MTR Corp profit falls on weaker property income

Transport and property giant gets extra funding for Express Rail Link project, but Sha Tin-Central line could go overbudget and behind schedule, chief warns

PUBLISHED : Friday, 11 March, 2016, 5:33pm
UPDATED : Friday, 11 March, 2016, 10:24pm

MTR Corporation posted a 5.9 per cent fall in post-tax underlying profit for last year to HK$10.89 billion on weaker property income, but its chief vowed on Friday to proceed with a HK$21 billion special dividend payout.

The Hong Kong railway operator, which also develops housing near its stations, said a 34 per cent drop in profit contribution from its property development business was to blame for a 16.7 per cent drop in profit attributable to shareholders to HK$12.99 billion.

“Our underlying profits did see a decline, but that is mainly due to our non-recurrent property development profits in 2015, which saw only the booking of profits from Hemera Lohas Park III, significantly less than in 2014 from the Austin station project,” MTR Corp chief executive Lincoln Leong said. Recurring business profit grew 6.7 per cent to HK$8.565 billion, while total revenue increased 3.8 per cent to HK$41.7 billion.

The delays and other construction difficulties will increase the estimated cost of the project
Lincoln Leong, MTR Corp

MTR Corp, which is 76 per cent owned by the Hong Kong government, received last-minute approval from the Legislative Council on Friday for an extra HK$19.6 billion in funding for the Express Rail Link to Guangzhou, preventing the HK$84.4 billion work-in-progress from being mothballed. Leong, who vowed to go full-speed with the project and to stick to the budget, said the company would pay the first half of an agreed special dividend of HK$4.40 per share in the second half of this year, and the remainder in the second half of next year.

But the new Sha Tin to Central Link, the other government project MTR Corp is managing, is likely to go overbudget too and could run into a similar kind of prolonged deadlock if there is no consensus on who should foot the bill. Leong said the project was already six months behind schedule because of archaeological work in To Kwa Wan and because the site near the Hong Kong Convention and Exhibition Centre was not available. “The delays and other construction difficulties will increase the estimated cost of the project,” he said. “We are taking a re-evaluation of the project cost and expect to report back to the government by the end of the second quarter.”

Leong declined to give an estimate of the possible extra funding required but indicated it was not MTR Corp’s responsibility to pay for it. “We are only the project manager,” he said.

MTR Corp’s transport operations in Hong Kong saw a 8 per cent drop in profit contribution to HK$2.493 billion as operating costs rose 5 per cent last year, despite passenger traffic rising to a new high. The company attributed that to the opening of new stations on its Island Line. Its station shops contributed HK$4.23 billion in profit, up from HK$3.93 billion in 2014, as rent increased.

MTR Corp’s railway businesses in mainland China – including operations in Beijing, Hangzhou and Shenzhen – recorded a growth, while that in Australia and Sweden declined.

Its Hong Kong, property development profit in 2015 was HK$2.89 billion, down from HK$4.22 billion. David Tang, MTR Corp’s property director, said the company would open tender for the Phase 11 development in Lohas Park and the first developments in Ho Man Tin and Wong Chuk Hang some time in the next 12 months, which would in total provide some 4,800 home units. He said the company’s first property development in mainland China, Tiara in Shenzhen, had met with a strong response and was 96 per cent sold at the end of last year. But finance director Stephen Law said the company was not expecting to book significant income from its property businesses in 2016. .

The company’s net assets increased 4.2 per cent to HK$170.17 billion, while earnings per share dropped to HK$1.87 from HK$1.99. It declared a final dividend of HK$0.81 per share, with a scrip dividend alternative.