Bank of America Securities: Downgrading Henderson Land (00012) to “neutral” and cutting the target price to HK$31

The Zhitong Finance App learned that Bank of America Securities released a research report stating that the rating of Henderson Land (00012) was downgraded from “buy” to “neutral”, and the target price was lowered from HK$33 to HK$31. Bank of America Securities pointed out that the increasing headwinds in the Hong Kong housing market, combined with the medium term land renewal risk and high financial leverage for Henderson Land Investment Properties in the Mainland, may limit the room for its share price to rise.

The bank estimates that the land use rights of Henderson Land's major mainland investment properties will expire within the next 18 years. It is estimated that the 20-year renewal will require payment of about RMB 6 billion in land replacement price, which is expected to reduce the net asset value (NAV) of HK$1.5 per share. On the other hand, the Hong Kong Urban Redevelopment Plan is expected to release profits of HK$6.6 billion (HK$1.4 per share), but the net asset increase due to the additional gross floor space is limited. The bank said that expectations of US interest rate hikes are heating up, and property prices in Hong Kong are showing initial signs of softening. After rising 8% in the first half of the year, they are expected to face pressure in the short term, but it is not expected that there will be a major turnaround, and tenacious rental demand limits the downside of the property market.