STOCKWATCH: Hang Lung Development higher on laggard buying
HONG KONG (AFX-ASIA) - Hang Lung Development Ltd shares were higher on laggard-chasing amid optimism over the company's earnings outlook, with the company's share prices having stayed at a relatively low level for some time, dealers said. As a company with a high gearing ratio, Hang Lung is said to be benefiting from the number of interest rate cuts since the beginning of the year, they added. At 12:15 pm, Hang Lung Development was up 0.25 hkd or 3.52 pct at 7.35 hkd on turnover of 5.53 mln shares. Amoy was up 0.10 hkd at 8.85 hkd on volume of 1.02 mln shares. The Hang Seng Index was up 64.95 points at 13,942.90. Herbert Lau, associate director with Celestial Asia Securities, said: "Hang Lung Development was higher as players were chasing laggards among blue chips." Lau said the net asset value of the stock was about 12.00-13.00 hkd, far higher than the company's current share price. He said that, like its peers, Sun Hung Kai Properties has been outperforming the broader market for some time, and that its current price was trading in a slight premium to its NAV. Sun Hung Kai was up 0.25 at 78.75. "I think the rally for Hang Lung will continue for some time as it's currently trading at about a 40 pct discount to its NAV. The fair price should be at around 8.00 hkd," he said. He added that the gearing ratio for the company is about 20 pct, and the company should benefit from the series of interest rate reductions since early this year. Jeff Yau, an analyst with South China Securities, said he expects Hang Lung will continue to benefit from its associate Amoy Properties' earnings prospect in the coming years. "We expect Hang Lung to see a compound annual growth rate of over 20 pct from now to 2003, with its growth mainly coming from its associate Amoy's property sales programme," Yau said. He added that he expects the company to record over 1 bln hkd in net profit during the year to June period, compared with 873.1 mln hkd a year He said he has a "buy" recommendation on the stock.
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