According to a UBS research report, the bank has assigned a target price of HK$27 and a "Buy" rating to Kerry Properties (00683).

The Lands Department announced that Kerry Properties won the Ho Man Tin Fat Kwong Street residential site for over HK$4.308 billion, a price far above the upper limit of market expectations. The accommodation value is about HK$20,738 per square foot, and the winning bid is 38% higher than the upper bound of market forecasts.

Based on the following assumptions: given that the project is a luxury development, sales are expected to generate a six-year cash inflow cycle after completion; annual funding cost is 4%; construction cost is HK$6,000 per square foot, UBS estimates the total development cost based on gross floor area at HK$33,155 per square foot.

If further assuming an efficiency ratio of 85%, the bank estimates that Kerry Properties would need to achieve an average selling price of about HK$39,000 per square foot of saleable area to break even. This price is far above the selling price of the nearby luxury project "Ultima," whose recent secondary market transactions were around HK$30,000 per square foot.

The bank believes the acquisition reflects management's confidence in the outlook for Hong Kong's luxury residential market.

The bank estimates that after the acquisition, Kerry Properties' net debt ratio will rise from 31.3% in June 2026 to 34.9%. However, the company's deleveraging trend should be maintained, as roughly RMB 8 billion in net sales proceeds from its Shanghai project is expected to be received by the fourth quarter of 2026, potentially bringing the net debt-to-equity ratio down to 27.1%.

Given the relatively high land price of the site, the bank expects the market's share price reaction to the acquisition will lean negative.