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Hong Kong company reporting season

Swire Properties sees no sign of turnaround in Hong Kong retail market as its interim core profit falls 9.6pc

PUBLISHED : Thursday, 18 August, 2016, 1:20pm
UPDATED : Thursday, 18 August, 2016, 11:00pm

Swire Properties says Hong Kong’s retail market shows no signs of a major turnaround as the owner of The Mall at Pacific Place and Cityplaza in Quarry Bay reported a 9.6 per cent year on year fall in core earnings for the first half this year.

Swire Properties chief executive Guy Bradley said it was hard to say at what stage the retail market was at the moment. “It is still tough. We have not seen any particular sign of a major turnaround,” he said after the firm’s interim results announcement.

On Thursday Swire Properties announced underlying profit, excluding revaluation gains in investment properties, fell 9.6 per cent to HK$3.55 billion for the six month to June due to a sharp fall in luxury property sales in Hong Kong.

Despite mainland developers bidding up land prices recently, Bradley said there were no change in the firm’s appetite for land acquisition.

“It is true that in the recent couple of years, competition in the [government land] auction from mainland companies has increased. But if we found something very attractive, we will continue to bid as aggressively as we can,” he said.

For the six months to June 30, operating profit from property trading, mainly contributed from Hong Kong and Miami, United States, dropped 48.78 per cent to HK$525 million in the first half, from HK$1.02 billion a year ago, the developer said.

Pacific Place retail sales underperformed the market further in the second quarter, partly because of the tenant reshuffling programme, in which more food and beverage tenants were added
Hildy Ling, Morgan Stanley analyst

“In Hong Kong, property buyers are cautious in light of the slowing Hong Kong economy. In

Miami, the strength of the US dollar against major South American currencies since the

latter part of 2015 has adversely affected demand for condominiums by non-US buyers,” chairman John Slosar said in the company statement.

Shares of Swire Properties, which owns more than 27 million square feet of offices, retail, hotels and serviced apartments in Hong Kong and mainland China, declined 2.04 per cent to close at HK$21.6 on Thursday. In the past six months the stock has risen 13.82 per cent.

Swire Properties said on August 8 that retail sales at The Mall at Pacific Place registered a 17 per cent year on year decline in the first half to June, while Cityplaza in Quarry Bay dropped 4.1 per cent during the same period, according to the announcement of its second quarter operating figures.

“Pacific Place retail sales underperformed the market further in the second quarter, partly because of the tenant reshuffling programme, in which more food and beverage tenants were added,” Hildy Ling, an equity analyst at Morgan Stanley, wrote in a research note ahead of Swire’s interim result announcement.

“More lower-yielding food and beverage tenants could mean average rent rates drop at Pacific Place mall,” she said .

The developer’s net profit fell 37.2 per cent to HK$5.33 billion for the first half to June.

The firm will pay an interim dividend of 23 HK cents, the same as a year earlier.

Separately, Swire Pacific, parent of Swire Properties, reported underlying profit fell 27 per cent to HK$3.54 billion for the six months to June. The directors declared an interim dividend of HK$1 per class A share andȼ22 HK cents per class B share.

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