Early Light International Holdings, a large Hong Kong toy producer, is shifting its focus to property investment because of a substantial dive in profit from toy-manufacturing, according to chairman Francis Choi Chi-ming. The group has snapped up more than 25 property projects including car parks, retail shops, grade-B office blocks and luxury residential apartments, since the 1997 financial crisis. The firm's total investment in property, about HK$3 billion, accounts for a quarter of its capital. 'Profit margins [generated from toys production] have been squeezed to 15 per cent now from more than 30 per cent in the 1980s,' said Mr Choi. 'We will continue to hunt for properties for long-term investment, even though prices could probably drop a further 10 per cent in this poor economy.' Early Light has emerged as the most aggressive investor in the market in recent months. Shortly after the September 11 terrorist attacks, it bought The Hacienda in Repulse Bay from Sino Land for HK$460 million. It also purchased commercial project Energy Plaza in Tsim Sha Tsui from joint owners Sino Land, Kerry Properties and the Chinachem Group for HK$453 million in July. Mr Choi said it was easier to buy quality properties when the market was shrinking. Competition would be keener when the market was picking up. 'Locations, rental yields and bank valuations are the most important [factors in deciding to buy a property],' he said. He revealed that the purchase prices of The Hacienda and Energy Plaza had a 10 per cent discount to the bank valuations. They were in prime locations and secured high rental yields, he said. Most Early Light properties were 'good buys', with stable rental yields of 7 per cent to 9 per cent and reasonable capital growth, Mr Choi claimed. He said his worst investment was for six apartments at DeerHill Bay in Tai Po, bought directly from developer Cheung Kong (Holdings) for HK$8,000 per square foot to HK$10,000 per sq ft in 1997. The properties generate only 2 per cent rental yields at present. However, he learnt a lesson from the mistake - newly developed residential projects, especially in the New Territories, are less certain to be profit-making due to an abundant supply. Mr Choi said China's entry into the World Trade Organisation would greatly benefit the SAR's industrialists initially, as they could give a helping hand to inexperienced overseas investors in dealing with the mainland. In the long term, however, the profitability of the manufacturing industry would diminish substantially as foreign companies began to deal directly with China, he said. Mr Choi said Early Light would still be active in the Hong Kong property investment market in the coming years. The company was set up in 1972 and produced mainly electronic toys. Its production line was moved to the mainland in 1983. From 1990 onwards, the group also invested in the United States property market and pharmaceutical production.