Good mix proves draw at Hang Lung Development

HANG Lung Development is an investment holding company whose subsidiaries include Amoy Properties and Grand Hotel Holdings. Its associated companies operate department stores, restaurants and dry-cleaners.

Brokerage Standard Chartered Securities has put a buy recommendation on the stock, saying it has a good mix of earnings and is trading at a cheap valuation.

Hang Lung recently reported a 10.5 per cent increase in net profit for the six months to December 30, with hotel operations reporting a hefty 23 per cent growth, thanks to higher room rates.

Hang Lung possesses a development land bank of more than four million square feet in Hong Kong and the cost is not particularly demanding, averaging about $1,489 per square foot for residential and $1,103 for commercial.

It is building a medium-priced hotel in Tsuen Wan, expected to be complete in mid-1997.

The recurrent earnings contributions from its two subsidiaries, Amoy Properties and Grand Hotel, are forecast to account for over 50 per cent of Hang Lung's pre-tax profit over the next two years. Stripping out profit contribution and attributable earnings from Amoy and Grand Hotel, Hang Lung is trading at real prospective price-earnings ratio of just three times for 1997 and 3.2 times in 1998.