Hang Lung First-Half Underlying Profit Rises on Home Sales

Hang Lung Properties Ltd., the Hong Kong developer that focuses on building shopping malls in China, said first-half underlying profit rose 72 percent after it booked more gains from selling homes and commercial assets.

Earnings excluding revaluation gains and deferred tax climbed to HK$2.52 billion ($325 million) in the six months to June 30 from HK$1.47 billion a year earlier, the developer said in a statement to the Hong Kong stock exchange today. That’s close to the median estimate of HK$2.4 billion from three analysts surveyed by Bloomberg News. Sales rose 60 percent to HK$4.23 billion.

Hang Lung, Hong Kong’s third-biggest developer by market value, joined rivals such as Sun Hung Kai Properties Ltd. in divesting shopping malls, offices and parking garages in the city over the past year to raise cash ahead of an increase in government land sales. It’s also seeking cash to fund development projects in other parts of China.

“The results look better than expected,” said Lee Wee Liat, a Hong Kong-based analyst at BNP Paribas Securities Asia, who has a “hold” rating on the stock.

The company booked a gain of HK$220 million in profit from the sale of its so-called non-core assets, it said today. The company in May sold a building in the city’s northwestern Kwai Chung district for HK$528 million and parking lots in the Tin Hau district, in the east of Hong Kong Island, for HK$220 million. It was the first time Hang Lung sold non-core commercial assets in Hong Kong since 1998, according to spokesman Kwan Chuk-fai.

Cash Reserve

Hang Lung, which derives almost half its rental income from other parts of China, is seeking to build up more cash reserve as it awaits a pullback in land prices, Chairman Ronnie Chan said in the company’s annual report in January.

The company, which is planning to open at least one property in Chinese cities outside of Hong Kong every year, will in September open its second shopping mall in the northeastern Shenyang city.

Rental profit from China, which includes shopping malls in Shanghai, Jinan and Shenyang, rose 26 percent to HK$1.17 billion, while those from Hong Kong gained 5 percent to HK$1.25 billion, the company said today.

The company made HK$798 million in profit selling apartments in Hong Kong in the first-half, Hang Lung said. It didn’t sell any properties a year earlier.

Land Sales

Hong Kong’s new chief executive, Leung Chun-ying, pledged to put more land on the market in a bid to rein in home prices that jumped more than 80 percent since the start of 2009 and are now the world’s highest. Hang Lung, which is investing at least $8.5 billion in mainland Chinese real estate, hasn’t bought land in Hong Kong for more than a decade, Chan has said.

Hang Lung’s shares climbed 3.8 percent to HK$27.60 at the close in Hong Kong, extending the rally this year to 25 percent, the third-best performer in the seven-member Hang Seng Property Index.

Including gains from revaluation, net income for the year rose 55 percent to HK$3.68 billion, or HK$0.82 a share, from HK$2.37 billion, or HK$0.53 a share, a year earlier.

The developer has net cash of about HK$1.58 billion, today’s statement said.

Hang Lung, founded by Ronnie Chan’s father Chan Tseng-hsi in 1960, is also building projects in Dalian, Jinan, Wuxi, Tianjin and Kunming. Its developments in Hong Kong include the Standard Chartered Building in the Central business district and Hang Lung Centre in the Causeway Bay area.

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