HONG KONG: Developer Cheung Kong (Holdings) reported a 29% jump in 2006 net profit, in line with forecasts, thanks to high-margin property projects and stronger earnings at associate firm Hutchison Whampoa Ltd.
At a time when many developers in Hong Kong are struggling to sell their apartments, Cheung Kong has sold almost all its Metro Town project and 70% of its The Legend project, spurring earnings for 2006 and 2007.
The city's second biggest property firm by market value posted a net profit of HK$18.08bil for the year to December 2006. The consensus forecast was for HK$18.15bil, according to 16 analysts polled by Reuters Estimates.
After brisk sales in 2005, Hong Kong's housing market slowed last year as interest rates rose. That hurt many developers, including the city's biggest, Sun Hung Kai Properties, which reported a 12.8% fall in half-year underlying net profit earlier this month.
Many analysts believe that any rate cut this year will unleash pent-up demand. Hong Kong's notoriously volatile housing prices are tipped by some analysts to rise as much as 30% in 2007 as rising salaries, tax cuts and cheap mortgages make home buying more attractive.
“We anticipate a stable property market in 2007 with moderate upward pressure on prices as buyers' confidence is positively impacted by stable lending rates and an optimistic outlook for Hong Kong's economy,” Cheung Kong chairman Li Ka-shing said in a statement.
He said the company's property sales were progressing as planned.
But, analysts say, the main value driver for Cheung Kong comes from its stake in Hutchison, which accounts for 56% of the company's gross asset value. Hutchison reported a 40% rise in 2006 net profit to HK$20.03bil yesterday.
Cheung Kong's 2006 net profit, excluding its contribution from Hutchison, rose 18% to HK$6.83bil.
Net profit from property sales jumped 69% to HK$5.58bil. – Reuters