UBS released a research report stating that CK ASSET (01113) maintained a cautious view on the Hong Kong residential market at the Asian Investment Forum on May 26. The company expects the occupancy rate for its Cheung Kong Center Phase II to exceed 50% by the end of 2026, up from the current rate of approximately 20%. Current rents have already recovered to over HK$100 per square foot. In the retail sector, rental performance at its shopping malls is stabilizing.
UBS assigned CK ASSET a "Buy" rating with a target price of HK$62, representing a 40% discount to the forecasted net asset value.
Management emphasized that while residential demand in Hong Kong remains resilient, supported by pent-up local demand and a steady inflow of mainland buyers—particularly for properties priced below HK$8 million—overall momentum is unlikely to accelerate significantly. Property prices continue to rise modestly, but transaction volumes in the mid-to-high-end market have decreased, with demand for luxury properties remaining weak. On the development front, CK ASSET anticipates pressure on profit margins for its Hong Kong property development projects, as the projects to be recognized are primarily those sold in the past.
UBS noted that following the completion of the sale of its UK Power Networks (UKPN) stake, CK ASSET will transition to a net cash position and maintain high discipline in capital allocation. With current government bond yields ranging from 4% to 6%, management sees limited urgency in redeploying capital into low-return development projects. The company will uphold its high double-digit profit margin threshold for Hong Kong development projects, focusing on defensive, income-generating assets. The board will discuss the possibility of distributing a special dividend when the 2026 interim results are announced, reflecting the substantial disposal gain from the UKPN transaction.
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