Developer expects 40pc margin on projects in next two years Sun Hung Kai Properties is confident of posting double-digit growth this year, with bigger margins from its property developments offsetting the recent slowdown in the sector, according to a senior executive. The blue-chip developer also expects property prices to increase 10 per cent a year until 2008, says executive director Michael Wong Yick-kam. He estimates profit margins from the company's property developments will reach 40 per cent in the year to June and remain at that level for the next two years. This compares favourably with the 35 per cent achieved last year but is still short of the 50 per cent margin it posted in 1996. 'The property market is quiet at present,' Mr Wong said yesterday. 'But homebuyers' confidence in the economy remains strong against a backdrop of tight residential supply. So, we expect to see healthy growth in the next few years.' SHKP's earnings, which surged 49.8 per cent to $10.37 billion in the past financial year, are expected to grow 21.24 per cent to $12.57 billion this year, according to a Thomson Financial poll of 18 brokers. However, the growth could slow to 4.2 per cent, or $13.1 billion next year, the poll showed. Projects that would be booked in the company's accounts this year included the Arch in West Kowloon, Chelsea Court in Tsuen Wan and Park Island on Ma Wan, Mr Wong said. The company was more cautious about the market's longer-term outlook after 2009 because of rising land costs. 'Unless there is a huge surge in property prices beyond 2009, there is a possibility that profit margin will not be as good as it is,' Mr Wong warned. He said SHKP aimed to complete 2.5 million square feet of residential projects this financial year, rising to 2.7 million sq ft next year and to 2.9 million sq ft in 2008. He said the controversial Hunghom Peninsula development should hit the market in the second half of this year. With reserves of more than $9 billion, the company was looking to replenish its land bank this year and was holding talks with the government to convert about five million sq ft of farmland into development plots, Mr Wong said. The group had a gross floor area of 41.9 million sq ft in its land bank on June 30 last year. It also had more than 21 million sq ft of agricultural land. Meanwhile, Mr Wong said SHKP had been in talks over residential projects in second-tier mainland cities with potential joint-venture partners, including China Resources Group. The projects, comparable in size to the company's 700 million yuan Hangzhou residential and commercial joint venture with China Resources, should be finalised in the next few months, he said. Shares of SHKP closed unchanged yesterday at $75.50. THINKING BIG Major Sun Hung Kai Properties projects 2005/2006 The Arch Kowloon Station Park Island (Phase 5) Ma Wan Noble Hill Sheung Shui Severn 8 The Peak Estimated total gross floor area of all completed SHKP residential projects: 2.5 million square feet 2006/2007 Harbour Green Airport Railway Olympic Station Park Island (Phase 6) Ma Wan Manhattan Hill Cheung Sha Wan Millennium City (Phase 6) Kwun Tong Estimated total gross floor area of all completed SHKP residential projects: 2.7 million square feet 2007/2008 Yoho Town (Phase 2) Yuen Long Estimated total gross floor area of all completed SHKP residential projects: 2.9 million square feet
