China Overseas Falls as Earnings Miss Estimate: Hong Kong Mover

China Overseas Land & Investment Ltd. dropped the most in nine months after it reported lower-than-expected underlying profit and data showed home sales in China fell in the first two months of the year.

The stock of China’s biggest developer by market value listed in Hong Kong fell as much as 5.1 percent and was down 4.3 percent at HK$18.76 at 3:44 p.m, local time. The shares headed for their biggest decline since June. The Hang Seng Property Index, which tracks the nine-biggest Hong Kong-listed builders, including China Overseas, lost 1.2 percent.

Profit excluding revaluations, or core profit, increased 20 percent from 2012 to HK$19 billion ($2.45 billion), the company said in a Hong Kong stock exchange filing. That was below an average estimate of HK$19.7 billion from a survey of 25 analysts compiled by Bloomberg. China’s home sales fell 5 percent in the first two months of the year to 598.5 billion yuan ($97.5 billion) from the same two months a year earlier, the National Bureau of Statistics said today.

“The coming year, 2014, is expected to be complex and ever-changing, affected by the unfavorable global political and economic environment,” Chairman and Chief Executive Officer Hao Jianmin said in today’s statement. “The group will continue to adhere to prudent financial management and will increase the speed with which it collects the proceeds of sales.”

Property Headwinds

China Overseas is expecting a net income growth of 20 percent this year, slower from last year’s 23 percent, Hao said at a press conference in Hong Kong today.

The developer’s contracted sales fell 4.7 percent in the first two months of this year from the same period in 2013 to HK$24.3 billion, it said in an e-mailed statement on March 10. Hong Kong and Chinese developers begin selling properties while they’re still in construction and book profit upon completion.

“The property industry may face some headwinds this year as the credit is tight, but big developers such as China Overseas should still outperform the peers,” Jeffrey Gao, a Hong Kong-based property analyst at Nomura Holdings Inc., said before the earnings announcement.

The company’s net income rose 23 percent to HK$23 billion ($2.96 billion), or HK$2.81 a share, from HK$18.7 billion, or $HK2.29 a share, a year earlier on gains from property sales and revaluations. Sales rose 28 percent to HK$82.47 billion, it said.

The state-owned developer benefited from its focus on so-called first-tier cities, which include Beijing and Shanghai, as home prices rose more than 15 percent in December in those two cities from a year ago, according to the National Bureau of Statistics data. China’s Premier Li Keqiang last year held off from imposing nationwide property curbs, while at least 10 Chinese cities announced local measures.

China Overseas sold a total of HK$138.5 billion worth of properties during 2013, a record high, it said today.

It bought 23 parcels of land with a total gross floor area of 12 million square meters (129 million square feet) during the year, it said.

China Overseas said it will pay a final dividend of 29 Hong Kong cents per share, compared with the 24 Hong Kong cents a year earlier.

— With assistance by Bonnie Cao

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