SHKP shares weathering the storm, analysts say
The worst may be over for shares in Sun Hung Kai Properties (SHKP), which appear to have fully priced in the corruption investigation into the company's billionaire co-chairmen.
Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen were charged on Friday with bribery and misconduct in public office.
Yesterday, shares in Hong Kong's largest developer closed slightly lower on the first day of trading after the brothers were charged.
It was the third most actively traded stock, dropping 0.895 per cent to HK$94.50 on turnover of HK$814.56 million, compared with a 13 per cent tumble when the pair were arrested by the Independent Commission Against Corruption on March 29. The benchmark Hang Seng Index closed 0.2 per cent higher yesterday.
The decision to charge the brothers is likely to remove part of the uncertainty surrounding the group, Credit Suisse analyst Cusson Leung wrote in a research note yesterday.
'The worst of the share price performance had already happened during the first month after the arrest was made,' he said. 'The formal charging by the ICAC should be well expected by the market. We believe the market will then be focused on the pace of its land banking and the project sales.'
Kenny Tang Sing-hing, general manager of AMTD Financial Planning, said SHKP shares would receive support in the market because its business operations were unaffected for the moment.
'Investors are jumping in to bet on a short-term rebound, because SHKP is trading at a cheap valuation,' Tang said.
SHKP is now trading at a more than 40 per cent discount to net asset value, with analysts' targets for the shares ranging between HK$92.25 and HK$109.
Citi Research property analyst Oscar Choi wrote in his latest report that the ICAC's decision to lay charges should have no impact on estimated net asset value of HK$167.72 per share, but uncertainty over the SHKP chairmen would remain for the medium term.
'We met over 100 investors during our recent marketing trip in Hong Kong, Singapore and Japan and noted most of the investors have not turned positive on SHKP due to the potentially lengthy legal process involved in the case,' Choi wrote.
'A number of investors are worried that any developments during the legal process will affect SHKP's share price, as Thomas and Raymond are still the joint chairmen who represent the company.'
Fitch Ratings and Standard & Poor's Ratings Services both said SHKP's rating and outlook were not affected by the charges against the top management.
But Fitch said it might consider lowering the rating 'if further developments related to the charges against the directors adversely affect SHKP's operations and financials'.
Standard & Poor's said SHKP's sales performance and land acquisition activities remained intact.
Thomas and Raymond Kwok will continue to discharge their duties with the assistance of new deputy managing directors Mike Wong and Victor Lui. Thomas's son Adam and Raymond's son Edward have been appointed alternative directors to their fathers.
Drop in Sun Hung Kai Properties' share price yesterday, the first trading day after Thomas and Raymond Kwok were charged