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Hongkong Land's underlying profit down 6% to US$848m in FY16

Gross rental receipts were 1% higher at US$859m.

Hongkong Land's FY16 underlying profit fell by 6% to US$848m, 7% below DBS analysts' forecast primarily due to lower-than-expected residential sales earnings. 

Here's more from DBS:

Gross rental receipts were 1% higher at US$859m reflecting primarily positive office rental reversion aided by tight vacancy & limited supply in Central which led to a 2% y-o-y growth in average office rents to HK$103psf in 2016. Vacancy of its Central office portfolio improved to 2.2% in December 2016 from June 2016’s 3.1%. Retail portfolio remained fully occupied but lower turnover rents resulted in average retail rents falling 1% to HK$218psf in 2016.

Its Singapore office portfolio was virtually fully leased in December 2016. However, reversionary growth has turned negative, resulting in average rents falling to S$9.3 psf in 2016 from S$9.5psf in 2015.

WF Central in Beijing is scheduled to open in 2H17. This retail-led development contains a 74-room Mandarin Oriental Hotel which is scheduled to open in 2018. Exchange Square, a mixed use development in Phnom Penh, has been completed recently and is in the process of being handed over to tenants. Contributions from new investment properties should further enhance the company’s rental income stream.

Residential property business recorded lower profit contributions as its FY15 results were boosted by a gain of US$63m arising from the reclassification of a trading property to investment property

In 2016, Hongkong Land's attributable contracted sales in China reached US$1,105m, up 38% y-o-y. As of December 2016, the company's net order book in China stood at US$1,083m. Over time, China residential sales should become increasingly vital to Hongkong Land's earnings as a result of higher completion.

In December 2016, Hongkong Land won the tender to develop a residential site on Margaret Drive in Singapore (GFA: 238,900sf). Hongkong Land beat 13 other developers, paying SG$238.4m (SG$998psf). The project is expected to be completed in 2020. After completing J Gateway in 2016, Hongkong Land is scheduled to complete one wholly owned project in Singapore each year from 2017 to 2020. The LakeVille development, scheduled for completion in 2017, has almost been fully pre-sold. Overall, development profits in Singapore is expected to be lower in FY17, offsetting the increase in residential sales contributions from China.

In December 2016, Hongkong Land’s net debt improved to US$2bn from June 2016's US$2.3bn. This translated into a comfortable gearing of 6%. The company is financially sound for making acquisitions to drive long-term growth.  

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