Bubble-looking For HK Luxury Condos

No matter how you cut, slice or dice the price HK$63,000 psf is a doozy. Yes, that is about $8,076 psf or RM27,400 psf. Much of the buying over the past few months have been by Chinese from the mainland. Article from The Standard.

Wednesday, October 14, 2009

Prices for luxury properties in Hong Kong are now firmly at a sky-high level, a fact confirmed yesterday as a developer slapped a price of more than HK$63,000 per square foot on a premium apartment in Mid-Levels.

That will make it the highest-priced penthouse in Asia - and it is not even on top of the building.

The top-of-the-pile tab was revealed as Henderson Land Development (0012) released the first price list for its residential project 39 Conduit Road yesterday. On it was the HK$357.7 million, 5,636-sq-ft duplex. That means a square- foot record of HK$63,473.

Another duplex, 5,131 sq ft and also on the 66th floor of the 88-story building, is listed at HK$311.4 million, or HK$60,696 psf.

In June last year, Sun Hung Kai Properties (0016) sold a 5,497-sq-ft penthouse at The Arch, atop Kowloon MTR Station for HK$41,100 psf - a record for Asia.

The pattern of soaring prices is setting off alarms as well as expressions of amazement.

Lui Hon-kwong, associate professor of marketing and international business at Lingnan University, warned of the danger of a price bubble in the property market, which is drawing huge inflows of cash from super-rich mainlanders.

"A price bubble is determined by the mainland government's policy direction," he said. "If it does not support people in investments, our property market will lose ground and prices will plunge."

Still, Eddie Hui Chi-man of Polytechnic University's department of building and real estate notes that the sale of expensive homes by Henderson is at the upper extremes of the property market and should not have a bearing on the mass market.

"Some super-rich people are chasing luxury homes like others collect paintings and wine because they are rare," Hui said.

"The property market is recovering ahead of the real economy, however, and people can afford mortgage payments."

Besides the two premium duplex homes, Henderson also set prices for 18 "regular" homes in the block - sized at 2,808 and 3,284 sq ft - from HK$73.4 million to HK$137.9 million. The developer's sales general manager, Thomas Lam Tat-man, said the company will set about securing sales as early as this afternoon.

Customers have shown interest in 20 to 30 apartments, Lam said. They are negotiating up to HK$70,000 psf for the most expensive unit.

The project has a total of 66 homes sized from 2,800 to about 7,600 sq ft, with two penthouses on the 88th floor still to be priced. Henderson has suggested it could be seeking a staggering HK$100,000 psf for the loftiest pair.

The firm intends to sell 40 percent of the homes this year, which would bring in about HK$4 billion. Lam predicts a 10 percent increase in prices for homes sold later.

Midland Realty regional sales director Jimmy Lee said the prices asked by Henderson will not deter buyers. "Housing supply in Mid-Levels is very limited and investors have long been waiting for new units."

p/s photo: Han Ye Seul

I Like Green Packet At Current Levels

Besides spotting good shares, the entry levels are important as well, especially when you talk about a momentum driven market like Malaysia. When the trend is negative, most shares get driven down as well, thus providing better entry levels for stocks with good prospects. I like Green Packet quite a bit. Its certainly one of the more innovative among the small companies. Investing in smaller companies brings forth a lot more risks (search for "small caps" in my blog), hence I will more than often shy away from them.

Why I like Green Packet... its the wifi/broadband market. The market in Malaysia for wifi/bb is still fragmented and offers a lot of opportunities thanks to the pathetic offering and service by the main players. Even izzit has managed to take substantial ground off the established telcos. Green Packet guided that its WiMax subscriber base has grown at a tremendous pace and already reached 50,000 by end of May. This represents a 5-folds improvement from 9,500 at end 2008.

Its 52 week high-low is RM2.51-0.60. I would be keen at levels below 70 sen. As I mentioned before, my yardstick remains a potential 30%-50% upside within 6 months. It won't be making a profit this year, but in this business, I see them ratcheting up subscribers to go past the critical mass levels by end of this year, which is where the value is.

I like their coverage, I like their aggressive marketing plan, I like the way their sales units interfaced with potential customers. I like the attitude of the sales force that work for the company. I get a strong sense that they are making good penetration, and that every potential client that walks by has a very good sign up rate and closure rate.

Management guided that in February and March 2009, the sign up for Wimax has seen an aggressive growth, clocking in as high as 500 subscribers per day but slowed since then. In May 2009, it was hovering between 300-350 subscribers per day. I like the pricing plans they have. I like that the modems can be free or be paid in installments.

The group has secured more than 400 sites currently and target to increase coverage sites to 700 by the end of 2009 to cater for up to 250,000 subscribers. Management said barring any delay, the deployment of coverage sites can hit 800 by year end as it has two turnkey vendors - Alcatel-Lucent and China's ZTE Corp to deploy the sites. Green Packet already rolled its services in Klang Valley, Johor Baru, Alor Setar, Penang, Kuantan, Kuala Terengganu and Ipoh. The company plans to extend services by penetrating into another seven states, including Melaka, Negeri Sembilan, Pahang, Terengganu, Kelantan and Perlis.

P1 also formed a partnership with Sunway Group last year, a
collaboration known as Wireless@Sunway, to be the preferred
technology  partner for broadband connectivity and communications
requirements in the Sunway township. P1 completed deployment of
the first phase of the Wireless@Sunway project, providing wireless
broadband Internet access to more than 80 per cent of Sunway
home and business users, students and visitors, thus making Bandar
Sunway the first integrated wireless broadband-enabled township in
the country.

Kuala Lumpur City Hall and the Malaysian Communications and
Multimedia Commission also picked P1 to set up the WiFi-WiMAX
KL Wireless Metropolitan Project (Wireless@KL). The
Wireless@KL network currently offers more than 100,000 users
free wireless broadband access in Kuala Lumpur.

China and India markets are not going to yield much to Green Packet's bottomline anytime soon. Let's look beyond that for now. The company has already delisted its associate company, GMO Limited from the Alternative Investment Market (AIM) of the London Stock Exchange in May. The cost savings from the listing fee is approximately USD300,000 per annum. Now that is sensible.

The prospects for the company does not come without investments cost. Capex YTD amounted to RM250mn and the group is committed to spend another RM230mn by the next two year to complete its Phase1 and Phase 2 Wimax implementation plan to cover 40% of the population. Green Packet's total capex could reach RM1bn over the next four years. The group has RM200mn cash as at 31 May 2009 and will have to raise funds. Fund raising is not necessarily a bad thing, and I quite like the business model. The company has issued three private placements and raised about RM300mn since its IPO in 2005. Currently, Green Packet is proposing a rights issue of 208.3mn shares of 50sen/share together with 208.3 free detachable new warrants on the basis of 1 rights share and 1 warrant for every 2 existing ordinary shares held. The company expects to raise between RM98.8mn and RM104.2mn for its Wimax network. I would be supportive of subscribing to the rights and warrants.

Given the market's euphoria over YTL-e solutions RM2.5bn investment in wifi/bb, I favour Green Packet's P1 head start anytime man.


p/s photos: Han Ye Seul