Bloomberg News

Hang Lung Profit Falls as It Holds Off Hong Kong Home Sales

July 29, 2011

(Updates with rental income from eighth paragraph.)

July 29 (Bloomberg) -- Hang Lung Properties Ltd., the Hong Kong developer that focuses on building shopping malls in China, said full-year profit excluding gains from revaluations fell 59 percent on fewer homes sales in the city. The shares dropped.

Net income excluding revaluation gains and deferred tax fell 59 percent to HK2.74 billion ($352 million) in the 12 months to June 30 from HK$6.67 billion a year earlier, the developer said in a statement to the Hong Kong stock exchange today. That is in-line with the median estimate of HK$2.75 billion from five analysts surveyed by Bloomberg News.

Hang Lung, Hong Kong’s third-biggest developer by market value, made only HK$3 million in revenue from apartment sales even after home prices rose 23 percent during the year under review. The company will open a shopping mall in Jinan in August, its fourth outside Hong Kong, as part of its $5.1 billion push to build commercial properties in the world’s fastest-growing major economy.

“The focus will be on the progress of leasing in their shopping malls in China,” Cusson Leung, a Hong Kong-based analyst at Credit Suisse Group AG, said before the earnings announcement.

Hang Lung’s shares have declined 20 percent this year, making it the worst performer in the seven-member Hang Seng Property Index, which lost 4.2 percent. The shares fell 2 percent to HK$29.45 as of 1:45 p.m. in Hong Kong, after the earnings were announced.

Rental profit

The developer hasn’t bought any land in Hong Kong over the last 10 years as it shifted its focus to China. It made a profit of HK$5.26 billion a year earlier from selling homes at the HarbourSide and Long Beach projects in the West Kowloon district.

Hang Lung still has about HK$6 billion worth of unsold homes in Hong Kong, according to today’s statement.

Rental profit from China rose 14 percent to HK$1.86 billion, while those from Hong Kong gained 11 percent to HK$2.33 billion, the company said today.

Hang Lung booked a HK$3.3 billion gain reflecting the increased value of real estate held for investment, against a HK$21.2 billion gain the same period the previous year.

Including those gains, net income for the year fell 75 percent to HK$5.79 billion, or HK$1.31 a share, from a restated HK$23.6 billion, or HK$5.61 a share, a year earlier.

Yuan Holdings

Chairman Ronnie Chan said in an interview last month that Hang Lung built up Chinese currency holdings of 20 billion yuan ($3.1 billion) over the past nine months, waiting for a pullback in prices to acquire land in the world’s fastest-growing major economy. Hang Lung hasn’t purchased land in China since early 2009, Chan said.

The developer has net cash of about HK$10.5 billion, today’s statement said.

The Chinese government has ordered banks to increase their reserve ratio and has lifted interest rates to damp accelerating inflation and curb property values. Prices of new homes rose in June from the previous month in 67 of the 70 cities measured by the National Bureau of Statistics.

Hang Lung, which has two shopping malls in Shanghai, is building in five other Chinese cities -- Shenyang, Dalian, Jinan, Wuxi and Tianjin. Its developments in Hong Kong include the Standard Chartered Building in the Central business district and Hang Lung Centre in the Causeway Bay area.

--Editors: Tomoko Yamazaki, Andreea Papuc

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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