Hong Kong developer K Wah reports first decline in core profit since 2017 in absence of dividend from chairman Lui Che-woo’s casino firm Galaxy Entertainment
- The company’s 2021 underlying profit, excluding a revaluation gain on investment properties, fell 17.4 per cent to HK$2.93 billion
- In 2020, K Wah received HK$73 million in dividend from Galaxy, which owns and operates hotels and casinos in Macau
The company’s 2021 underlying profit, excluding a revaluation gain on investment properties, fell 17.4 per cent to HK$2.93 billion (US$374 million) from HK$3.54 billion, K Wah said in a statement on Tuesday. Net profit taking the revaluation gain into account rose 3 per cent to HK$3.4 billion.
“The global economy is expected to be volatile and growth is less visible, as there are more uncertainties resulting from the anticipated interest rate hikes led by the US, along with its tightening of liquidity to curb its rising inflation,” the company said.
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As of December last year, Galaxy’s share price was down to HK$40.4 from HK$60.25 as of the end of 2020, which translates into a HK$3.2 billion decline in the total value of its 162 million shares. K Wah said on Tuesday that the change in Galaxy’s fair value would not be reclassified to profit or loss. Since it did not sell the stock, the decline in Galaxy’s fair value will not affect K Wah’s balance sheet.
K Wah recorded a 38 per cent increase in turnover to HK$16.2 billion last year, mainly from property sales at its K Summit and Solaria developments in Hong Kong, its Azure and Windermere projects in Shanghai, the J City development in Jiangmen, and rent income from the Shanghai K Wah Centre.
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The developer will pay a final dividend of HK$0.14 for last year, the same as 2020.
The relationship between China and the United States remained tense, and escalating geopolitical tensions and resulting oil price hikes, profound changes in the international landscape and signs of deglobalisation also continue to cast uncertainties and volatility in the global economy, K Wah said.
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The average price of lived-in homes in the city fell 1.14 per cent in January, its biggest drop in almost two years, as the fifth wave prompted anxious owners to offload their flats at steeper discounts. But the worst was yet to come, with industry experts forecasting a deeper correction of up to 10 per cent in the first half of this year.
K Wah, however, remained positive about demand in both the resilient Hong Kong and mainland China property markets, it said. It added that it had about HK$8.6 billion worth of contract sales yet to be recognised as of December 31, 2021. This is because under Hong Kong’s accounting rules, developers can only book profits when the concerned flats have been completed.
This year, the developer will launch new joint-venture residential projects at Kam Sheung Road Station, Kai Tak and Lohas Park in Tseung Kwan O. It has a 33.33 per cent stake in the Kam Sheung Road Station project, and a 40 per cent-owned development in Kai Tak. Both were expected to launch for presale in the first half of 2022, it said.
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The presale launch of its 30 per cent-owned project in Lohas Park will come in the second half of this year, it added.
