Share-sale gains lift Chinese Estates profit
Chinese Estates Holdings saw its core earnings almost double in the first half of the year on sales of listed shares, but analysts said growth would slow in coming years as the company lacked completed homes from which to derive income.
'The company sold its securities at a very good timing, probably at the beginning of the year before the market slump, which helped boost its bottom line,' said an analyst.
However, as the stock market sell-down looked to worsen, the firm was unlikely to repeat the gain from share sales in the second half, he said.
Chinese Estates booked a net gain of HK$1.44 billion from selling HK$3.69 billion worth of securities in the first half.
It also marked down HK$1.87 billion in the value of the remaining shares, cutting its treasury portfolio by 47.1 per cent from HK$11.81 billion as of the end of last year to HK$6.25 billion on June 30.
'I am conservative and cautious about the outlook of Hong Kong's stock market in the second half,' said executive director Lau Ming-wai.
If the market deteriorates, the company may continue to scale down its treasury portfolio, which consists of shares in blue-chip firms, and invest the funds in properties.
Chinese Estates' core profit, excluding revaluation gains from investment properties and other non-cash items, rose to HK$1.87 billion in the first half from HK$944 million a year ago, largely because of income from selling listed securities.
Taking into account the HK$1.54 billion fair-value gain on investment properties and deferred tax, net profit rose 71.7 per cent to HK$3.52 billion.
However, turnover slumped 61 per cent from HK$2.53 billion to HK$985.8 million because of the absence of large-scale projects to be booked. Profit from property sales, including those by associates, tumbled 83.2 per cent from HK$682.8 million to HK$114.8 million.
In the first half of last year, the company booked sales of more than 300 units in the Zenith, a residential project in Wan Chai.
The company will continue selling York Place in Wan Chai and kick off sales of a 182-unit residential project on Larch Street and Bedford Road next quarter.
Rental income rose 27.9 per cent to HK$461.8 million from HK$361 million a year ago, but growth would slow in this half because of the slowing economy, Mr Lau said.
He said the earnings potential of its property investments could be fully reflected after the completion of the second phase of renovations at Windsor House in Causeway Bay and the redevelopment of Tung Ying Building in Tsim Sha Tsui.
Nevertheless, analysts are cautious on developer's outlook.
'Since its major projects are on the mainland and in Macau, which are expected to be completed by 2010 at the earliest, I believe Chinese Estates lacks a catalyst in the next two to three years,' said another analyst.
Chinese Estates declared an interim dividend of 13.5 HK cents per share, unchanged from a year ago.
Its shares fell 0.91 per cent to HK$10.90 yesterday after the results.
