Investment Property041206新鸿基金融集团 .pdfVIP

Equity Research - Hong Kong Company Note Investment Property Sector Stock picks amid continual market recovery 6 Dec 2004 Hang Lung Properties (101.HK) Buy Hysan Development (14.HK) Buy Great Eagle Holdings (41.HK) Hold Swire Pacific A (19.HK) Buy Wharf Holdings (4.HK) Hold Michael Mok (852) 2822 5082 michael.mok@ Investment Highlights With improved economic fundamentals such as GDP growth, strong business sentiment and improved corporate earnings, demand for quality office space is on the rise. 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. 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. 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. 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. In our model, we have also revised down the retail rental yield by 1% to narrow the gap