Shui On Land considers acquisitions as gains rise

Shanghai-based developer Shui On Land is considering buying up to seven property projects after reporting a more than 33 per cent jump in underlying first-half profit.

Underlying profit, fuelled by a sharp reduction in finance costs, rose to 578 million yuan from 433 million a year earlier. Turnover advanced 0.92 per cent to 2.17 billion yuan from 2.15 billion yuan.

'We are now studying six or seven projects but it is inappropriate to give more details at the moment,' said chairman Vincent Lo Hong-sui.

The company signed an agreement in July with the Kunming municipal government to study the potential of regenerating the Caohai district into a mixed-use community with office, retail, entertainment, cultural and residential developments, Mr Lo said.

Shui On Land would bid for the land, which had a potential 2.5 million square metres of gross floor area, if the study achieved positive results, he said.

The company, meanwhile, plans to expand its investment property portfolio to 567,000 square metres by 2009, from 253,000 square metres this year.

Core earnings, which came mainly from the sale of the luxury Lakeview Regency residential project in Xintiandi, Shanghai, were linked to strong profit margins and a 66 per cent cut in finance costs to 56 million yuan in the first half from 167 million yuan, said the company's managing director and chief financial officer Tim Addison.

Gross margin was 69 per cent, compared with 70 per cent a year ago.

Net profit, including a 267 million yuan investment property revaluation gain and a 352 million yuan non-recurring deferred tax credit adjustment, nearly doubled to 1.09 billion yuan from 558 million a year ago.

The company said the deferred tax credit adjustment mainly reflected the effect of the mainland's new Enterprise Income Tax Law, which stipulates a cut in the tax rate from 33 per cent to 25 per cent from January 1 next year for certain corporations.

Mr Lo expected rental revenue to account for about 30 per cent of income in the long term, but gave no specific time frame. Gross rental income rose 5 per cent in the first half to 180 million yuan.

Shui On increased its land bank 41.66 per cent to 11.9 million square metres of gross floor area as of the end of June, from 8.2 million square metres the previous year.

The company proposed an interim dividend of 5 HK cents per share.

The shares closed down 1.46 per cent at HK$8.10 yesterday before the results announcement.