Morningstar | 00683 Updated Forecasts and Estimates from 25 Feb 2019
Going into the second half of 2018, Kerry Properties' two major residential projects in Hong Kong, Mantin Heights and Bloomsway, have largely been sold. The current project pipeline is limited to two phases of the Beacon Hill project and a joint venture with Sino Land for the Wong Chuk Hang station package. We expect earnings to be underpinned by the current order book as well as steady performance of the investment properties. We maintain our fair value estimate of HKD 33 and our no-moat rating.Two phases of the Beacon Hill project, at 116,000 square feet and 343,000 square feet, were acquired in 2015 and 2016 at accommodation values of HKD 20,000-21,000 per square foot. Phase 1 of Beacon Hill received presale consent in March 2018, but marketing activities have been limited and sales have not begun. These acquisitions were made during a period of boom land sales, thus carrying relatively high accommodation value. While they will be affected by the current market downturn, the risk is somewhat mitigated by the project’s small size. Phase 1 is expected to yield 45 low-density units and to be delivered in mid-2019. The sales of phase 2 of Beacon Hill and the Wong Chuk Hang project are a year out. Prudently, the company did not make any land acquisitions in Hong Kong during 2018.
We expect Kerry's investment properties in Hong Kong and China to be steady. In Hong Kong, the company’s rental assets should benefit from the continued recovery of the retail sector. In China, the company’s well-located mature assets should continue to see steady growth.
Kerry Properties is an investment holding company. Through its subsidiaries and associated companies, Co. is engaged in property development, investment and management in Hong Kong, the People's Republic of China (the PRC) and the Asia Pacific region; hotel ownership in Hong Kong, and hotel ownership and operations in the PRC; and integrated logistics and international freight forwarding. The two principal activities of Co. and its subsidiaries are property business and logistics business. The property business is further segregated into the PRC property, Hong Kong property and Overseas property.
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