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Sun Hung Kai Properties' profit up 6.6%

Hong Kong

SUN HUNG KAI Properties Ltd, Hong Kong's biggest developer, reported a 6.6 per cent jump in annual earnings before the city's political crisis intensified.

Underlying profit, which excludes property revaluations, increased to HK$32.4 billion (S$5.7 billion) in the year ended June 30, Sun Hung Kai said in an exchange filing on Thursday. That missed the HK$33.3 billion mean estimate of 11 analysts polled by Bloomberg. "In the coming year, the global economy is expected to be clouded by a number of challenges, including populism and trade protectionism," the company said in a statement. "The downside risks, however, are likely to be mitigated by the low interest rate environment worldwide."

It also said "results are likely to be uncertain in future years given the current unprecedented challenging situation in Hong Kong."

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Hong Kong property sales did well over the 12-month period, with contracted sales of HK$59.7 billion, 40 per cent higher than an earlier company forecast of HK$42.5 billion. But that performance looks hard to repeat as prices soften and the protests show no sign of ending.

The same goes for Sun Hung Kai's retail properties: less traffic from both tourists and locals will put downward pressure on rents in its shopping malls. Sun Hung Kai's land bank in Hong Kong increased to about 58 million square feet of attributable gross floor area, including 25.1 million square feet of properties under development. Its vast holdings are set to benefit from faster farmland conversion as authorities strive to boost housing supply and ease the political crisis. The developer also has one of the lowest levels of leverage: its gearing ratio rose slightly to 12.9 per cent compared with 12.1 per cent for 2018.

Shares in Sun Hung Kai fell 0.8 per cent on Thursday, bringing declines since early June to 5.8 per cent . The stock is still up 4.8 per cent for the year, however. Full-year total revenue was HK$85.3 billion, versus an estimate of HK$94 billion. Profit before tax came in at HK$54.5 billion. Final dividend per share was HK$3.70 .

Sun Hung Kai's business will come under pressure should anti-government demonstrations continue to rock the city, JPMorgan Chase & Co analysts said in a note ahead of the earnings release. The investment bank did, however, upgrade the developer to neutral earlier this month, saying it sees only moderate downside for the stock after a meaningful correction from its peak. BLOOMBERG