Hang Lung (10 HK) Is Still Inexpensive. Lack Of Liquidity Not Helping

• Back in January 2024, Hang Lung Properties (101 HK) (HLP) offered a scrip dividend option for FY23, a first for the company. Scrip dividends have been afforded ever since.

• HLP’s major shareholder, Hang Lung (10 HK), has taken full advantage of this option, increasing its stake by 4%; and potentially up to 5% when factoring in FY25 dividends.

• Interestingly, the implied stub has widened since the commencement of scrip dividends, with the market assigning HK$600mn less for the stub ops.

The Trade:

• HLG is cheap (0.23x P/B), albeit illiquid.

• Expect HLG to continue to exercise its rights to HLP scrip for the foreseeable future.

• There may some grand plan afoot.

• But I’d still be cautious jumping into either HLG or HLP in a major way.

This insight is labelled bullish, as I’m not bearish.