Merrill forecasts huge profit jump at China Overseas

Doris Chan

Merrill Lynch expects China Overseas Land & Investments' net profit for the first half of this year to jump to HK$499 million, up 101 per cent from the same period last year. China Overseas will announce its result today.

Merrill Lynch said the developer's HK$330 million gain from the disposal of its Ryoden Development stake in April was believed to be booked in the first half of this year.

The core profit would drop 47 per cent to HK$119 million excluding the Ryoden sale, it said.

In April, China Overseas made a gain on disposal of 244 million Ryoden shares, its entire shareholding in Ryoden Development at HK$1.40 each.

Chairman Sun Wenjie said the shares were acquired three years ago at about HK$3 each. Provisions had been made for the investment during the past three years so the disposal had generated a profit.

Merrill Lynch estimated the drop in core earnings was mainly due to a scale-back in its Hong Kong property development profits.


It expects no profit from the Nerine Cove sale in Tuen Mun as most of the units were sold with preferential packages and at discounted prices.

China Overseas last week released 60 units at Nerine Cove, the development's last batch of unsold units, with additional sweeteners including 12-month free car-parking subsidies to buyers.

Merrill Lynch said the company's sales of its mainland residential projects in Beijing and Shanghai could be booked in the first half of the year.

It expected a 1 per cent to 2 per cent profit margin for China Overseas' Hong Kong projects but added it would need to adjust its earnings estimates if the developer continued to sell other Hong Kong properties such as Ellery Terrace in Ho Man Tin at discount prices.


Merrill Lynch maintained its intermediate-term 'buy' rating on the stock.