Sun Hung Kai Properties

Sun Hung Kai Properties reports 57pc increase in first half core profit on strong home sales

PUBLISHED : Tuesday, 28 February, 2017, 10:46pm
UPDATED : Wednesday, 01 March, 2017, 3:42pm

Sun Hung Kai Properties, Hong Kong’s largest property developer by market capitalisation, on Tuesday reported a 57 per cent increase in first-half underlying net profit, driven by strong home sales in Hong Kong.

The developer, which has a diversified portfolio of flats, retail and office space in both Hong Kong and mainland China, increased its interim dividend by 4.8 per cent to HK$1.1 per share.

Underlying net profit, excluding one-off items and foreign exchange fluctuations, climbed to HK$14.6 billion (US$1.9 billion) for the June to December period. Net profit was up 40 per cent to HK$20.7 billion. Revenue increased 32 per cent to HK$46.3 billion.

Despite the Hong Kong government raising stamp duty for second time buyers to cool the property market, the city’s home prices surged to another all time high in January.

“Factors such as low interest rates, a healthy labour market in Hong Kong and growing uncertainties in the global market have pushed more people to consider buying properties to maintain the asset value,” Victor Lui, deputy managing director at Sun Hung Kai, told reporters at the result briefing on Tuesday. He added that most of its newly launched units are sold to end-users.

The company expects to see “mild growth” in home prices throughout 2017.

Sun Hung Kai’s revenue from property sales amounted to HK$26.1 billion during the period, contributing 56 per cent of its total income. Rental income was HK$10.8 billion, accounting for 23 per cent of total income.

With deep-pocketed mainland Chinese developers willing to pay top dollar for prime land plots in Hong Kong, Lui admitted that as a local player it was “getting hard” to obtain land from government auctions now.

Nevertheless, the company said it would continue to actively acquire land in the city, but may seek alternative strategies such as converting farm land into residential use.

At the end of 2016, the company had a total Hong Kong land bank of 49.3 million square feet, including 29.4 million square feet of completed investment properties and 19.9 million square feet of properties under development.

On Tuesday chairman Raymond Kwok said the land bank was sufficient for the company’s development needs over the next 4 to 5 years.

During the next 10 months the company plans to launch 11 new residential developments in Hong Kong and mainland China, including Cullinan West at Hong Kong’s Nam Cheong MTR station. The developer has set a sales target of HK$40 billion for 2017.

On the mainland, its land bank comes to a total of 65.6 million square feet, with 12.4 million square feet of completed investment properties, which are mainly integrated landmark projects in Shanghai, Beijing and Guangzhou.

The developer said its iconic high-end shopping mall Shanghai IAPM, which is part of the Shanghai ICC integrated complex, recorded robust growth in retail sales and traffic. Occupancy of the One ICC office tower remained at high levels with positive rental growth, and the Two ICC office tower is expected to be nearly fully let by the end of this year, Sun Hung Kei said.

The company’s 20 billion yuan (US$2.9 billion) mega project ITC in Xujiahui, Shanghai, will begin handing over office space to tenants in the first half of 2017. The mall is scheduled to be opened in 2018.

After reporting a 4 per cent year-on-year growth in rental revenue, the developer said rents will become a larger proportion of the company’s revenue in the future.

Sun Hung Kai shares closed down 1.05 per cent compared with a 0.77 per cent decline in the Hang Seng index. The results were announced after the market had closed.