SHKP builds profit by 21pc

SUN Hung Kai Properties has waded through the soft property market to record a 21 per cent rise in profit to $3.24 billion for the six months ended December 31.

The earnings growth, bolstered by buoyant property sales and rental income, was moderate compared with the previous year's 107 per cent rise in half-year profit to $2.67 billion.

Analysts said the slower growth rate was ''understandable'' as a result of the softened home market, and the previous year's growth rate had been exceptionally strong.

They were optimistic that Sun Hung Kai Properties could see profit growth for the year of more than 30 per cent, lifting the figure to more than $6 billion, of which more than $2 billion would be generated by rentals.

For the financial year to June 30, 1992, the property giant lifted profit 36 per cent to $4.68 billion.

Group chairman and chief executive Walter Kwok Ping-sheung expected the year profit to show ''satisfactory'' growth over the previous year and said the dividend payment would increase accordingly.

Besides property sales, he said the group's investment properties had been performing well and significant growth in rental income was expected to continue.

In the first half, property sales amounted to $1.69 billion against $2.22 billion for the same period in 1991.

Rental income exceeded $1 billion. Turnover rose 27.3 per cent to $7.02 billion.

With a 12 per cent increase to $1.70 in earnings per share, the group will pay an interim dividend of 45 cents a share.

The company's share price rose yesterday by 50 cents to $33, which analysts said was ''not demanding'' considering an estimated net asset value of more than $38 a share.

Mansion House Group analyst Simon Lam estimated that Sun Hung Kai Properties could see a strong growth in rental income and steady contribution from property sales.

The group's other operations such as hotels, construction, parking management and property management would also provide steady earnings streams, he said.

Despite the threat of the dampened residential market, analysts remain positive about the long-term profitability of Sun Hung Kai in view of its large and cheap land bank in Hongkong, which amounts to 37.4 million square feet.

Mr Kwok said that, as the cost of land under development was substantially below market value, the future profitability of the group was well protected.

The group owned 12.8 million sq ft of completed investment properties in Hongkong, and it planned to increase this portfolio to 16 million sq ft during the next three to four years, he said.

''The group's long-term objective is to achieve an equal balance between profits from sale of properties and recurrent income,'' he said.

Retail space, mainly shopping centres, owned and managed by the group totals 5.2 million sq ft.

While urging the Government to raise the 70 per cent mortgage ceiling guideline for the home market, Mr Kwok expected that sales of offices and industrial properties would stay strong.

He said Sun Hung Kai was in a strong financial position, which would be enhanced by the proceeds from pre-sales during the next few months of several residential projects.

The projects being put up for sale include Sea Crest Villa phase four in Sham Tseng, Villa Athena in Ma On Shan, Pristine Villa in Sha Tin and King's Park Villa in Kowloon.

''The $4 billion cash inflow from conversion of 1993 warrants by the end of the year will further strengthen the group's financial capability to participate in large-scale projects,'' he said.

''The group always maintains a low debt ratio policy and keeps available substantial long-term stand-by banking facilities to cope with its expansion needs.'' Since last June, the group has acquired several sites with an aggregate developable gross floor area of about 3.3 million sq ft, of which 55 per cent is for residential development.

Last month, Sun Hung Kai Properties agreed to acquire the 545,000 sq ft World Trade Centre in Causeway Bay for $2.22 billion. The lower levels of the building will be converted into a shopping centre to be held as a long-term investment.

Mr Kwok said his group was seeking opportunities to participate in large property developments and infrastructure projects in Hongkong.

But he reiterated that projects in China would not exceed 10 per cent of the group's total investment.

As well as the Dong'an Market project in Beijing, Sun Hung Kai was going after property and related projects in Guangzhou, Shenzhen and the Pearl River delta, he said.

''The group adopts a prudent approach and takes a long-term view in selecting our investment projects in China,'' he said.