Hysan Development Company Limited:A HK landlord play with twin engines

研究机构：美林证券 分析师： Karl C ... 撰写日期：2011年01月04日

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    We reinstate coverage on Hysan as our Top Pick in the HK landlord sector: notonly should Hysan benefit from strong sector growth in HK office/retail spot rentsin 2011, but the upcoming completion of Hysan Place in 2012 will also expand itsportfolio GFA by 17%, allowing Hysan to take advantage of the booming HKrental market. Yet, valuation is still at a wider than historical average discount(35%). Our PO of HK$46 is based on a 25% discount to 2011E NAV of HK$62.
    Leasing progress at Hysan Place to act as a catalyst。
    We believe contributions from the new Hysan Place (opening in Q2 2012) areunder-appreciated. Our current valuation at HK$11.7bn (HK$16.5k psf) for theproject is twice its book value of HK$6bn, suggesting HK$5/sh of potential upside.
    The retail portion (60% of GFA) is 25% pre-leased at good rates, while preleasingfor the office portion will start soon, thus acting as a catalyst, in our view.
    Benefit from both spot rent growth and occupancy gains。
    We project Hysan’s EPS to grow by 20% CAGR between FY10 and FY13,including a 6% increase in rental revenues in 2011 and 16% in 2012 ex. HysanPlace. We see a 20-25% jump in its 2011 office spot rents, while its officeoccupancy has rebounded from 89% at Y/E2009 to 95% at Y/E2010E. Its retailspot rent should also grow by 15% in 2011, benefiting from mainland Chinesetourist spending. Major renovations should help lift its rental income as well.
    Hysan – a pure-play landlord in CWB – ready to take off。
    Hysan is a pure-play landlord with 4.2mn sqf GFA (53% office, 28% retail and19% residential), most of which in Causeway Bay. Risks: Loss of major tenants,stake liquidation by a large non-family shareholder, geographical concentration.