Li confident on developer's path
The Cheung Kong chairman cites low debt ratio as boost for investment options after first-half earnings slide
Cheung Kong (Holdings), controlled by billionaire Li Ka-shing, says it will continue to pursue quality investments in Hong Kong and abroad. It reported a 30 per cent fall in first-half profit, excluding the contribution from Hutchison Whampoa.
"With a low debt ratio, the Cheung Kong group is well placed to make steady progress in a constantly challenging market," Li, the company's chairman, said in the results announcement. Its net debt was about 5.6 per cent.
Before Hutchison's contribution, the group's profit was HK$7.21 billion for the six months to June, down from HK$10.35 billion a year ago. Earnings were hurt by the government's property curbs.
"The property division was below market expectations as no major property projects were booked in the first half," said Adrian Ngan, Citic Securities' executive director of property equities research.
Hit by the depressed housing market and the cancellation of the controversial sale of HK$1.4 billion of hotel units at its Apex Horizon project in Kwai Chung, profit from property sales - including its share from joint ventures - fell 36.58 per cent to HK$3.83 billion in the first half, from HK$6.04 billion a year earlier. The sale of Apex Horizon was dropped in May after the Securities and Futures Commission found the deals breached the law as unauthorised investments.
However, rental income jumped 8.24 per cent to HK$1.06 billion during the period,
Analysts said deputy chairman Victor Li Tzar-kuoi, who chaired an analyst briefing, did not directly answer questions about whether the developer managed to meet this year sales target of up to HK$40 billion.
"He (Victor Li) said the buyers' profiles had changed after the government introduced a string of cooling measures. Due to the policy risk, it is hard to predict the market outlook," an analyst said, referring to a sharp drop-off in mainland buyers and investors.
Cheung Kong earlier said it aimed to sell more than 5,200 Hong Kong flats and 2,500 mainland units to raise between HK$35 billion and HK$40 billion from property sales this year, a record for the company.
Victor Li revealed in the analyst briefing that the company had achieved HK$13 billion in sales from mainland properties so far. That compares with HK$24 billion in 2011.
To boost its full-year earnings, Ngan expects Cheung Kong will dispose of more non-core assets or increase mainland property sales to offset the plunge in home sales in Hong Kong.
On Tuesday, Cheung Kong announced it has agreed to sell a shopping mall in Tin Shui Wai for about HK$5.85 billion. "The profit to be realised from the sale will help to boost its balance sheet and it will be ready to book in the second half," Ngan said.
After contributions from subsidiary Hutchison and a revaluation gain from its investment properties, Cheung Kong said its first-half net profit declined 13 per cent to HK$13.41 billion.
Earnings per share for the first half fell 13 per cent to HK$5.79, from HK$6.65 last year. Turnover, excluding the contribution from Hutchison, dropped 17 per cent to HK$14.62 billion. Directors declared an interim dividend of 58 HK cents per share, up from 53 HK cents a year ago.
Cheung Kong shares rose 2.38 per cent to close at HK$111.60 before the results announcement.