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Lincoln Leong Kwok-kuen, chief executive officer of MTR Corp, sees another slow year for property development profits in Hong Kong. Photo: Jonathan Wong

Hong Kong’s MTR Corp net profit drops 21.1pc to HK$10.2b on lower property income

Seven property projects would provide 8,000 units, accounting for 42 per cent of the Hong Kong government’s target to provide 19,000 private flats in the year to March 2018

MTR Corp plans to offer seven property projects for tender over the next 12 months, believed to be the largest number planned in a single year by Hong Kong’s rail operator, after it announced a 21.1 per cent fall in net profit last year on lower property development income.

The seven projects would provide a total of 8,000 units, accounting for 42 per cent of the Hong Kong government’s target to provide 19,000 private flats in the year to March 2018.

The move comes after the company announced that full year net profit plunged to HK$10.25 billion (US$1.32 billion) after its earnings contribution from Hong Kong property development slumped.

The company’s profit from transportation edged up 3.2 per cent to HK$2.57 billion.

“I believe seven projects put up for sale would be a record for MTR Corp,” said Kenny Tang Sing-hing, chief executive of Junyang Securities.

It would break MTR Corp’s previous record of four property tenders in 2015. The tender number dropped to two in 2016.

I believe seven projects put up for sale would be a record for MTR Corp
Kenny Tang Sing-hing, chief executive of Junyang Securities

Tang believes MTR Corp’s profit will be boosted in coming years as developers at home and from the mainland are becoming more aggressive when it comes to land acquisitions, particularly sites in prime locations.

In December a consortium led by Goldin Financial Holding, which won luxury residential development rights at Ho Man Tin MTR station, revealed that the total development costs for the project, including the assessed premium and the lump sum payment, was estimated to be HK$13 billion, or HK$17,500 per square foot, according to the firm’s filing to the Hong Kong stock exchange.

MTR Corp’s move to accelerate site tenders will also be seen as supporting the government’s call to increase land for private housing to ease the housing shortage, said Tang.

Lincoln Leong Kwok-kuen, MTR Corp’s chief executive, attributed the company’s profit decline for the year to December 31 to lower property development profits.

“Profits from Hong Kong property development were muted in 2016 and would remain so in 2017, as we will have no new developments scheduled for completion in the year,” he said

Over the next 12 months or so, subject to market conditions, the company expects to put up for tender seven developments in Hong Kong, including the first property project at the Kam Sheung Road station site in Yuen Long, acting as an agent for the KCRC.

The city’s sole operator of the mass transit railway system said total revenue rose 8.4 per cent to HK$45.19 billion for the financial year.

Underlying profits fell 13.3 per cent to HK$9.4 billion in line with expectations, compared with underlying earnings of HK$10.9 billion for 2015.

Its net profits from property developments fell to HK$311 million compared with HK$2.89 billion in 2015.

Shares of MTR Corp dropped 0.6 per cent to HK$41.45 on Tuesday. Directors declared a final dividend of HK$0.82 per share.

The company’s Hong Kong transport business saw passenger volume growth of only 0.5 per cent, lower than the average annual growth rate of 2.4 per cent over the last five years.

“The impact on patronage of the slowdown in economic growth in Hong Kong was partially offset by the opening of two new rail lines,” Leong said.

The two new rail lines are the Kwun Tong Line extension with new stations in Ho Man Tin and Whampoa, and the South Island Line with four new stations including Ocean Park and Wong Chuk Hang.

Leong said the fare review with the government was still underway and would be announced once details are available.

He said MTR Corp has been invited by the government to prepare proposals for the first four of the seven railway projects indentified under the Railway Development Strategy 2014.

In December last year it submitted a proposal for the extension of the West Rail line to Tuen Mun South.

This article appeared in the South China Morning Post print edition as: MTR Corp to offer 7 project tenders as profit slips 21pc
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