Sun Hung Kai’s interim profit rises on valuation gain, eyes boost from ‘downward trend’ in interest rates

Its interim net profit stood at HK$9.145 billion (US$1.17 billion), or HK$3.16 per share, 9 per cent higher than a year earlier. The increase was driven by a rise in the fair value of its investment properties net of deferred taxation and non-controlling interests worth HK$432 million, compared to a decrease of HK$967 million in the same period last year, the developer said in a stock exchange filing.

Its underlying profit for the six-month period, excluding the fair value change in its investment properties, dropped 6 per cent to HK$8.9 billion. The developer has declared an interim dividend of HK$0.95 per share, 24 per cent lower than a year earlier.

SHKP’s interim result came the same day as Financial Secretary Paul Chan Mo-po’s announcement that the city is removing all stamp duties and other curbs on the property market. The Hong Kong Monetary Authority, the city’s de facto central bank, has also relaxed all restrictions on mortgage lending for properties.

“Hong Kong’s residential market continues to be affected by elevated interest rates and an uncertain economic outlook,” Raymond Kwok Ping-luen, SHKP’s chairman and managing director, said in the exchange filing. “Nevertheless, home rents picked up moderately over the past few months.”

SHKP’s profit generated from property sales reached HK$2.04 billion during the six months, dropping 39 per cent from the HK$3.37 billion reported a year earlier.

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But this was offset by a 5 per cent increase in net rental income to HK$9.32 billion from Hong Kong and mainland China. International Finance Centre, its core building in Central, was almost fully let, while the International Commerce Centre in Kowloon also had good occupancy, it said.

It accounted for the sale of 3,200 out of the 11,011 units that changed hands in 2023, according to data from Dataelements, a data provider that tracks new residential properties in Hong Kong.

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Over the next 10 months, the developer will launch several major projects including The Yoho Hub II in Yuen Long, the third phase of Novo Land in Tuen Mun, and the first phase of a large-scale project in Sai Sha near Ma On Shan.

Kwok is positive about the property sector’s outlook because of government policies and expected interest rate cuts later this year.

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“Despite uncertainties about the near-term path of the US interest-rate movement, the transition from a rate-hike cycle to a downward trend is expected to provide favourable conditions for the world economy,” Kwok said in the filing.

“Further policy relaxations, rising home rents, potential rate cuts and the relocation of more professionals and high-calibre students to Hong Kong should benefit the property market. Despite short-term market volatilities, the group remains confident in the long-term prospects of Hong Kong and its property market.”

SHKP’s shares closed 0.7 per cent higher at HK$78 on Wednesday.