Title: Property Development Profits Plummeted by Over 90% for MTR Corporation, Amid Hong Kong’s Deteriorating Property Market
Date: August 10, 2023
Hong Kong’s property market has experienced a significant decline in recent months, impacting the financial performance of developers. The decline in property prices has negatively affected the earnings of MTR Corporation, well-known for its “railway + property” development model, according to a report from Viewpoint.com.
Tang Zhihui, the Director of Property and International Business at MTR Corporation, acknowledged the fluctuation of property prices during economic cycles and emphasized that the company would adjust the pricing of its projects in accordance with market conditions.
During the 2023 interim results press conference held on August 10, MTR Corporation reported a year-on-year decline of 11.7% in interim net profit, amounting to HK$4.178 billion. Despite an increase in total revenue to over HK$27.5 billion, representing a nearly 20% rise, the company experienced a substantial decline of over 90% in property development profits, which stood at approximately HK$730 million.
The Chief Financial Officer, Xu Lianghua, attributed this sharp decline to the high base established in the same period of the previous year when three real estate projects were recorded simultaneously.
In terms of passenger transport services, MTR Corporation saw positive signs as Hong Kong gradually returns to normal. The revenue generated from bus services increased by 60.7% to HK$9.342 billion. However, the segment still recorded a loss of HK$774 million, a 72% decrease year-on-year. The Hong Kong station business income also showcased growth, reaching HK$2.415 billion, an increase of 63%, with profits of HK$1.798 billion, a 64% year-on-year rise.
Jin Zepei, an executive at MTR Corporation, expressed cautious optimism regarding the turnaround of Hong Kong’s car operations, stating that it would depend on the economic environment and citizens’ travel needs. Notably, the number of local passengers has recently recovered to more than 90% of pre-epidemic levels.
Looking ahead, Jin Zepei shared plans for future property development, including calling for tenders for approximately 4,000 units within the next 12 months. The first phase of Tung Chung East Station will be launched first.
Regarding the Siu Ho Wan project, which failed to secure bids earlier this year, Tang Chi-fai, another executive at MTR Corporation, assured that it remains a top priority project. The company is currently conducting technical research and preliminary works to address developer concerns about the railway’s development risks.
Tang Zhihui highlighted that the “railway + property” development model is a long-term project, and MTR Corporation will price its projects based on market conditions. With approximately 17,000 residential units at different stages of development, construction, and pre-sales, the company aims to ensure a continuous and consistent supply.
MTR Corporation’s financial future appears positive, with the expectation of continued profits from the eleventh phase of “Sunrise Cannes.” The company plans to utilize the “railway + property” development model to finance new railway projects, ensuring sustainable growth.
Additionally, MTR Corporation discussed its upcoming shopping malls, including “THE SOUTH SIDE” at Wong Chuk Hang Station, which is set to open in phases from the fourth quarter of this year. According to Jin Zepei, the retail portfolio’s gross floor area has increased by approximately 30% due to the addition of the new shopping mall “Wai Fong” at Tai Wai Station.
Despite uncertainties surrounding cross-border travel and consumption, MTR Corporation maintained a cautiously optimistic outlook. The company assured stability when it comes to new lease renewals and stated its ability to meet the capital expenditure needs through healthy financial standings without any plans for equity financing.
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Source: Viewpoint.com