Hopewell interim profit leaps to HK$10.4 billion

Hopewell interim profit leaps to HK$10.4 billion

Revaluation gains on investment property and on land under redevelopment helped infrastructure and property company Hopewell Holdings (0054), controlled by tycoon Sir Gordan Wu Ying-sheung, push its interim profit 470 percent to HK$10.4 billion.

Hopewell Holdings is currently redeveloping the 55-storey Hopewell Centre II at a total cost of HK$9 billion on this site which is next to the original Hopewell Centre  (Danny Chung)

Hopewell Holdings is currently redeveloping the 55-storey Hopewell Centre II at a total cost of HK$9 billion on this site which is next to the original Hopewell Centre (Danny Chung)

In its interim results released last week the company said for the six months ending 31 December 2012, its earnings before tax and interest (EBIT) but excluding the revaluation gains was HK$883 million.

Under accounting practice, the land conversion gain of HK$2.15 billion for the Hopewell Centre II redevelopment project and the fair value gain of HK$7.69 billion for its rent generating investment properties are to arrive at the profit attributable to shareholders of HK$10.4 billion.

By comparison for the same period in 2011, the interim profit, which included a revaluation gain of HK$1.14 billion, was only HK$2 billion.

The latest interim profit could have been even higher because Hopewell only booked the gain arising from only the commercial portion of Hopewell Centre II.

“The value of the hotel portion of the project is still stated at cost in the Group’s balance sheet in accordance with general market practice,” Hopewell said in its stock exchange notice.

Total revenue for the period dipped 6.5 percent to HK$2.94 billion of which HK$1.11 billion came from toll road investment and HK$726 million came from power plant.

Hopewell said that site preparation work for Hopewell Centre II, which is next to its Hopewell Centre building in Wanchai, started at the end of last year.

The 55-storey building with a total price tag of HK$9 billion including premium for land exchange is scheduled for completion in 2018.

The project has been considerably cut down to size.

The original design called for a vertigo inducing 93-storey building, which although was approved by Buildings Department in 1994, drew heavy flak from environmentalists and local residents.

In November 2008, the company gave in and cut the number of storeys to 55 storeys.

In July last year it agreed to pay a land premium of HK$3.7 billion to the government for a land exchange that would allow for redevelopment.

According to a former senior official at Lands Department the land premium of HK$3.7 billion would represent the difference in the value of the land of before redevelopment and after redevelopment at the date of valuation, ie July 2012.

Hopewell said in its results the market value of the land after redevelopment as of 31 December was HK$8.5 billion while the historical cost of the land was HK$4.2 billion as of October 2012 when the land exchange was completed.

The HK$4.2 billion was represented by the HK$500 million sum spent for site acquisition and the HK$3.7 billion premium to the government.

By paying the premium as it did, it said “HK$4.3 billion of land value would be unlocked”.

“There is likely to have been some ‘marriage’ value elements accruing as a result of the site amalgamation exercise,” the former Lands official said.

“All I do know from my present dealings with Lands Department valuers is that they are very up to date and like to ensure developers pay full value so there can be no accusations of any favours being given,” he added.

Danny Chung

 

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