K.Wah to boost rental income

Analysis, Slider 30 Aug 2013
K.Wah to boost rental income

Higher recurring income to iron out sales fluctuations

From left: Executive director Alexander Lui Yiu-wah, Chairman Dr Lui Chee-woo, Executive director Paddy Lui Wai-yu, Chief Financial Officer  Herbert Hui Leung-wah   (K.Wah International Holdings)

From left: Executive director Alexander Lui Yiu-wah, Chairman Dr Lui Chee-woo, Executive director Paddy Lui Wai-yu, Chief Financial Officer Herbert Hui Leung-wah (K.Wah International Holdings)

Mid-sized developer K. Wah International Holdings (0173) is hoping to increase the revenue contribution from investment property to iron out fluctuations in revenues from property sales.

Speaking at the release of the company’s interim results Thursday, executive director Paddy Lui Wai-yu, said there was no specific number for the percentage for rental income within total revenue.

“We only want to increase the recurring income for the group,” Lui, who is the daughter of tycoon and company chairman Lui Chee-woo, said.

To this end, the company plans to reserve selected apartments at The Palace and Grand Summit projects in Shanghai for use as service apartments that would add 50,000 square metres of gross floor area to the existing investment property portfolio of 120,000 square metres.

The company’s investment portfolio includes Shanghai K.Wah Centre, J SENSES in Wanchai and Huadu Jiahua Plaza in Guangzhou.

In its latest interim results, rental income for the six months to 30 June 2013 was HK$140.4 million, representing just 4.2 percent of total revenue of HK$3.3 billion.

In fact with relatively little rental income to hold up the bottom line, the company was at the mercy of severe fluctuations from profits of joint ventures leading to profit attributable to equity holders in the first half plunging 69.4 percent to HK$887.6 million.

This was despite revenue actually jumping 16.5 percent to HK$3.3 billion, generated from from sales of flats at The Palace and The Legend projects in Shanghai and Le Palais in Guangzhou.

The real damage came from the company’s share of profits of joint ventures in Hong Kong, which plunged 97.7 percent to just HK$37.2 million.

In a stock exchange statement, the company said the government’s cooling measures in October last year and in February this year as well as the introduction of the Residential Properties (First-hand Sales) Ordinance in April caused a drop in property market.

Executive director Alexander Lui Yiu-wah described prospects for the market in the next one to two years as “very desolate”.

He noted construction costs have been increasing which meant developers being all the more reluctant to cut prices to sell flats.

Company chairman Lui Chee-woo said the K.Wah would continue to buy land for development regardless of whether it was expensive or cheap.

The company bought five lots of land last year with three of them in Hong Kong.

Planning for the two lots in Tseung Kwan O and one lot in Yuen Long was underway for completion in 2016 and 2017 respectively.

Danny Chung

 

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