I have sold my shares of Sun Hung Kai Properties today (Hong Kong stock exchange is open for today).
I first bought the shares in 2 May 2012. So it is about 3 years ago. My realised gain is approx. 71%. Not bad.
P/E ratio is 10.59. Price to Book: 0.86. Enterprise Value/EBITDA: 17.86
I have been feeling uncomfortable about the frothy rallies in China and Hong Kong Stock market. (read here, here and here). Nevertheless, I will not be surprised if the upward trend continues in the next few months. However, there seems to be more quick and abrupt movements in the stock market over there. And ultimately, psychologically, I feel there is more greed than fear in the HK market.
“Could we have learned from the past experience during the bubble years of 2007 and 2009? Could this time be different? Academic evidence appears unfavourable in this regard,” Hong said, warning investors of “surging volatility.” (read here)
The four most dangerous words in investing are ‘This time it’s different.’” Sir John Templeton.
There were also talks about a housing bubble in Hong Kong for many years – 8 years to be exact (read here and here). With the [US] Federal Reserve set to tighten policy this year and growth likely to slow further in the mainland, there are rising concerns about a possible collapse in house prices.
The case for bubbles will always be the same. A certain feeling of optimism arises when the situation repeats and when the opportunity reappears. However, I choose to zig when others zag, and not be lured into the news stating that ‘this time will be different’. The fact is that there is a potential housing bubble forming in HK and coupled with the rapid rallies in China (Shanghai / Shenzhen) and Hong Kong Stock markets.
The price of SHK shares went up despite the fact that Sun Hung Kai Properties’ property development business saw declining performance with operating margins falling more than 10% year on year in Hong Kong and China.
I may not be saying goodbye to Sun Hung Kai Properties for good, and will keep a lookout for a good entry price to go in if there is any sudden drastic big drop in price. To me at the moment, SHK does not appear over-valued, base on the price to book value and Enterprise Value/EBITDA. (read here) However, this is a cyclical stock which is heavily reliant on the real estate and market trend. I would like to capitalise on the frothy HK market (to achieve a good sell price) and perhaps the popping of the housing bubble / market bubble to achieve a better entry price.
I sucks at market timing. Always sold too early and buy too late. And never did like to sell. However, I felt I had to sell. My next thought would be on CapitaLand.
As stated in the Feb 2015 Morning Star report, in the near term (1 to 2 yrs time), revenue is expected to drop in 2015, mainly due to lower booking of property development business in Hong Kong. Operating margins in Hong Kong are expected to be lower in 2016 and 2017 before rebounding, and operating margins in China are expected to remain flat. While residential trading revenue will continue to be volatile, we expect rental income to grow at 10% compound annual growth rate, or CAGR, during the projection period, especially as more projects coming to completion in 2018 and 2019.
In the whole scheme of things, I did manage to up my war chest by a bit with this selling of SHK properties.