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Thursday, 20 November 2008
Downgrades spur sell-off in property stocks
Hong Kong property stocks ended lower yesterday after JP Morgan downgraded five property companies and cut share-price estimates on two leading developers.
Hong Kong property stocks ended lower yesterday after JP Morgan downgraded five property companies and cut share-price estimates on two leading developers.
“Hong Kong has officially entered a recession,” JP Morgan analyst Raymond Ngai wrote in the report.
The brokerage expected residential prices to fall 35 per cent from their peak in the second quarter of this year to June next year as a result of the recession.
Office rents would drop 40 to 50 per cent from their peak in the third quarter to the end of next year, while retail rents would fall 15 per cent, it said. The brokerage expected most developers to post an earnings decline of 13 to 17 per cent next year.
JP Morgan cut its stock ratings on KWah International Holdings and Kerry Properties to neutral from overweight. The brokerage also revised its outlook on Pacific Century Premium Developments, Great Eagle Holdings and Far East Consortium International to underweight from neutral.
JP Morgan slashed the target price of Cheung Kong (Holdings) to HK$80 from HK$113.
As Hong Kong’s largest developer by market value, Cheung Kong would inevitably be affected by the global financial crisis, JP Morgan said.
The brokerage estimated Cheung Kong had locked in 70 per cent of its development profit for the financial year in 2009 through strong sales of the Capitol in Tseung Kwan O and Celestial Heights in Ma Tau Wai at the market peak.
Its shares closed 3.7 per cent lower at HK$65.10 yesterday.
The brokerage also cut the target price of Sun Hung Kai Properties by 41.66 per cent to HK$70 from HK$120.
SHKP has locked in little development profit for the financial year to June next year, as the developer launched only one project, and that was booked in the past financial year.
Although SHKP planned to launch Peak One in Sha Tin this month and Cullinan at Kowloon Station in the first quarter of next year, JP Morgan expected slow sales because of the poor market conditions.
It said SHKP’s residential project Harbour Place was expected to see defaults as about 800 units had yet to be delivered to buyers by next month’s deadline.
Shares in SHKP fell 5.82 per cent yesterday to close at HK$55.
JP Morgan cut its core net profit forecasts for K Wah by 51 per cent to HK$182 million for this year and by 39 per cent to HK$719 million next year, based on lower selling-price assumptions and sales rates for the developer’s projects in Hong Kong and on the mainland.
Shares in KWah fell 4.35 per cent to close at 88 HK cents yesterday.
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Downgrades spur sell-off in property stocks
Yvonne Liu
19 November 2008
Hong Kong property stocks ended lower yesterday after JP Morgan downgraded five property companies and cut share-price estimates on two leading developers.
“Hong Kong has officially entered a recession,” JP Morgan analyst Raymond Ngai wrote in the report.
The brokerage expected residential prices to fall 35 per cent from their peak in the second quarter of this year to June next year as a result of the recession.
Office rents would drop 40 to 50 per cent from their peak in the third quarter to the end of next year, while retail rents would fall 15 per cent, it said. The brokerage expected most developers to post an earnings decline of 13 to 17 per cent next year.
JP Morgan cut its stock ratings on KWah International Holdings and Kerry Properties to neutral from overweight. The brokerage also revised its outlook on Pacific Century Premium Developments, Great Eagle Holdings and Far East Consortium International to underweight from neutral.
JP Morgan slashed the target price of Cheung Kong (Holdings) to HK$80 from HK$113.
As Hong Kong’s largest developer by market value, Cheung Kong would inevitably be affected by the global financial crisis, JP Morgan said.
The brokerage estimated Cheung Kong had locked in 70 per cent of its development profit for the financial year in 2009 through strong sales of the Capitol in Tseung Kwan O and Celestial Heights in Ma Tau Wai at the market peak.
Its shares closed 3.7 per cent lower at HK$65.10 yesterday.
The brokerage also cut the target price of Sun Hung Kai Properties by 41.66 per cent to HK$70 from HK$120.
SHKP has locked in little development profit for the financial year to June next year, as the developer launched only one project, and that was booked in the past financial year.
Although SHKP planned to launch Peak One in Sha Tin this month and Cullinan at Kowloon Station in the first quarter of next year, JP Morgan expected slow sales because of the poor market conditions.
It said SHKP’s residential project Harbour Place was expected to see defaults as about 800 units had yet to be delivered to buyers by next month’s deadline.
Shares in SHKP fell 5.82 per cent yesterday to close at HK$55.
JP Morgan cut its core net profit forecasts for K Wah by 51 per cent to HK$182 million for this year and by 39 per cent to HK$719 million next year, based on lower selling-price assumptions and sales rates for the developer’s projects in Hong Kong and on the mainland.
Shares in KWah fell 4.35 per cent to close at 88 HK cents yesterday.
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