Hang Lung Properties (0101) H2 2024 earnings summary

Executive summary

• FY2024 revenue rose 9% year-over-year to HK$11,242 million, driven by property sales and a 6% increase in rental income, but operating profit fell 13% and underlying net profit dropped 25% due to weaker leasing, lower variable rents, and higher finance costs.

• Hong Kong rental revenue declined 9% to HK$3,049 million, reflecting challenging market conditions, while Mainland China rental revenue fell 4% in RMB and 5% in HKD terms.

• Strategic reset included a 30–33% dividend cut, scrip dividend program, and a HK$10 billion syndicated loan to strengthen liquidity.

• Sub-luxury malls outperformed with strong occupancy and record-high lease renewals, while luxury malls and overall retail sales declined 14% year-over-year.

• Net debt increased to HK$47.1 billion, with a net gearing ratio of 33.4% at year-end.

Financial highlights

• Total revenue reached HK$11,242 million (+9% YoY), with rental income at HK$9,515 million (+6% YoY), property sales at HK$1,538 million, and hotel revenue up 123% to HK$189 million.

• Underlying net profit was HK$3,095 million (-25% YoY), and net profit was HK$2,153 million (-46% YoY), impacted by a HK$942 million revaluation loss and RMB 380 million in inventory provisions.

• Gross margin was 71% overall (Mainland China: 68%, Hong Kong: 78%).

• Net gearing stood at 33.4%, with average borrowing cost at 4.3% and interest cover at 2.8x.

• Net assets per share at year-end were HK$27.5, down from HK$29.4.

Outlook and guidance

• Management expects continued market pressure in 2025, but sees signs of stabilization and potential mild growth, especially in sub-luxury retail.

• Major projects, including Westlake 66 and Center 66 Phase 2, are on track for phased openings in 2025–2026, with strong pre-leasing momentum.

• Focus on sustainability, with 5 Mainland properties powered by renewable energy and a Net Zero Roadmap to be published in 2025.

• Dividend policy and scrip dividend program are interim measures, with ongoing review as gearing is expected to decline post-2025 CapEx peak.

• Property development milestones anticipated in 2025, including Center Residences in Wuxi and a new luxury redevelopment in Jardine's Lookout, Hong Kong.