MTR looks to key property project after profit dip

PUBLISHED : Tuesday, 11 March, 2014, 5:58pm
UPDATED : Wednesday, 12 March, 2014, 12:47am

MTR Corp saw its net profit drop 2.6 per cent to HK$13 billion last year but says a major property project to be booked this year will boost earnings.

The company's underlying profit, stripping out investment property revaluation, dropped 10.6 per cent year on year to HK$8.6 billion, with the contribution from property development dropping 57 per cent to HK$1.16 billion.

"Property development profits in 2013 were more modest than in 2012," MTR chief executive Jay Walder said yesterday.

However, it had achieved strong pre-sales at Austin Station site C last year, he said, with all 576 units sold and the profit would be recognised when occupation permits were issued, which was expected this year.

Robust growth at retail businesses in its stations and retail rents at its shopping malls partially offset the weaker property results.

Operating profit from stations' commercial business increased 25 per cent to HK$4.1 billion, while retail rents at shopping malls run by MTR - including Elements, above Kowloon Station, and Telford Plaza in Kowloon Bay - increased 11 per cent to HK$3.8 billion.

Income from transport operations in Hong Kong rose 4.4 per cent to HK$15 billion last year on 3 per cent growth in patronage.

Operating profit from the unit increased 3.2 per cent to HK$6.7 billion, representing an operating margin of 44.3 per cent.

DBS Vickers analyst Jeff Yau said MTR had not tendered any land at its stations over the past three years and that would dim the prospects of its property division from 2016.

The company aims to tender a project atop Tai Wai Station and also Lohas Park IV this year, which would provide 4,400 units in total.

But it cancelled a tender at Tin Wing light rail station last month, the second time it had been withdrawn.

Development profits in 2013 were more modest than in 2012

A conflict between the Hong Kong government's plan to increase land supply and MTR's desire to maximise returns to shareholders escalated last week when Secretary for Development Paul Chan Mo-po criticised the company for not pulling its weight in the tendering of the Tin Wing project.

Chan even threatened on March 2 to reclaim the land for public housing, saying that discussions with MTR were continuing.

"It is a necessity for us to develop property while we are in support of the government's plan to increase land supply," MTR property director David Tang said yesterday.

He added that MTR was now in "deep discussion" with the government, the company's major shareholder.

Tang said pre-sales at a site above the Shenzhen Longhua Line depot, MTR's first mainland property project, were expected to start this year.

The gross floor area of the project is approximately 206,167 square metres.