文档介绍：Equity Research - Hong pany Note
Investment Property Sector
Stock picks amid continual market recovery
6 Dec 2004
Hang Lung Properties () Buy
Hysan Development () Buy
Great Eagle Holdings () Hold
Swire Pacific A () Buy
Wharf Holdings () Hold
Michael Mok
(852) 2822 5082 @
Investment Highlights
Ö With improved economic fundamentals such as GDP growth, strong business sentiment and
improved corporate earnings, demand for quality office space is on the rise.
Ö Increased office take-up in prime areas has been driven by tenant relocation as well as business
expansion, especially for Central District. We believe Central will continue to take the lead in
rental and capital value appreciation next year.
Ö Office rent in fringe areas will lag those in Central, but will benefit from the spillover as medium
term supply remains very tight. Vacancy rates are expected to drop further across Hong Kong.
Ö We have revised our rental reversion assumptions to 20% and 10% for Central, and 15% and 10%
for other areas in FY05 and FY06, respectively.
Ö Amid a resilient retail market with improving domestic consumption and continual increase in
tourist spending, retail rent is expected to rise by 15% and 10% in core business areas for FY05
and FY06, respectively.
Ö In our model, we have also revised down the retail rental yield by 1% to narrow the gap between
office and retail rental yields, based on the historical average gap of 2%.
Ö Stock price performance is more related to capital values rather than rental levels. The lowest
yields that we see currently is a result of rapid surge in capital values post-SARS while rent is not
catching up. In the long term, we believe rent rise can be more sustainable than capital value
appreciation.
Ö As capital values have been rising rapidly during this year while share prices lag behind, we
believe share prices would have a 20-25% upside should they catch up with