2018 is coming to an end.
And investors would hope to put the year behind quickly due to the stock market volatility experienced in the last few months. However, due to the recent market pullback, many shares are selling at cheap prices. Let’s look at one such company in this third part of a three-part series of articles. The first and second articles discussed one cheap share each, and they can be found here and here.
Introduction to Company #3
Hongkong Land Holdings Limited (SGX: H78) is a property investment, management, and development group with properties in countries such as Hong Kong, Singapore, and China. Currently, the company owns and manages more than 850,000 square metres of real estate across Asia. Hongkong Land has two business segments, namely, investment properties and development properties.
Good track record
The property outfit’s net profit had improved by 47.2% per year from US$1.19 billion in 2013 to US$5.59 billion in 2017. Without any non-trading items such as property revaluations, the company’s underlying earnings per share also improved from US$0.40 to US$0.412 over the same period.
Latest business developments
Hongkong Land gave an update on its 2018 third-quarter results early last month. It said that in Hong Kong, its Central office properties posted positive rental reversions as market supply remained tight. Vacancy fell to 0.8%, as of 30 September 2018, from 1.9% three months prior. As for the Singapore office portfolio, rental reversions were positive too as the market continued to improve. Vacancy rose to 2.8% from 0.1%, but the situation is expected to improve “before the end of the year as tenants take up committed space”.
The company noted that market demand for private properties in Singapore has moderated due to the additional property cooling measures introduced by the government in July this year. The sales launch at Margaret Ville was successful while sales at Parc Esta (formerly Eunosville) are expected to start soon.
Why it’s cheap
As of 30 September 2018, Hongkong Land’s net debt stood at US$3.7 billion while its net gearing was 10%. This is a healthy balance sheet for a real estate company. On Tuesday, Hongkong Land’s share price closed at US$6.59, which gave the company a PB (price-to-book) ratio of just 0.41.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Hongkong Land Holdings Limited. Motley Fool Singapore contributor Sudhan P owns shares in Hongkong Land Holdings Limited.