SHARES of mainboard-listed Hongkong Land Holdings HongkongLand USD: H78 +12.62% jumped as much as 13.6 per cent during Tuesday' s early morning trading session, following news of the property group' s proposed share buyback plan on Monday evening.

 

Hongkong Land said it intends to invest up to US$500 million to buy back its shares in a programme extending until Dec 31, 2022. The purpose of the share buyback is to reduce the company' s capital.

 

Its counter reached a high of US$4.77 as at 10.38am on Tuesday, up 13.6 per cent or US$0.57. The last time the company' s shares were trading near this level was in June 2021.

 

The company said in a bourse filing that the buyback is in line with its longstanding capital-allocation practice. This practice prioritises investment in new assets to drive long-term growth and shareholder value continue paying steady and over time, increasing dividends as well as invest in existing assets on an opportunistic basis, including through share buybacks.

 

" The group has and remains committed to retaining a strong balance sheet which provides financial resilience through the cycle," Hongkong Land said.

 

The company, which is a member of the Jardine Matheson Group, owns and manages office and luxury retail properties in Hong Kong, Singapore, Beijing and Jakarta. 

 

It had narrowed its net loss to US$863.2 million for the half-year ended June 30, from US$1.8 billion a year ago. The loss included net non-cash losses of US$1.3 billion arising from the revaluation of the group' s investment properties due to lower open market rents. 

 

Net asset value (NAV) per share as at end-June fell to US$14.75 from US$15.30. This means Hongkong Land is currently trading at a third of its NAV. 

 

Lim & Tan Securities on Tuesday said it continues to reiterate " accumulate" on Hongkong Land. Its consensus target price stands at US$5.81, representing an upside of about 22.6 per cent from the 1.53pm trading price of US$4.74.

 

The brokerage was referencing comments made by Colliers International that Hong Kong' s office sector will remain a " tenant' s market" in the next 12 months. The property firm is projecting a correction in office rents before recovering from 2022 onwards.

 

The group' s properties in Hong Kong are among the most prestigious, Lim & Tan said, noting tenants such as JPMorgan, KPMG and the Hong Kong Exchanges & Clearing. 

 

The brokerage added that valuations for the stock are " extremely undemanding" . Hongkong Land is trading at a forward price-to-earnings ratio of 10 times and is also trading at 0.3 times its book value, with an attractive 5.35 per cent dividend yield, Lim & Tan said.