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Richard Woo

Kerry Properties' net profit fell 41 per cent from HK$1.23 billion to HK$728.2 million in the year ended December 31, due mainly to a HK$400 million provision for its residential project Ocean Pointe in Sham Tseng.

The result is below analysts' expectations of HK$975 million to HK$1.44 billion. Kerry shares fell 2.99 per cent yesterday to close at HK$11.35.

Chairman Edward Kuok Khoon Loong said that excluding the impact of provisions, net profit fell only 8.5 per cent, and some provisions could be written back during the year if selling prices improved.

After the provisions, the all-in cost of the Ocean Pointe project now stands at HK$3,700 per square foot.

Executive director Steven Ho said he believed Ocean Pointe could be sold at HK$3,900 per sq ft to HK$4,000 per sq ft on average.

Mr Ho dismissed suggestions the Park Avenue project in Olympic Station would make a loss, saying sales response to the property, priced at HK$4,700 per sq ft to HK$4,800 per sq ft, had improved. Remaining units were mainly on higher floors with sea views.

The Hong Kong property division's contribution to profit fell 80 per cent to HK$199 million for the year, despite unchanged turnover of HK$1.68 billion.

After the sale of several investment properties, rental income fell 2.3 per cent, but Mr Ho said the company's Mid-Levels luxury portfolio reported a 5 per cent to 18 per cent increase in rents on lease renewals.

Kerry will pay a final dividend of 20 HK cents a share, making a total payout of 40 HK cents for the year, unchanged from a year earlier.

Mr Ho said this year the company would offer for sale Ocean Pointe, Constellation Cove in Tai Po Kau, Enterprise Square Two in Kowloon Bay and 88 units at Tregunter Tower II in Mid-Levels - which together could generate HK$7 billion if all were sold.

Operating profit from China rose strongly to HK$375.51 million from HK$79.34 million the previous year, mainly on the back of the property division's contribution of HK$252 million. Rental income from China grew to HK$355 million from HK$190 million with a full year's contribution from Beijing Kerry Centre and Shanghai Kerry Centre.

Joint managing director Wong Siu-kong said he expected China would contribute more to Kerry's revenue next year. The company would launch phase two of Central Residences in Shanghai and develop the 94,000 square-metre luxury residential project in Shenzhen.

Chief financial controller Chew Fook Aun said Kerry had no intention of raising funds by issuing convertible bonds or making a share placement.

With HK$5 billion in cash and credit lines on hand, the company would repay a HK$4 billion bank loan due in September, thus reducing its gearing ratio to 25 per cent from 40 per cent.



Kerry Properties down 41pc due largely to Ocean Pointe provision