Henderson Land

Tenement buy to boost earnings

PUBLISHED : Thursday, 22 March, 2012, 12:00am
UPDATED : Thursday, 22 March, 2012, 12:00am

Henderson Land Development paid HK$11.8 billion for 37 old tenement buildings in the city centre which it will redevelop, adding significantly to the group's future earnings.

Chairman Lee Shau-kee said in the company's results statement yesterday that these 37 projects would provide 2.88 million square feet, or 3,000 flats, after the redevelopment. This translates into an average land cost of about HK$4,100 per sq ft.

The projects will be ready for sale over the next two years.

Lee said he believed the government's policy initiatives on urban renewal could 'provide the group with a source of urban land supply that requires lower costs and hence higher margins'.

The tenement buildings, located in Mid-Levels, Tai Hang, Western District, Cheung Sha Wan and Tsim Sha Tsui, are part of the developer's 21.1 million sq ft land bank.

The developer yesterday reported its underlying profit rose 10 per cent to HK$5.56 billion last year. In 2010, Henderson Land announced a 16 per cent drop in core earnings after it cancelled the sale of 20 flats at its controversial 39 Conduit Road development. Turnover last year rose 114.15 per cent to HK$15.18 billion.

The company declared a final dividend of 70 cents a share for the second half, the same as it did last year. Including the interim dividend of 30 cents per share already paid, the total dividend for the year amounts to HK$1 per share.

Looking ahead, Lee expressed optimism about the prospect of Hong Kong's property market given growing housing demand from both mainland and local residents as well as the continuation of the low-interest-rate environment.

This year the company plans to sell two sizeable developments in Lok Wo Sha, Ma On Shan and Tai Tong, Yuen Long.

Together with its unsold stock, more than 4,000 units would be available for sale this year, and should bring in significant revenue.

The group's projects were all well positioned for sale to capitalise on emerging opportunities arising from market changes, he said.

Meanwhile, the company's subsidiary Henderson Investment announced its net profit last year totalled HK$108 million, down 34 per cent compared with a year earlier.

Henderson Investment said it was seeking clarification from the mainland authorities regarding the operating rights of its 60 per cent interest in Hangzhou Qianjiang Third Bridge in Zhejiang province.

The Hangzhou toll office told the joint venture this month that its operating rights would terminate on March 20 this year, instead of 2027, as was the company's understanding.

Henderson Investment said the joint venture was granted a 30-year operating right to the bridge that opened in 1997. But in 2003 the Zhejiang government fixed the period of entitlement to toll fees for 39 toll roads, including the Hangzhou Qianjiang Third Bridge, at 15 years.

'Henderson Investment will continue to negotiate with the mainland authorities and take all necessary action to protect its interests,' it said in the results statement.

If Henderson Investment ceases to have an economic interest in the Qianjiang Third Bridge and no suitable investment opportunities are identified, its assets would consist substantially of cash.

As a result, the stock exchange may consider the firm does not have a sufficient level of operations or sufficient assets to warrant the continued listing of its shares and may suspend dealings or cancel listing of shares.

Henderson Investment announced a final dividend of 2 cents.

Henderson Land shares closed 0.1 per cent higher yesterday at HK$46.05, while Henderson Investment rose 1.61 per cent to 64 cents.