Hongkong Land Holdings

[gzbkel]

This blogger published an essay about market inefficiencies, using Hong Kong Land as an extensive example. It touches on some points brought up by @karlmarx earlier:

https://lt3000.blogspot.com/2020/07/mark...heels.html

Thank you jaco for introducing this article.
Writer has substance and is worth following.

[jfc18]

LT3000 is a blog worthy to follow. Thank you for sharing.

[specuvestor]

This blogger published an essay about market inefficiencies, using Hong Kong Land as an extensive example. It touches on some points brought up by @karlmarx earlier:

https://lt3000.blogspot.com/2020/07/mark...heels.html

Thank you jaco for introducing this article.
Writer has substance and is worth following.

Think this intro sums it up well:

"What is little understood - and I hope to argue in this article - is that market inefficiency is structural and behavioural, rather than informational, which is why I believe it will always exist, and provide ample opportunity for the well-heeled"

Facts and information are still important as basis for decision making; but they are just part of the truth and reality. For HKL I would also argue that domicile and exchange and even listing currency also makes a structural difference and not just because it is lumped into "equity bucket". They would likely have a higher valuation if they remained listed in HK, with large cap comparables like SHKP. But again on a different A-B-S structural perspective: does Jardine cares?

[Shiyi]

I must confess that this article is quite a heavy reading for me.
The takeaway is: share price movement is a function of liquidity, not intrinsic value.

Do I get it right?

[jaco]

The takeaway is: share price movement is a function of liquidity, not intrinsic value.

This is a fair summary of the first Liquidity flywheels section. We should probably note that liquidity refers to the liquidity residing with (potential) buyers of the assets, not as in: "this is a liquid stock".

The second section might be summarized as: radically different costs of capital (and hence asset valuations) can emerge for the very same assets, depending on how they are packaged.

[jaco]

For HKL I would also argue that domicile and exchange and even listing currency also makes a structural difference and not just because it is lumped into "equity bucket".

I agree. HKL seems a poor example for the argument that the author makes. The author acknowledges as a side note that HK might lose its station as a desirable offshore financial center. However, isn't this fear a major factor in the low valuation of HKL right now? In this light, his suggestion of repackaging listed real estate into a REIT vehicle to bridge the valuation gap is unlikely to work for HKL. The REITs already listed in HK are also priced at very low valuations.

The author would have illustrated his points much clearer by chosing an example in a jurisdiction that has less uproar and controversy surrounding it as HK at the moment. Nevertheless, the article is thought provoking.

[dreamybear]

I too am inclined to think that the shift to working from home(WFH) trend post Covid, would not affect the HK office mkt as much as the other developed countries, as most of the HK home sizes may not be conducive to facilitate WFH.

However, it is also possible that some jobs in HK may be relocated to other countries as a result.

At the same time, the relocation of luxury brands from HK may affect HKL.

As an aside, I wonder if the WFH trend will take hold in SG, and if so, what are the implications to our office REITs or residential property mkt ?

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WFH won't hurt Hong Kong office market: JPMorgan
THU, JAN 07, 2021 - 5:50 AM
https://www.businesstimes.com.sg/real-es...t-jpmorgan

Relocation of top luxury brands’ regional headquarters to China likely to weigh further on Hong Kong office rents
Published: 8:30am, 7 Jan, 2021
https://www.scmp.com/business/article/31...kely-weigh

Central London office space demand to undergo changes
JANUARY 8, 2021
https://www.icompareloan.com/resources/c...ice-space/

[jaco]

Premium office occupancy costs in Hong Kong Central are still the highest worldwide at 313 usd/sqft/year versus London as number two at 212 usd/sqft/year. I could not find a more recent source as this one, but I assume the picture did not change drastically within one year.



Note the high gap between Hong Kong and London, with London having some distance with number 3 itself. I don't believe that Hong Kong will become irrelevant over a short time-span, like for example Detroit in the 1970s. However, a tumble from this top position to a more average rate in that list seems thinkable, considering all the developments we discussed earlier. Mr Market could be correct in being concerned about that. 



Learning this, I decided not to buy Hongkong Land or any other HK real-estate linked stocks for now. I might look at such stocks again when they tumble even further, for example in a general market sell-off.

[alanyeoinvest]

If we eventually return back to the office to work, this counter presents some good opty.
https://alphaedgeinvesting.com/2021/06/2...rmal-play/

[dreamybear]

Even if the pandemic is controlled, I think it may take several years before we see upward revisions of the open mkt rents(especially for HK properties) so as to reverse the revaluation losses.

Longer term factors may include
- behaviour trends upon covid normalization (work from home, order online/delivery)
- Hong Kong exodus (https://www.washingtonpost.com/world/202...migration/)

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Hongkong Land narrows H1 loss, declares 6 US cent interim dividend
https://www.businesstimes.com.sg/real-es...m-dividend

HONGKONG Land, a member of the Jardine Matheson Group, narrowed its net loss to US$863.2 million for the half-year ended June 30, from US$1.8 billion a year ago.

The loss included net non-cash losses of US$1.3 billion arising from the revaluation of the group's investment properties due to lower open market rents. The year before, H1 net loss included net losses of US$2.2 billion, also due to investment property revaluations......