What the broker says ...

Hang Lung Properties, one of the developers with an interest in the West Kowloon reclamation area, recently posted a 23.7 per cent drop in its interim net profit from HK$830 million to HK$634 million for the first half of financial 2002.

At the same time both the operating margin (down 3.1 per cent) and the net profit margin (down 1.4 per cent) fell.

The interim dividend, meanwhile, remained unchanged at 11 HK cents per share.

According to a Core Pacific-Yamaichi report, the drop in net profit was mainly due to a 73 per cent drop in pre-tax profit in property sales during the period. In contrast, pre-tax profit from Hang Lung's rental business rose by 5.6 per cent due to an increased contribution from Plaza 66 in Shanghai.

Because of a negative outlook for Hang Lung's earnings and a profit warning from its chairman, Core Pacific retained a 'sell into strength' recommendation on the firm's stock.

Graphic: NOW14gwz