Hong Kong Property & Conglomerates Value-Up Through Self-Help

Research evidence excerpt

Hong Kong Property & Conglomerates Value-Up Through Self-Help

Asia Pacific InsightM

Investment Summary

Hong Kong still lacks a full value-up policy push. Hong Kong has taken steps in

the right direction, including stronger board-independence requirements,

governance-code enhancements and treasury-share flexibility that make buybacks

easier. However, these measures remain less comprehensive than Japan’s TSE cost-

of-capital campaign or Korea’s Corporate Value-Up Program. Hong Kong still lacks

a dedicated framework that pushes companies to disclose ROE targets, explain

cost of capital, cancel treasury shares, return excess capital or publish value-up

plans. Therefore, the burden of re-rating falls more heavily on the companies’ own

initiatives.

We introduce a four-bucket Value-Up Checklist. Our framework focuses on

observable evidence rather than intention. We assess companies across

shareholder returns, capital recycling, capital allocation and ROE discipline, and

corporate governance. The key indicators include dividend growth or payout

policies, buybacks with cancellation, non-core or mature asset disposals, clear use

of proceeds, ROE/ROIC/TSR targets, evidence of ROE improvement, remuneration

tied to shareholder returns, and accountability to minority shareholders. We also

provide concrete company-level evidence through an execution scorecard and

quantitative table.

We saw a consistent valuation de-rating during 2011 to 2018 for HK prop/conglo

companies even when fundamentals were strong (rent/prices were up). From 2018

until now, stocks have moved mainly due to cyclical factors (price/rents

movement), but from hereon, the biggest factors to drive relative performance will

be the value-up initiatives and delivery, in our view.