Wharf confident on retail outlook
Developer aims to boost rental income from spruced-up HK malls and new centres on the mainland, following 5pc gain in core profit
The Wharf (Holdings) plans to strengthen its retail property income by renovating its shopping malls in Hong Kong and adding to its commercial projects on the mainland.
About 56 per cent of its core profit came from its investment properties in Hong Kong and on mainland in the first half of this year.
Deputy chairman Stephen Ng Tin-hoi yesterday said: "We have spent about HK$500 million to renovate Times Square in Causeway Bay. After the work is completed at the end of this year or early next year, the area under renovation is expected to contribute an extra rental income of HK$200 million a year."
The company will also build an extension to Ocean Terminal in Tsim Sha Tsui, but the development cost has yet to be confirmed.
On the mainland, the firm is developing five International Finance Squares (IFS). Chengdu IFS will be its next flagship centre and is scheduled for completion next year.
"The total retail area in Hong Kong and mainland will reach 11.5 million square feet by 2016, three times our current retail space in Hong Kong," Ng said. "Based on the leasing of Chengdu IFS, international brands still have confidence in the mainland's retail market. We do not see a slowdown in rental growth in Hong Kong and the mainland. Rental growth in July is still higher than the average growth rate in the first half."
The Wharf yesterday posted a 5 per cent increase in underlying profit, excluding property revaluation gains, to HK$5.68 billion in the first half. But turnover dropped 18 per cent to HK$14.88 billion, due to fewer projects being completed in the period.
Operating profit from Harbour City surged 17 per cent during the period, while that of Times Square grew 6 per cent.
In property development, the company generated 10.9 billion yuan from contracted sales in the first half. Including the property sales over the last two months, Ng said the company achieved 70 per cent of the full-year sales target of 20 billion yuan.
But the profit margin of property development on the mainland in the first half was over 20 per cent, which is less than the 30 per cent recorded in 2012.
"We sold the projects at a lower price last year because of the poor market sentiment. It has affected the profit margin this year and the first half of 2014," Ng said. "But the projects released for sale this year have a higher selling price. We hope it could boost our profit margin."
The firm declared an interim dividend of 50 HK cents a share, against 45 HK cents a year ago.
Shares in The Wharf dropped 3.9 per cent to close at HK$64 yesterday.