A HUGE tax provision for China's new tax laws saw travel group Morning Star Holdings' attributable profits plunge 49.66 per cent to $2.24 million for the year ended December 31. The provision for the new taxes amounted to about $16.7 million to bring the group's total tax bill to $32.18 million, according to industry sources. Earnings per share fell 57.14 per cent to 0.9 cents. No dividend was recommended. The tax bill is not far behind the group's pre-tax profit of $46.7 million which was actually up 705 per cent from $5.83 million from the previous year. The source said that had it not been for the tax bill, the group would have recorded an after-tax profit of about $18.9 million. ''The figure set aside for the tax bill could be considered prudent as the group does not have any specific guidelines on how they will be taxed under the new laws. ''The Chinese tax pertains principally to the group's property projects on the mainland,'' the source said. Turnover increased 20.45 per cent to $1.17 billion while operating profits rose 457.44 per cent to $37.07 million. In a statement issued last night, the group said the $2.24 million attributable tax profits was slightly above the break-even position as estimated by the company in a circular dated January 12. The fall in profits have been well-anticipated by the market after the group announced a sharp revision in its profit forecast in January. The group said at the time it expected to see zero profit for the year-end as opposed to an earlier estimate of no less than $30 million profit. The break-even forecast came shortly after the Lippo Group sold Morning Star to one of Malaysia's largest conglomerate, Malaysian United Industries (MUI) for $144.57 million. At that time, the stock exchange was understood to be concerned that Morning Star's management was unable to deliver the whole picture of the company's business performance to shareholders. In a review of its operations, the group said Hong Kong travel agents experienced a sharp fall in the number of passengers for outbound package business tours, particularly in the second-half last year. ''Against this background, the operating results of our package tour business have been disappointing. ''The profit margin was further undermined by the keen competition among local travel agents,'' the group said. Phase I of the Morning Star Villa project in Zhongshan, China, in which the group has a 55 per cent equity, is almost completed, with about 80 per cent of the units sold. Construction work is underway on Phase II and more than 50 per cent of the units are sold. In the second-half last year, the group embarked on a property consultancy business. Apart from Morning Star Villa, the group succeeded in obtaining sales agency contracts with developers of Dragon Plaza in Guangzhou and Golden Chrysanthemum Garden in Zhongshan to market their properties outside China. Vista International Hotels, the hotel management arm of the group, manages seven hotels in Australia and China and it has plans to expand this division in the next year. Morning Star Holdings Australia, an Australian-listed subsidiary, recorded a consolidated after-tax profit of A$581,000 for the year ended December 31. The amount represented more than a two-fold increase over the past year. ''It is believed that the revenue from our hotels will increase in the years ahead when the economy continues to recover and further tourism opportunities arise in Australia,'' the group said.
