Hong Kong’s property market has been experiencing a decline in performance in recent months, leading to concerns about the income of MTR Corporation, which relies on the “railway + property” development model. Tang Zhihui, the director of property and international business of MTR Corporation, acknowledges the fluctuation of property prices during economic cycles and states that the company will adjust the pricing of its projects according to market conditions.
During the 2023 interim results press conference held on August 10, MTR Corporation reported a year-on-year decrease of 11.7% in its interim net profit, which amounted to HK$4.178 billion. The company maintained its interim dividend at HK$0.42 per share, with optional scrip dividends.
Although MTR’s total revenue increased by nearly 20% to exceed HK$27.5 billion and recurring business turned losses into profits, the profits from property development decreased by over 90% to approximately HK$730 million. Xu Lianghua, the chief financial officer of MTR Corporation, explained that the decline in property development profits was mainly due to the high base resulting from the simultaneous recording of three real estate projects in the same period last year.
In terms of passenger transport services in Hong Kong, MTR Corporation reported a 60.7% increase in operating revenue from its bus services, amounting to HK$9.342 billion. However, the bus services still recorded a loss of HK$774 million, a decrease of 72% year-on-year. The Hong Kong station business income reached HK$2.415 billion, a 63% increase, with a profit of HK$1.798 billion, a 64% increase compared to the previous year.
As Hong Kong has been gradually returning to normal, local and patrol railway passengers have been increasing. The number of local passengers has recently recovered to over 90% of the pre-pandemic level. However, Jin Zepei, CEO of MTR Corporation, stated that it is still dependent on the economic environment and citizens’ travel needs to predict when the car operations in Hong Kong will fully recover. Jin remains cautiously optimistic about passenger flow growth.
Regarding property development, Jin Zepei mentioned that around 4,000 units will be available for tender in the next 12 months, with the first phase of Tung Chung East Station being launched first. He also clarified that the Siu Ho Wan project, which failed to bid in February this year, is still a top priority project for the MTR Corporation. The project is currently undergoing technical research and preliminary works to address developer concerns about the development risks of the railway.
Tang Zhihui reiterated that property prices fluctuate during economic cycles, and the “railway + property” development projects are long-term endeavors. MTR will adapt its pricing strategies for sale according to market conditions. With approximately 17,000 residential units in different stages of development, construction, and pre-sales, MTR ensures there will be no gaps in the market.
MTR Corporation is expecting the profits from the eleventh phase of the “Sunrise Cannes” project to continue in the second half of this year. To ensure the sustainable development of the company, MTR will continue to finance new railway projects using the “railway + property” development model.
Additionally, MTR Corporation has plans for new shopping malls. “THE SOUTH SIDE” at Wong Chuk Hang Station, with a floor area of 47,000 square meters, is expected to open in phases starting from the fourth quarter of this year. The new shopping mall “Wai Fong” at Tai Wai Station has also increased the attributable gross floor area (GFA) of the retail portfolio by about 30%. The growth of consumption after customs clearance is still uncertain, but MTR Corporation remains cautiously optimistic, particularly in terms of new lease renewals.
In terms of the company’s financial situation and capital expenditure, Xu Lianghua mentioned that MTR Corporation generated HK$3.87 billion in net cash from operating activities in the first half of the year. The net amount received from property development was HK$4.533 billion, which is sufficient to meet the capital expenditure needs. With a debt-to-asset ratio of only 22% and a healthy financial situation, MTR Corporation has no plans for equity financing.
Overall, MTR Corporation is facing challenges in its property development profits due to the fluctuating property market. However, the company is implementing strategies to adjust pricing according to market conditions and continue its long-term “railway + property” development projects.