(Bloomberg) -- Sun Hung Kai Properties Ltd.’s first-half profit slipped as protests that roiled Hong Kong dented Chinese demand for luxury homes and slashed spending at the company’s malls.
Hong Kong’s largest developer also issued a warning that, should the coronavirus epidemic linger longer, its adverse impact on the company’s property sales and earnings could last for as long as two years. It said it had already drawn up plans to increase spending in shopping malls to help tenants, as well as initiatives to promote property sales and aid hotels, without elaborating.
- Underlying profit dropped 2.3% to HK$13.4 billion ($1.7 billion) in the six months ended Dec. 31, the company said in an exchange filing Thursday
- Net rental income for the period, including contributions of joint ventures and associates, increased just 1.7% to HK$9.7 billion
- “While the group’s office portfolio performed satisfactorily, the challenging business environment faced by the retail sector in Hong Kong has created downward pressure for retail rental,” Sun Hung Kai said
- It added that the “operating environment in Hong Kong, in particular retail leasing and hotel operations, has weakened since mid 2019 impacted by local social incidents. In the short term, it will be further hit by the outbreak of a novel coronavirus”
- Hong Kong’s retail sector was assailed by the often-violent protests, which scared away tourists, kept locals off the streets, and at times spilled into malls. The coronavirus outbreak has only exacerbated the downturn, with the city headed for a second year of recession
- The slump has prompted mall-owners to offer concessions to tenants: Sun Hung Kai is giving rental discounts of 30%-50% this month to help them ride out the impact from the virus. That could continue to weigh on profit this quarter, according to Bloomberg Intelligence
- Contracted sales in Hong Kong plunged by 55% to HK$17.9 billion versus the same period of last year. Buyers from the mainland, a key source of demand for Sun Hung Kai’s luxury apartments, avoided Hong Kong during the protests
- For more details on the earnings, click here
- Sun Hung Kai shares gained 1.5% Thursday ahead of the results announcement, trimming losses for the year to 5.2% versus a 5% decline in the benchmark Hang Seng Index
--With assistance from Natalie Lung.
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