投资金融之 Investment Property041206新鸿基金融集团.docxVIP

Equity Research - Hong Kong Company NoteInvestment Property SectorStock picks amid continual market recovery6 Dec 2004Hang Lung Properties (101.HK)Hysan Development (14.HK)Great Eagle Holdings (41.HK)Swire Pacific A (19.HK)Wharf Holdings (4.HK)Michael MokBuyBuyHoldBuyHold(852) 2822 5082michael.mok@Investment HighlightsWith improved economic fundamentals such as GDP growth, strong business sentiment andimproved 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 businessexpansion, especially for Central District. We believe Central will continue to take the lead inrental and capital value appreciation next year.Office rent in fringe areas will lag those in Central, but will benefit from the spillover as mediumterm 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 intourist spending, retail rent is expected to rise by 15% and 10% in core business areas for FY05and FY06, respectively.In our model, we have also revised down the retail rental yield by 1% to narrow the gap betweenoffice and retail rental yields, based on the historical average gap of 2%.Stock price performance is more related to capital values rather than rental levels. The lowestyields that we see currently is a result of rapid surge in capital values post-SARS while rent is notcatching up. In the long term, we believe rent rise can be more sustainable than capital valueappreciation.As capital values have been rising rapidly during this year while share prices lag behind, webelieve share prices would have a 20-25% upside should they catch up with the rise.We recommend BUY on Hang Lung Properties, Hysan Development, and Swire Pacific A andHOLD