Cheung Kong Profit Rises on China Sales and Hutchison Gains

Cheung Kong Holdings Ltd., the builder controlled by Asia’s richest man, said 2013 profit rose 10 percent as property sales grew in mainland China and the contribution from unit Hutchison Whampoa Ltd. increased.

Net income rose to HK$35.3 billion ($4.5 billion) from HK$32 billion a year earlier, billionaire Li Ka-shing’s developer said in a statement to Hong Kong’s stock exchange. That compares with a HK$29.6 billion average estimate from six analysts surveyed by Bloomberg. Excluding Hutchison’s contribution, profit rose 3 percent to HK$19.7 billion, Cheung Kong said.

China’s home sales last year exceeded $1 trillion for the first time as property prices surged in the absence of further nationwide housing curbs and as local measures failed to deter buyers. In contrast, Hong Kong’s builders sold the fewest homes in almost two decades in 2013 as the government stepped up measures to prevent a bubble in the world’s most expensive housing market.

“Their sales in China are offsetting the poor performance in Hong Kong,” Alfred Lau, a Hong Kong-based property analyst at Bocom International Co., said before the announcement. “The developer had weak sales in Hong Kong last year and didn’t market many projects, which will affect this year’s earnings.”

Lower Sales

Cheung Kong’s property sales in Hong Kong last year “were much lower” than in 2012, while sales of the group’s operating activities in the mainland grew to HK$16.4 billion from HK$11.9 billion a year earlier, it said.

Barclays Plc, UBS AG and Bank of America Merrill Lynch in October forecast Hong Kong property prices may drop because of the government curbs and expectations of higher interest rates. Barclays predicted home prices will fall at least 30 percent by the end of 2015 as income growth stalls and supply increases.

In China, Premier Li Keqiang has held off more nationwide policies to cool the real estate market since he took office in March 2013. Home prices in December had the biggest year-on-year gain in 2013, up 12 percent, according to SouFun Holdings Ltd., the nation’s biggest real estate website.

Li said in November his companies slowed land purchases in Hong Kong and China as prices had risen to a high level.

Hutchison’s full-year profit rose 20 percent to HK$31.1 billion in 2013, from HK$25.9 billion a year earlier on growth in its expanding mobile phone business in Europe, it said.

Hutchison picked Bank of America Corp., Goldman Sachs Group Inc. and HSBC Holdings Plc to work on an initial public offering of its retail arm, two people with knowledge of the matter said on Dec. 18.

Infrastructure Contribution

Cheung Kong’s earnings were also helped by an increase in profit from its infrastructure businesses, which rose to HK$1.6 billion from HK$839 million a year ago, the statement showed. The improvement was mainly due to a full-year profit contribution from Wales & West Utilities Ltd. in which Cheung Kong took a 30 percent stake in 2012, while it completed the purchase of a 35 percent interest in the Netherland’s largest energy-from-waste business.

Shares of Cheung Kong rose 0.9 percent to HK$121.60 at the close of trading in Hong Kong, bringing their losses this year to 0.7 percent.

The earnings contribution from property sales rose to HK$10.2 billion from HK$10 billion a year earlier, the company said. The development of Kennedy Park at Central was delayed and should contribute to profit on completion this year, it said.

The company sold 625 units of homes for HK$4.77 billion last year, and compared with HK$26.2 billion in 2012, according to Centaline Property Agency Ltd., the fifth most among the city’s developers. It targets the sale of 3,000 units in Hong Kong this year, ETnet reported on Feb. 12, citing Cheung Kong Executive Director Justin Chiu.

Rentals Increased

Cheung Kong’s earnings from property rentals increased to HK$1.8 billion last year from HK$1.7 billion a year earlier. The company is landlord to Goldman Sachs Group Inc. and Barclays in the city. Rental for retail properties in Hong Kong increased, reflecting a growing number of Chinese tourists, it said.

The Hong Kong government will sell more land this fiscal year ending March 2015 that could yield 11 percent more private homes than the previous year, Financial Secretary John Tsang said in his budget speech on Feb. 26.

Hong Kong Chief Executive Leung Chun-ying made tackling soaring property prices one of his main goals, introducing the city’s toughest curbs last February and pledging to provide more public housing.

Final Dividend

Cheung Kong will pay a final dividend of HK$2.9 a share, compared with HK$2.63 a year earlier.

Li, 85, is nicknamed “Superman” by the local media for his investing prowess. He forecast in 2007 that China’s stock-market bubble would burst and predicted in 2009 the rally in Hong Kong home prices. Home prices in the city have more than doubled since the beginning of 2009, according to an index compiled by Centaline.

Ranked 22nd on the Bloomberg Billionaires Index with a net worth of $29.2 billion, Li opened a plastic flower factory after World War II and began investing in Hong Kong real estate in 1967 after riots from China’s Cultural Revolution depressed prices.

— With assistance by Bonnie Cao

    Before it's here, it's on the Bloomberg Terminal.