Hang Lung Properties (0101) H1 2024 earnings summary

Executive summary

• Total revenue rose 17% year-over-year to HK$6,114 million, driven by property sales of HK$1,228 million, while recurring rental revenue fell 7% to HK$4,886 million due to weaker luxury consumption, RMB depreciation, and soft Hong Kong markets.

• Underlying net profit attributable to shareholders declined 22% to HK$1,735 million, mainly from lower leasing profits and a 52% increase in interest expenses.

• Net profit attributable to shareholders was HK$1,061 million, down from HK$2,394 million, reflecting a HK$674 million revaluation loss on properties.

• Interim dividend was cut by 33% to HK$0.12 per share, with a scrip dividend option, to reset payout policy and preserve cash amid unsustainable prior payout ratios.

• Management cited challenging macro conditions in Mainland China and Hong Kong, with weak consumer confidence and luxury sales headwinds.

Financial highlights

• Revenue: HK$6,114 million (+17% YoY); property leasing: HK$4,886 million (-7% YoY); property sales: HK$1,228 million (2023: nil).

• Operating profit: HK$3,430 million (-10% YoY); underlying net profit: HK$1,735 million (-22% YoY).

• Net profit: HK$1,061 million (down 56% YoY); EPS: HK$0.23 (net), HK$0.38 (underlying).

• Net assets per share: HK$28.0 (Dec 2023: HK$29.4); cash and bank deposits: HK$6.6 billion.

• Scrip dividend arrangement preserved HK$1.7 billion in cash, improving gearing by 157 basis points.

Outlook and guidance

• Management expects continued macroeconomic headwinds and high interest rates, but anticipates improved sentiment as rates trend downward.

• Sub-luxury malls in Mainland China expected to benefit from improved occupancy and footfall; office leasing demand in Hong Kong to remain subdued.

• CapEx will peak at HKD 6 billion in 2024, then drop to HKD 5 billion over the next three years.

• Dividend policy will remain flexible, based on underlying profit and cash preservation, with no fixed payout ratio.

• Major property development projects progressing in Mainland China and Hong Kong, including new hotels and residential towers.