The Motley Fool

Hongkong Land Holdings Limited’s Shares Are on Sale Now

Hongkong Land Holdings Limited  (SGX: H78), or HK Land, operates in the property sector. It is mainly involved in the property development, investment and management business. Its property businesses are spread across China, Southeast Asia and in its home base of Hong Kong.

Recently, the stock tanked by 27% from its 52 weeks high price of US$7.53, mainly driven by the turmoil in Hong Kong. I think the challenges in Hong Kong will have an impact on HK Land’s business. But to what extent the impact will be is something that nobody can really answer.

What I do know is that the company is currently trading at an extremely attractive valuation.

Historical metrics

One way to look at valuation is to compare its current valuation metric to its historical metric. Let’s consider a simple metric — price-to-book (PB) ratio, a metric most relevant to HK Land given the nature of its business.

In the last decade, HK Land’s shares have traded at PB multiples of roughly between 0.4 to 1.0 times. Presently, it has a PB ratio of 0.33 times, which is even lower than the lowest end of the spectrum. I don’t know about you, but HK Land’s shares do appear to be really cheap to me.

Peer benchmarking

Another way we can look at this is to compare HK Land to its listed peers in Singapore. Let’s take CapitaLand Limited (SGX: C31) and City Developments Limited (SGX: C09) for this comparison.

Again, we will look at the PB ratio of all three companies. And here are the numbers:

Capitaland and City Developments are currently trading at PB ratios of 0.76 and 0.80, respectively. With a PB ratio of 0.33, HK Land is trading at more than a 50% discount to both of its peers.

On the one hand, it makes sense for HK Land to trade at a lower valuation than its peers. Yet, is a discount of more than 50% a reasonable valuation for the company?

Conclusion

In all, HK Land is trading at an extremely low valuation due to its exposure to the Hong Kong property market. Yet, for the enterprising investors, this might be a great time to put the company onto your research list.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of Hongkong Land Holdings, CapitaLand Limited and City Developments Limited.