Contents
Investment summary 3
Near-term exuberance 6
Contrarian view #1: while most people attribute property price fluctuations to
affordability and the supply/demand balance, we believe these are just two of many
contributing factors that we have incorporated into our Four-gate pyramid model.
6
Confluence of factors driving the HK property market 6
Four-gate pyramid 7
Price is not everything 12
Contrarian view #2: we think property price projections (we forecast a 5% rise in six
months) are becoming increasingly irrelevant as a measure of share price
performance given the following four factors.
12
Medium-term woes 16
Contrarian view #3: we see lack of investment opportunities and unmotivated
management hampering Hong Kong developers and landlords’ medium-term
growth prospects, although we are bullish about property prices for the near term.
16
A lack of growth 16
A lack of internal drivers and diminishing external support 18
A lack of land supply 19
Not aggressive enough 20
Near-term market views 25
We are positive on the residential market’s near-term price and volume trends but
think long-term growth will favour the luxury segment. Retail rents will likely be more
resilient than office rents, and we are cautious on the long-term prospects of the
hotel market.
25
Valuation 32
Contrarian view #4: we take a comprehensive valuation approach to account for
each business’s development properties (using DCF), investment properties (using
NAV) and other businesses (using PE), rather than simply linking the valuation to
NAV.
32
Methodology 32
Valuation summary 37
Company profiles 38
Cheung Kong 40
Hang Lung Properties 62
Henderson Land 78
Hysan Development 96
Kerry Properties 111
New World Development 127
Sino Land 146
Sun Hung Kai Properties 161