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QuestionsCategory: Exit StrategiesHang Lung Properties
Jayden Lee asked 3 years ago

Hi Rusmin and Victor,
Previously in 2018, you guys presented a case study on Hang Lung Properties. After your presentation, I did some due diligence, had the conviction that Ronnie Chan is good management, and took a position in this counter.
This counter has since gained more than 30% for me and I believe for many of the group members here as well who bought and at this point, I am not too sure how to determine the selling price? 
Can I seek some advice on exit strategy?
Thanks Rusmin and Victor.

5 Answers
Rusmin Ang answered 3 years ago

Hi Jayden,
 
Congratulation!
 
Based on what you’ve learned at IQ online and the workshop, can you recall when it is the time to sell? What’s the most suitable ratio to value company like Hang Lung? If you need help, can review on the valuation module. Do give it a try :)

Ming Jie Ang replied 3 years ago

For asset heavy company, normally will use PB.

I got some at a good valuation, don’t think i will sell anytime soon. Collect good dividends and let the management grow more value.

Jayden Lee answered 3 years ago

Hi Rusmin and Ming Jie,
Here are my results. I have used 2 valuation methods to decide when Hang Lung would be overvalued.
What methods would you use to decide your selling price? 
Method 1: Using historical 5 years PB ratio
Minimum PB: 0.456
Maximum PB: 0.9407
Mean PB: 0.6589
Current PB: 0.6211
Exit plan: Sell when PB ratio hits historical high PB ratio ,i.e. 0.9407
Potential Upside from current share price: 34%
 
Method 2: Using CNAV Method
CNAV Per Share: 26.22
NAV Per Share: 31.92
Current Share Price: 18.92
Exit plan: Sell when share price reaches NAV per share, i.e. 31.92
Potential Upside from current share price: 41%
Is it unrealistic to wait for PB ratio to reach historical high PB ratio before selling? 
Regards,
Jayden

Rusmin Ang answered 3 years ago

Hi Jayden,

Nice, now you’ve got some ideas when it is a good time to exit. Just have to put the knowledge into actual application :)

I think your reasoning is sound. You can consider selling if it reaches your estimate of fair value. Or, follow what Ming Jie suggested – hold and collect dividends. Either way, i think you both would make money since you’ve got in at gd price

Jayden Lee replied 3 years ago

Thanks Rusmin ;)

Koh Ming Shao answered 3 years ago

Hi Team, I have doing the analysis for Hang Lung Properties. I would like to ask if the increase of fair value of the investment properties considered extra ordinary items?

Rusmin Ang answered 3 years ago

Hi Ming Shao
 
Yes you can exclude them as extraordinary items since they are merely paper gain/loss.