Zhi Tong Cai Jing·2026-02-02 07:34Core Viewpoint - Morgan Stanley believes that the ongoing recovery of tenant sales in mainland China will drive a revaluation of Hang Lung Properties (00101), raising the target price from HKD 11.5 to HKD 12, making it one of the bank's top picks [1] Group 1: Financial Performance - The performance for the fiscal year 2025 confirms a recovery in tenant sales for Hang Lung Properties, with a year-on-year growth of 18% in Q4 2025, reaching a historical high, compared to a 10% year-on-year growth in Q3 2025 [1] - Management anticipates a mid-single-digit percentage growth in tenant sales for the fiscal year 2026, with positive momentum continuing until January 2026 [1] Group 2: Valuation and Market Position - Hang Lung Properties is currently trading at a 66% discount to net asset value, with a price-to-book ratio of 0.3 and a dividend yield of 5.5%, indicating that the company is still undervalued [1] - Despite low single-digit growth of international luxury brands in China, investors may overlook the strong growth of non-luxury brands, which account for half of tenant sales [1] Group 3: Rental Income Strategy - There are concerns among some investors regarding the lag in rental income growth compared to tenant sales growth; however, Morgan Stanley believes that they underestimate Hang Lung Properties' efforts to convert more variable rent into fixed rent, which helps stabilize rental income during downturns [1]