Hang Lung Group (10) H2 2013 earnings summary

Executive summary

• Wuxi’s new mall was performing well, with leasing in the mid-90% range, satisfactory footfall and sales, and remaining units let or in final negotiations.

• Performance varied across the portfolio: Shanghai luxury retail faced a difficult market, while China malls outside Shanghai recorded strong sales growth and Hong Kong assets benefited from upgrades.

Financial highlights

• Hong Kong investment-property growth was 9% on a like-for-like basis; property margins edged up to 85% in 2013 from 84% in 2012.

• Shanghai office revenue grew 7% YoY; Plaza 66 occupancy was in the high 90s and Grand Gateway occupancy in the mid-to-high 90s as of Dec. 31.

• Hong Kong residential development margins appeared lower in 2013 due to sales mix; over 99% of 2013 sales were The Long Beach, versus 2012 sales that included nine higher-margin HarbourSide units.

Outlook and guidance

• Tianjin mall was expected to enter the market toward end-Q3 2014; initial yield guidance remained 4%-5%, with management cautious about promising more given the city’s challenges.

• Previously opened projects achieved first-year yields of 7.9% at Jinan and 9% or better at Forum 66, above the stated 4%-5% guidance.

• Hong Kong residential sales would continue when buyers offered acceptable prices; selling inventory at lower prices was not considered necessary while cash-rich.