MTR doubles earnings as railways return to profit
A robust property market and strong passenger numbers doubled earnings at MTR Corp for the first six months of the year and further improvement can be expected this year, the company said yesterday.
Mainstay rail services returned to profitability during the period, while all other business units - including property sales and rentals, advertising and telecommunications - posted solid growth.
The adoption of new accounting standards that require Hong Kong companies to record property valuation changes in their profit-loss accounts also buoyed corporate performance, enabling the MTR to book $1.01 billion in property appreciation directly into earnings.
Interim net profits jumped 122.2 per cent year on year to $2.6 billion, reflecting a thriving consumer economy, lucrative property sales and higher rents from prosperous retail shops in and above MTR stations.
Excluding the property valuation surplus, net profits for the first half were 50.8 per cent higher year on year at $1.76 billion, comfortably exceeding JP Morgan's estimate of $1.4 billion and Credit Suisse First Boston's forecast of $1.6 billion.
Earnings per share, including the surplus, were 48 cents. Dividend remained the same as last year at 14 cents per share.
A Thomson First Call poll showed a full-year profit consensus of $4.87 billion, although some analysts said they were upgrading their forecast.
Chief executive Chow Chung-kong said the corporation remained cautiously optimistic about prospects for the second half of this year but cited a number of unfavourable factors that made a repeat of the bumper first half unlikely.
'Risk factors such as interest rates, oil prices and the adjustment of the yuan are having an impact on Hong Kong's economy,' Mr Chow said yesterday, adding that the comparative period in the second half of last year was 'already good'.
'But Hong Kong will nonetheless move forward in the next six months, and we are positive about the growth of our fare revenue and property development.'
Core rail services yielded $5 million in interim profits, reversing a $219 million loss recorded during the same period last year. Fare revenue rose 4.1 per cent to $2.98 billion as MTR lines carried 2.5 per cent more passengers. Passenger volumes on the Airport Express railway were up 5.6 per cent.
Mr Chow said the corporation had no plans to raise fares and would instead boost rail-related revenue such as advertising, leasing of station retail spaces and telecommunications facilities.
Property revenue, which it uses to fund rail construction, jumped 31.8 per cent to $1.52 billion, with significant new contributions from developments along the Tung Chung line, including Caribbean Coast, Coastal Line and the third phase of Olympic Station.
Finance director Lincoln Leong said the MTR would recognise the bulk of $4.4 billion in deferred income - paid in advance by developers for station-side properties - within the next 11/2 to two years.
It would also recognise, pending the issuance of occupancy permits, profits from Sun Hung Kai's luxury residential project the Arch, near Kowloon Station, in the second half of this year, he said.
Mr Leong shed no light on the ongoing talks with the government over the proposed merger between the MTR and Kowloon-Canton Railway Corp.