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Morningstar | Sino Land Co.: Project Launch Moderates Exposure to Hong Kong Residential Sector

Sino Land launched its Grand Central project in early December. The units were priced at 15% lower compared with new projects in the nearby Kai Tak district. The discount strategy was well received by the market. The company unloaded 65% of the project before year-end and will continue to launch the remaining units in 2019. We believe the company’s pricing strategy is astute given the current market condition. The successful launch has moderated the company’s exposure to the Hong Kong residential property market in the near term. We maintain our fair value estimate of HKD 13 and the company’s no-moat rating.

The company holds a 90% stake in the 2000-unit project with attributable GFA of near 1.5 million square feet. The discounted price partially reflects the expected completion date of April 2021, almost two and half years away. One additional large project in the pipeline is the next phase of Mayfair by the Sea with GFA of 400,000 square feet.

Over the past two years, Sino Land was the most active developer in Hong Kong in terms of land acquisitions, acquiring eight sites totaling more than HKD 20 billion, adding 1.2 million square feet of residential development projects since the beginning of 2017. The risk of the aggressive acquisition pace is somewhat mitigated by these projects’ joint venture structure and target completion dates of more than four years away. Further, the company’s balance sheet is in a net cash position.