Why Kerry's low embedded development margin still worries analysts

Won't the proposed spin-off help?

According to Barclays, on 15 November 2013, Kerry Properties announced that the record date for its proposed spin-off of Kerry Logistics is to be 2 December 2013. 

According to the announcement, the record date was set for the purpose of determining the conditional dividend to qualifying shareholders if the proposed spin-off proceeds.

Here's more from Barclays:

On 24 September 2013, Kerry Properties announced that it intended to spin off its logistics business, Kerry Logistics Network Limited, by way of an initial public offering. 

We believe the announcement of the date of record should provide investors with additional visibility around the timing of the spin off. At this stage, we still await details on the proposed size of the funds to be raised as well as the structure around how much of Kerry’s debt would be allocated to Kerry Logistics.

As discussed in our initiation report, we believe Kerry’s near-term priority is to repair its balance sheet and de-gear.

With a land purchase in March 2013 at HK$11.7bn having increased Kerry’s net debt/equity ratio from a manageable 22.4% to 39.2%, any move to reverse this should help to reduce de-risk its balance sheet, in our view. While we view the spin-off as an incremental positive, the issue of Kerry’s low embedded development margin still remains.