BOCOM International released a research report stating that according to market consensus forecasts, the Federal Reserve is expected to cut interest rates twice more in Q4 2025, followed by three additional cuts from 2026 to Q1 2027, for a total further reduction of 125 basis points. The firm believes that the rate-cutting cycle will continue through the remainder of 2025 and into 2026, which will benefit Hong Kong real estate companies through reduced interest expenses, further activation of the property market to boost sales and profit margins in the real estate development sector, and potential asset appreciation in investment property portfolios.
BOCOM International also noted that Chief Executive John Lee's policy address released last Wednesday announced more flexible land resumption and exchange models. The firm believes that accelerated development of the Northern Metropolis will help HENDERSON LAND (00012) monetize its substantial farmland reserves in the region. HENDERSON LAND holds approximately 41.9 million square feet of agricultural land reserves with a historical average cost of only HK$227 per square foot (recent land resumption prices exceed HK$1,000 per square foot). The acceleration of Northern Metropolis development could potentially generate considerable returns, profits, and cash flow for HENDERSON LAND in the coming years.
BOCOM International believes that with further interest rate declines, the short-term risks to the company's core business have diminished. Based on the market liquidity brought by Fed rate cuts, expectations of asset value enhancement, and the potential for accelerated monetization of farmland in the Northern Metropolis, the firm has raised its net asset value forecast for the company to HK$65.4 per share (previously HK$57.6).
BOCOM International has also slightly raised its profit forecasts for HENDERSON LAND from 2025 to 2027 to reflect the impact of reduced interest expenses, and upgraded the company's rating to "Buy" with a valuation based on a 50% (previously 55%) discount to net asset value, raising the target price from HK$25.9 to HK$32.68.