Hang Lung Properties’ profit sinks 56% amid Hong Kong, mainland China slowdown

“In Hong Kong, the market experienced a slower-than-expected recovery in the first half of the year,” Hang Lung said in the filing. “Uncertainties in the geopolitical and economic environment led to negative reversion of some anchor tenants and dragged down our rental revenue and operating profit, which declined by 8 per cent and 11 per cent, respectively, in the first half of the year.”

Revenue from property leasing decreased by 7 per cent to HK$4.88 billion, primarily affected by weakened luxury consumption on the mainland, the softening of retail and office markets in Hong Kong, and the yuan’s depreciation, the company said.

Rental revenue from its mainland portfolio dropped by 3 per cent in yuan terms and 6 per cent in Hong Kong dollar terms. “Our offices, particularly those in Shanghai, face challenges due to the oversupply of office spaces and soft demand,” it added.

The cost of servicing its debt in the first half rose by 52 per cent to HK$455 million, versus HK$299 million a year earlier.

Overall operating profit dropped by 10 per cent to HK$3.43 billion.

“Results are soft across key lines,” said Jefferies analysts in a note. “Ongoing weakness in luxury sales may put further pressure on future earnings. Pickup in interest expense and margin were also worse than expected. As such the decline in the first half underlying profit was wider than the previously expected 9-10 per cent.”

Hang Lung Properties will pay an interim dividend of HK$0.12 per share, 33 per cent less than a year earlier.

Its parent company, Hang Lung Group, which owns 60 per cent, reported a first-half net profit attributable to shareholders of HK$1.28 billion, 47.2 per cent lower than a year earlier.

The company will pay an interim dividend of HK$0.21 per share.

Adriel Chan, the new chairman, recently told the Post that he was aware of the challenges facing the mainland China and Hong Kong property markets, but at the same time sees the turmoil as an opportunity to grow.

Chan said the company plans to continue investing HK$5 billion a year in China. “Asset prices in China have come down, which is an investment opportunity,” he told the Post previously.

Hang Lung, which has been actively investing in China’s commercial and residential real estate market since 1992, derives 68 per cent of its rental income from the mainland, according to its latest annual report.

It has seven office projects in six cities across China, and five residential projects in Shanghai, Wuxi, Kunming, Wuhan and Shenyang.

Hang Lung currently has one residential project in Hong Kong, The Aperture, in Kowloon Bay.