K Wah International aims to double its investment property portfolio to 200,000 square metres in the next three to four years in a bid to enhance its recurrent income after first-half profit sank 76 per cent to HK$214 million due to a sharp fall in property sales.
Excluding a HK$101.94 million revaluation gain on investment properties, the company's underlying profit for the six months to June was HK$129 million, far below Goldman Sachs' estimate of HK$377 million.
Turnover in K Wah, whose chairman is Lui Che-woo (pictured), dropped 77 per cent to HK$750 million, from HK$3.03 billion in the same period last year.
An interim dividend of 5 HK cents was declared.
"The lower than expected profit was mainly because of only one new project launch in Hong Kong in the first half," said Kay Ng, an analyst at Phillip Securities.
Ng expects to see an improvement in the company's sales in the second half of 2014 as more projects are due for launch in the coming months.
Herbert Hui, the chief financial officer at K Wah, said that three residential projects - in Shanghai, Guangzhou and Dongguan - would be released for sale in the second half, while two housing projects in Tseung Kwan O will be ready for pre-sale next year.
He said about HK$600 million of contract sales were not booked in the first-half result. They comprised sales from its 15 per cent owned Mayfair by the Sea phase one in Tai Po and its wholly owned luxury residential project Grand Summit in Shanghai.
Lui said the developer would retain 55,000 square metres of serviced apartments from The Palace and Grand Summit in Xuhui district in the heart of Shanghai for possible lease as part of the plan to double its investment portfolio.
Gross rental in the first half at the company was HK$149.04 million, up 6 per cent from the same period last year, while property sales slid 82 per cent to HK$551.52 million during the period.
"Xuhui district is a prestigious area which has residences of the rich and the famous," Lui said.
"We believe holding quality assets will be at the best for our shareholders in the long term."
He said about 29,000 sq metres in Grand Summit would be ready to be leased out in November.
Commenting on the market outlook, Lui said the polarisation of Hong Kong's real estate market may be deepening in the coming months.
"We will continue seeing buoyant sales of flats worth less than HK$10 million given strong demand from end-users while it is stable in the top-end sector," he said.
K Wah International shares fell 2.25 per cent to close at HK$5.20 yesterday.