JP Morgan: Raise HANG LUNG PPT (00101) Target Price to HK$12, Reaffirming It as Top Pick Recommendation.

J.P. Morgan released a research report stating that they believe the continued recovery of mainland China tenants' sales will drive a revaluation of Hang Lung Properties' (00101) valuation. The target price has been raised from HK$11.5 to HK$12, and Hang Lung Properties is one of the bank's top picks. The performance in the 2025 fiscal year has confirmed the recovery of mainland China tenants' sales for Hang Lung Properties, with a year-on-year growth of 18% in the fourth quarter of 2025, reaching a historical high and surpassing the 10% year-on-year growth in the third quarter of 2025. Management expects tenant sales to achieve mid-single-digit percentage growth in the 2026 fiscal year, with momentum remaining strong as of January 2026. Based on the current 66% discount to net asset value, 0.3 times price-to-book ratio, and 5.5% dividend yield (with upside risk from the 2027 fiscal year onwards), the bank believes that Hang Lung Properties is still undervalued. Hang Lung Properties is a "luxury retail agent in China," and although single-digit growth of international luxury brands in China may not be attractive, investors may overlook the strong growth of non-luxury brands for Hang Lung Properties (accounting for half of tenant sales). Additionally, some investors may question why rental income growth seems to lag behind tenant sales growth, but J.P. Morgan believes they underestimate Hang Lung Properties' efforts to convert more variable rents into fixed rents, which helps to safeguard the stability of rental income during downturns.