ANALYSTS from DBS Group Research, in a July 30 report, upgraded their call on Hongkong Land H78 : H78 0%to "buy", amid expectations of an uptick in office market sentiment in Hong Kong's Central.

The research team not only adjusted its recommendation upwards for the security from "hold", it also upped its target price for Hongkong Land by 3.2 per cent or US$0.16 to US$5.23.

Explaining their view, the analysts said that while the office market in Central is currently in a downturn, rental decline is moderating and vacancy figures are stabilising. In addition, they noted that retail is improving and that the ongoing pandemic is being gradually brought under control - thereby indicative of a trend of steady rental income for Hongkong Land.

Hongkong Land is also expected to deliver a higher development profit for the second half of fiscal 2021 on the back of more project completions in China. It saw its attributable contracted sales in China jump 130 per cent to US$1.36 billion, and as at June this year, its unsold but unrecognised contracted sales stood at US$3.37 billion.

However, DBS projects that 55 per cent of these developments will be booked in the second half of FY2021, implying high earnings visibility in the near term.

Beyond this, the analysts noted that Hongkong Land's stock price slipped 8 per cent in the last three months, and is currently trading at a 60 per cent discount to their assessed net asset value, against its 10-year average of 41 per cent.

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"The worst for Central office market should be over with relatively stable vacancy and moderating rental decline," the team wrote. "We believe that investment value is re-emerging following the recent share price retreat."

Hongkong Land shares were up 0.7 per cent or US$0.03 at US$4.57 as at 3.32pm on Monday.

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