Shui on land tgt up

BROKER CALL - Hong Kong's Shui On Land target raised - Macquarie


Macquarie has raised its target price on Shui On Land Ltd by 3 pct to 13.70 hkd while maintaining its ""outperform"" rating on the stock, taking into account the developer's new land acquisition and stronger-than-expected sales.

Shui On Land (SOL) recently bought a plot of land in Foshan of Guangdong province for 7.5 bln yuan, increasing its landbank by 17 pct to 10.2 mln square meters(sq m) in gross floor area terms, of which 75 pct is located outside Shanghai.

The plot, located in the city center, has a net developable area of approximately 517,471 sq m and has been designated by the Foshan authorities as a large-scale city center redevelopment project.

The developer said earlier it plans to redevelop the plot into a comprehensive mixed-use community comprising of offices, retail space, a hotel, cultural facilities and residential units, with a total gross floor area of approximately 1.5 mln sq m.

""We regard this as a further evidence of SOL's strong branding in redevelopment projects, which is well-recognized by local city governments"", the investment bank said.

Macquarie said it has revised up its 2008 net asset value(NAV) forecast for SOL by 3 pct to 14.5 hkd to reflect the new acquisition.

It also cited SOL's stronger-than-expected sales in the eastern Chinese cities of Shanghai and Wuhan.

SOL started pre-sale of its project in Wuhan in October, with all available 190 units sold out within six hours at an averaged price of 13,500 yuan per sq m, or 23 pct higher than expectations, Macquarie said.

Meanwhile, SOL's KIC project in Shanghai continues to post robust sales, despite sales in the overall Shanghai property market slowing down a little bit recently after tighter mortgage policies.

Macquarie also raised its earning per share (EPS) forecasts by 2 pct for 2007, by 4 pct for 2008 and by 3 pct for 2009 to reflect deferred revenue from some projects and stronger-than-expected sales in Shanghai and Wuhan.

SOL closed the morning session at 10.04 hkd, up 0.29 hkd or 2.87 pct.