Hong Kong property

Chinese Estates issues first-half profit warning, as rental income falls

Hong Kong landlord expects net profit to drop between 8pc and 18pc, with revenue to slump between 60pc and 70pc

PUBLISHED : Friday, 11 August, 2017, 9:13pm
UPDATED : Friday, 11 August, 2017, 9:13pm

Shares in Chinese Estates Holdings, controlled by Hong Kong property tycoon Joseph Lau Luen-hung’s wife Chan Hoi-wan, dropped 3 per cent on Friday after it posted a profit-warning for the half-year, due to reduced rental income and residential sales.

The Hong Kong landlord expects net profit to drop between 8 and 18 per cent in the half, compared with HK$2.9 billion (US$371 million) recorded in the same period last year, with revenue to slump between 60 and 70 per cent.

The decline in revenue was blamed on a drop in rental income as it disposed of shops in Shenzhen, an office tower in Shanghai, as well as commercial building Windsor House in Causeway Bay in Hong Kong over the past year. The company also expects a 71 per cent decline in residential sales income in Hong Kong during the period.

The extent of the profit drop, however, was helped by significant rises in other income from its investment in shares in Shengjing Bank and China Evergrande Group. The company said it earned HK$2.1 billion from Shengjing, and HK$1.2 billion from Evergrande during the period.

Last month, Chinese Estates revealed it has bought 655.2 million shares in Evergrande – China’s largest property developer – since April this year, becoming its second largest shareholder with a 5 per cent stake.

Evergrande was one of the best performers on the Heng Seng Index over the past year, with its shares more than doubling since April.

Earlier last month, the Hong Kong developer also said it would record a HK$2.3 billion gain from the sale of Shengjing Bank shares – which it bought from Evergrande last May – in the first half.

Lau, considered Hong Kong’s fourth richest man with a net worth of US$15.3 billion, has a close business partnership with Evergrande chairman Hui Ka-yan.

In 2015, Evergrande acquired the Mass Mutual Tower in Hong Kong’s Wanchai district from Chinese Estates for HK$12.5 billion, setting a new record for a Hong Kong office building.

Lau has disposed of most of Chinese Estates’ key assets to himself as well as his family members in the past five years, amid serious health issues.

In March, he announced the transfer of his 74.99 per cent shareholding, estimated to be worth HK$16.99 billion (US$2.17 billion) to his wife Chan Hoi-wan and son chairman Lau Ming-wai.