SHKP earnings sink 94.9pc as property slump kicks in
Sun Hung Kai Properties, Hong Kong's largest developer by market value, reported the worst interim results in 20 years as a severe property downturn sent net profit plunging 94.92 per cent.
The developer announced net earnings of HK$692 million for the six months to December, compared with HK$13.63 billion a year earlier.
The sharp fall was mainly due to a revaluation deficit of HK$4.34 billion on investment properties, compared with a revaluation gain of HK$5.84 billion a year ago.
'It is the poorest result for more than 20 years,' said Eric Yuen Chi-fung, the head of research at Dao Heng Securities.
He recalled SHKP's full-year earnings in 1986 were HK$750 million.
But he emphasised the net profit, which included the revaluation on investment properties, did not reflect the real performance of SHKP.
With an investment property portfolio of about HK$155 billion the developer's net profit would be wiped out by HK$15 billion if property prices declined 10 per cent, he said.
Residential prices fell about 20 per cent last year. Office rentals dropped 14 per cent in the fourth quarter.
'For professional investors, there will be more concern about its underlying earnings,' he said.
SHKP's underlying net profit, excluding the effect of the revaluation deficit, dropped 26.85 per cent to HK$4.53 billion from a year ago as a result of a 52.28 per cent decline in property sales to HK$1.78 billion, much below market expectations.
Profit contributions from hotels decreased 20.9 per cent while earnings from its communications business dropped 51.3 per cent. Rental income rose 24.05 per cent from a year ago to HK$3.52 billion.
Turnover increased 26.95 per cent to HK$15.12 billion.
An interim dividend of 80 HK cents will be given, the same as last year.
Adrian Ngan Wai-hung, an executive director of research at CCB International Securities, said SHKP had been hurt by lower than expected profit margins from the sale of its luxury residential project, Peak One, in Sha Tin.
He said the developer had adopted a low-price strategy for Peak One - the main profit contributor during the period - which squeezed margins to about 30 per cent.
Mr Yuen said the developer's profit margin was about 60 per cent in 2007.
Vice-chairman and managing director Raymond Kwok Ping-luen said 90 per cent of the HK$16 billion sales target for the financial year to June had been achieved.
For the first two months of this year, SHKP had pulled in HK$6.5 billion from the sale of luxury residential development Cullinan in Kowloon Station and La Grove in Yuen Long.
Thomas Kwok Ping-kwong, SHKP vice-chairman and managing director, expects property prices to be volatile in the short term. 'But prospects for the property market remain positive as low mortgage rates and a tight supply of new flats will draw buying interest. Market sentiment is not as bad as the newspapers report.'
Victor Lui Ting, an executive director of Sun Hung Kai Real Estate Agency, said the developer would sell 2,500 units worth HK$17 billion this year.
Shares of SHKP rose 3.95 per cent to close at HK$59.20 yesterday.
