20% 0% 0% 07 08 09 10 11 12 13 14 15 16 17 -20% -20% -40% -40%
-60% -60% -80% 92 93 95 97 98 00 02 03 05 07 08 10 12 13 15 17 % to NAV +1 SD -100% NAV discount (%) +1 SD Mean -1 SD Mean -1 SD -2 SD
Source: Company data, Thomson Reuters Datastream, HSBC estimates Source: Company data, Thomson Reuters Datastream, HSBC estimates
Fig 9. Valuation summary: HK Developers, REITs and Landlords Share Target Upside / Mkt 3M Est. Current ____ Core PE (x) ______Yield P/B Net debt/ HSBC Price Price Downside Cap ADTV NAV (Disc)/Prem (%) (x) equity Company Ticker Rating (HKD) (HKD) (%) (USDbn) (USDm) (HKD/sh) (%) FY16a FY17e FY18e FY17e FY16a FY16a (%) HK developers CK Asset 1113 HK Buy 65.20 79.00 21 30.9 53.9 107.6 (39) 13.9 12.9 11.1 2.6 0.9 26 Henderson Land 12 HK Buy 53.05 55.40 5 28.3 27.5 88.0 (40) 13.6 13.3 14.8 3.2 0.7 13 New World Development 17 HK Buy 11.50 14.20 24 14.5 15 24.3 (53) 15.4 13.6 12.2 4.2 0.6 43 Sino Land 83 HK Buy 13.82 15.20 10 11.3 7.4 26.7 (48) 15.8 15.6 8.0 3.8 0.7 net cash Sun Hung Kai Properties 16 HK Buy 129.90 156.40 20 48.9 59.9 214.2 (39) 15.5 14.5 12.8 3.2 0.8 11 Simple average (44) 14.8 14.0 11.8 3.4 0.7 23
HK Landlords Hang Lung Properties 101 HK Buy 19.14 24.20 26 11.0 11.5 34.6 (45) 13.6 15.1 16.5 3.9 0.7 2 HKLand (USD) HKL SP Buy 7.36 8.90 21 17.4 12.8 12.7 (42) 20.4 19.0 17.6 2.6 0.6 6 Hysan 14 HK Hold 37.50 37.00 (1) 5.1 4.7 74.0 (49) 16.6 16.2 15.2 3.7 0.6 5 Kerry Properties 683 HK Buy 33.70 38.50 14 6.3 9.2 68.7 (51) 13.2 9.0 11.4 4.0 0.6 35 Swire Properties Ltd 1972 HK Buy 26.65 32.70 23 20.2 7.1 46.6 (43) 21.9 18.9 19.9 2.8 0.7 16 Simple average (46) 17.2 15.7 16.1 3.4 0.6 13
REITs & Trusts Champion REIT* 2778 HK Hold 5.48 6.30 15 4.2 5.6 6.3 (13) 23.9 22.9 22.3 4.4 0.6 22 Langham Hospitality Inv.* 1270 HK Hold 3.36 3.30 (2) 0.9 0.6 3.3 2 13.2 15.5 15.8 6.4 0.6 36 Simple average (6) 18.5 19.2 19.1 5.4 0.6 29 *Core PE refers to PE/Distribution (x) and Yield refers to DPU Yield, while Net debt/equity refers to Gross debt/total assets Source: Bloomberg, HSBC estimates; closing as of 6 Oct 2017. N/A – Not Applicable.
8 EQUITIES ● REMD 11 October 2017
Fig 10. NWD’s PB valuation Fig 11. NWD’s 12-month forward PE multiple 1.6 25 1.4 20 1.2 1.0 15
0.8 10 0.6 5 0.4 0.2 0 07 09 11 13 15 17 07 09 11 13 15 17
Trailing PB +1 SD 12m fwd PE +1 SD Mean -1 SD Mean -1 SD Source: Bloomberg, HSBC estimates Source: Bloomberg, HSBC estimates
Fig 12. Dividend yield (%) Fig 13. Core earnings in FY16-20e (HKDbn) 10% 12 10.6 8% 10 9.0 6% 8.1
Thousands 8 7.1
4% 5.6 6 2% 4 0% 07 09 11 13 15 17 2
12m fwd div yield +1 SD - Mean -1 SD 2016 2017 2018e 2019e 2020e Source: Bloomberg, HSBC estimates Source: Company data, HSBC estimates
Fig 14. NWD conducted a share buyback in Fig 15. GAV breakdown by business segment September 2017, the first time in 17 years (2017)
30 25 HK DP 25 20 16% 11% 20 HK IP 15 15 China DP 10% 10 10 34% China IP 7% 5 5 Hotel 0 - 22% Dec-99 Dec-03 Dec-07 Dec-11 Dec-15 Listed Inv & Share price (LHS) others Buyback amount (HKD m, RHS))
Source: Bloomberg, HKEx Source: HSBC estimates Note: DP stands for development properties while IP stands for Investment properties.
9 EQUITIES ● REMD 11 October 2017
Peer comparison
NWD has a diversified property portfolio across asset classes. Its GAV exposure in Hong Kong and China is 52% and 32%, respectively. The Hong Kong commercial (office and retail) segment accounts for the highest percentage at 42%. NWD’s residential gross floor area (GFA) under development is 4.8m sq ft as of end-June 2017.
Fig 16. Hong Kong Property – 2017 GAV breakdown by property type (%) ______Developers ______Landlords ______REITs ______Company CKP HLD NWD Sino SHKP HLP HKL Hysan Kerry Swire Prop MGCCT HX REIT Jinmao Ticker 1113 HK 12 HK 17 HK 83 HK 16 HK 101 HK HKL SP 14 HK 683 HK 1972 HK MAGIC SP 87001 HK 6139 HK Hong Kong Residential 14 14 11 23 18 4 0 2 20 1 0 0 0 (development) Office 16 18 14 16 22 15 51 38 5 52 0 0 0 Retail 11 24 16 38 28 25 12 43 4 16 73 0 0 Hotel 14 1 7 1 5 0 0 0 0 2 0 0 0 Others 4 4 4 8 7 6 0 11 13 3 0 0 0
China Residential 25 6 22 4 3 0 13 0 11 0 0 0 0 (development) Office 0 11 2 6 5 8 0 1 14 4 27 42 34 Retail 1 3 5 0 9 28 0 3 11 12 0 41 4 Hotel 0 0 2 0 0 0 0 0 8 1 0 10 61 Others 0 0 1 0 0 14 0 1 3 3 0 7 1
Other Overseas 2 0 1 4 0 0 24 0 3 5 0 0 0 Listed investment 13 21 16 0 3 0 0 0 7 0 0 0 0 Total 100 100 100 100 100 100 100 100 100 100 100 100 100
Hong Kong assets 59 60 52 85 80 51 63 94 43 74 73 0 0 China assets 27 19 32 10 16 49 13 6 47 21 27 100 100 Others 15 21 16 4 3 0 24 0 10 5 0 0 0 Source: HSBC estimates
Fig 17. Hong Kong residential land bank Fig 18. China residential land bank (under (under development – as of end-2016) development – as of end-2016)
(mn sq.ft) (mn sqm) 18 16.3 14.0 16 11.6 12.0 14 12 10.0 10 8.0 8 6.0 6 4.0 4 2 2.0
0 0.0
Sino
CKP
Sino
CKP
Kerry
Kerry
Wharf
SHKP
Wharf
SHKP
HK Land HK
New World New
Henderson New World New Henderson Source: Company data Source: Company data
10 EQUITIES ● REMD 11 October 2017
Why read this report?
Here’s what we are saying with conviction that differentiates our analysis:
1) We believe the transformation of NWD into an integrated developer with a balanced mix of property sales and rental business will drive the next stage of re-rating. The company scaled up its property sales business over the past few years, and the rental business will likely be the next segment to see a strong pick-up.
2) We provide an in-depth analysis on its upcoming completion of Victoria Dockside. It not only significantly strengthens NWD’s rental income but also has other positive implications. These include: 1) higher dividend payment capacity; 2) lower earnings volatility, given higher recurrent income; and 3) a stronger balance sheet for future acquisitions.
3) Our FY18-19e estimates are 10% and 9% above consensus, respectively. We believe investors have yet to fully appreciate NWD’s execution. Our above-consensus estimates are mainly due to: 1) higher rental assumptions at the Victoria Dockside project; and 2) higher sales and gross margin assumptions on NWD’s China property development business. We expect the company to declare a full year DPS of HKD0.56/sh in FY20e, equivalent to a 4.9% yield.
11 EQUITIES ● REMD 11 October 2017
Investment positives
Completion of Victoria Dockside not only significantly strengthens its rental income but also has other positive implications NWD has ramped up its Hong Kong property development business, and we expect sales to stay above HKD10bn and grow steadily in the next few years Its China property business should stay solid, given fast asset turnover and high exposure in tier-1 cities
Victoria Dockside – the next milestone
We expect NWD to enjoy another round of re-rating in the next 1-2 years, thanks to the completion of Victoria Dockside in Tsim Sha Tsui (TST). The completion not only significantly strengthens its rental income but also has other positive implications. On top of this, management has been proactively revamping the company’s overall business with several initiatives. Significant improvements were seen in the China and Hong Kong property business. Major events included the privatisation of its property flagship New World China Land in 2016 and the disposal of several non-core property projects in 2015 for over RMB20bn. These transactions should lead to a better resources allocation and higher cost efficiency, which we believe will be reflected in the coming 1-2 years.
We expect the company to deliver: 1) a FY17-20e earnings CAGR of 14.0%; 2) significant growth of 107% in rental income from HKD2.4bn in FY17 to HKD5.0bn in FY19e; and 3) a dividend uplift of 15% to HKD0.53/share in FY19e, equivalent to a dividend yield of 4.6%.
Fig 19. Contracted sales in Hong Kong Fig 20. Overall rental income (HKDbn) (HKDbn)
25 FY14-17 6 HKD15.0bn p.a 5.3 5.0 20 5 15.8 15.6 4
Thousands 3.5 15 13.1 12.3 FY09-13 3 2.4 HKD6.7bn p.a 10 2
5 1
0 0 FY09 FY11 FY13 FY15 FY17 FY19e FY09 FY11 FY13 FY15 FY17 FY19e
Source: Company data, HSBC estimates Source: Company data, HSBC estimates
12 EQUITIES ● REMD 11 October 2017
Fig 21. Major company events over the past few years Year Event 2017 Completion of New World Centre redevelopment project (Victoria Dockside) in Tsim Sha Tsui Disposal of a 20% stake in Newtown Resources (stake reduced to 15.5%) 2016 Contracted sales of the China property division reached a record high of close to RMB23bn Acquisition of several land parcels in Qianhai, Shenzhen, for an aggregate amount of over RMB10bn Disposal of a 24% stake in Tricor, one of the leading providers of integrated corporate services Privatisation of its China property flagship New World China Land (917 HK, delisted) Disposal of NWS Kwai Chung Logistics Centre for HKD3.75bn 2015 Disposal of several property projects in China to Evergrande Group (3333 HK, Not Rated) for RMB20.8bn Sale of a partial stake of NWD’s three hotels in Hong Kong to ADIA 2014 Contracted sales of the Hong Kong property division reached a record high and exceeded HKD20bn 2013 Disposal of CSL New World Mobility Opening of Shanghai K11, the first art mall in mainland China 2011 Acquisition of Rosewood Hotels & Resorts’ brand and distribution network Acquisition of a Hangzhou Ring Road project Source: Company data
1) Hong Kong rental – Prepare for a game changer
The new landmark – Victoria Dockside in FY18e We view NWD’s upcoming completion – Victoria Dockside (VD) in Tsim Sha Tsui, or previously named the New World Centre redevelopment project – as more than a new commercial landmark in Hong Kong. It accounts for 18% of company’s gross asset value. The project’s completion signifies the transformation of NWD and has other positive implications for the company, in our view. These include:
A material increase in rental income, which enhances its dividend uplift capability. A stronger balance sheet, which can increase its capacity for more sizable acquisitions. A lower business risk profile, given an increase in recurrent rental income, which can offset the high cyclicality of the property development business.
The 3m sqft commercial complex is scheduled to be completed in late-2017 and should operate fully in mid-2019. It comprises a high-end Rosewood Hotel, Rosewood Residences, a shopping mall, and offices. Its scale is comparable to IFC in Central, which is on the opposite side of Victoria Harbour.
Fig 22. Comparison between IFC and Victoria Dockside (VD) IFC Victoria Dockside Developer(s) Sun Hung Kai Properties & Henderson Land New World Development District Central Tsim Sha Tsui Total GFA (m sqft, 3.28m 3.09m excluding car park) Mall 0.68m 1.21m Office 1.89m (One IFC & Two IFC) 0.38m Hotel 0.52m (399 rooms, Four Seasons Place) 0.95m (685 rooms in two hotels) Residence suites 0.53m (519 suites) 0.55m Car park 1,400 parking spaces 2,100 parking spaces Source: Company data, HSBC estimates
Victoria Dockside’s rental income to reach HKD1.9bn in FY19e We estimate the annual rental contribution to be HKD1.9bn when the project is fully operational in mid-2019. Overall, we believe NWD’s rental income will increase by 107% to HKD5.0bn in FY19e, compared to HKD2.4bn in FY17.
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The office segment (L7-21), which is set to open by the end of 2017, is well recognised by financial institutions. Mizuho Group and Fubon Group are confirmed to become anchor tenants. According to HKET, they have leased 100,000 sqft and 27,000 sqft of the office space, respectively.
Fig 23. Key rental assumptions of the Victoria Dockside project Floor area Rental assumptions Gross asset value k sqft HKDbn Shopping mall 1,213 Passing rent: HKD180/sqft/month 27.8 Office 380 Passing rent: HKD65/sqft/month 6.2 Hotel (Rosewood Hong Kong – 398 rooms) 500 Room rate: HKD4,500/night 7.1 Suite (Rosewood Residence – 199 rooms) 250 Passing rent: HKD60/sqft/month 3.1 Hotel (Tower 2 – 287 rooms) 450 Room rate: HKD4,000/night 3.9 Suite (Tower 2) 300 Passing rent: HKD60/sqft/month 3.5 Car park 2,061 Passing rent: HKD2,000/month 0.5 52.1 Source: HSBC estimates
Fig 24. Artist impression of Victoria Dockside Fig 25. Overview of Tsim Sha Tsui Promenade – Victoria Dockside project on the right
Source: Company data Source: HSBC
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Rental income to increase materially, so should the dividend payout capacity NWD’s total floor area of completed investment properties is set to increase by 66% from the existing size of 4.7m sqft to 7.8m sqft upon the completion of Victoria Dockside. We estimate overall Hong Kong rental income will jump from HKD1.6bn in FY17 to HKD3.6bn in FY19e.
The jump in recurrent rental income should increase NWD’s dividend payment capacity, in our view. We note that the percentage of net rental income to dividend should improve from 44% in FY17 to 96% in FY19e. With a more stable stream of recurrent rental income, we expect the company to increase DPS accordingly. We estimate DPS to grow from HKD0.46 in FY17 to HKD0.56 in FY20e, equivalent to a 4.9% yield based on the current share price.
Fig 26. Rental income in Hong Kong to jump in FY19e 3.5
3.0
2.5
2.0 3.3 1.5 3.1
1.0 1.8 1.6 0.5
0.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e
Source: Company data, HSBC estimates
Fig 27. Ratio of net rental income to Fig 28. DPS to increase gradually dividend to improve in the next few years 6 120% 0.6 0.56 80% 0.53 5 100% 0.48 70% 0.5 0.44 0.46 4 80% 60% 0.4 50% 3 60% 0.3 40% 2 40% 30% 0.2 1 20% 20% 0.1 10% - 0% 0 0% FY16 FY17 FY18e FY19e FY20e FY16 FY17 FY18e FY19e FY20e Dividend (HKD bn, LHS) Net rental income (HKD bn, LHS) DPS (HKD/sh, LHS) Payout ratio (%, RHS)
Ratio (%) Source: Company data, HSBC estimates Source: Company data, HSBC estimates
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Balance sheet to strengthen significantly We believe the completion of the entire Victoria Dockside project will lead to a considerate increase in shareholders’ equity on NWD’s balance sheet via an increase of the fair value from completed investment properties, resulting in a reduction of its net gearing. We expect its net gearing to decline by 7ppt y-o-y to 36% by the end of June 2018.
A stronger balance sheet should offer NWD more room for sizable acquisitions. We estimate the fair value of the project to be HKD52.1bn (AV of HKD16,900psf, net of outstanding construction cost), compared to the existing carrying cost of HKD33.2bn as stated in the balance sheet as at end-June 2017. When the project is completed, we estimate the company to record a fair value gain of HKD10bn as a reflection of the difference between the fair value of the project and the carrying cost of the project.
Fig 29. Net gearing of NWD from FY09-19e back below 40%
55
50 Average net gearing (FY09-17) : 41.3% 45 Net gearing 40 (FY18-19e) : 36% 35
30
25
20 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e
Source: Company data, HSBC estimates
Fig 30. NWD is one of the most geared stocks across the Hong Kong real estate sector
45 40 35 30 25 20 15 10 5 Net cash
0
HLD
Prop
Inv
Prop
NWD
Kerry
Swire
CK
Wharf
Hysan
REIT
Jinmao
REIT
Hang
MGCCT
Property Xian Hui
Hospital… HK HK Land
Langham
Wheelock
SHK Prop SHK
Sino Land Sino Champion Lung Prop Lung Source: Company data
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Risk profile to improve reasonably Another implication would be the change in NWD’s risk profile, in our view. The company historically has had higher risks compared to its peers, given its above-average net gearing and relatively low recurrent rental income. However, we believe this is about to change, as its net gearing will likely moderate and there will likely be a more balanced income stream mix. The jump in recurrent rental income should also enhance its earnings stability, which will offset the higher income volatility of the property development business. We expect the percentage of net rental income to other business to increase from 12% in FY17 to 30% in FY19e.
Fig 31. Percentage of rental income to overall business to reach c30% in FY19e 22 40% 19 35% 16 30% 13 25% 10 20% 7 15% 4 10% 1 5% -2 0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e Recurrent rental income (HKD bn, LHS) Property development business (HKD bn, LHS) Others (HKD bn, LHS) % of net recurrent rental income to total (RHS)
Source: Company data, HSBC estimates
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Strong commercial project pipeline in the coming few years We expect NWD’s rental income to increase steadily, given more commercial GFA for rental purposes. Over the past 12 months, the company spent cHKD16bn to acquire commercial GFA of 2.2m sqft. This should continue to strengthen its recurrent rental income stream and further improve its risk profile in the medium term, if NWD decides to keep them for rental purposes, in our view.
Fig 32. New addition of commercial GFA exceeds 2m sqft over the past 12 months Time Project Type District Type GFA Purchase Estimated price AV sqft HKDm HKD/sqft Dec-16 Tsun Yip St project Industrial Kowloon East Old building acquisitions 262,400 1,312 5,000 Feb-17 King Lam St project Commercial Cheung Sha Wan Public tender 998,000 7,794 7,800 May-17 Cheung Shun St project Commercial Cheung Sha Wan Public tender 538,800 4,029 7,500 Aug-17 Wing Hong St project Commercial Cheung Sha Wan Public tender 371,100 2,967 8,000 2,170,300 16,103 Source: Lands Department, Company data, HSBC
Hotel business staying resilient NWD currently owns five completed hotels in Hong Kong with a total of 3,000 rooms. These include Grand Hyatt Hong Kong (545 rooms) in Wanchai, Renaissance Harbourview Hotel (861 rooms) in Wanchai, Hyatt Regency (381 rooms) in Tsim Sha Tsui, Hyatt Regency Hotel (559 rooms) in Shatin, and Pentahotel Hong Kong (695 rooms) in San Po Kong. We expect the operational performance to be largely stable, given the stabilisation of Hong Kong’s tourism market. For the first seven months of 2017, total visitor arrivals grew 2.4% y-o-y to 33.0m, compared to a decline of 4.5% in the full-year 2016. However, we do not anticipate any significant improvement in the hotel rental business.
Fig 33. Occupancy rate of four major Fig 34. Average daily rate of four major hotels in Hong Kong (%) hotels in Hong Kong (HKD/night)
100% 3,500 90% 3,000 80% 70% 2,500 60% 2,000 50% 40% 1,500 30% 1,000 20% 500 10% 0% 0 Grand Hyatt Renaissance Hyatt Hyatt Grand Hyatt Renaissance Hyatt Hyatt HK Harbourview Regency Regency Sha HK Harbourview Regency Regency Sha TST Tin TST Tin 1H16 2H16 1H17 2H17 1H16 2H16 1H17 2H17
Source: Company data Source: Company data
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HK property development – on a new scale
NWD has ramped up its Hong Kong property development business since 2010 and is now one of the top five developers in terms of contracted sales scale. We expect its momentum to continue and its annual sales should stay at or above HKD10bn in the next few years, which almost doubles the size of the annual sales achieved during the period of FY09-13.
The company has been proactively acquiring land via multiple means. These include farmland conversion, public tender and old building acquisitions. Its attributable landbank by the end of February 2017 doubled to 10.0m sqft, compared to ~5m sqft by the end of 2009.
We estimate its contracted sales to reach HKD12.3bn in FY18e and HKD13.1bn in FY19e. Looking ahead, its contracted sales should be sustainable at this level given its sufficient residential landbank of c5m sqft. In the next 12-24 months, we expect NWD to focus more on product quality, which should enable the company to command premium pricing or higher profit margin. Upcoming major launches would be its Tai Wai Station project in Sha Tin and Fleur Pavilia in North Point.
Fig 35. Contracted sales in Hong Kong now at a higher base of over HKD10bn p.a. 25 Margin focus FY14-17 average Gross 20 HKD15.0bn p.a margin to reach 30% 15.6 15.8 15 13.1 12.3 FY09-13 10 HKD6.7bn p.a
5
0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e
Source: Company data, HSC estimates
Fig 36. Summary of upcoming project new launches Project District Stake GFA ASP Saleable Margin resources % k sqft HKD psf HKD m % FY18e The Parkville (天生樓 Residential) Tuen Mun 100% 70 14,000 883 36% ARTISAN HOUSE (1-17 Sai Yuen Lane) Western 100% 83 22,000 1,558 43% Babington Hill (23 Babington Path) Mid-levels 10% 66 22,000 125 25% Park Reach (YLTL 527) Yuen Long 21% 19 11,500 39 37% FY19e FLEUR PAVILIA North Point 40% 573 29,000 5,686 23% Tai Wai Station project Phase I Sha Tin 100% 1,172 15,500 15,527 35% FY20e 4A-4P Seymour Road Mid-levels 35% 472 35,000 4,946 39% Tongkin St Complex Cheung Sha Wan 100% 194 16,000 2,654 3% Tai Tong Road (YLTL 524) Yuen Long 21% 171 11,500 353 39% Source: Company data, HSBC estimates
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Farmland reserves serving as a potential share price upside catalyst HKSAR government is now considering farmland reserves under developers as a viable means of increasing land supply. For detail please refer to report titled Farmland conversion on the agenda, dated 7 September 2017. NWD should be one of the major beneficiaries as it is one of major HK property companies possessing sizable amount of farmland reserves. Over the past ten years, NWD successfully converted a total floor area of c6.8m sqft into residential uses, which is one of the major sources of its land banking.
We view farmland reserves as one of the major sources of new land supply for developers. These reserves allow developers to replenish their land bank at a reasonable cost, thus enhancing their medium-term growth visibility, in our view. The scale of its farmland reserves is triple the size of its developable residential land bank in Hong Kong.
Across major HK property companies, HLD (12 HK) had the largest farmland reserves at 45m sq ft, followed by SHKP (28m sq ft) and NWD (17m sq ft) as at end-June 2017.
Potential upside of HKD2.7/share of NAV accretion We estimate the potential NAV accretion of the farmland reserves at HKD2.7/share, based on the following assumptions: 1) a plot ratio of 2.5x; 2) an ASP of HKD10,000psf; 3) all-in cost (including construction and capitalised interest expenses) of HKD4,500psf; 4) a land conversion premium of HKD2,500psf; 4) an investment horizon of 20 years (i.e. an average conversion of 0.85m sqft per year); and 5) a development cycle of five years.
Fig 37. Farmland reserves owned by NWD exceed 17m sqft 50 44.9 45 40 35 30 28.0 25 20 17.4
15 10.0 10 5 0 Henderson Land Sun Hung Kai New World Dev CK Properties 2009 2010 2011 2012 2013 2014 2015 2016 1H17
Source: Company data
Fig 38. Good track record of farmland conversion Project District Year of Stake Gross floor area Attrib. floor area conversion (%) (k sqft) (k sqft) Lung Tin Tsuen Phase III Yuen Long 2017 100% 121 121 PARK REACH Yuen Long 2016 21% 21 5 Tai Tong Road project II Yuen Long 2016 21% 171 36 MOUNT PAVILIA Sai Kung 2011 63% 1,079 679 THE WOODSIDE Yuen Long 2010 100% 80 80 THE REACH Yuen Long 2010 21% 1,300 273 DOUBLE COVE Ma On Shan 2009 32% 2,951 944 PARK SIGNATURE Yuen Long 2008 100% 1,098 1,098 6,821 3,236 Source: Company data
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China property – solid earnings contributor, thanks to its faster asset turnover
NWD is one of the veterans in China real estate business with over 30 years of property development experience. Its China property business accounts for 30% of company’s GAV and around 40% of its profit on average. The group’s strategy of optimising its business in second and third-tier cities and allocating more resources in first-tier and provincial capital cities are showing solid progress, in our view. Over the past few years, we saw a steady growth in its contracted sales performance. Looking ahead, we expect its contracted sales to stay above RMB16bn level, comparable to RMB16.1bn achieved in FY17.
Its major exposures are in key cities of mainland China. As of end-June 2017, its developable landbank amounted to 8.2m sqm across 14 cities. In terms of GAV breakdown, tier-one and tier- two cities account for 58% and 28% of total, respectively.
Fig 39. NWD’s contracted sales performance in China to stay above RMB20bn in the next few years (RMBbn) More sales contribution from Disposal of several Shenzhen new projects 25 non-core projects 22.1 FY14-17 20 Rmb17.3bn p.a 18.1 16.2 16.1 15 FY09-13 Rmb10.8bn p.a
10
5
0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e
Source: Company data, HSBC estimates
Fig 40. Breakdown of developable landbank in China GFA (k sqm) % of total GAV (HKDbn) % of total Breakdown by region Southern Guangzhou, Foshan, Shenzhen 2,610 32% 18.8 34% Central Wuhan 625 8% 0.4 1% Eastern Ningbo 521 6% 8.4 15% Northern Beijing, Langfang 654 8% 18.2 33% North-eastern Shenyang 2,122 26% 6.1 11% Others Huizhou, Changsha, Yiyang, 1,705 21% 3.5 6% Yangzhou, Jinan & Anshan 8,237 100% 55.25 100%
Breakdown by tiering of cities Tier-1 cities 2,042 25% 32.07 58% Tier-2 cities 3,483 42% 15.64 28% Others 2,712 33% 7.55 14% Source: Company data, HSBC estimates
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Asset recycling on the move Over the past two years, the company has recycled its business resources by disposing non- core projects situated in lower tiered cities and increasing exposures in tier-one cities, in particular Shenzhen.
Cities with lower exposures - Wuhan, Huiyang, Haikou, Guiyang and Chengdu In December 2015, the company disposed five projects to Evergrande (3333 HK, Not Rated) for RMB20.8bn. These projects are situated in Wuhan, Huiyang, Haikou, Guiyang and Chengdu. Sales proceeds will be collected in phases and these disposals have resulted in a total gain of RMB5.4bn (HKD6.6bn).
City with growing exposure - Shenzhen Subsequently, the company acquired three prime projects in Shenzhen in 2016 by spending over RMB10bn, which is consistent with its asset recycling strategy.
In August 2016, company formed a consortium with its parent company CTF Enterprise in a structure of 30%/70% to acquire Qianhai commercial project of Shenzhen at RMB4.2bn. The average land cost is attractive at RMB24.7k psm, thanks to the high entry barrier of the land auction. Total developable GFA reached 170k sqm. Of which, one office tower (GFA of 45-55k sqm) will be restricted to sell to a foreign financial institution listed in Fortune 500.
In December 2016, NWD acquired two prime sites in Prince Bay of Shezhen by forming a strategic partnership with China Merchants Shekou (001979 CH, non-rated). Attributable investment cost reached RMB10.2bn, of which RMB6.5bn is related to land cost. We expect the first phase of residential project to start pre-sales as early as mid-2019 with an estimate ASP of RMB110k psm, which can provide a satisfactory gross margin of 30%.
Fig 41. Land purchases in FY17 were all in Shenzhen Project City Stake (%) Usage GFA (k sqm) Attrib. area (k sqm) Qianhai project Shenzhen 30% Office 176 53 Prince Bay project - Parcel A Shenzhen 51% Commercial 208 106 Prince Bay project - Parcel B Shenzhen 49% Commercial/Office/Residential 160 78 544 237 Source: Company data
Fig 42 Property development business in Fig 43 Property development business in China (HKDbn) HK (HKDbn)
20 32% 20 35% 17.4 30% 16 31% 16 26.7%
30.0% 25% Thousands 30% Thousands 12 12 20% 29% 8.5 8 8 15% 28% 10% 4 4 27% 5% - 26% - 0% FY15 FY16 FY17 FY15 FY16 FY17 Revenue (including shares of JVs, LHS) Revenue (including shares of JVs, LHS) Operating profit margin (%, RHS) Operating profit margin (%, RHS) Source: Company data Source: Company data
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Valuation and risks
Our target price of HKD14.2 is based on a 42% discount to the forward NAV, offering 24% upside from the current share price We forecast FY18e dividend yield of 4.2% Our sensitivity analysis shows a 3.1% move in NAV for every 10% move in property prices
We initiate coverage with a Buy rating and a target price of HKD14.20, based on a target discount of 42% (0.25 SD above the historical mean) applied to our NAV estimate of HKD24.3/share.
Valuation framework
For HK property stocks in our coverage universe, we use an 8-factor valuation framework to set a stock’s target premium/discount standard deviation band relative to its long-term mean NAV. The deviation band that determines our target prices currently ranges from -1.0SD to +0.25SD to mean NAV.
NWD is only one of two stocks in our universe where we set a target premium of +0.25SD; the other is Henderson Land. We believe its 62% owned NWS Holdings (659 HK, not rated), focusing on infrastructure and service business, can provide a stable cashflow and diversification to NWD. In FY17, NWS declared total dividends of HKD5.6bn, or an attributable amount of HKD3.4bn cash to its parent company NWD. This amount is equivalent to 48% of NWD’s FY17 core earnings. New rental contribution from Victoria Dockside can offset the high cyclicality of property development business too.
The NAV valuation discounts we have set for the other HK property companies under our coverage reflect our judgment of how they fare respectively in our 8-factor valuation framework. These discounts are primarily related to policy and industry risks. A number of cooling measures were introduced by the government to the real estate sector starting from 2009, and they are one of the harshest in HK real estate history. We apply DDM and NAV valuation to REITs. The former approach is used to assess the valuation of completed investment properties, while the latter is used to value properties currently under development.
Our 8-factor valuation framework for applying premium/discount to NAV incorporates:
1) Discount for low market cap and/or trading liquidity relative to sector leader: NWD is one of the largest property companies with a market capitalisation of over USD14bn and an excellent trading liquidity at 3M ADTV of USD15m. Thus, we do not ascribe any discount on it.
2) Discount for lack of management track record. Management has an established track record in property business for over 30 years. Thus, we do not see a rationale for any discount on this factor.
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3) Discount for transparency and agency issues. We do not see any transparency or agency issues on the company and its sister companies. Thus, we see no rationale for any discount on this factor.
4) Discount for holding company nature of business. There are no holding company structures, so we do not ascribe any discount on this basis.
5) Premium or discount for policy and industry risks. Cooling measures introduced starting from 2009 have been one of the harshest in HK real estate history. These include eight rounds of mortgage tightening and five rounds of demand-side measures. We see chance of further policy tightening if property prices continue to rise. As a result, we think a discount is warranted, and we attribute 0.5SD for this.
6) Premium or discount for directional trend of asset markets: While asset markets are relatively lacklustre, we do not see significant swings in near-term valuation either way. We do not see a rationale for any premium or discount on the basis of this factor.
7) Premium or discount for utility business/diversification. Company owns 61.2% of NWS Holdings (659 HK, not rated), which focuses on infrastructure and service industry. It accounts for c15% of NWD’s GAV. NWS enables NWD to enjoy a stream of stable income and to diversify its risk from the high cyclicality of the property development business, in our view. Its incremental new rental income from Victoria Dockside can help to diversify its business. As a result, we ascribe a premium of 0.5SD for its business diversification.
8) Premium or discount for land reserves. NWD currently owns 17m sq ft of farmland reserves and 5m sqft of residential land bank. Company has a sound track record of converting farmland into residential uses, which should help the company replenish its land bank at a reasonable margin. Therefore, we ascribe a premium of 0.25SD for this.
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Fig 44. NAV discount for HK property Fig 45. NAV discount for China property sector sector
20% 0% -10% 0% -20% -30% -20% -40% -50% -40% -60% -70% -60% -80%
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
2012 2017 2008 2009 2010 2011 2013 2014 2015 2016 % to NAV +1 SD % to NAV +1 SD Mean -1 SD Mean -1 SD -2 SD Source: Thomson Reuters Datastream, HSBC estimates Source: Thomson Reuters Datastream, HSBC estimates
Fig 46. PB ratio for HK developers Fig 47. 12m forward PE ratio for HK developers
1.4 23 21 1.2 19 1.0 17 15 0.8 13 0.6 11 9 0.4 2010 2011 2012 2013 2014 2015 2016 2017 7 2010 2011 2012 2013 2014 2015 2016 2017 PB (x) +1 SD 12M fwd PE (x) +1 SD Mean -1 SD Mean -1 SD
Source: Thomson Reuters Datastream, HSBC estimates Source: Thomson Reuters Datastream, HSBC estimates
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2018e net asset value of HKD24.3/sh
We utilise a NAV approach as the basis of our valuation methodology. We arrive at our NAV estimate of HKD24.30/sh. It comprises HKD11.7/sh for property development business (including farmland reserves), HKD15.1/sh for property investment business (including hotels), HKD0.6/sh for listed subsidiaries/associates and HKD4.2/sh for non-property business, net of HKD7.1/sh debt.
Target price of HKD14.2 based on a 42% target discount
Our target price of HKD14.2 implies a 24% upside. Historically, NWD’s share price traded at an average NAV discount of 47%, with a monthly standard deviation of 21%.
Looking across the sector, we observe that Sun Hung Kai Properties, the largest player in the sector, is trading at ~39% discount to our NAV recently, while Sino Land, a mid-cap developer is trading at ~49% discount.
Fig 48. NAV breakdown of NWD 2018 2018 2018 (HKDm) (HKD/sh) % of GAV HK Development properties 31,862 3.3 11% HK Investment properties Office/retail 85,951 9.0 30% Residential 7,344 0.8 3% Others 2,121 0.2 1% China - Development properties 63,724 6.7 22% China - Investment properties Office/retail 19,566 2.0 7% Residential 1,436 0.2 1% Hotels 28,296 3.0 10% Listed sub & asso at market value 45,071 4.7 16% GAV 285,371 29.8 100% Net debt (68,114) (7.1) Est. NAV 217,257 22.7 Farmland 15,303 1.7 Est. NAV including Farmland 232,560 24.3 Source: HSBC estimates
Fig 49. NAV discount for New World Fig 50. WACC calculation Development
60% Risk Free Rate (Rf) 2.5% 40% Adjusted Beta (B) 1.01 Market risk premium (Rm - Rf) 5.0% 20% Cost of Equity (Ke) 7.6% 0% Target debt ratio (%) 30.0% 97 99 01 03 05 07 09 11 13 15 17 Cost of debt (Kd) 3.4% -20% Tax rate 16.5% WACC 6.1% -40% -60% -80% -100% NAV discount (%) +1 SD
Mean -1 SD Source: Company data, Thomson Reuters Datastream, HSBC estimates Source: HSBC estimates
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Valuation methodology
We utilise a NAV approach as the basis of our valuation methodology. We calculate the value of each existing or prospective property development project using a discounted cash flow method to derive the GAV of each project. Our valuation is based on several project-specific information and assumptions. These include sellable GFA, completion schedule, construction cost, presale schedule and expected ASP. These allow us to estimate the sales proceeds, construction costs and other miscellaneous costs per year.
For investment properties, valuations are done based on prevailing rents and cap rates for each property type, while hotel properties are valued based on expected room rates and estimated value per room.
Listed investments are valued based on market values.
This approach enables us to test sensitivity to many variables, such as movement in property prices, interest rates and discount rates. It also ensures consistency of methodology among different companies.
Lastly, we deduct net debt and the net amount of other outstanding liabilities (such as land premium and LAT) to derive our NAV estimate.
In our NAV estimate, we include the book cost for agricultural sites that are still pending final agreement on the respective land premiums for conversion.
We use a WACC of 6.1% for the DCF calculation in the case of development properties. We derive the WACC based on a risk-free rate of 2.5% and an equity risk premium of 5.0% (with a beta of 1.01). We assume a cost of debt of 3.4% and a target debt ratio of 30.0%.
Fig 51. Key assumptions table 2012 2013 2014 2015 2016 2017e 2018e 2019e HK property Overall index 116 119 132 136 146 160 152 152 Price growth (%) % change 20% 3% 11% 3% 8% 10% -5% 0% - Luxury index 126 128 135 141 148 159 151 151 % change 11% 1% 6% 4% 5% 7% -5% 0% - Mass market index 113 117 131 135 146 161 153 153 % change 22% 3% 12% 3% 8% 10% -5% 0% Primary market Sales value (HKDbn) 132 92 178 167 187 226 236 247 % change -1% -30% 93% -6% 12% 21% 4% 5% Volume (000s units) 13 10 17 16 17 20 22 24 % change 21% -23% 70% -1% 1% 21% 10% 10% Value/unit (HKDm) 10.4 9.5 10.7 10.2 11.3 11.3 10.7 10.2 % change -18% -9% 13% -5% 11% 0% -5% -5% Secondary market Sales value (HKDbn) 313 209 238 241 237 273 298 295 % change 3% -33% 13% 1% -2% 15% 9% -1% Volume (000s units) 63 36 43 36 35 40 46 50 % change -7% -42% 18% -15% -4% 15% 15% 10% Value/unit (HKDm) 5.0 5.8 5.6 6.7 6.8 6.8 6.5 5.9 % change 11% 16% -3% 20% 3% 0% -5% -10% Market share Primary segment 30% 31% 43% 41% 44% 45% 44% 46% Source: Land Registry, Centaline, HSBC estimates
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Sensitivity analysis
We provide a NAV sensitivity analysis incorporating changes in property prices and rent growth movements, as well as other key parameters such as capitalisation rate and WACC, which are used in our income-capitalisation and DCF valuations. Scenarios include:
1) Change in HK retail rental growth and capitalisation rate assumptions
2) Change in HK office rental growth and capitalisation rate assumptions
3) Change in HK residential price and retail/office rental growth assumptions
Results: If HK property price corrects by 5% and 15%, our NAV estimate would drop 1.5% and 4.6%, respectively (53.1% and 51.6% NAV discount).
If HK office and retail rents go down by 5%, our NAV estimate would drop 0.7% and 1.4%, respectively (53.5% and 53.2% NAV discount).
For a 50bp increase in HK retail and office capitalisation rate assumptions, our NAV estimate would change by 2.6% and 1.4%, respectively (52.6% and 53.2% NAV discount).
For a 50bp increase in WACC assumptions, our NAV estimate would change by 1.6%, and new NAV discount would be 53.1%.
Fig 52. Sensitivity analysis – change in NAV and NAV discount under different scenarios NAV sensitivity to retail rental growth and capitalisation rate % change in NAV % NAV % NAV discount Retail rental growth (%) Retail rental growth (%) -10% -5% 0% 5% 10% discount -10% -5% 0% 5% 10% +0.50% -5.0% -3.8% -2.6% -1.3% -0.1% +0.50% -51.4% -52.0% -52.6% -53.2% -53.8% Cap. +0.25% -4.0% -2.7% -1.4% -0.1% 1.2% Cap. +0.25% -52.0% -52.6% -53.2% -53.8% -54.4% rate 0.00% -2.7% -1.4% 0.0% 1.4% 2.7% rate 0.00% -52.6% -53.2% -53.9% -54.5% -55.1% -0.25% -1.3% 0.1% 1.5% 3.0% 4.4% -0.25% -53.2% -53.9% -54.6% -55.2% -55.8% -0.50% 0.3% 1.8% 3.3% 4.9% 6.4% -0.50% -54.0% -54.7% -55.3% -56.0% -56.6% NAV sensitivity to office rental growth and capitalisation rate Office rental growth (%) Office rental growth (%) -10% -5% 0% 5% 10% -10% -5% 0% 5% 10% +0.50% -2.7% -2.0% -1.4% -0.8% -0.1% +0.50% -52.6% -52.9% -53.2% -53.5% -53.8% Cap. +0.25% -2.1% -1.4% -0.8% -0.1% 0.6% Cap. +0.25% -52.9% -53.2% -53.5% -53.8% -54.1% rate 0.00% -1.4% -0.7% 0.0% 0.7% 1.4% rate 0.00% -53.2% -53.5% -53.9% -54.2% -54.5% -0.25% -0.6% 0.1% 0.9% 1.6% 2.4% -0.25% -53.6% -53.9% -54.3% -54.6% -54.9% -0.50% 0.3% 1.1% 1.9% 2.7% 3.5% -0.50% -54.0% -54.3% -54.7% -55.1% -55.4% NAV sensitivity to overall rental growth and ASP changes Residential ASP changes Residential ASP changes -15% -5% 0% 5% 15% -15% -5% 0% 5% 15% +10% -0.1% 3.0% 4.6% 6.1% 9.0% +10% -53.8% -55.2% -55.9% -56.5% -57.7% Overall +5% -2.3% 0.8% 2.3% 3.8% 6.7% Overall +5% -52.7% -54.2% -54.9% -55.5% -56.8% rental +0% -4.6% -1.5% 0.0% 1.5% 4.4% rental +0% -51.6% -53.1% -53.9% -54.5% -55.8% growth -5% -6.9% -3.8% -2.3% -0.8% 2.2% growth -5% -50.4% -52.0% -52.8% -53.5% -54.8% -10% -9.2% -6.1% -4.6% -3.0% -0.1% -10% -49.2% -50.9% -51.7% -52.4% -53.8% NAV sensitivity to overall capitalisation rate and WACC Change in WACC Change in WACC -1.0% -0.5% 0% 0.5% 1.0% -1.0% -0.5% 0% 0.5% 1.0% +0.50% -2.8% -4.3% -5.9% -7.4% -8.8% +0.50% -52.5% -51.8% -51.0% -50.2% -49.4% Cap. +0.25% 0.1% -1.5% -3.1% -4.7% -6.2% Cap. +0.25% -53.9% -53.1% -52.4% -51.6% -50.8% rate 0.00% 3.3% 1.7% 0.0% -1.6% -3.2% rate 0.00% -55.4% -54.6% -53.9% -53.1% -52.3% -0.25% 7.0% 5.3% 3.6% 1.9% 0.3% -0.25% -56.9% -56.2% -55.4% -54.7% -54.0% -0.50% 11.3% 9.4% 7.6% 5.9% 4.2% -0.50% -58.5% -57.8% -57.1% -56.4% -55.7% Source: HSBC estimates
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Versus consensus
Our FY18/19e earnings forecasts are 10.4% and 8.9% above market consensus Our FY18e and FY19e earnings forecasts are 10% and 9% above market consensus, respectively. Our higher-than-Street estimate is mainly due to 1) higher rental assumptions of its upcoming completion Victoria Dockside and 2) higher sales and gross margin assumptions in its China property development business. We believe the market underappreciates the asset quality of Victoria Dockside, in particular its hotel business. Fast asset turnover of its China property sales could continue to drive up the earnings estimates, in our view.
Fig 53 HSBC estimates versus consensus (HKDm) FY18e FY19e FY20e Earnings forecasts (HKDm) HSBC 8,076 9,031 10,575 Market consensus 7,316 8,293 8,883 Versus consensus (%) 10.4% 8.9% 19.1%
Core profit margin (%) HSBC 11.5% 12.5% 13.8% Market consensus 11.3% 12.0% 12.0% Difference (%) 0.2% 0.5% 1.8% Source: Bloomberg, HSBC estimates
Over the past twelve months, NWD’s FY18e earnings consensus were revised down by 6.5%, while its FY19e earnings consensus were revised up 9.4%
Fig 54. Earnings consensus for NWD Fig 55. Earnings consensus over the past (HKDm) 12 months
9,000 FY16 FY17 8,600 FY18 FY19 8,400 8,500 8,200 8,000 8,000 7,800 7,500 7,600 7,000 7,400 7,200 6,500 7,000 6,000 6,800 6,600
FY18 FY19
Jan-16 Jan-14 Jan-15 Jan-17
Sep-15 Sep-16 Sep-13 Sep-14
May-16 May-14 May-15 May-17 Sep-16 Mar-17 Jun-17 Sep-17 Source: Bloomberg Source: Bloomberg
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Investment risks
We believe several risks on investing New World Development should be addressed. Company- specific risks include delayed completion of its Victoria Dockside project and sales slippage of the Tai Wai station project. Other risks include macro uncertainties and policy risks Risk of delayed completion in Victoria Dockside prejct Victoria Dockside integrated commercial project is New World Development’s largest project in Hong Kong. Company has spent over HKD20bn in investing this project and it is set to fully commence in 2019. Any delayed completion of this project might negatively impact its medium earnings growth, in our view.
Risk of sales slippage in Tai Wai station project The Tai Wai property develop project is the largest residential project under NWD’s land bank. Attributable GFA as of end-June 2017 reaches 2.1m sqft, representing c29% of its Hong Kong development land bank. This project comprises 2,900 residential units in total. Any sales slippage may disappoint investors and negatively impact the share price, in our view.
Increasingly challenging land bank replenishment Land market is turning more competitive given more participants. Over the past few years, land price continues to pick up, which might lower the likelihood of land acquisitions for NWD. Company has been proactively acquiring commercial sites in Cheung Sha Wan of Kowloon district. However, we are yet to see a material land bank replenishment in residential segment. Lower-than expected land bank replenishment may hamper its medium-term growth visibility, in our view.
Macro uncertainties and property regulation in HK/China With a high exposure to HK and China property business, NWD’s businesses are affected by the property market and macro trends, particularly in HK and Shenzhen. Any slowdown in the economy and/or property regulation in these markets may affect demand for residential flats and in turn SHK’s contracted sales and residential sales bookings
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Risk of hawkish interest rate hikes Interest rate of Hong Kong will be affected by interest rate outlook in the US, given the pegged USD-HKD relationship. Should the US begin to raise rates aggressively, this could lead to upward pressure on interest rates and in turn cap rates in HK. Assuming other factors, such as rental, stay constant, higher cap rates would lead to lower commercial capital value.
Analysis on an impact of US Fed Fund hikes to NWD’s share price We have analysed the impact of Fed Fund rate hikes to NWD’s share price performance in the past three decades. There were four US Fed Fund rate hike cycles between 1980s and early 2000s. They happened in 1988-89, 1994-95, 1999-00 and 2004-06.
Our findings show that US rate hike may not necessarily impact the share price or the property price negatively. The share price of New World Development underperformed Hang Seng Index in 1994-95 and 1999-2000. During these periods, the share price was down 43% (underperforming the index by 16%) and 61% (underperforming the index by 82%), respectively.
Fig 56. Analysis of Fed Fund hikes – HK home price, HSP Index, HSI and stock price changes __ US rate hike ___ US rate hike Hike HSP HSI Home _____ HIBOR ______NWD ___ Chg index price Cycle Beginning End Start End Bps % chg % chg % chg Start End Bps Start End % 1 Feb-88 Feb-89 6.50 9.75 325 51% 25% 29% n.a n.a n.a 6.6 11.5 74% 2 Jan-94 Feb-95 3.00 6.00 300 (32%) (28%) 4% 3.57 6.64 307 29.2 16.6 (43%) 3 May-99 May-00 4.75 6.50 175 (18%) 21% (12%) 5.46 7.00 153 15.6 6.1 (61%) 4 May-04 Jun-06 1.00 5.25 425 33% 33% 19% 0.43 4.56 414 5.1 11.1 115% 5 Nov-15 Dec-15 0.25 0.50 25 0% 0% (3%) 0.37 0.39 2 7.7 7.7 (1%) 6 Nov-16 Aug-17 0.50 1.25 75 12% 13% n.a 0.69 0.78 9 8.6 10.6 22% Source: CEIC, Thomson Reuters Datastream, Rating & Valuation Dept., HSBC; Note HSP = Hang Seng Properties Index, HSI = Hang Seng Index
HSBC house view: A gradual form of tightening, not hawkish rate hikes Our house view is that we expect the Fed's disinvestment programme to act as a gradual form of tightening, thus slightly reducing the need for rate hikes, even amid stronger growth or an uptick in inflation. Risks are knowable and manageable.
HSBC’s Chief US economist believes the next 25bp Fed rate hike will not be until December 2017, and we expect only one 25bp rise in 2018. The FOMC formally announced it will start shrinking its USD4.5trn balance sheet in October. We anticipate that the quantitative tightening program – a reversal of the quantitative easing (QE) put in place after the 2008/2009 financial crisis – will start slowly, last for about three years, and will reverse about one-third, or USD1.3trn, of the total securities purchases made during successive rounds of QE. For details refer to FOMC Multi-asset Reaction – Hello quantitative tightening, 20 September 2017.
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Fig 57. US Fed Fund rate versus share price of New World Development 12.0 (1) (2) (3) (4) (5) (6) 50 45 10.0 40 8.0 35 30 6.0 25 20 4.0 15 2.0 10 5 0.0 0 Jan-85 Apr-88 Jul-91 Oct-94 Jan-98 Apr-01 Jul-04 Oct-07 Jan-11 Apr-14 Jul-17
US Fed Fund rate New World Dev
Source: CEIC, Bloomberg, Thomson Reuters Datastream, HSBC
Fig 58. US Fed Fund rate versus HK mortgage rate 14.0 (1) (2) (3) (4) (5) (6) 12.0
10.0
8.0
6.0
4.0
2.0
0.0 Jan-85 Apr-88 Jul-91 Oct-94 Jan-98 Apr-01 Jul-04 Oct-07 Jan-11 Apr-14 Jul-17 US Fed Fund rate HK Mortgage rate
Source: CEIC, Bloomberg, Thomson Reuters Datastream, HSBC
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Financial analysis
We forecast its underlying earnings to grow at a 14.0% CAGR over 2017-20e For every 10% move in ASP assumptions, net profit changes by 7.0% in 2018e New completion of Victoria Dockside and fast asset turnover of HK/China property development business should help NWD to deliver stable earnings growth in coming years
Earnings outlook
We expect its core net profit to grow by 13% in 2018e, 12% in 2019e and 17% in 2020e. These are underpinned by: 1) a material rental income contribution from its trophy integrated commercial project Victoria Dockside, 2) resilient property sales in Hong Kong, and 3) steadily growing property sales in China.
Fig 59. Core profit to grow from HKD7.1bn Fig 60. Revenue, operating profit and in FY17 to HKD9.0bn in FY19e margin, 2016-20e
12 16% 100 30% 10.6 14% 10 9.0 80 25%
8.1 12% Thousands Thousands 8 7.1 20% 10% 60 5.6 15% 6 8% 40 6% 10% 4 4% 20 5% 2 2% - 0% - 0% 2016 2017 2018e 2019e 2020e 2016 2017 2018e 2019e 2020e Revenue (HKD bn, LHS) Core profit (HKD bn, LHS) EBIT (HKD bn, LHS) Core profit margin (%, RHS) EBIT margin (%, RHS) Source: Company data, HSBC estimates Source: Company data, HSBC estimates
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Earnings sensitivity analysis
We provide an earnings sensitivity analysis in accordance with changes in property prices and rent growth movements.
For every 10% move in property prices over our base case, we find 2018e and 2019e core profit would change by 7.0% and 10.0%, respectively.
For every 5% change in rents over our base case, 2018e and 2019e core profit would change by 1.1 % and 2.3%, respectively.
Fig 61. 2018e earnings sensitivity to rental growth and ASP changes (% diff) ASP changes -10% -5% 0% 5% 10% -10% -9.3% -5.8% -2.3% 1.2% 4.7% Rental -5% -8.2% -4.6% -1.1% 2.3% 5.8% Growth (%) 0% -7.0% -3.5% 0.0% 3.5% 7.0% 5% -5.9% -2.3% 1.1% 4.6% 8.1% 10% -4.7% -1.2% 2.3% 5.8% 9.2% Source: HSBC estimates
Fig 62. 2019e earnings sensitivity to rental growth and ASP changes (% diff) ASP changes -10% -5% 0% 5% 10% -10% -14.3% -9.3% -4.3% 0.7% 5.5% Rental -5% -12.1% -7.1% -2.1% 2.8% 7.7% Growth (%) 0% -10.0% -5.0% 0.0% 5.0% 9.8% 5% -7.9% -2.8% 2.1% 7.1% 12.0% 10% -5.7% -0.7% 4.3% 9.3% 14.1% Source: HSBC estimates
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Dividend analysis
We expect the company to declare a DPS of HKD0.48/sh in FY18e, up 4.3% y-o-y compared to the same period last year. This translates into a dividend yield of 4.2%, based on current share price; the payout ratio would be 57%, compared with 62% in FY17. Its DPS should further increase and reach HKD0.56/sh in FY20e, when its integrated commercial project, Victoria Dockside, starts to contribute recurrent rental income to the company.
We conduct an analysis on the company’s dividend payment capability, which is based on the sufficiency of rental income to cover dividend payments. We believe New World Development has a lower capacity for increasing its DPS, given its ratio of 44% in FY17. We expect this ratio to gradually improve to 77% in FY18e and 96% in FY19e given more rental income.
Fig 63. NWD is focusing on growing absolute DPS, not payout ratio (HKD/sh)
1.6 80% 1.4 70% 1.2 60% 1.0 50% 0.8 40% 0.6 30% 0.4 20% 0.2 10% - 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e Core EPS (HKD/sh, LHS) DPS (HKD/sh, LHS) Payout ratio (%, RHS)
Source: Company data, HSBC estimates
Fig 64. Ratio of rental income to dividends (dividend payment capability)
6 160% 140% 5 120% Thousands 4 100% 3 80% 60% 2 40% 1 20% 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e Net rental income (HKD bn, LHS) Dividends (HKD bn, LHS) Net rental income to dividends (RHS)
Source: Company data, HSBC estimates
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Balance sheet analysis
Fig 65. Debt maturity profile (HKDbn as of Fig 66. Net debt (HKDbn) and gearing (%) end June 2017)
85 90 100 60% 80 48% 45% 50%
70 80 43% Thousands
Thousands 37% 60 32% 40% 60 50 30% 40 40 30 24 20% 19 15 20 20 10% 10 0 0% 0 FY13 FY14 FY15 FY16 FY17 <1 year 1-2 years 2-5 years >5 years Net debt (HK$bn, LHS) Gearing (%, RHS)
Source: Company data Source: Company data
Fig 67. % of fixed debt to total borrowings Fig 68. Gross interest expenses (HKDbn) and interest coverage (x)
100% 7 6 90% 5.2 80% 6 5 70% 3.5 65% 66% Thousands 5 73% 70% 69% 4 60% 3.3 3.2 4 50% 3 2.1 40% 3 2 30% 2 20% 35% 34% 1 27% 30% 31% 1 10% 0% 0 0 FY13 FY14 FY15 FY16 1H17 FY13 FY14 FY15 FY16 FY17 Fixed debt Floating debt Gross interest expense (HK$bn, LHS)
Interest coverage (x, RHS) Source: Company data Source: Company data
Fig 69. % y-o-y growth in DPS Fig 70. Dividend payout ratio (%)
0.5 12% 1.2 71% 80% 10.5% 0.4 10% 1.0 60% 8% 0.8 55% 62% 0.3 45% 4.8% 4.5% 6% 0.6 43% 40% 0.2 4% 0.4 20% 0.1 2% 0.2 0.0 0% 0.0 0% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Final DPS (HKD/sh, LHS) DPS (HKD/sh) Core EPS (HKD/sh) Interim DPS (HKD/sh, LHS) % yoy chg (RHS) Payout ratio (%) - RHS
Source: Company data Source: Company data
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Cash flow analysis
We expect a positive net cash flow of HKD0.9bn in FY18e and HKD12.4bn in FY19e based on existing capex assumptions. These cash inflow could be used for future land purchases or to declare more dividends to shareholders, in our view. With faster asset turnover in both Hong Kong and China property business, we believe NWD’s cash flow are well manageable. We believe the company has sufficient financial strength and can spend HKD10-20bn in land purchases, should the opportunity of quality project exist.
Fig 71. NWD’s cash flow (HKDbn) 32 24 16 8 - (8) (16) (24) (32) FY13 FY14 FY15 FY16 FY17e FY18e FY19e OCF FCF ICF Net CF
Source: Company data, HSBC estimates
Fig 72. Ratio analysis Year to 06/2015a 06/2016a 06/2017a 06/2018e 06/2019e 06/2020e Gross profit margin 35% 31% 32% 30% 29% 29% Net profit margin 35% 15% 14% 26% 13% 14% Underlying Net profit margin 12% 9% 13% 12% 13% 14% Avg. Debt to Equity 66% 70% 76% 73% 74% 78% Net debt to Equity 32% 45% 43% 36% 36% 37% ROE 10.7% 4.8% 4.1% 9.2% 4.6% 5.4% Underlying ROE 3.8% 3.1% 3.8% 4.1% 4.6% 5.4% Source: Company data, HSBC estimates
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Fig 73. P&L summary (HKDm) Year to 06/2015a 06/2016a 06/2017a 06/2018e 06/2019e 06/2020e Turnover 55,245 59,570 56,629 70,104 72,022 76,835 Property development 25,682 28,528 25,968 36,328 35,324 39,162 Property investment 2,402 2,492 2,411 3,478 4,994 5,315 Service 15,844 19,904 20,556 21,172 21,807 22,462 Infrastructure 2,471 2,444 2,411 2,411 2,411 2,411 Hotels 4,061 1,762 1,422 2,853 3,624 3,624 Department stores 3,913 3,550 3,389 3,389 3,389 3,389 Others 873 890 473 473 473 473 Gross profit 19,306 18,522 18,216 20,888 21,068 22,550 Selling & Admin expenses (9,809) (9,624) (8,786) (9,049) (9,321) (10,066) Other gains 15,308 7,378 957 726 627 677 Net interest expense (492) (537) (446) (267) (274) (140) Share of profit from asso. 3,657 2,661 3,925 3,666 3,963 5,044 Non-operating profit/loss 3,166 307 1,364 10,000 0 0 PBT 31,137 18,707 15,230 25,964 16,064 18,065 Taxation (4,264) (6,424) (4,756) (5,602) (5,572) (6,264) Minority interests (7,760) (3,617) (2,799) (2,285) (1,461) (1,227) Net profit 19,112 8,666 7,676 18,076 9,031 10,575 Net impact of ppty rev reserves 12,342 3,027 542 10,000 0 0 Core profit 6,770 5,639 7,133 8,076 9,031 10,575 Source: Company data, HSBC estimates
Fig 74. Cash flow summary (HKDm) 06/2015a 06/2016a 06/2017a 06/2018e 06/2019e 06/2020e Net cash flow operating activities 5,999 3,087 14,449 29,029 9,448 8,821 - interest paid (4,869) (5,654) (5,989) (5,992) (6,529) (6,645) - tax paid (3,982) (4,359) (4,350) (4,381) (5,014) (5,874) Net cash from investing activities 626 (127) (7,255) (15,327) (5,280) (6,286) - Capex (15,705) (13,192) (7,255) (15,327) (5,280) (6,286) Net cash from financing activities (8,809) (6,870) 4,826 (12,754) 8,213 (2,257) - Dividends paid (5,427) (1,882) (4,077) (4,399) (4,591) (5,069) Net change in cash (2,184) (3,910) 12,021 948 12,381 278 Cash at beginning 61,077 58,861 54,965 66,986 67,933 80,314 Effect of FX changes (33) (653) 0 0 0 0 Cash at end 58,861 54,298 66,986 67,933 80,314 80,592 Source: Company data, HSBC estimates
Fig 75. Balance sheet summary (HKDm) 06/2015a 06/2016a 06/2017a 06/2018e 06/2019e 06/2020e Shareholders' funds 178,919 179,573 186,091 196,102 196,579 197,041 Long-term liabilities 83,638 114,842 125,895 126,549 124,332 121,126 Minority interests 43,439 21,322 34,853 37,139 38,600 39,827 Deferred tax and others 10,931 9,848 10,716 10,930 11,149 11,372 Total capital employed 316,928 325,586 357,556 370,719 370,660 369,365 Fixed assets 141,057 130,959 156,567 172,791 179,063 185,404 Other assets 97,489 106,095 101,639 104,906 108,491 113,179 Current assets 159,385 155,055 178,850 169,595 175,037 168,899 Total assets 397,931 392,109 437,056 447,292 462,591 467,482 Source: Company data, HSBC estimates
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Corporate profile
Fig 76. Group structure of New World Development
Source: HKEx, Bloomberg, Company data
Company description New World Development is a leading property company in Hong Kong with principal focus on HK and China real estate. The company has also diversified its businesses into different segments, including infrastructure, service and department store business. The company currently owns 61% stake in NWS Holdings Limited (659 HK, not rated) and New World Department Store China (825 HK, not rated). Its key commercial flagship projects include Victoria Dockside in Tsim Sha Tsui, K11 project in Tsim Sha Tsui and Grand Hyatt Hotel in Wanchai. As of December 2016, it owned a land bank of 10.0m sqft in Hong Kong, of which 50% are for residential uses.
The top-five institutional investors of the company are Blackrock (2.67% stake), PGGM (2.38%), Norges Bank (0.91%), State Street (0.63%) and APG Asset management (0.49%), according to Bloomberg.
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Fig 77. Management profile Management Position Age Current job responsibility and experience Dr. Cheng Chairman & 69 Appointed as Director in October 1972, Executive Director in 1973, became Managing Director in 1989 and Chairman since March 2012. Kar-Shun, Managing Chairman of the Nomination Committee and Executive Committee of the Board of Directors of the Company. Henry Director Member of the Remuneration Committee. Chairman and executive director of NWS Holdings Limited, Chow Tai Fook Jewellery Group Limited and International Entertainment Corporation. Chairman and non-executive director of New World Department Store China Limited, Newton Resources Ltd and FSE Engineering Holdings Ltd. Independent nonexecutive director of HKR International Limited and Hang Seng Bank Limited Non-executive director of SJM Holdings Limited and former Chairman and managing director of New World China Land Limited. Former Non-executive director of Lifestyle International Holdings Limited. Mr. Doo Wai- Vice Chairman 72 Appointed as the Vice-chairman and Non-executive Director in July 2013. Hoi, William & Non- Non-executive director of Lifestyle International Holdings Limited upon re-designation from executive director on 11 June 2015. Executive Independent non-executive director of The Bank of East Asia, Limited and Shanghai Industrial Urban Development Group Limited. Director Former Vice-chairman and non-executive director of New World China Land Limited. Former deputy chairman and non-executive director of NWS Holdings Limited. Director of certain subsidiaries of the Group and the chairman and director of Fung Seng Enterprises Holdings Limited. Dr. Cheng Executive Vice- 36 Member of the Executive Committee of the Board of Directors of the Company. Chi-Kong, chairman and Executive director of New World Department Store China Limited, Chow Tai Fook Jewellery Group Ltd. and International Adrian Joint General Entertainment Corp. Manager Non-executive director of Giordano International Limited and Modern Media Holdings Limited. Former executive director of New World China Land Limited. Director of Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited. Chairman of New World Group Charity Foundation Limited and a director of certain subsidiaries of the Group. Mr. Chen Executive 57 Joined the Company as general manager in January 2011. Guanzhan Director and Member of the Executive Committee of the Board of Directors of the Company. Joint General Acts as director of New World Group Charity Foundation Limited and certain subsidiaries of the Group. Manager Mr. Yeung Director 59 Member of the Audit Committee and the Remuneration Committee of the Board of Directors of the Company. Ping-Leung, Independent non-executive director of Miramar Hotel and Investment Company Limited. Howard Former chairman of King Fook Holdings Limited. Mr. Cha Mou- Director 74 Chairman of the Audit Committee and a member of the Remuneration Committee of the Board of Directors of the Company. Sing, Payson Chairman of HKR International Limited and the non-executive chairman of Hanison Construction Holdings Limited. Independent non-executive director of Eagle Asset Management (CP) Limited. Chairman of Mingly Corporation and an independent nonexecutive director of Hong Kong International Theme Parks Limited. Mr. Cheng Director 64 Independent non-executive director of King Fook Holdings Limited. Kar-Shing, Former executive director of New World China Land Limited. Peter Former Independent non-executive director of Symphony Holdings Limited. Director of Cheng Yu Tung Family (Holdings) Limited, Cheng Yu Tung Family (Holdings II) Limited, Chow Tai Fook Capital Limited, Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited. Director of New World Hotels (Holdings) Limited, NWS Service Management Limited and certain subsidiaries of the Group. Mr. Cha Mou- Alternate 66 Alternate Director ot Mr. Cha Mou-Sing, Payson. Zing, Victor Director Deputy chairman and managing director of HKR International Limited. Independent non-executive director of SOHO China Limited. Mr. Ho Hau- Independent 65 Alternate Director of the Company from 7 January 2004 to 29 August 2004. Hay, Hamilton Non-Executive Chairman of the Remuneration Committee and a member of the Audit Committee of the Board of Directors of the Company. Director Independent non-executive director of King Fook Holdings Limited. Executive director of Honorway Investments Limited and Tak Hung (Holding) Company Limited. Mr. Lee Luen- Independent 67 Member of the Audit Committee, the Remuneration Committee and the Nomination Committee of the Board of Directors of the Company. Wai, John Non-Executive Managing director and chief executive officer of Lippo Limited, an executive director and the chief executive officer of Lippo China Director Resources Limited and Hongkong Chinese Limited Independent non-executive director of UMP Healthcare Holdings Limited. Former independent non-executive director of New World China Land Limited. Mr. Liang Independent 69 Member of the Audit Committee and the Nomination Committee of the Board of Directors of the Company. Cheung-Biu, Non-Executive Independent non-executive director of Miramar Hotel and Investment Company. Thomas Director The group chief executive of Wideland Investors Limited. Ms. Ki Man- Executive 69 Member of the Executive Committee of the Board of Directors of the Company. Fung, Leonie Director Managing director of New World China Enterprises Projects Limited (a subsidiary of the Company) since 1997 and is also a director of certain subsidiaries of the Group. Independent non-executive director of Clear Media Limited and Sa Sa International Holdings Limited. Was the founder, partner and chairman/chief executive officer of Grey Hong Kong Advertising Limited and Grey China Advertising Limited. Mr. Cheng Executive 38 Member of the Executive Committee of the Board of Directors of the Company. Chi-Heng Director Executive director of Chow Tai Fook Jewellery Group Limited. Former Non-executive director of China Huishan Dairy Holdings Company Limited. Director of Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited, both are substantial shareholders of the Company. Ms. Cheng Executive 35 Member of the Executive Committee of the Board of Directors of the Company. Chi-Man, Director Currently oversees the hotel division and the project management division of the Group. Sonia Former executive director of New World China Land Limited and a director of certain subsidiaries of the Group. Mr. Au Tak- Executive 64 Member of the Executive Committee of the Board of Directors of the Company. Cheong Director Head of the Finance and Accounts and senior management of the Company. Source: Company data, HSBC
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Disclosure appendix
Analyst Certification The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Raymond Liu and Michelle Kwok
Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
41 EQUITIES ● REMD 11 October 2017
Rating distribution for long-term investment opportunities As of 11 October 2017, the distribution of all independent ratings published by HSBC is as follows: Buy 44% ( 27% of these provided with Investment Banking Services ) Hold 42% ( 25% of these provided with Investment Banking Services ) Sell 14% ( 16% of these provided with Investment Banking Services )
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
Share price and rating changes for long-term investment opportunities New World Development Co (0017.HK) share price Rating & target price history performance HKD Vs HSBC rating history From To Date Analyst N/A N/R 15 Nov 2004 14 Target price Value Date Analyst 12 Price 1 N/R 15 Nov 2004 Source: HSBC 10 8 6 4 2
0
Oct-14 Oct-13 Oct-15 Oct-16 Oct-17 Oct-12 Source: HSBC
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please use the following links to access the disclosure page:
Clients of Global Research and Global Banking and Markets: www.research.hsbc.com/A/Disclosures
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HSBC & Analyst disclosures Disclosure checklist
Company Ticker Recent price Price date Disclosure NEW WORLD DEVELOPMENT CO 0017.HK 12.04 10 Oct 2017 1, 4, 5, 6 Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 30 September 2017 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 August 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 August 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
42 EQUITIES ● REMD 11 October 2017
7 As of 31 August 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company 12 As of 05 Oct 2017, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 13 As of 05 Oct 2017, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities. This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as such, this report should not be construed as an inducement to transact in any sanctioned securities.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. HSBC Private Banking clients should contact their Relationship Manager for queries regarding other research reports. In order to find out more about the proprietary models used to produce this report, please contact the authoring analyst.
Additional disclosures 1. This report is dated as at 11 October 2017.
2. All market data included in this report are dated as at close 06 October 2017, unless a different date and/or a specific time of day is indicated in the report.
3. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
4. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument.
Production & distribution disclosures 1. This report was produced and signed off by the author on 11 Oct 2017 02:18 GMT.
2. In order to see when this report was first disseminated please see the disclosure page available at https://www.research.hsbc.com/R/34/cjQNqVv
43 EQUITIES ● REMD 11 October 2017
Disclaimer
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44 Global Financial Institution Group Research Team
Europe Insurance Analyst, Global Sector Head, Banks Europe Albert Tam +852 2822 4395 Robin Down +44 20 7991 6926 [email protected] [email protected] Analyst, Co-Head of European Insurance Dhruv Gahlaut, CFA +44 20 7991 6728 Simon Sin +852 2996 6514 Iason Kepaptsoglou +44 20 7991 6722 [email protected] [email protected] [email protected] Analyst, Co-Head of European Insurance CEEMEA Alevizos Alevizakos +44 20 7005 8722 Thomas Fossard +33 1 56 52 43 40 [email protected] [email protected] Patrick Gaffney +971 4 423 6204 [email protected] Fan Yang +44 20 7992 0985 Steven Haywood +44 20 7991 3184 [email protected] [email protected] Latin America Global Head of Exchanges Abilash P T, CFA +44 20 7991 4475 Jonathan Brandt, CFA +1 212 525 4499 Johannes Thormann +49 211 910 3017 [email protected] [email protected] [email protected] Asia Yevgeniy Shelkovskiy +1 212 525 3035 [email protected] CEEMEA Analyst, Head of Financials Equity Research, Andrzej Nowaczek +44 20 7991 6709 Asia-Pacific Eduardo Altamirano +1 212 525 8333 [email protected] Kailesh Mistry, CFA +852 2822 4321 [email protected] [email protected] Aybek Islamov +971 44 236 921 Coleman Clyde +1 212 525 2441 [email protected] Sinyoung Park +822 3706 8770 [email protected] [email protected] Nigel Fletcher +971 4 423 6862 Credit Research [email protected] Anthony Lam +852 2822 4202 [email protected] Ivan Zubo +44 20 7991 5975 Henry Hall +27 11 880 1855 [email protected] [email protected] Green Cai +852 2822 2895 [email protected] Banks and Insurance Latin America Financials Vinod Rajamani +91 22 2268 1232 Asia Analyst, Global Sector Head, EM Banks [email protected] Carlos Gomez-Lopez, CFA +1 212 525 5253 Analyst, Head of Global Research, Asia-Pacific [email protected] Dilip Shahani +852 2822 4520 Asset Management [email protected] Neha Agarwala, CFA +1 212 525 5418 UK [email protected] Specialist Sales Abilash P T, CFA +44 20 7991 4475 [email protected] Carlo Digrandi +44 20 7991 6843 Asia [email protected] Analyst, Head of Financials Equity Research, Real Estate /Conglomerates Asia-Pacific Matthew Robertson +44 20 7991 5077 Kailesh Mistry, CFA +852 2822 4321 Europe [email protected] [email protected] Head of Real Estate, Europe Cecilia Luras +44 20 7991 5493 Stephen Bramley-Jackson +44 20 7992 3102 York Pun +852 2822 4396 [email protected] [email protected] [email protected]
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