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9 Quick Things Investors Should Learn About Hongkong Land Holdings Limited

Hongkong Land Holdings Limited (SGX: H78) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations (the link for Hongkong Land is here).

Hongkong Land is a leading property investment, management, and development group with operations primarily in Hong Kong, Singapore, and mainland China. Its business can be segmented into the ownership of commercial offices and the development of residential real estate.

You can read more about Hongkong Land in here.

What’s the story?

Below are nine useful things I learned from listening to Hongkong Land’s earnings webcast for the first-half of 2015:

  1. Chief Financial Officer John Witt headed the company’s presentation for this round. He highlighted that US$94 million of Hongkong Land’s US$513 million profit in the first-half of 2015 was due to the revaluation of properties. This is down from the selfsame figure of US$130 million over the same period last year. On an underlying profit basis, which excludes the impact of revaluation of properties, Hongkong Land had recorded a 3% year-on-year decline.
  2. The majority of Hongkong Land’s commercial property portfolio lies in its near 5 million square footage of space in Hong Kong. This is followed by Singapore where the company has 1.8 million square feet of commercial space. Overall, Hongkong Land owns a little over 8 million square feet of attributable commercial space.
  3. As of 30 June 2015, vacancy at Hong Kong’s Grade A office space had dropped to 1.7%, the lowest that it has been since 2008. Given the lack of new office space expected in the near future, real estate research firm Jones Lang LaSalle is expecting vacancies to remain tight. This could help prop up and grow rental rates for Hongkong Land’s Hong Kong portfolio.
  4. But, investors may want to note that Hongkong Land’s vacancy levels for the first-half of 2015 were at 4.2%, higher than the general market. Witt did stress though, that Hongkong Land is focused on obtaining the right yield levels for its properties.
  5. It should also be noted that a large majority of tenants in Hongkong Land’s Hong Kong office portfolio come from the financial services and legal services sectors. They made up 39% and 31%, respectively, of Hongkong Land’s office tenant profile. This presents a source of concentration risk for Hongkong Land.
  6. On a brighter note, Hongkong Land managed to maintain its 0% vacancy rate for its Hong Kong Central retail portfolio as of the end of June 2015. There were positive signs all round, with rental rates bumped up to HK$219 per square foot and the weighted average lease expiry (WALE) standing at 2.5 years. These are up from a year ago when the rental rate and WALE stood at HK$210 per square foot and 2.1 years.
  7. At the Singapore front, Hongkong Land’s interests include a 100% stake in One Raffles Link and a 33% stake each in One Raffles Quay and the Marina Bay Financial Center. Similar to what was reported by CapitaLand Commercial Trust (SGX: C61U) recently, Witt stated that significant office space supply is expected to be added in 2016 in Singapore’s Central Business District (CDB). How Hongkong Land’s Singapore office portfolio performs will depend partly on demand. It is also notable that financial services firms make up 74% of Hongkong Land’s Singapore office tenant profile – this is another area of concentration risk investors may want to watch.
  8. Vacancy at Hongkong Land’s Singapore office portfolio was 1.9% at the end of the reporting quarter while the average gross rental rate was S$9.50 per square foot. The latter number had been raised from S$9.10 per square foot a year ago.
  9. On the residential properties front, the majority of Hongkong Land’s recognized revenue during the reporting period came from ongoing projects in ChongQing and Chengdu. As of 30 June 2015, Hongkong Land had US$585 million in unrecognized sales in Mainland China.

Foolish takeaway

To buy and hold a company’s shares for the long-term also means the need to keep up with developments in the firm’s business.

The access to management teams via webcasts and transcripts gives the Foolish investor a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.