Hongkong Land Holdings

[karlmarx]

Vacancy rate seems to have stabilised, so office demand has been resilient. Its retail rents are also recovering. So generally good signs. With the outbreaks mostly under control, a re-opening of the border with the mainland will further boost HK's business and retail activities.

After observing this phenomenon for more than a year, my guess is that the post-pandemic work arrangement will be a hybrid of working from home and at the office. Offices are far from being disrupted.

As for the migrating local resident (and Western companies), I'm guessing that there will be plenty of migrants from mainland eager to market themselves on a more global platform, who are willing to take their place (and leases).

So I think the next few years for HKL will be better, even though the returns are likely to be modest.

Sister company DFI however continued to perform terribly when all its peers are raking it in.

[Choon]

In my view, not based on any substantiated research or anecdotal evidence, as HKL's tenants are mostly law firms and financial firms, the 'not-in-sight, not-in-mind' corporate pressure would be high. Thus HKL tenants' tendency to revert back to work-from-office would be high.

[weijian]

It is a no brainer that buying back much below NAV, is a net gain for remaining shareholders. HKL just made their first repurchase today (~1.5mil USD) and cancelled them

HONGKONG LAND HOLDINGS LIMITED PROPOSED SHARE BUYBACK PROGRAMME

Hongkong Land Holdings Limited (the ‘Company’) today announces its intention to invest up to US$500 million in a
share buyback programme (the ‘Programme’) extending until 31st December 2022

https://links.sgx.com/FileOpen/HKLH0906....eID=682657

[Choon]

It is a no brainer that buying back much below NAV, is a net gain for remaining shareholders. HKL just made their first repurchase today (~1.5mil USD) and cancelled them

HONGKONG LAND HOLDINGS LIMITED PROPOSED SHARE BUYBACK PROGRAMME

Hongkong Land Holdings Limited (the ‘Company’) today announces its intention to invest up to US$500 million in a
share buyback programme (the ‘Programme’) extending until 31st December 2022

https://links.sgx.com/FileOpen/HKLH0906....eID=682657

I may be wrong. 

The last one was in 2018. US$132M of share buybacks at average price of US$6.95.

[cyclone]

Share Repurchase

On 11 October 2021, Hongkong Land bought back 407,000 shares. The highest price paid was US$4.95, and the lowest price paid per share was US$4.90. The repurchased shares will be cancelled.

More details in https://links.sgx.com/1.0.0/corporate-an...LH1011.pdf

17th share repurchase since share buyback programme announcement on 6 September 2021.

[cyclone]

SHARE REPURCHASE

Date of repurchase: 17th November 2021
Total number of shares repurchased: 802,400 shares
Highest price paid per share: US$5.765
Lowest price paid per share: US$5.750

The repurchased shares will be cancelled.

Source : https://links.sgx.com/1.0.0/corporate-an...LH1117.pdf

[weijian]

Vacancy rate = 9.6/(9.6+73) = 11.6% for HK and that looks bad. For reference, Spore is currently at ~5.1%.

That said, it doesn't really concern these Taipans, who have multi generational views. They know prime, while it may not be in vogue at times, will always remain prime.

Hong Kong office vacancies double after protests, pandemic

Empty Grade A office space spiked from 4.2 million sq ft to 9.6 million sq ft in the 3 years leading up to March, according to a report by real estate investment firm CBRE.

The jump came as a result of downsizing by nearly 950 companies, it said - a record high vacancy rate.

Occupancy fell by 2.3 million sq ft in that same three-year period - sinking to 73 million sq ft - making up Hong Kong’s “biggest and longest office market downcycle in history”, the report added.

Rents also dropped nearly 30 per cent.

https://www.businesstimes.com.sg/real-es...s-pandemic

Spore Grade A vacancy rate: https://realestateasia.com/commercial-of...s-51-in-q2

[Choon]

As a shareholder of the company and a keen admirer of the company's ethos for high standards in its projects, I am saddened to read that Robert Wong who has spent 38 years with the company would be leaving his CEO position. As a retail shareholder, my 'encounters' with him are limited to only HKL's results briefings (available on HKL's website) and his interviews in news articles. In these brief encounters, he comes across as one who knows his business deeply and in small details, one who does not give fluffy answers, one who is boldly confident yet conservative, a doer.

My sadness is exacerbated by that he would be replaced by a Michael Smith whom background is in property investment, asset management and investment banking. HKL's announcement has one line that says, "(at Mapletree), Michael has been responsible for monetising assets into public and private vehicles."

Would this change in leadership herald in a period of asset monetisation at HKL done under the banner of creating shareholder value? Would long-term value be sacrificed for short-term share price gains? Would management's focus and energy on delivering quality projects and executing the business well be diluted by gazing too much at HKL's share price? These are my worries.

I had thought that family-business (Hong Kong Land, Wilmar, The Hour Glass) would be immune to short-termism and asset monetisation / restructuring that sacrifices long-term value for short term share price appreciation. I hope my fears would not come true. 

I am disappointed that HKL has not promoted from within or appointed a true-blue property person. I am disappointed that HKL has selected an investment banker.

I also realised that perhaps I am too emotionally-attached to my stocks.

[weijian]

Hi Choon,

Post covid, most of Jardine's subsidiaries (MOI, DFI and now HKL) had a change in CEO and a change in the calibre of CEO (outside appointed than promoted within). There are pros and cons to outside appointment and promote from within. No approach is always right and it is about what the company needs at that point of time.

As for your worries of "Jardine doing asset monetization for short term gains over long term value" and "gazing too much at share price", you probably do not need to think too much. HKL has accumulated (and locked) a lot of value and Mr Market has rightly valued it as such. What ultimately matters to the Jardines is to keep the wealth under their control over generations and that the operating businesses continue to grow and pay upwards - There is no "share price" in the consideration here.

Value is only unlocked for OPMIs via asset monetization. Value is locked up for controlling shareholders via asset accumulation.

[ghchua]

Hi Choon,

The change of CEO doesn't change the structure of Hong Kong Land, as it is still majority controlled by Jardine Matheson. Unless you think that Jardine Matheson's objective in those investments changes, I don't think it would have a significant impact on the operations of Hong Kong Land.

Remember that any major asset monetization or otherwise need the blessing of Jardine Matheson, even if the CEO is a professional hired from outside the company.