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Peggy Sito

Chairman says increased building in China may be the only choice if freeze on land sales is extended

Hang Lung Group could be forced to accelerate investment on the mainland should the Hong Kong government decide to extend its suspension of land sales, chairman Ronnie Chan Chi-chung warned yesterday.

Mr Chan said a dearth of investment opportunities at home had led Hang Lung to consider looking  in mainland cities, which he said offered a stable market outlook.

'In the Hong Kong market ... we have no opportunity,' he said, referring to a government decision in November last year to put land sales on hold.

Mr Chan made the comments yesterday after Hang Lung posted a 29.6 per cent drop in full year earnings to HK$488 million.

His is one of a growing number of voices to express worries over the government's land policy, designed to rein in supply and support prices. The suspension was to last a year and a review is scheduled in November.

'If the government does not dispose of land, we will look at other opportunities,' Mr Chan said.

He said the land policy would have a detrimental effect should other Hong Kong property companies join Hang Lung in shifting their attention to the mainland.

It is not easy to withdraw capital once it is committed to China, Mr Chan said, adding the investment trend could harm Hong Kong's property  sector.

Hang Lung's lower earnings reflected lower contributions from subsidiary Hang Lung Properties, of which it owns 62 per cent, and a HK$73 million loss from joint venture Seaview Crescent.

Turnover rose 5 per cent to HK$3.42 billion. Despite the profit fall, its dividend was held steady at 32 cents per share each, bringing the full-year payout to 44 cents.

Earnings at Hang Lung Properties dropped 16.3 per cent to HK$1.01 billion, despite a 1 per cent rise in its rental portfolio. The fall was due to a reduction in property sales, it said.

Turnover fell 10 per cent to HK$2.14 billion. The dividend for Hang Lung Properties was left flat at 29  cents, bringing the full-year payout to 40 cents, unchanged from the previous year.

Mr Chan said the company's outlook would improve as Hong Kong investment property rentals were likely to grow in the single digits this year.

He was optimistic about the mainland market, especially Shanghai, where the company is building The Grand Gateway - a residential-commercial complex jointly developed by Hang Lung Group, Henderson China, Hysan Development and the Shanghai government.

During the year, Henderson China sold its 25.9 per cent interest in the site  to Hysan and Hang Lung. The deal raised  Hang Lung's stake to 66 per cent from 47 per cent.

As part of the deal, Henderson China agreed to buy one  Grand Gateway office tower from the joint venture company for US$124 million. The transaction will be completed by September 2006.

Mr Chan said the deal would contribute to profits but he did not say how much would be booked at the Hang Lung Group this year.

He also said he did not put 'too much hope' in the idea that the market would receive a boost from mainland visitors buying flats in Hong Kong,

Still, he conceded  sentiment had improved and the  property market was close to bottom.



Hang Lung turns towards mainland