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Great Eagle Holdings

Great Eagle profit soars on rental income

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

Great Eagle Holdings, a key hotel operator and landlord in Hong Kong, said underlying profit jumped 36.4 per cent last year thanks to higher rental income amid the city's economic boom.

Underlying earnings were HK$896.4 million, up from HK$657 million the previous year while revenue climbed 10.9 per cent to HK$4.18 billion. A final dividend of 35 HK cents was declared, up from 25 HK cents.

Despite the recent volatility in the global financial markets, chairman Lo Ka-shui said: 'Current low vacancy rates and the shortage of new supply in the core commercial districts in the next several years should lend considerable support to office rent rates in Hong Kong.'

Net profit, including a HK$4.14 billion revaluation gain from investment properties, soared 734 per cent to HK$3.4 billion from HK$407.5 million. The revaluation gain on investment properties was HK$342.2 million in 2006.

Mr Lo said rental income would continue to rise, underpinned by higher new rates when existing leases expired and were rolled over.

Also a cut in income distribution to minority shareholders by its property trust Champion Reit, from 55 per cent last year to 20 per cent this year, would bring a higher contribution to the company, he said.

But Mr Lo expected profit from the firm's overseas hotel business to fall because of renovation work at the Langham Hotel in London and the slowdown in the US economy.

'The result was generally in line with my expectation,' said an analyst at a US investment bank.

Great Eagle has proposed to sell its Langham Place Mall and the office tower to Champion Reit. The analyst said the greatest concern was over how the sales proceeds would be used - whether for a special dividend or reinvestment in China property or the hotel market.

Great Eagle could not book the HK$124.9 million final distribution by Champion Reit in its earnings for last year as it was recognised after the closing of the company's financial year. Shares in Great Eagle rose 5.77 per cent to close at HK$22 before the results announcement.

Healthy nest egg

Despite recent volatility, Great Eagle's net profit rose 734 per cent to, in HK$: $3.4b