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Sandy Li

Hang Lung Properties may raise its HK$40 billion budget  for retail property investment on the mainland  despite a 53 per cent dive in its underlying profit for the  past full financial year as a result of selling only four  flats in Hong Kong during the  period.
Chairman Ronnie Chan Chichung  said Hang Lung had committed HK$38 billion towards building seven shopping centres on the mainland so far this year.
'Our target will be met if we add one more project,' he said. 'But our cash-rich position allows us to be flexible in our investment. If we see a good investment, there is no reason not to go for it.'
 Besides two shopping centres in Shanghai, Hang Lung owns a land bank of 20 million square feet  to be developed into commercial space in five mainland cities, he said.
The land cost ranged from HK$100 to HK$450 per square foot, accounting for less than 16 per cent of the total investment costs of each project, Mr Chan said.
Typically, land costs  could be about 30 per cent of total development costs, analysts said.
For the year to June,  Hang Lung's underlying profit,  derived from its core operations, fell to HK$2.39 billion mainly  because of a 99 per cent  dive in property sales. The result was in line with the market forecast of  HK$1.95 billion  to HK$2.4 billion.
Hong Kong's fifth-largest developer sold only four residential units  at Aqua Marine in Cheung Sha Wan, bringing a gross profit of HK$10.4 million, while rental income grew 11 per cent to HK$4.16 billion.
Mr Chan said the  company would not change its home-selling strategy, which is to  release units only at the best possible time  to maximise the development margin.
'Our units will only sell at good prices,' he said. 'We will closely monitor the market before we put more units on sale.'
The company  is in no rush to sell the 2,000 completed units  at Long Beach and the HarbourSide luxury residential project in West Kowloon.
Executive director Terry Ng Sze-yuen said the  company hoped to release 500 units with a garden view at  the HarbourSide  if prices continued to rise in the second half.
Taking into account a significantly lower revaluation gain from its investment properties, Hang Lung's net profit  fell 69 per cent to HK$4.13 billion while turnover  dived 58.6 per cent to HK$4.17 billion. It declared a final dividend of 51 HK cents. 
Eric Yuen Chi-fung, the head of research at Guoco Capital, said Hang Lung  was very likely to start selling flats in the next 12 months, considering the rally in property prices and  sales.
'Yet the HarbourSide won't be sold out within the year as only one-third of the flats were sold in the past five years,' Mr Yuen said.
Hang Lung  will generate a total profit of HK$20 billion  from  selling the remaining 2,000 flats in Hong Kong,  Guoco Capital estimates.
Adrian Ngan Wai-hung,  the executive director of  research  at CCB International Securities, estimates  prices at HarbourSide will be more than HK$12,000 per square foot for garden-view flats and HK$15,000 to HK$20,000 for units with a seaview. 
Mr Ngan said about 40 per cent of the 1.2 million sqft at its shopping centre in Shenyang  had been pre-leased at between HK$30 and HK$35 per square foot  a month.
'We expect 80 per cent of the space to be taken up when the mall opens next year,' he said.
The seven shopping centres on the mainland to be completed  by 2013 are in Shenyang and Wuxi with two each, Tianjin,  Jinan and Dalian.
Separately, Hang Lung Group reported underlying profit dropped 43 per cent to HK$1.45 billion. It declared a final dividend of 54 HK cents.



Hang Lung may boost HK$40b war chest