| Bloomberg  MTR Corp., Hong Kong’s subway operator, said first-half underlying income rose 43 percent as it booked earnings from apartment sales.
Underlying profit, excluding property revaluation gains, rose to HK$3.90 billion ($503 million) from HK$2.7 billion a year earlier, MTR, 76 percent-owned by the city’s government, said in a statement to the stock exchange today. That beat the median HK$2.96 billion forecast of six analysts surveyed by Bloomberg News.
A rebound in Hong Kong’s real estate prices boosted property development earnings to HK$2.15 billion from HK$348 million in the previous first half, while income from the company’s railway operations were flat at HK$4.8 billion. MTR sells land to developers for a cut of the profit and with developers booking earnings from the earlier sale of uncompleted homes, MTR was able to recognize its share.
“At the beginning of the year, there were concerns that some of the buyers may default on their purchases at the Palazzo and Capitol projects, but they haven’t,” Jonas Kan, a Hong Kong-based analyst at Daiwa Institute of Research, said before MTR’s announcement.
In the second half of the year, the company will be able to book profit from the Lake Silver project in the Wu Kai Sha district, Lincoln Leong, MTR’s finance and business development director, told reporters at a briefing today.
Property Recovery
“Leveraging off the recovery in the property market,” about 85 percent of 2,169 units at the project, developed by Sino Land Co., have been sold since pre-selling began in May, Chief Executive Chow Chung Kong said.
MTR’s shares have gained 57 percent this year in Hong Kong trading, compared with a 46 percent advance in the Hang Seng Index. The stock dropped 0.4 percent to HK$28.2 today, before the earnings announcement.
Net income fell to HK$4.50 billion , or 79 Hong Kong cents a share, from HK$4.69 billion, or 83 cents, a year earlier, the company said today. MTR reported a gain in the fair value of its investment properties of HK$712 million, down from HK$2.08 billion a year earlier.
Profit from property development rose to HK$2.15 billion in the first half from HK$348 million a year earlier. The company booked sales from the Palazzo, a housing project developed by Sino Land Co. in the Sha Tin district, Capitol, built by Cheung Kong (Holdings) Ltd. in Tseung Kwan O, and Hang Lung Properties Ltd.’s HarbourSide.
Values to Rise
Home prices in Hong Kong have risen 22 percent this year, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd. and City University of Hong Kong. The Centa-City Leading Index stood at 69.44 on Aug. 2, compared with 100 in the first week of July 1997. Values may rise 32 percent by the end of 2010 from June 2009, UBS AG analysts led by Eric Wong said in a July 27 report.
The lack of land for developers may benefit MTR, allowing it to negotiate for a bigger cut of profit in future projects, Raymond Ngai, a Hong Kong-based analyst at JPMorgan Chase & Co., said before the company announced its earnings.
MTR will pay a first-half dividend of 14 Hong Kong cents per share, unchanged from a year earlier.
The railway operator has expanded outside Hong Kong to reduce its reliance on its home market. In June, it led a group that won the contract to operate the suburban rail network in Melbourne, Australia’s second-biggest city. It also won a contract to maintain two of Shenyang Metro Group Co.’s lines in the northeastern Chinese city.
The company won a HK$12.7 billion capital grant from Hong Kong’s government to help pay for extending a railway line.
To contact the reporters on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; Nicholas Olczak in Hong Kong at nolczak@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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