K Wah International

Residential property sales propel K Wah core gains 1,048pc higher

PUBLISHED : Thursday, 03 April, 2008, 12:00am
UPDATED : Thursday, 03 April, 2008, 12:00am

K Wah International, a mid-tier developer run by gaming tycoon Lui Che-woo, said profit surged 1,048 per cent last year as it booked sales at three residential projects.

Its underlying earnings, excluding gains from the disposal of Galaxy Entertainment Group's shares and a property revaluation, rose to HK$800 million from HK$69.7 million a year earlier.

In 2006, no property sales were booked as earnings.

Last year, K Wah booked HK$4.2 billion from sales at Shanghai Westwood Plaza, Great Hill in Sha Tin and J Residence in Wan Chai.

Turnover jumped 1,639 per cent to HK$4.8 billion from HK$276 million a year ago, while net profit rose 967 per cent to HK$2.45 billion.

However, one analyst said underlying profit was 10 per cent lower than his expectation. 'Its gross profit margin was only 24.5 per cent due to the significant increase in cost of sales,' he said. 'That is lower than our expectation of 30 per cent.'

Cost of sales rose 2,168 per cent to HK$3.62 billion last year. But the analyst expected underlying earnings this year will be higher than last year as profit margins at the Great Hill and phase two of Shanghai Westwood were expected to be high.

Ken Wong, the general manager of finance and accounts, said the company could book HK$4.94 billion as earnings from the sale of the two projects this year, with a total saleable area of 250,000 square feet.

He said the developer planned to pre-sell a total saleable area of 10 million sq ft in the market over the next three years.

The company was targeting an increase of its investment portfolio from a total floor area of 1 million sq ft currently to 4 million sq ft in five years in order to provide stable rental income, he said.

The company has a land bank of a total saleable floor area of 25 million sq ft, which is sufficient for development over the next five years.

Mr Lui said the company acquired five development sites in Hong Kong and the mainland last year and had more than HK$8 billion in available funds to replenish its land bank.

He expects to spend half of the funds on purchasing development sites in Hong Kong, while the remaining will be spent in the mainland. He is interested in projects in major mainland cities, particularly Tianjin.

K Wah currently has development projects in Guangzhou and Shanghai.

The company proposed a final dividend of 3 HK cents per share, up from 2.5 HK cents a year earlier.

Shares of K Wah International rose 5.41 per cent yesterday to close at HK$3.12.

Substantial increase

Last year, the developer's turnover jumped 1,639 per cent to, in HK$: $4.8b