Company Overview - The company announced a 20-year operational lease agreement for the Shanghai Nanjing West Road 1038 commercial project (formerly Meilong Town Plaza) with Shanghai Jiubai on December 12 [1] - The project is part of the "V.3" strategy, focusing on light asset expansion in key areas of the Yangtze River Delta [1] Strategic Insights - The V.3 strategy prioritizes the expansion of core projects in the Yangtze River Delta, with initial projects located in Shanghai, Wuxi, and Hangzhou [1] - The cities involved have significant consumer capacity and potential for multiple brand placements, enhancing the company's competitive advantage in these markets [1] Project Details - The company will consider a mix of luxury and experiential brands for the new project, based on the existing project conditions [1] - The three projects have a total capital expenditure of approximately 1.6 billion yuan, with around 1 billion yuan attributable to the company, primarily for soft decoration costs [2] Financial Structure - The Hangzhou project is fully owned by the company, while the Shanghai and Wuxi projects are joint ventures with a 60% stake, not consolidated due to technical reasons [2] - The lease agreements for all three projects are set for 20 years, with the company potentially having a priority renewal right [2] Cost Management - The company maintains strict control over initial costs, with fixed rent being the primary cost structure, and no rent payments required during the renovation period before project delivery [2] - The management team will be shared with existing projects to reduce marginal management costs [2] Profitability Forecast - The company expects a payback period of under 10 years for the three projects, with an internal rate of return (IRR) projected to reach double digits [2] - Financial contributions from these projects are anticipated to begin between 2028 and 2030 [2] Valuation and Ratings - The company maintains its earnings forecast and continues to rate as outperforming the industry, with a target price of HKD 9.46 per share, corresponding to a 15x core P/E for 2025 and a 5.5% dividend yield [2] - The current trading valuation is at 14.6x core P/E for 2025, with a 5.8% dividend yield [3]

Core Viewpoint - Hang Lung Properties Limited has signed a lease agreement for the commercial operation project at 1038 Nanjing West Road, Shanghai, which will enhance its total building area by approximately 96,000 square meters, expanding it by 44% to around 312,000 square meters [1] Group 1 - The project is part of the "Hang Lung V.3" strategy, demonstrating the company's commitment to high capital efficiency investments and asset optimization to strengthen its leadership position in core markets [1] - The Nanjing West Road 1038 commercial project is located in a prime area and will be upgraded into a vibrant mixed-use commercial landmark, including retail, hotel, and office spaces [1] - The project aims to cater to a new generation of consumers seeking high-quality experiential spaces, creating a new social hub that brings together leading fashion brands and emerging consumer forces [1] Group 2 - The CEO of Hang Lung Properties, Lu Weibak, emphasized the commitment to enhancing customer experience and diversifying the business portfolio to attract a broader customer base [2] - The initiative aims to reinforce the area's status as an international lifestyle and fashion hub through a carefully curated mix of offerings [2]