Hongkong Land posts 20% fall in underlying net profit to US$766m
Uma Devi
PROPERTY group Hongkong Land on Thursday (Mar 2) reported underlying earnings of US$766.1 million for 2022, down 20 per cent from earnings of US$966 million in the prior year.
Net profit came in at US$203 million for the year, after including net non-cash losses of US$573.4 million due chiefly to lower valuations of the group’s investment properties. In 2021, Hongkong Land booked a net loss of US$349 million, which included a US$1.3 billion reduction in property valuations mainly due to lower market rents for the Hong Kong central portfolio.
The board of directors has recommended a final dividend of US$0.16 per share, unchanged from 2021.
Hongkong Land’s revenue for 2022 was down 5.9 per cent to US$2.2 billion from US$2.4 billion in 2021.
Hongkong Land said its profitability was significantly lower in 2022, due to a lower contribution from its development properties business in the second half of the year, after a record performance in 2021.
The contribution from its investment properties segment, however, only had a “modest” financial impact in the retail portfolio from the pandemic measures introduced across China last year.
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The impact of lower average office rents in Hong Kong was partially offset by a reduction in operating costs, the company said.
The combined value of the group’s investment properties portfolio fell 2 per cent in 2022, due largely to a modest increase in capitalisation rates in the Hong Kong portfolio. There was no change in the capitalisation rates for the Singapore, Beijing and Shanghai investment properties.
For investment properties, the group said office leasing demand remained subdued in Hong Kong. Its central office portfolio, however, outperformed the broader market due to its prime central business district location and premium offering, said the company.
Retail market sentiment in Hong Kong was severely affected by the fifth wave of the pandemic in the first half of 2022. However, retail trading benefited in the second half of the year, as social distancing and travel restrictions were progressively relaxed.
In Singapore, contributions from the group’s office portfolio increased due to positive rental reversions underpinned by a healthy level of occupier demand, with average office rents rising to S$10.60 per square foot in 2022 from S$10.30 per square foot in 2021.
In Beijing and Macau, pandemic measures negatively impacted trading at the group’s two luxury retail malls, with tenant sales and footfall in 2022 both lower than the prior year.
For development properties, profit contributions from the Chinese mainland fell in 2022 compared to 2021, as a result of a significantly lower profit contribution in the second half of the year due to fewer planned sales completions and the impact of pandemic-related restrictions.
In Singapore, recognised profits in 2022 were also lower than 2021 – where the group had benefited from the construction progress of the wholly-owned Parc Esta project which was handed over to buyers in 2022.
Hongkong Land’s attributable interest in contracted sales was US$615 million in 2022 compared to US$328 million in the prior year, driven by the healthy pre-sales performance of two new residential projects launched during the year.
The 407-unit Piccadilly Grand and Galleria and 639-unit Copen Grand projects are 85 per cent and 100 per cent pre-sold or reserved respectively, Hongkong Land said.
Looking ahead, the company said it continues to be disciplined in evaluating and selecting development opportunities in the Chinese mainland, with a focus on Tier 1 and Tier 2 cities.
“Stable contributions are expected to continue from the group’s investment properties business, although rental reversions for the Hong Kong office portfolio are expected to remain negative. The extent of improvement in performance from the development properties business will depend on policy support measures implemented on the Chinese mainland,” said the company.
Shares of Hongkong Land fell 0.4 per cent or US$0.02 to US$4.63 on Thursday prior to the results announcement.
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