Lai Sun eyes stronger leasing to boost cash flow

The group is banking on key projects in Hong Kong and the mainland to increase its portfolio and boost rental income, deputy chairman says

PUBLISHED : Thursday, 10 October, 2013, 12:00am
UPDATED : Thursday, 10 October, 2013, 4:01am

The Lai Sun group of companies says it aims to strengthen cash flow by increasing the leasing of properties in Hong Kong and on the mainland.

The group's property flagship Lai Sun Development (LSD), which is focused on the Hong Kong property market, owns a leasing portfolio of 1.4 million square feet.

LSD deputy chairman Chew Fook Aun said: "The joint-venture office development with Henderson Land in Tsim Sha Tsui is scheduled for completion in the third quarter of 2015. CCB Tower in Central started to contribute this year. The two buildings will contribute a total rental income of HK$200 million a year."

He said annual rental income of the leasing portfolio would increase to between HK$700 million and HK$800 million in two years. The leasing portfolio of Lai Fung Holdings, the group's mainland property arm, will increase from 2.4 million sq ft to 3.5 million sq ft in two years, with rental income increasing 26 per cent to about HK$800 million.

Chew, also Lai Fung's chairman, said: "It could strengthen our cash flow. Then it won't be a problem for us, even if there is fluctuation in property prices."

At the end of 2012, LSD joined ousted Sun Hung Kai Properties' chairman Walter Kwok Ping-sheung to acquire a residential site in Tseung Kwan O. It is the most expensive site in the area in terms of accommodation value. Chew said the project would be launched in 18 months to two years. "I don't think the land price is expensive," he said. "It is located in a prime location and has a sea view."

He said he believed demand for housing remained strong, even though developers had begun to cut their asking prices for new projects recently.

"The market is supported by the low interest rates," Chew said. "I believe the United States will raise the interest rates as soon as the second half of 2014. And Hong Kong is still having the problem of supply imbalance."

The companies announced their annual results yesterday.

LSD recorded an underlying loss, excluding property revaluations, of HK$201.4 million for the year to July, compared with an underlying profit of HK$845.5 million the previous year.

The loss was owing to higher provision for the tax indemnity given to Lai Fung when it was spun off in 1997, higher interest expenses from guaranteed notes issued during the period and a smaller contribution from eSun Holdings. Net profit grew 12 per cent to HK$2.56 billion, while turnover rose 10 per cent to HK$963.8 million.

Meanwhile, Lai Fung posted a 114 per cent jump in underlying profit to HK$287.5 million from strong growth in property sales and rental income.

Its turnover from property sales grew 49 per cent to HK$1.37 billion during the period.