February 27, 2019 / 10:18 AM / 3 months ago

UPDATE 1-Sun Hung Kai Properties profit slumps on accounting change, sees stable market

* H1 underlying profit drops 31 pct y/y

* HK property market sees supports - senior exec

By Clare Jim

HONG KONG, Feb 27 (Reuters) - Hong Kong’s Sun Hung Kai Properties reported a 31 percent fall in half-year underlying profit, dragged down by a change in accounting standard, and said it expects the property market to be stable in 2019.

SHKP is the most valuable developer in one of the world’s priciest property markets. It told an earnings conference on Wednesday an easing of tensions between Beijing and Washington, softening interest rates and favourable mortgage plans offered by banks would help to support the housing market.

Company deputy managing director Victor Lui said many investors would turn to real estate rental yield amid volatility in other financial instruments, though he expected the overall transaction volume would drop this year.

Hong Kong’s private home prices started softening since August after a 28-month bull run, but they still climbed 1.6 percent for the whole of 2018. The city’s sky-high property prices have posed challenges to policymakers faced with public discontent and asset bubble risks.

The outlook for Hong Kong’s property market has started to firm up, with some analysts predicting prices could rise as much as 10 percent this year after only a short-lived correction.

SHKP posted an underlying profit of HK$13.7 billion ($1.75 billion) in the six months ended December 31, versus HK$$19.97 billion a year ago, mainly due to a 33 percent drop in revenue as the change in accounting standard deferred recognition of revenue.

Higher property sales revenue will be recognised in the second half of the financial year, the company said in a statement.

Total contracted sales during the reporting period, which include development projects in mainland China, rose 49 percent to HK$43 billion. Lui said the company will launch more new flats in the market in the second half.

Smaller rival New World Development Co Ltd, which was using the same accounting policies as the last financial year, reported on Wednesday a 29 percent rise of underlying profit during the same period at HK$5.4 billion, as its property development segment recorded a 202 percent increase in revenue.

Shares of SHKP, seen as a market proxy, have rebounded 33 percent from a trough in October. It closed up 0.8 percent ahead of the results announcement on Wednesday, giving the company a market value of $49.05 billion. ($1 = 7.8494 Hong Kong dollars) (Reporting by Clare Jim; Editing by Muralikumar Anantharaman)

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