Things are finally rolling out again for Sino Land

Take-up rate for Providence Peak jumped to 75%.

Nomura recently had an investor luncheon with Sino Land’s management. The key message that the analysts took away was that “Things are moving again”.

While the market was initially quiet after the introduction of the BSD, demand is starting to pick up even for high-end luxury units. For 2013, with the Government’s aim to increase housing supply, Sino sees lots of opportunity to replenish its landbank at favourable terms.

While its very low gearing (4.4%) affords it with a lot of buying power, it will continue to maintain its discipline and focus on returns.

Here are the key takeaways from the luncheon:

Market picking up after the BSD – 2012 had been a good year for Sino Land, with good take-up for launched projects (i.e Coronation and Park Summit). While the BSD had cooled the market after its launch, demand has started to pick up. Pre and post the BSD, Providence Bay and Providence Peak’s take-up has risen to 53% (50% before) and 75% (70% before) respectively.

Furthermore, it has recently sold some specialty units at The Coronation and One Mayfair to a mainland and local buyer respectively. Things seem to be moving again.

Pipeline: Small units in 1H, larger units in 2H – For 2013, Site B of Lee Tung Street in Wanchai should be launched around March/April with Yuet Wah St also expected in 1H.

These together with Hau Wong Rd are all smaller-sized units (Lee Tung St – 500-700sf; Yuet Wah St– 500- 800sf, Hau Wong Rd – 300sf). For the Graces in Tai Po, although Sino already has the presale consent, it plans to wait for market sentiment to pick up further before its launch.

These four projects will provide a total of 1,845 units, translating into a GFA of 1.4mn sf.

More non-core asset sales – Sino Land recently disposed of seven floors at Exchange Tower in Kowloon Bay for HKD1.5bn at the equivalent of a 2% passing yield. At the right price, Sino is open to selling more non-core assets which should help generate upside against its book values.

Steady rental growth – Since Sino’s retail portfolio focuses on the mid-end, it has enjoyed steady growth throughout 2012. Similarly as Sino’s office portfolio is outside Central, it continues to benefit from spot rental increases.

While it has disposed of some non-core assets, with new investment properties coming on-line, Sino’s overall rental income should continue to increase.