China Resources Land Ltd. (01109.HK) is advancing its asset recycling strategy with the planned sale of its Chengdu MixC mall, a move Morgan Stanley projects will unlock over RMB 3 billion ($415 million) in profit by 2026 and bolster dividend growth.
"The disposal marks another milestone in the Company's transformation process," Morgan Stanley analysts said in a research report on Tuesday, reiterating their "Overweight" rating and maintaining the stock as a top pick.
The investment bank estimates the Chengdu MixC property, with a gross floor area of 287,000 square meters, carries a valuation of RMB 7 billion to RMB 8 billion. The projection of a RMB 3 billion gain is based on the assumption of a 70% stake sale within this valuation range, a transaction comparable in scale to the company's sale of Mixc Qingdao in 2024. The stock showed a muted reaction, trading down 1.4% to HK$32.10 in Hong Kong.
The asset sale is crucial for enhancing earnings visibility and shareholder returns in a challenging property market. The expected gain provides a clear path to bolstering the company's balance sheet and supports Morgan Stanley's forecast for mid-single-digit annual dividend growth in the coming years, a key factor for investors focused on income stability.
The move is part of a broader strategy by China's state-backed developers to optimize their portfolios and generate liquidity. By selling a majority stake in a mature, stabilized asset like the Chengdu MixC, China Resources Land can redeploy capital into new developments or reduce leverage, while likely retaining a management role and a share of future income. The company's cap rate and occupancy rate for the property were not disclosed.
Confidence in the developer's outlook is further supported by strong operational performance. The company reported a 14% year-over-year increase in rental income for the first quarter, demonstrating the resilience of its investment property portfolio even as the broader residential market faces headwinds. This combination of asset recycling and steady rental growth strengthens the case for sustained dividend payouts, making the company a defensive holding within the sector, according to the bank's note. Morgan Stanley's HK$39.3 price target implies an upside of more than 22% from the current price.
This article is for informational purposes only and does not constitute investment advice.
