Hang Lung Properties Ltd, the third largest developer in Hong Kong, reported a 59 percent drop in its full-year underlying profit after selling fewer properties during the period.

Net income excluding revaluation gains and deferred tax for the financial year ended June 30, 2011, fell 59 percent to HK$2.74 billion. This compares to HK$6.67 billion a year earlier, the developer said in a statement to the Hong Kong stock exchange on Friday.

Hang Lung generated almost all of its earnings from its core property leasing business in Hong Kong and the mainland, which rose 18 percent from the HK$2.32 billion it earned a year earlier.

Property sales, however, were virtually frozen as the company only earned HK$2 million from home sales, in comparison with the HK$4.36 billion sales gain a year earlier.

Ronnie Chan, chairman of Hang Lung Properties said that due to the current uncertain market conditions, Hang Lung decided to retain its already completed flats, which resulted in insignificant property sales last year.

"We have not bought any land in Hong Kong for the past 11 years and we have ample cash on hand now," Chan told a media briefing on Friday. "The property market in Hong Kong is lukewarm at the moment. We will release these unsold units when the market picks up again," Chan added.

However, Castor Pang, research director at Cinda International, noted that Hang Lung may only have some 20 luxury flats unsold in the city at the moment and whether they are sold or not will have little effect on the company's bottom line.

"Hang Lung has basically given up on the Hong Kong market and is putting its full attention on the mainland. If Chan was still bullish on the city's property market, he wouldn't have done nothing in Hong Kong in the past few years," said Pang.

Hang Lung, which entered the mainland in 1992, will open a shopping mall in Jinan, Shandong province in August, its fourth outside Hong Kong.

It is also planning to open seven more shopping mall-based projects in second-tier cities on the mainland, with a total investment amounting to HK$50 billion, according to Chan.

In March this year, Chan said the company planned to spend more than HK$30 billion over the next few years to buy land on the mainland.

He also said Friday that the company has bought 20 billion yuan last year in the offshore Hong Kong market to finance its projects on the mainland.

Shares of Hang Lung tumbled HK$1.25 or 4.16 percent to close at HK$28.8 on Friday, compared with the 0.58 percent drop in the city's benchmark Hang Seng Index.

The stock has declined 20 percent this year, making it the worst performer in the seven-member Hang Seng Property Index, which has lost 4.2 percent this year, according to a report by Bloomberg News.

Hang Lung Group Ltd, its parent company, also posted a full-year underlying profit of HK$1.73 billion on Friday. It fell 53 percent from the HK$3.70 billion it earned last year.

litao@chinadailyhk.com

China Daily

(HK Edition 07/30/2011 page2)