Hongkong Land Holdings Limited (SGX: H78) and UOL Group Limited (SGX: U14) are both property giants that are listed on the Singapore stock market. Over the last five years, Hongkong Land’s shares have declined 16% while UOL Group Limited shares have risen 11%.
While the duo’s shares have had contrasting fortunes in the past five years, what investors really want to know is which would make the better dividend investment now. Let’s find out.
Introducing the contenders
On the surface, Hongkong Land and UOL are similar businesses, since both are property developers and also own their own investment properties. But there are important differences to appreciate.
In one corner, Hong Kong office assets account for 79% of Hongkong Land’s entire office portfolio. In addition, it has around 165,000 square metres of office space in Singapore held through joint ventures. Hongkong Land also has around 5,984,000 square meters in area to be developed or under development around the world. In 2018, it secured four new residential sites in mainland China, adding to its land bank.
UOL owns a wide range of investment properties, including five commercial offices, five shopping malls and four serviced suites in Singapore, along with two commercial properties in the United Kingdom. It recently acquired 180 apartment units and ancillary facilities in Jakarta and an office property in Sydney.
UOL also has a hotel management operation through its Pan Pacific and Parkroyal brands where it manages or owns more than 30 hotels.
Historical track record
As both companies develop, invest and manage properties, a useful metric to gauge their historical track record is the net tangible asset value per share.
UOL has managed to increase its net tangible asset value per share from S$8.73 at end-2013 to S$11.56 as of 30 June 2019, which translates to an annualised growth rate of 5.2%.
Hongkong Land’s net tangible asset value per share increased from US$11.41 at the end of 2013 to US$16.50 as of 30 June 2019, which is good for a 6.9% annualised growth rate.
Winner: Hongkong Land
There are many factors to consider when gauging a property company’s growth prospects. Analysis should include its development pipeline, growth in valuation of its properties, potential growth in rental income and management contracts.
UOL has launched seven projects, with three other residential projects in the pipeline. It also has two retail investment properties under development. In addition, UOL has 11 hotels in the pipeline.
On the other hand, Hongkong Land’s investment properties saw positive rental reversion in its main geographical segments — Hong Kong and Singapore. Its 49%-owned British Embassy in Bangkok and 30%-owned mixed-use property, CBD Z3, is also expected to be completed in 2023/24.
Hongkong Land also has a much larger development pipeline, with twenty projects in China alone. In Singapore, Hongkong Land has four residential properties under development.
While Hongkong Land has a larger development pipeline, it is also worth noting that the Hong Kong property giant is also comparatively larger in size. Its market cap is more than twice that of UOL.
All things considered, it is too close a call to declare a winner here.
Winner: It’s a tie
Given the importance of the net asset value per share and the dividend yield in gauging the underlying economic values of property company, two useful metrics to compare are the price-to-book ratio and the dividend yield.
Based on current share prices, Hongkong Land has a trailing dividend yield of 3.8% and a price-to-book ratio of 0.35.
UOL has a dividend yield of 2.4% and a price-to-book ratio of 0.62. Hongkong Land’s shares may be trading at a slight discount on the back of uncertainty in rental rates in Hong Kong due to the ongoing protests there. Nevertheless, on a purely numerical standpoint, Hongkong Land has the cheaper valuation.
Winner: Hongkong Land
Both property companies have managed to grow their book value per share at fairly reasonable rates in the past. On top of that, they both have substantial development pipelines, and have grown their recurring income through expanding their investment and management portfolios.
Although I believe both companies can continue to provide decent returns to shareholders, Hongkong Land, with its better track record of growing its book value per share, and its higher dividend yield, looks to be the better dividend share at the moment.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of Hongkong Land Holdings.