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Tai Cheung (88 HK)

Solid Hong Kong property developer at 79% discount to NAV with no debt
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Tai Cheung (88 HK - US$261 million) is a small Hong Kong property developer. It owns 35% of the Sheraton Hotel and several higher-end residential developments on Hong Kong Island.

The stock was recently mentioned by the French Substack Patrimoine en Actions, and it’s also a long-term holding of Spain’s Horos Asset Management. I met with Tai Cheung several times in a previous job and have a decent impression of the company and its management team.

Tai Cheung has a storied history. It was founded in 1952 by a certain Edward TT Chan, who fled Guangzhou during the Second World War and ended up in Hong Kong. He was initially involved in the construction business and became a trusted partner to several Hong Kong tycoons needing his expertise. But by the 1970s, Tai Cheung had transformed into one of the top 5 Chinese-owned property developers in Hong Kong.

When Edward passed away in 1981, his son David Pun Chan took over the business. Since then, Tai Cheung has become more sleepy but still well-managed and generous with dividends. It stands out among its Hong Kong property developer peers as having decent corporate governance.

The last few years have been tough, though. The troubles began with the anti-government protests in 2019 and then escalated when Hong Kong’s borders were closed in response to COVID-19. After that, the Hong Kong government introduced a National Security Law that caused roughly 4% of the population to emigrate. And from 2022 onwards, interest rates have risen almost 500 basis points, causing residential property prices to drop about 20%. Due to these events, Tai Cheung’s own share price has dropped almost 70% from the peak.

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