Hongkong Land H78 has reported a loss of US$333 million ($443.6 million) for the 1HFY2023 ended June, down from its earnings of US$292 million for the same period the year before.
The figure reflected unrealised losses from the group’s revaluations of US$755 million from its investment properties. The revaluation loss is largely due to the group’s Hong Kong office portfolio following a “modest decrease” in market rents and slight cap rate expansion.
However, the group’s results from its investment properties portfolio stood “resilient” thanks to better performance by its luxury retail portfolio, which more than offset lower contribution from its Hong Kong office portfolio.
In development properties, the group recognised profit in the period from the acquisition of additional stakes in two existing projects in China at valuation below cost. However, profit contributions were lower y-o-y due to lower planned sales completions.
Underlying profit attributable to shareholders, which the group considers to be a “key measure in providing additional information to” understand its business performance, fell by 1% y-o-y to US$422 million from US$425 million before.
Loss per share for the six-month period stood at 15 US cents while underlying earnings per share (EPS) stood at 19.02 US cents.
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Total revenue for the 1HFY2023 fell by 25% y-o-y to US$670.3 million.
The group noted a US$742.6 million loss in fair value of investment properties.
As a result, operating loss stood at US$349.9 million, compared to the operating profit of US$273.6 million.
The group’s Central office portfolio saw physical vacancy and committed vacancy at 6.9% and 6.2% as at June 30, higher than the 4.9% and 4.7% as at the end of December in 2022. That said, this is still significantly lower than the average vacancy in the overall Central market.
During the half-year, negative rental reversions resulted in average office rents decreasing to HK$107 ($18.28) psf, 4.5% lower y-o-y. Contributions from the group’s Central series luxury retail malls in Beijing and Macau grew y-o-y due to higher average rents as tenant sales experienced a strong recovery.
Market conditions in Singapore remained healthy with the vacancy in the group’s office portfolio at 2.1%. On a committed basis, vacancy was at 1.0%. Rental reversions were positive, with average rents increasing to $10.90 psf, 3.8% higher y-o-y.
As at June 30, the group’s net asset value (NAV) per share stood at US$14.51.
Cash and cash equivalents stood at US$1.14 billion as at June 30.
“The group’s financial performance was stable in the first half of 2023, although trading conditions are likely to remain challenging in a number of key markets for the remainder of the year. Full-year underlying profits are expected to improve somewhat compared to 2022, driven by the timing of development properties project completions. Modestly higher contributions from investment properties are also anticipated, as improved retail trading performance is expected to offset negative rental reversions in Hong Kong. The group’s balance sheet remains strong,” says Ben Keswick, chairman of the group.
Shares in Hongkong Land closed 2 US cents lower or 0.55% down at US$3.59 on July 27.
