An increase in property sales last year helped nearly double the net profits of subway operator and landlord Mass Transit Railway Corporation (MTRC).

But the stellar growth, which brought in HK$15.18 billion, may not be able to be maintained this year, the company said yesterday.

MTRC's profits from its property developments climbed significantly, by 42.8 percent, to HK$8.3 billion, with most of the contribution coming from two property projects - Le Point at Tiu Keng Leng Station and Harbour Green at Olympic Station.

The firm's underlying profits - excluding property revaluation gains - surged 43.8 percent to HK$8.57 billion, beating market estimates of between HK$5.87 and HK$6.01 billion.

The company proposed a dividend payout for shareholders of HK$0.31 a share, compared with HK$0.28 a year earlier.

MTRC, which is 76 percent-owned by the Hong Kong government, said it boosted real-estate earnings because the city's economic growth raised demand for office and retail space.

Last year, the company also took over the operations of Hong Kong's other train operator, Kowloon-Canton Railway Corp (KCRC), to increase passenger traffic and add more property developments.

Two security guards pass a large corporate logo for the MTRC. MTRC's net profits nearly double last year to HK$15.18 billion after it booked revenue from the KCRC. Bloomberg

However, "we do not expect the magnitude of property development profits to be repeated in 2008," said C. K. Chow, chief executive of MTRC, adding that the profits last year were exceptionally strong.

In 2008, the MTRC may book profits from sales of two projects - The Capitol in Tseung Kwan O, whose pre-sales were completed earlier; and the Ho Tung Lau Project in Fo Tan, whose pre-sale may start this year.

But Chow said the profits depend on the issuance of the occupation permits, so "chances are slight for the profits (from these two projects) to be put on the balance sheet in the first half".

Matthew Kwok, head of research at Tanrich Financial, said it's hard to predict MTRC's results this year due to uncertainties of when the profits from the two projects will be recognized.

"The property market is booming, and MTRC's property sales shouldn't be bad. The thing is, we don't know when the property gains will be booked."

Another concern Kwok raised is the firm's operating profits after its merger with the KCRC on Dec 2.

With KCRC, MTRC's fare revenue rose 9.1 percent to HK$7.1 billion in 2007.

However, the average fare per passenger on domestic services fell to HK$6.39, lower than the average of HK$6.83 on just the MTRC lines.

MTRC's operating profit margin in 2007 was 55.3 percent, 0.8 percent higher than a year before, but Chow said the operating margin is expected to be lower this year as a result of the fare reductions.

MTRC shares rose 2.1 percent to HK$28.85 yesterday before the earnings announcement.

(HK Edition 03/12/2008 page2)