Hysan profit dips 4.1pc but rentals buoyant
Hysan Development, the biggest landlord in Causeway Bay, said earnings at its core business dropped 4.1 per cent in the first half because of lower gains from financial investments, but its overall rental business remained resilient.
Recurring underlying profit was HK$580 million for the six months to June, compared with HK$605 million a year earlier. The decline was due to lower gains from financial investments and other gains, which totalled HK$23 million, down from HK$117 million.
Including one-off items and a HK$397 million fair-value gain on investment properties, net profit slumped 68.9 per cent to HK$1.07 billion from HK$3.44 billion a year earlier, when it booked a HK$3 billion revaluation gain. Revenue climbed 7.59 per cent to HK$851 million.
Hysan declared an interim dividend of 14 HK cents per share, unchanged from last year.
Owing to the deteriorating economy, spot rents for office spaces fell 16 per cent on average during the first half, said executive director Wendy Yung Wan-yee. However, rentals for new contracts signed in the first half were 37 per cent higher than contracts signed three years ago, which helped boost overall rental income.
'I am confident that positive rental reversion could [continue to] be achieved in the second half, even though the degree will be narrowed,' said Ms Yung.
During the period, rental income from the office sector climbed 11.95 per cent to HK$384 million. The occupancy rate was 91.4 per cent on June 30, falling 6.1 percentage points from the end of last year because the majority of the contracts due this year expired in the first half.
Insurance company Manulife Financial Corp decided to relocate part of its office space from Hysan's Lee Garden to Kowloon East. Although the 100,000 square feet of office space to be vacated would only be available in the second and third quarters of next year, Ms Yung said it would not put heavy pressure on the office leasing portfolio.
Meanwhile, the retail segment posted moderate growth, with rental income increasing 4.55 per cent year on year to HK$322 million, while residential income totalled HK$145 million, up 3.57 per cent.
'There are some recent signs of the Hong Kong real economy stabilising,' said chairman Peter Lee Ting-chang. 'There may, however, be uncertainties on the path to a sustained recovery.'
Analysts believe office rents in Causeway Bay will decline at a lower pace or even start stabilising in the second half, which will help relieve pressure on rental income.
But the redevelopment of Hennessy Centre is not expected to be completed until the end of 2011, which means Hysan will lack a catalyst to stimulate earnings in the next two years.
Hysan shares closed 2.35 per cent down at HK$20.80 after the results were announced.
