Higher demand for natural gas and increased interest income gave Hong Kong and China Gas (Towngas) a moderate rise in its interim profit. However, the 6.69 per cent profit rise to HK$1.7 billion did not overshadow the HK$18.2 million loss in the company's property portfolio. Analysts said the loss was due partly to disappointing sales at the King's Park Rise apartments in Kowloon, as well as refinancing charges for the International Finance Centre development, and costs associated with other smaller projects. Most of the loss was attributed to 10 apartments at King's Park Rise, which were sold for a combined loss of HK$10 million. 'The loss from the King's Park Rise project was a bit disappointing,' UBS Warburg analyst Alice Hui Suk-fong said. It had expected the property division to show a HK$48 million gain for the half. It was a far cry from last year's HK$10 million windfall from the sale of 32 units. Analysts said the general economic downturn, which had kept Hong Kong's property market in the doldrums, was the major reason for the poor performance in the company's property portfolio this year. Overall turnover, however, was up 6.16 per cent to HK$3.71 billion while gas sales in volume terms increased almost 3 per cent to 14.52 billion megajoules. Net interest income jumped 12.85 per cent to HK$167.7 million in the first six months. However, the strong contribution from the interest income was unlikely to repeat in the second half. Towngas, which distributes Naphtha-based pipe gas in Hong Kong, saw substantial growth in its liquefied petroleum gas (LPG) stations. Launched in the fourth quarter last year, the LPG business generated a revenue of HK$60 million in the first half. Towngas said about 66.66 per cent, or 12,000, out of a total of 18,000 taxis had switched to LPG from diesel. Its mainland gas transmission joint-ventures also did well, with a net contribution of HK$6.5 million in the first six months. Earnings per share were boosted 7.5 per cent to 30.1 HK cents, as a result of a HK$3.54-billion share buy-back in June. The repurchase resulted in a 6.45 per cent reduction in issued share capital, at a repurchase price of between HK$9.70 and HK$10.30 per share. An analyst said earnings per share would grow even more strongly in the second half as the group had continued to buy back shares. Looking to the future ABN Amro analyst Rohan Dalziel said: 'A smaller cash pile as a result of the share buy-back and sinking interest-rates mean interest-income will decline in the second half.' Cash reserves were down about half - from HK$6 billion to HK$2.47 million - as of June 30 as a direct consequence of the share buy-back. Analysts said Towngas was facing a testing time as the continuing weak property market would hamper growth in the property sector and, as a result, an increase in its customer base. During the first half, its Hong Kong customers rose 5.4 per cent, to 1.36 million. On a full-year basis, ABN Amro estimated Towngas' attributable profit to grow 2 per cent excluding any exceptional items while UBS Warburg believed the company's recurring earnings would edge up to HK$3.09 billion. Analysts said the stock would perform well as investors sought shelter in utilities amid a turbulent economic outlook globally and locally. Directors recommended a 12 HK cents interim dividend.
