Bloomberg News

Sun Hung Kai Underlying Profit Rises to Record on Home Sales

September 15, 2011

(Adds apartment sales profit in seventh paragraph.)

Sept. 15 (Bloomberg) -- Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, said full-year underlying profit rose 55 percent to a record high after home sales and rental income increased.

Profit excluding property revaluations rose to HK$21.5 billion ($2.8 billion) for the 12 months ended June 30, the Hong Kong-based builder said in a statement to the city’s stock exchange today. That compares with the HK$19 billion median estimate of seven analysts surveyed by Bloomberg News.

Sun Hung Kai has spent more than HK$11 billion buying sites from the Hong Kong government this year even as rising mortgage rates and concerns that the global economic expansion is slowing stalled home price growth. The developer booked profits from the sales of apartments at projects including Larvotto and Valais during the period under review.

“They still have a strong pipeline of land reserves and apartments for sale in the next couple of years,” Kenny Tang, Hong Kong-based general manager of AMTD Financial Planning Ltd., said before the announcement.

Shares of Sun Hung Kai, with a market capitalization of about $34 billion, have declined 21 percent this year, compared with the 20 percent drop in the Hang Seng Property Index, which tracks the city’s seven biggest developers including the company.

Hong Kong’s home prices have risen more than 70 percent since the beginning of 2009 on record low mortgage rates, an influx of buyers from other parts of China and a lack of new supply. This has prompted the city’s government to impose measures such as higher mortgage down-payment requirements and accelerating land sales to curb the formation of an asset bubble.

Sales, Rental

Profit from apartment sales rose to HK$16.64 billion from HK$6.62 billion, the company said. Hong Kong’s developers begin selling homes while they’re still in construction and book profits upon completion.

Sun Hung Kai, which owns the International Finance Centre II and the International Commerce Centre, the city’s two tallest buildings, posted increased earnings from rental properties, as expansion by Hong Kong companies pushed up office rents. Overall prime office rental in the city jumped 40 percent in the second quarter from a year earlier, according to Colliers International.

Rental income at the developer rose to HK$9.51 billion from HK$8.31 billion a year earlier.

The developer is controlled by the family of Chairwoman Kwong Siu-hing, wife of late founder Kwok Tak Seng. She will retire at the shareholders meeting to be held on Dec. 8, the company said in a separate statement.

Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen will be appointed as joint chairmen of the company, according to the statement. The brothers, sons of Kwok, took over running Sun Hung Kai in May 2008 after ousting elder brother Walter Kwok from the chairmanship.

The family’s combined wealth of $20 billion is second on Forbes Magazine’s list of Hong Kong’s richest.

Including property revaluation, net income rose to HK$48.1 billion, or HK$18.71 a share, from HK$30 billion, or HK$11.71 a share, a year earlier, the company said.

--Kelvin Wong, Bonnie Cao. Editors: Andreea Papuc, Tan Hwee Ann

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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