DANIEL ONG asked 1 week ago
With Hongkong Land releasing its latest results, I\'ve noticed that the company is under-going changes in its top management (new Chairman, CEO), change of strategy from property development to property management, doing major renovation of its prime Central HK properties, its revenues, net profit (including GPM, NPM) are being reduced.
The only thing the company has done is increased its dividend from 22 cents (2023) to 23 cents (2024).
When I calculate the dividend payout ratio for FY2024, the payout ratio is more than 100%.
As of 07-Mar close share price of USD4.46, I\'m sitting with a profit of 37% (excluding dividends).
I\'m a bit concerned with the many changes which the company is undergoing now: change in top management/strategy, HK and China property markets is still facing challenges (although some reports seem to suggest it has bottomed and is recovering), Hong Kong continues to face poor tourists visiting, Hong Kong citizen going to SZ for cheap shopping/food.
Based on its latest results, can you advise if you are detecting any other major red flag besides the high dividend payout ratio?
I\'ve done my analysis and found the biggest red flag is the high dividend payout ratio of 140.4% (using $0.1856 EPS for its underlying business).
Should I consider taking a profit and cash out to wait for more clarity from its new management and strategy to show positive results?
Rusmin Ang Staff answered 1 week ago
Hi Daniel,
HKLand is due for a shakeup after going the storm in HK over the last few years. I think the change is for the good and if we were to calculate the payout ratio, we should use their underlying profit which excludes fair value gain and loss. After you make the adjustment, you should get payout of less than 70%. My concern is that there is a higher vacancy rate in HK commercial properties and HK government is intervening the situation by attracting the demand and pausing the supply. Recently they just announced a pause for commercial land sales which is good because it can improve the supply and demand dynamic in HK commercial property. Whether to take profit and stay invested, you would have to make your own judgement call. Also good to check whether they are trading at historical high yield or low yield before you make any decision. Ultimately, you must have confident that HK can recover can its current crisis. Else it won't make sense to hold it.
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