Hongkong and Shanghai Hotels, owner of the world renowned Peninsula hotel chain, recorded a near nine times rise in net profit for the first half of this year because of a HK$1.175 billion gain on disposal of the Kowloon Hotel.

Excluding non-operating items, the net profit also saw a 74 per cent growth to HK$285 million and the company's turnover during the period was HK$1.529 billion, up 7 per cent year-on-year. Earnings per share rose 9 times to HK$0.90 with an interim dividend of HK$0.04 per share declared.

Riding on the tide of a tourist boom, Hongkong and Shanghai Hotels had an occupancy rate of 81 per cent in the first half of this year, compared to 70 per cent for the same period of 2004 and an average room rent of US$360, up from US$324 for the first half of 2004.

The Peninsula Palace hotel in Beijing had an occupancy rate of 75 per cent, compared to 54 per cent for the first half of 2004 and an average room rent of US$147, up from US$119 for the first half of 2004. The hotel is 42.1 per cent owned by Hongkong and Shanghai Hotels.

Chief Executive Officer Clement Kwok said he is optimistic on bookings for hotel rooms in the second half of this year due to the opening of Disneyland, which is expected to increase the number of visitors to Hong Kong.

Regarding the appreciation of the yuan, Kwok said: "It has little impact on the company as it only appreciated 2.1 per cent."

"Although the company has expenses denominated in yuan, it also has income in the currency." He said. "The company's investment on the mainland will consequently have a higher value."

The company has prepared a large portion of the payment in yuan needed for its hotel project in Shanghai, he said, and the company's loan is also likely to be denominated in yuan which is in line with its practice of funding projects with local currencies.

The final phase of renovation of the Beijing Hotel is scheduled for completion in the last quarter of this year.

Commenting on the company's result, Kwok noted: "The Kowloon Hotel's disposal has enabled us to focus on the core Peninsula brand and our strategy of enhancing existing assets continues and its efficiency is demonstrated by the significantly improved performance of the Peninsula Palace Beijing."

Merril Lynch adjusted down earlier the target price for the company at HK$8.33 with the profit projection in 2005 and 2006 at 5 per cent and 6 per cent respectively (a higher rate of depreciation will be applied under new accounting standards).

Shares of the stock fell by 2.25 per cent to close at HK$8.7 yesterday despite making an impressive gain in net profit for the first half of the year.

Hong Kong tourist industry saw an instant rebound since the introduction of the individual travel scheme by the central government in the wake of the SARS devastation in 2003.

The opening of Disneyland theme park in September will add at least 10,000 mainland tourists in Hong Kong (immigration officials estimate), boosting business for hotels.

To cope with soaring lodging demand from tourists and business travellers, Hong Kong government is turning some of the traditional industrial areas into hotel village sites such as Aberdeen in Hong Kong Island South.

(HK Edition 07/29/2005 page3)