UBS: Cuts HANG LUNG PPT (00101) target price by 27.1% to HK$7, maintains "Neutral" rating

UBS released a research report stating that it has cut the target price of HANG LUNG PPT (00101) by 27.1%, from HK$9.6 to HK$7, while maintaining a "Neutral" rating. This downward revision mainly reflects Shanghai's commercial land renewal policy and the bank's latest channel checks on luxury retail trends in the third quarter of 2026. The bank has lowered HANG LUNG PPT's net asset value forecast by 26% and reduced its earnings forecasts for 2026 to 2028 by 6% to 13%. The bank's cash flow analysis shows limited room for dividend growth, and it expects the payout ratio excluding capital expenditure to exceed 90% of operating cash flow from the leasing business in 2027 to 2028. The recently announced Shanghai commercial land renewal policy is the first detailed framework. The bank expects HANG LUNG PPT to extend the leases of its two Shanghai shopping malls by 20 years, with a land renewal premium of RMB 2.8 billion (the same unit below), equivalent to RMB 140 million per year, accounting for 6% of the bank's 2027 dividend forecast. In first-tier cities, the net operating income (NOI) capitalization rate for commercial real estate with remaining land use rights of less than 20 years exceeds 7%. Based on the implied capitalization rates of China REITs and adjusted for the land use terms of HANG LUNG PPT's 11 commercial properties in mainland China, the bank has lowered its net asset value forecast by 26%.