Sun Hung Kai Properties

Revaluation lifts Hang Lung profit

PUBLISHED : Wednesday, 22 February, 2006, 12:00am
UPDATED : Wednesday, 22 February, 2006, 12:00am

Half-year earnings plummet 84pc before one-off gain as turnover halves on flagging sales of residential units

Hang Lung Properties posted a 0.76 per cent rise in interim profit yesterday, with rental growth and a revaluation of investment properties offsetting a fall in residential sales.

Pressure on rental growth and the possible sale of investment properties are also likely to build for the second half as the company has delayed selling the remaining flats at its HarbourSide development in Tsim Sha Tsui after the government put the West Kowloon cultural district project on hold yesterday.

Hang Lung's net profit for the six months to December rose to $1.61 billion from $1.6 billion a year earlier. Turnover slumped to $2.29 billion from $5.08 billion. The firm netted a revaluation gain of $921 million.

Hong Kong property sales fell 50 per cent to a two-year low in December last year, as best lending rates rose to the highest in more than four years.

BNP Paribas Peregrine regional property analyst Adrian Ngan Wai-hung said: 'If we had not taken its revaluation gain into account, Hang Lung's first-half profit was about $890 million, lower than our forecast of more than $1 billion.'

This means half-year net profit fell 44 per cent from a year earlier.

The developer reported profits from property sales of $245 million, down 81 per cent from a year ago, while income from property leasing increased 10 per cent to reach $983 million.

Hang Lung chairman Ronnie Chan Chichung said: 'We are focusing on sale price, not quantity. We do not have a schedule for the launch of our projects, it all depends on the atmosphere of the property market. We will definitely sell our projects if there are reasonable profits to be had.'

Executive director Terry Ng Sze-yuen said the company was considering selling one to two investment properties in Hong Kong, including Burnside Estate in Island South and the Summit in Mid-Levels.'

Mr Ng expected Hang Lung to have about $10 billion cash in the next three years from rental income and the sale of residential projects, as well as rental income from serviced apartments and offices in a Shanghai project which will be completed next year.

Mr Ngan expected the firm to book a net profit of $2.3 billion to $2.4 billion for the financial year, excluding the revaluation gain, although he said it would make a big difference if the company launched one of its residential projects this year.

Despite the results, Hang Lung will pay an interim dividend of 13 cents, unchanged from a year ago.

'The board will maintain the modest interim dividend to show that we feel optimistic about the property market. We believe rentals will have significant growth,' Mr Chan said.

Meanwhile, parent company Hang Lung Group saw its interim net profit drop 21.8 per cent to $1.09 billion as turnover fell to $2.55 billion from $5.35 billion.

Hang Lung Properties shares dipped 3.84 per cent to $13.75, their lowest price since January 24. The stock has gained 11 per cent in the past six months. Shares in Hang Lung Group dropped 5.96 per cent to $16.55.

Hang Lung was the first major developer to report earnings this year. Sun Hung Kai Properties is due to post its first-half earnings on March 3 and Cheung Kong (Holdings) will report full-year earnings on March 23.