Hang Lung loaded with cash

PUBLISHED : Friday, 20 January, 2012, 12:00am
UPDATED : Friday, 20 January, 2012, 12:00am
 

Hang Lung Properties says it has built up a war chest of more than HK$43 billion in cash and credit for future expansion.

The ambitious plan comes after the developer reported underlying profit rose 29 per cent for the six months to last month, driven by strong rental income.

Excluding a revaluation gain on investment properties, core earnings at Hang Lung - the first listed developer to announce its results for last year - were HK$1.65 billion for the six months to December 31, compared with HK$1.27 billion a year earlier.

Turnover jumped 22 per cent to HK$3.06 billion from a year ago. Operating profit from property leasing grew 11 per cent to HK$2.3 billion, while property sales reached HK$150 million, up from just HK$2 million in 2010. Two flats at the Harbourside in Kowloon Station were sold at an average of HK$44,000 per sq ft during the period. Hang Lung declared a dividend of 36 cents.

Parent Hang Lung Group saw its underlying profit jump 27 per cent to HK$1 billion in the period, and a dividend of 38 cents was given.

The two companies have changed their fiscal year end to December 31 from June 30.

'We are in no hurry to sell our new projects in Hong Kong as we have sufficient capital,' said Ronnie Chan Chi-chung, chairman of Hang Lung Properties.

Ho Hau Cheong, executive director of the company, said the firm had cash reserves of HK$23 billion plus a HK$20 billion undrawn credit line and had no immediate plan to tap the debt market.

In addition, he said the firm could raise about HK$20 billion if it released up to 1,400 units - including 1,200 at Long Beach and 200 units at the Harbourside - for sale.

Commenting on prospects for the mainland property market, Chan said it was difficult to make a forecast.

'The mainland real estate market is heavily clouded by uncertainties. I'm unsure if now is a good time for land acquisition,' he said.

Mainland Hang Lung properties like Grand Gateway in Shanghai have been very profitable, but property sales and prices have dropped in general as cooling measures introduced by Beijing last year started to take effect.

'It is unclear if the mainland property market has hit the bottom,' Chan said.

He said it was also not a good time for land acquisition in Hong Kong, despite the MTR Corporation withdrawing the sale of the Bayside site at Tsuen Wan last week owing to unsatisfactory offers.

'We will buy when the market is entering a stage of darkness, which means none of our rivals have submitted bids [at a land sale or tender].'

The tender sale for the Tsuen Wan site still received four bidders, he said.

He expected rental income on the mainland to exceed that of Hong Kong in the short term.

'It is just a matter of time, as we will add one to two million square feet of commercial projects on the mainland every year,' he said.

For the six months to last month, the mainland contributed 48 per cent of the company's HK$2.87 billion in gross rental income. As of June 30 last year, rental income from the mainland accounted for 45 per cent of the total.

After the announcement of the strong results, shares of Hang Lung Properties rose 9.93 per cent to close at HK$26.50, while Hang Lung Group rose 7.39 per cent to HK$49.35.

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