Sun Hung Kai Full-Year Earnings Fall 7.4% on Fewer Projects

Updated on
  • Profit excluding property revaluation was HK$19.8 billion
  • Company had lower contributions from sales in Hong Kong

Sun Hung Kai Properties Ltd., Hong Kong’s largest developer by market value, said full-year earnings fell 7.4 percent, dragged by fewer projects completed in Hong Kong.

Profit excluding property revaluation sank to HK$19.8 billion ($2.6 billion) for the year ended June 30 from HK$21.4 billion a year earlier, the company said in an exchange filing on Thursday, compared with the HK$20 billion median estimate of 14 analysts compiled by Bloomberg. Net income from property sales in Hong Kong slumped 40 percent to HK$4.6 billion, contributing to a 30 percent decline in profit from sales in all regions to HK$7.3 billion, according to the filing. Profit from sales in mainland China fell 5 percent.

An economic slowdown in Hong Kong and China is starting to weigh on demand for homes. Hong Kong had the weakest monthly home sales in 17 months in August and banks including JPMorgan Chase & Co. expect home prices to start to drop from next year. Sun Hung Kai completed fewer major projects in Hong Kong in its fiscal year, though it “has a stronger completion pipeline in 2016,” which may lead to better sales, Daiwa Capital Markets analyst Jonas Kan said before the earnings release.

“The result is affected by the property-booking progress,” Sun Hung Kai Chief Financial Officer Patrick Chan said at a briefing on Thursday.

Hong Kong developers begin selling homes while they are under construction and book profits upon completion. Sun Hung Kai has HK$21.5 billion from pre-sold units in Hong Kong, including at the Ultima luxury project in the Ho Man Tin area, that haven’t been recognized yet, the developer said in the statement.

Hong Kong property sales were not hurt by the recent stock-market volatility, Deputy Managing Director Victor Lui said.

Sun Hung Kai “is set to increase its future market share of Hong Kong residential sales” after acquiring large sites over the past two years, according to Hong Kong-based BNP Paribas SA analyst Patrick Wong.

Gross rental income, which comes from properties including the International Finance Centre in Hong Kong’s Central business district, climbed 6 percent to HK$19.7 billion, driven by higher rents, according to the filing.

Rental income from commercial properties is expected to grow at 10 percent annually, underpinned by increasing office rents in Hong Kong and China, Morgan Stanley analyst Praveen Choudhary wrote in a Sept. 8 note.

Sun Hung Kai shares have dropped 16 percent this year, compared with a 3.5 percent decline in the Hang Seng Properties Index, which tracks 10 Hong Kong-listed developers. The stock fell 0.8 percent to HK$99.20 at the close of trading on Thursday before the announcement.

— With assistance by Emma Dong

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