Mainland developments give appeal to property counter
CHINA Overseas Land & Investment undertakes property development and investment in Hong Kong, Shenzhen, Guangzhou and Shanghai.
ING Baring Securities (Hong Kong) recently put a buy on the stock, saying it is more than just a Hong Kong property developer.
China Overseas has a large exposure to Hong Kong's property market but investors do not appreciate the company's strong interest in the mainland's residential property sector.
By the end of this year, about 30 per cent of the China Overseas' pre-debt net asset value should be derived from mainland property, and this should continue to grow.
While other mainland property plays have rallied recently due to the announcement of housing reform plans, China Overseas remains relatively cheap.
The stock's 35 per cent discount to its net asset value may not be especially attractive compared with pure Hong Kong property plays, but it is highly attractive compared with the other red chips and pure China property counters.
As China Overseas' share price continues to lag the Hang Seng Index, this represents an excellent opportunity for investors to get into a stock that will be leveraged into the mainland property market.