Hang Lung Properties’ first half profit dips 4pc on lower rental income
Upbeat chairman Ronnie Chan Chi-chung says despite the sluggish performance in the sector in recent years, ‘the winter is coming to an end’
The chairman of Hang Lung Properties, the luxury mainland shopping mall operator, believes the worst is over for the top-end retail industry after the company’s first-half core profit dipped on lower rental income.
“Despite the sluggish performance in the sector in recent years, the winter is coming to an end,” chairman Ronnie Chan Chi-chung said during a post-results briefing on Thursday.
He said the luxury sector of his business was the hardest hit but it has shown signs of recovery.
The company’s marquee mall in Shanghai, “Plaza 66”, is seeing tremendous growth after a series of upgrades were made, he added, with rental revenue reported to have risen 23 per cent.
“We achieved solid performance with our core leasing business in the first half against a backdrop of challenging business conditions and the 5 per cent depreciation in the yuan.”
“I remain cautious about the business environment in the short term but I’m optimistic long term, “ he said.
Asked about a possible reshuffle within the industry, prompted by Wanda’s recent retreat from the market, Chan said: “In this business, reshuffle is part of the natural cycle of a market economy.”
He said Hang Lung’s business model is drastically different from that of Wanda’s as Hang Lung focuses on less than a handful of high-performing malls, while Wanda owns a huge number.
“Our business model has worked for us and there is reason behind it,” he said, “It’s the right direction for the business.”
The Hang Lung interim results beat projections by Goldman Sachs, which had projected to see underlying profit drop 22 per cent from HK$3.2 billion to HK$2.5 billion, but still came in 4 per cent lower compared to the same period last year, on lower rental income.
They were in line, however, with projections by Morgan Stanley, which forecast the company to report HK$3.2 billion in underlying net profit.
Underlying profit, excluding revaluation gains in investment properties, dropped 4 per cent year on year to HK$3.04 billion for the six months to June, the company said in its statement to the Hong Kong stock exchange. An interim dividend of 17 HK cents is being offered, the same as in 2016.
Revenue from property leasing dipped 2 per cent year on year to HK$3.8 billion while revenue from property sales grew 5 per cent to HK$2.5 billion.
Taking into account revaluation gains on investment properties, its net profit jumped 30 per cent to HK$3.83 billion.
Hang Lung attributed the overall profit dip partly to disruption to rental income from renovation work at some of its major malls, including Grand Gateway 66 in Shanghai and Causeway Bay, and The Peak Galleria in Hong Kong. The company also said the 5 per cent devaluation of the renminbi in the corresponding period had put a damper on the consolidated results.
Its parent, Hang Lung Group, saw underlying profit fall 3 per cent to HK$1.81 billion . It plans to pay an interim dividend of 19 HK cents.
In January, Hang Lung Properties chairman Ronnie Chan Chi-chung described prices being fetched at Hong Kong government land auctions as “irrational fever” and said the company was having trouble replenishing its land bank in the city amid aggressive bidding from deep-pocketed mainland China rivals.
By the midday market close in Hong Kong, the firm’s shares were up 0.724 per cent.