Kerry's $11.7b Homantin acquisition doubled its gearing to 39.2%

But balance sheet remains unrepaired.

According to Barclays, the debt repayment from Kerry Logistics Network (KLN) together with recent Hong Kong property sales have helped to partly repair Kerry's balance sheet.

"Reflecting this, we narrow our target discount by 2.5pp to 52.5%. But at the same time, we also reduce our spot and forward NAV estimate by 11% and 14% to HK$59.40 and HK$53.33, respectively, to reflect the spin-off of KLN," Barclays said.

Here's more from Barclays:

We lower our price target by 10% to HK$25.33 but with potential upside of 2%, we upgrade Kerry Properties to EW from UW.

The HK$11.7bn that Kerry spent in acquiring a site in Homantin back in March 2013 nearly doubled its gearing from 22.6% to 39.2%.

While it has not fully repaired its balance sheet, the recent debt repayment from Kerry Logistics as well as sales of Hong Kong property have helped to bring in HK$5.5bn. We believe this has helped to lower Kerry's risk profile. We are narrowing our target discount by 2.5pp to 52.5% from 55%.

Spot and forward NAV lowered by 11% and 14% to reflect KLN spin-off: At the NAV level, we had previously attributed a HK$21.8bn value to Kerry's logistics operations and its warehouses (HK$15.2bn + HK$6.6bn). Post the spin-off of KLN, we now account for Kerry's 43% stake in KLN based on current market value (worth HK$9.9bn based on HK$13.74/share of KLN). Net of the reduced interest (from 100% to 43%) as well as the change from asset to MV-based value approach, we reduce our spot and forward NAV by 11% and 14% to HK$59.40 and HK$53.33, respectively.