Citi's Projections for Ratings, Target Prices, and Valuations of HK Real Estate Stocks (Table)

Citi Research Insights: Citi Research highlights that investors are focusing on the potential upside of the Hong Kong real estate market for 2026-2027, despite last year's subdued performance, with a polarized rental outlook between luxury homes and office spaces.

Developer vs. Landlord Potential: The report suggests that developers may have greater earnings per share (EPS) upside compared to landlords, benefiting from improved profit margins and new land acquisitions.

Stock Recommendations: Recommended stocks include SHK PPT, SINO LAND, and HANG LUNG PPT, while UBS has made adjustments to its top picks, adding SINO LAND and removing HENDERSON LAND.

Dividend Outlook: The report indicates stable dividends for several companies, with SWIREPROPERTIES and Hongkong Land aiming for mid-single-digit growth, while LINK REIT and others may see a decrease in dividend per unit (DPU) due to negative rental growth.

Stock Performance Overview: Various Hong Kong stocks showed mixed performance, with WHARF HOLDINGS and MTR CORPORATION experiencing slight gains, while HENDERSON LAND and NEW WORLD DEV saw declines.

Short Selling Data: Significant short selling activity was noted across several stocks, with HENDERSON LAND leading at $77.95M and a ratio of 26.874%, indicating bearish sentiment among investors.

Analyst Ratings: Analysts have mixed ratings for the stocks, with HYSAN DEV and SHK PPT receiving "Buy" ratings, while WHARF HOLDINGS and NEW WORLD DEV are rated as "Sell."

Market Predictions: CLSA predicts a 5% rise in Hong Kong home prices this year, favoring Hysan and Link REIT as preferred investments.

Investor Sentiment: Citi's research shows positive sentiment towards Hong Kong real estate, with a preference for property developers and Central office over luxury retail, while non-discretionary retail is underperforming.

Stock Performance: Investors favor SHK PPT, with notable short selling activity in Hongkong Land, HANG LUNG PPT, and SWIREPROPERTIES, indicating mixed confidence in these stocks.

Divided Opinions: There are varied opinions on SINO LAND, HENDERSON LAND, and HYSAN DEV, with some stocks receiving underweight targets, including LINK REIT and WHARF REIC.

Limited Discussion: Other developers like CK ASSET and KERRY PPT have limited discussion, with varying short selling ratios reflecting differing investor confidence.

Stock Performance: Various Hong Kong stocks showed mixed performance, with some companies like Henderson Land and Hysan Development experiencing gains, while others like Wharf REIC and Champion REIT saw declines.

Short Selling Data: Significant short selling activity was noted across multiple stocks, with SHK PPT and Wharf Holdings having the highest short selling ratios, indicating bearish sentiment among investors.

Investment Ratings: Analysts provided investment ratings, recommending buys for several stocks including Hysan Development and Sino Land, while suggesting sells for Wharf Holdings and New World Development.

Discount to NAV: Many stocks are trading at substantial discounts to their net asset values (NAV), with Kerry Properties and Hang Lung Properties showing the largest discounts at 74% and 68%, respectively.

Leasing Environment Outlook: Fitch Ratings predicts that the leasing environment for commercial real estate in Mainland China and Hong Kong will face challenges in 2026, with high office vacancy rates and low net absorption impacting Grade A office rents.

Stability of Investment-Grade Landlords: Despite market difficulties, investment-grade landlords in Hong Kong are expected to maintain stable operational and financial indicators, supported by their quality assets.

Projected Rental Income Growth: Companies like HYSAN DEV and SHK PPT are anticipated to see an increase in office rental income as their new projects become operational in 2026.

Challenges for Other Firms: WHARF HOLDINGS and YUEXIU REIT may struggle with rental pressures due to new supply and lack of new projects, although their strong financial positions and asset quality help sustain their ratings.

Stock Performance Overview: Various Hong Kong stocks showed mixed performance, with WHARF HOLDINGS and HYSAN DEV experiencing slight gains, while HENDERSON LAND and SHK PPT saw declines.

Short Selling Activity: Significant short selling was noted across several stocks, with SHK PPT and HENDERSON LAND having the highest short selling ratios at 42.588% and 32.313%, respectively.

Analyst Recommendations: Analysts have mixed ratings for the stocks, with WHARF HOLDINGS rated as a "Sell" and HYSAN DEV and SHK PPT rated as "Buy."

Market Predictions: CLSA predicts a 5% rise in Hong Kong home prices next year, highlighting CHINA RES LAND, HYSAN DEV, and LINK REIT as top picks.