Hongkong Land: Transfer Coverage With USD 6.10 Fair Value; Near-Term Office-Space Headwinds Remain

We transfer and resume coverage of Hongkong Land with a fair value estimate of USD 6.10, which implies a price/book ratio of 0.4, in line with the 10-year historical average. Our narrow moat rating for the company is unchanged, and we continue to like the company for its high-quality commercial portfolio in the heart of Hong Kong central business district, or CBD. The portfolio’s prestigious positioning and strategic location has attracted demand from occupiers trading up for quality office space in the current office market downturn, and we expect this trend to persist in the foreseeable future. Over the long run, we expect office rents to be underpinned by the structural long-term undersupply of Hong Kong CBD Grade A offices and Hong Kong’s status as an international financial hub.