MTR posts HK$8.57b profit on property sales
Housing projects drive 43.8pc surge in underlying earnings
Government-controlled rail operator and property developer MTR Corp said underlying profit soared 43.8 per cent last year to HK$8.57 billion on record income from apartment sales coupled with rising retail and office rents.
The rail operator, which merged with the Kowloon-Canton Railway Corp on December 2, said profit from property sales surged 42.8 per cent to a record HK$8.3 billion from HK$5.82 billion a year ago as it booked income from apartment sales at the Le Point development at the Tiu Keng Leng station and Harbour Green at Olympic Station.
'The numbers are better than expected and the major reason is the impressive rise in property sales,' Tung Tai Securities associate director Kenny Tang Sing-hing said.
MTR's windfall from residential sales is set to continue in the near to mid term, with profits from a pipeline of projects yet to be booked.
But the company said it would have to rely more on earnings from its core rail business for the HK$37.4 billion Sha Tin-Central line announced yesterday, which is targeted for completion by 2019.
Separately, the management said a planned property development component to the Shenzhen Metro Line 4 project failed to receive approval from the central government.
MTR had previously said the 6 billion yuan (HK$6.58 billion) development was awaiting final approval from the National Development and Reform Commission, but announced yesterday that 'under the current policy relating to property development in China, the public sector funding support to this project is likely to take forms other than the grant of property development rights'.
MTR bottom-line earnings almost doubled on an HK$8.01 billion revaluation gain on investment property - IFC and Elements being key.
Net profit for the year rose 96 per cent to HK$15.18 billion, from HK$7.76 billion in 2006.
Income from property sales, leasing, management and other businesses accounted for 78.4 per cent of profit. Railway operations contributed 11.1 per cent, with station-based leasing and advertising and rail-related businesses accounting for 10.3 per cent.
The new Sha Tin-Central underground line will be operated under a new government concession business model instead of a 'property and rail' model, where the MTR receives development rights to the land.
Under the concession, the government keeps the land rights but foots the bill for construction and MTR in turn pays a fee for 50 years' operating rights.
'The project alone has got very limited upside from property development, but will contribute to the MTR's expanding network,' UBS analyst Eric Wong said.
Mr Wong pointed to new MTR projects such as the Island South and Island West rail lines on Hong Kong Island, and the Kowloon Southern rail link at Tsim Sha Tsui, which are on track for services in the next 10 years.
MTR said the new projects would be carried out under different business models. The Island South line and a new extension of the Kwun Tong line to Whampoa Gardens would include property developments, while the Kowloon Southern link would be a government concession. The Island West rail line is planned as an outright HK$6 billion government grant of capital to the company.
MTR announced a final dividend of 31 HK cents per share, bringing the full-year payout to 45 HK cents per share, a 7.1 per cent increase from the previous year.
