Result review: Lifted by substantially higher development earnings
Sino Land’s 1HFY22 underlying profit more than doubled to HK$4.37bn on higher development earnings. Despite increased earnings, interim DPS rose 7% to HK$0.15, which came as a pleasant surprise.
Including those from joint ventures and associates, development profit was substantially higher at HK$4.14bn. (1HFY21: HK$808m) The bulk came from the selling Mayfair by the Sea 8 in Tai Po and remaining stock at Grand Central in Kwun Tong. The balance stemmed from the sales of 133 Portofino in Sai Kung, Dynasty Park Ph 3 in Zhangzhou, and car parks. Mayfair by the Sea 8 is virtually sold out. Most of sold units have been handed over to the buyers with profit recognition in 1HFY22. On the other hand, Grand Central is 94% sold. As of Dec-21, Sino Land had a net order book of HK$12.4bn, of which HK$2bn will be booked in 2HFY22 with the balance in FY23-24.
Gross rental income fell 2.4% to HK$1.8bn in 1HFY22 as negative rental reversion was working its way through its office and retail portfolios. The overall occupancy rate was stable. While retail occupancy witnessed slight improvement, office occupancy remained under pressure. To drive foot traffic and boost tenants’ sales, promotion and marketing expenses increased. This led to a larger 4.4% y-o-y decline in net rental income.
Pre-leasing activities of One North in Yuen Long and Landmark South in Wong Chuk Hang have begun. Upon scheduled completion in FY23, these two commercial properties will provide a total attributable GFA of 0.6msf, which will augment rental earnings.
Sino Land has obtained pre-sale consent for the 121-unit One Central Place in Central. Given its close proximity to CBD, this URA redevelopment project should draw strong interest when it goes on sale after the current pandemic situation stabilises. Besides, the company is also applying for pre-sale consent of three joint venture residential projects at Kam Sheung Road Station, Lohas Park Station and Wong Chuk Hang Station. These projects are well-located which indicates strong marketability.