JPMorgan has issued a research report reiterating its "Overweight" rating on Hang Lung PPT (ASX: 00101) with a target price of HK$12.
The report notes that the West Lake 66 development demonstrated robust foot traffic in its first two weeks of operation, exceeding 100,000 daily visitors, primarily benefiting from a novel retail experience featuring over 80 brands making their debut in Hangzhou or Zhejiang province.
However, the bank acknowledges that some investors may be disappointed by the mall's positioning as a "near-luxury/lifestyle" destination rather than a pure luxury one.
JPMorgan believes Hang Lung's strategy is to first establish a strong track record through high foot traffic and customer engagement, with the potential to gradually introduce select luxury concepts in a future asset-light expansion phase slated for 2029.
The bank estimates the West Lake 66 project's cost yield at 3.7% (or a 2.6% net operating income yield), with room for improvement should more luxury brands become tenants.
According to JPMorgan's calculations, West Lake 66 (at full operation) is expected to increase Hang Lung's rental income by 6%.
The report highlights that West Lake 66 is situated in Hangzhou's core Wulin business district, with a total gross floor area of 390,000 square meters. This includes a shopping mall (106,000 sqm, over 90% leased), five office towers (96,000 sqm, 17% pre-leased as of end-2025), and the Mandarin Oriental Hotel, Hangzhou (38,000 sqm, 194 rooms, opening in 2027).
Furthermore, Hang Lung has signed a 20-year operating lease with Bailian Group for Towers B and C of Wulin Intime Department Store, which will expand retail gross floor area by 42,000 square meters, a 40% increase.
The report points out that Hangzhou currently has three core commercial districts, each anchored by a luxury mall: Hangzhou Tower in Wulin, Hubin Intime IN77 in Hubin, and Hangzhou MixC in Qianjiang New City.
West Lake 66 is located adjacent to Hangzhou Tower, which already boasts a comprehensive lineup of luxury brands such as Hermès and Louis Vuitton. Consequently, West Lake 66's current positioning leans more towards near-luxury and lifestyle, rather than pure luxury.
JPMorgan estimates that West Lake 66 (including the hotel and parking) will contribute approximately RMB 600 million in annual rental income upon full leasing of its retail and office spaces, accounting for 6.1% of Hang Lung's projected FY2025 rental income. This assumes average retail rents of RMB 300 per square meter per month and office rents of RMB 150 per square meter per month.
For the asset-light expansion portion, the bank estimates total rental income at RMB 194 million. However, after deducting the annual RMB 150 million rent payable to Bailian Group, the expected net annual rental income is approximately RMB 44 million.
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