Chinese Estates shares end lower despite rise in core profit

Shares of Chinese Estates fell sharply on Tuesday despite its core profit jumping 3.4 times last year to HK$16.78 billion, mainly driven by asset disposals.

The company’s shares ended Tuesday’s trade in Hong Kong 8.65 per cent lower at HK$19, after hitting an intraday low of HK$18.50.

The hefty increase in core earnings, excluding revaluation gains on investment properties, followed the sale of investment properties including the Tsim Sha Tsui commercial building The One, and other buildings in Chengdu, Chongqing and Shanghai.

In a filing to the Hong Kong stock exchange, Chinese Estates said a final dividend of 1 HK cent would be paid, down 98 per cent from 50 HK cents a year ago.

Shareholders received a conditional interim dividend of HK$2 per share in January.

Net profit, including revaluation gains on investment properties, fell 11.67 per cent to HK$7.72 billion last year due to lower rental income after its disposal of Silvercord and The One in Tsim Sha Tsui.

Turnover tumbled 41.22 per cent to HK$1.54 billion.

“The group remains cautiously optimistic in the rental income growth from its retail investment properties,” said chairman Lau Ming-wai, who is the son of Joseph Lau Luen-hung, the firm’s controlling shareholder.

The group’s overall gross rental income from Hong Kong tumbled 35.23 per cent to HK$1.09 billion last year. Rental income from retail properties fell 50.8 per cent, while rental income from non-retail properties rose 7.09 per cent.

Lau said some retail business sectors had shown indications of reaching their peaks, especially tourist-related business.

“Although the group’s well-located retail investment properties in Hong Kong leased well during the year, the group will continue to closely monitor the changes in local consumption patterns, refine its tenant mix, boost customer flow and spending for its retail investment properties by organising various marketing and promotional activities,” he said.

Lau said the disposal of MassMutual Tower in Wan Chai in January would mean the rental income contribution from office buildings would be significantly lower this year.

Chinese Estates sold the MassMutual Tower to Evergrande Real Estate for HK$12.5 billion.

In December , the firm sold the Windsor House in Causeway Bay for HK$12 billion to a company wholly owned by Joseph Lau. The deal will be completed this year.

It said the majority of the sale proceeds from the sale of Windsor House would be declared as a dividend.

This month, it said it had entered into a sale and purchase agreement with an independent party to acquire a London freehold property at St George Street, Mayfair, for £121.7 million (HK$2.33 billion).