Revaluation gain lifts Chinese Estates earnings

PUBLISHED : Thursday, 10 August, 2006, 12:00am
UPDATED : Thursday, 10 August, 2006, 12:00am

Chinese Estates Holdings, whose plans to launch a real estate investment trust this year have been rejected, yesterday said underlying interim profit rose 32 per cent on disposal of securities and other treasury products.

The company, which derives its main income from renting office and retail space in prime areas such as Causeway Bay, said underlying profit, excluding revaluations, rose to HK$793 million from HK$601 million a year earlier.

Profit from the disposal of securities, investments and treasury products surged threefold to HK$249 million from HK$82 million a year earlier.

The company achieved an average 60 per cent rise in monthly rents for office premises and 40 per cent growth for retail properties when leases came due for renewal.

Even so, rental income dipped 5.1 per cent to HK$330.4 million due to the redevelopment of Tung Ying and Tung Sang buildings, the renovation of Excelsior Plaza and the sale of a substantial part of Chic Castle.

'Such a temporary reduction is believed to be worthwhile as the redevelopment and renovation will maximise the future rental value of the group's retail properties,' chairman Thomas Lau said.

The main profit driver was a HK$5 billion revaluation gain from its investment properties, an analyst who attended a company briefing yesterday said.

Including the revaluation gain, net profit jumped 154.7 per cent to HK$4.99 billion in the six months to June 30. Turnover rose to HK$2.22 billion from $430 million a year ago.

A delay in the proposed real estate investment trust may lead to an increase in interest expenses that might cut earnings by 30 per cent for next year, according to analysts.

Chinese Estates earlier planned to raise up to HK$5 billion by selling its commercial and industrial assets as a real estate investment trust to fund expansion. The plan was rejected by the Securities and Futures Commission as the properties to be included were only partially owned by the company, sources said.

The company owns 1.05 million square feet of prime retail space, mainly in Causeway Bay and Tsim Sha Tsui. These include Windsor House, Excelsior Plaza and Silvercord shopping arcade.

Shares of Chinese Estates, which have declined from a peak of HK$11.35 in April, jumped 5.7 per cent to close at HK$8.35 yesterday.

The company has cash on hand of HK$2.8 billion, according to an analyst. Chinese Estates would continue looking for investment opportunities.

The company will pay an interim dividend of 12 cents, up 33 per cent from a year ago.

Earnings per share were 96.7 cents per share, up 139.5 per cent from a year earlier.