Hong Kong company reporting season

Hong Kong developer Kerry Properties posts 34 per cent drop in core earnings

Profits from mainland projects surged while contribution from Hong Kong property sales weakened

PUBLISHED : Monday, 22 August, 2016, 7:16pm
UPDATED : Tuesday, 23 August, 2016, 8:55am

Kerry Properties, a Hong Kong-listed developer with property investments in both Hong Kong and mainland China, said its underlying first-half earnings fell 34 per cent to HK$1.43 billion as property sales in Hong Kong declined.

Net profit after property revaluation gains for the six months ended June 30 was HK$2.04 billion, or HK$1.41 a share, a decrease of 27 per cent from the same period last year.

The developer said an increase in fair value of investment properties of HK$607 million for the six months was unchanged from the same period in 2015.

Directors declared an interim dividend of 30 HK cents per share for the first half, unchanged from the previous year.

The underlying profit is in line with an earnings forecast of HK$1.44 billion predicted by Bocom International.

“Earnings fell as Hong Kong property sales have been slow when compared with that of last year,” said Bocom property analyst Alfred Lau.

During the six month period Kerry’s Hong Kong property unit reported a turnover of HK$715 million compared with HK$1.74 billion for the same period in 2015. Gross profit fell 46.73 per cent year on year to HK$473 million, mainly due to a drop in sales bookings at Dragons Range, a residential project in Sha Tin, in the first half.

Earnings fell as Hong Kong property sales have been slow when compared with that of last year
Alfred Lau, Bocom property analyst

However, gross profit for its mainland division grew 68 per cent to HK$2.14 billion from HK$1.27 billion last year as property sales in mainland projects improved.

China’s property sector has staged an encouraging rebound since the start of 2016. This upturn

reflects the central government’s supportive policies aimed at reducing the inventory of unsold

properties, as well as improved consumer and investor confidence, the developer said in the results announcement.

Kerry Properties, which was listed on Hong Kong exchange in 1996, focuses on residential, commercial, retail and office buildings, shopping malls, warehouses and logistics centres and mixed-used properties.

In June, S&P Global Ratings affirmed its “BBB-” long-term corporate credit rating on Kerry with a negative outlook. The company’s debt-funded expansion plan and accelerated land acquisitions could weaken its cash flows in the next 12 months, temporarily increasing leverage and limiting financial flexibility, the ratings agency said in its June report.

On Monday Kerry Properties’ shares fell 0.88 per cent to HK$22.5. They have dropped 2.39 per cent in the past 12 months, against a 8.2 per cent rise in the Hong Kong HSI Index.