Hysan bucks slump to post 12.2pc growth in core profit
Hysan Development, the biggest landlord in Causeway Bay, said earnings at its core business rose 12.2 per cent last year, defying the deteriorating commercial property sector.
Recurring underlying profit rose to HK$1.07 billion in the year to December from HK$950 million a year earlier, thanks to higher rents. The results were in line with the average HK$1.12 billion forecast of 12 analysts surveyed by Thomson Reuters.
Including one-off items and a HK$212 million fair-value loss on investment properties, net profit fell 59.6 per cent to HK$1.59 billion from 2007 when it booked a HK$3.13 billion revaluation gain.
The company declared a final dividend of 54 HK cents per share, 12.5 per cent higher than last year.
Rental income from offices increased 24 per cent to HK$703 million last year, with the occupancy rate at 97.5 per cent at the end of the year. It collected HK$608 million in rents from shops, up 20.4 per cent, and the occupancy rate was 97.8 per cent at the end of the year.
The growth in local retail consumption slowed down in the second half last year because of the financial crisis, but the increasing number of mainland tourists helped offset that, the company said.
'The global economic outlook will remain negative in 2009, and Hong Kong's real economy is to be further affected. Hysan will inevitably be affected by the overall environment,' said chairman Peter Lee Ting-chang. 'However, the longer-term contractual nature of our core leasing business, and our balanced tenant base with no undue dependence on any particular business sector, mean we should be more resilient during these challenging times.'
Mr Lee admitted that spot rent softened after the financial meltdown, but a huge correction was not expected in the short term because of very limited new supply of quality office and retail spaces.
But Nomura analysts Paul Louie and Perveen Wong expect office rents outside Central to drop 32 per cent to HK$33 per square foot this year and retail rental will decline 15 per cent.
Hysan has an investment property portfolio of more than 4 million sqft of commercial and residential space mainly in Causeway Bay, including 500 Hennessy Road - the former Hennessy Centre - which will provide 710,000 sqft of gross floor area when completed at the end of 2011.
'Hysan's Causeway Bay portfolio is, in fact, quite defensive. The rents didn't grow much in the last up-cycle and I think it would have limited downside under the current crisis,' an analyst said.
Earnings would be driven by rental growth, although at a slower pace, and the stock was quite good, considering its stable performance and dividend payout, the analyst said.
Hysan shares closed up 5.08 per cent at HK$11.18 after the results.
