Wharf First-Half Underlying Profit Rises 28% on Retail Rents in Hong Kong

Wharf (Holdings) Ltd., owner of two of Hong Kong’s largest shopping centers, said first-half underlying profit rose 28 percent on higher rental income.

Profit excluding property revaluations rose to HK$4.2 billion ($540 million) from HK$3.29 billion a year earlier, the company said today in a filing to Hong Kong’s stock exchange. Sales were little changed at HK$8.62 billion.

Wharf, which owns Times Square and Harbour City malls and office complexes in the city, is benefiting from rising retail rents. The average monthly rent on Russell Street in the Causeway Bay district, where Times Square is located, stood at HK$1,200 a square foot in the first half, the third-costliest retail strip in the world, according to Colliers International Ltd.

“The performance of their retail portfolio has been quite impressive,” said Francis Lun, general manager at Fulbright Securities Ltd. “Companies like Wharf, with a lot of investment properties, will continue to be among the top picks for investors with a more conservative portfolio.”

Shares of Wharf, which also controls one of Hong Kong’s two-biggest pay-television operators, have declined 6.4 percent this year, compared with the 3.4 percent drop in the seven- member Hang Seng Property Index which doesn’t include Wharf.

Wharf rose 0.4 percent to HK$41.90 at the 4 p.m. close of trading in Hong Kong.

Seventh-Richest

Times Square and Harbour City made up more than 50 percent of Wharf’s assets. Wharf is a unit of Hong Kong-listed Wheelock & Co., which is controlled by Chairman Peter Woo and other heirs of deceased shipping tycoon Sir Yue-kong Pao. With a net worth of about $4.3 billion, the family was ranked as Hong Kong’s seventh richest by Forbes Magazine in March.

Turnover from Harbour City’s shopping mall rose 20 percent to HK$1.44 billion, while Times Square posted a 13 percent increase to HK$512 million, the company said. Overall retail sales from the group’s Hong Kong properties rose 24 percent.

Earnings were partly offset by a drop in office rental, with turnover at Harbour City dropping 8 percent and 2 percent at Times Square.

The decline “reflects the softness in the market since the second half of 2008,” the company said in today’s statement.

Residential Sites

The Hong Kong government has been trying to curb a 45 percent surge in home prices since the beginning of 2009 amid concerns housing is out of reach of ordinary residents. The surge has been fueled by record low mortgage costs and an influx of wealthy mainland Chinese buyers.

Wharf and Nan Fung Development Ltd. on July 28 jointly bought a residential site in the luxury Peak district for HK$10.4 billion in a government auction.

The parcel “will be developed into very exclusive and super deluxe residences, whose exclusivity will be unmatched even among the Peak properties,” according to today’s statement.

Profit from property sales from mainland China fell 5 percent to HK$560 million as the developer completed fewer projects compared with a year earlier, Wharf said today.

The company, which is building properties in cities including Shanghai, Changzhou, Chengdu and Wuxi, has sold or pre-sold a total of 161,000 square meters (1.7 million square feet) of apartments in the first half for 1.7 billion yuan ($250 million), according to today’s statement.

Developers in Hong Kong usually sell apartments while still under construction, booking earnings when building is finished.

Including property revaluation gains, net income rose to HK$9.89 billion, or HK$3.59 a share, from HK$6.98 billion, or HK$2.53 a share, a year earlier,

I-Cable Communications Ltd., the pay TV operator 73.6 percent-owned by Wharf, on Aug. 10 posted a first-half net loss of HK$146 million, compared with a profit of HK$491 million a year earlier, because of higher programming costs for events such as the World Cup soccer tournament and the Winter Olympics.

Wheelock, Wharf’s Hong Kong-listed parent, today said first-half net income rose to HK$5.97 billion from HK$3.6 billion a year earlier.

Wharf will pay an interim dividend of 36 Hong Kong cents, unchanged from a year earlier.

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

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