The Business Times | MARCH 28, 2013
Cheung Kong profit down 30% for 2012 on lower sales
[HONG KONG] Li Ka-shing, Asia's richest man, backed recent measures by the Hong Kong government to curb an "unhealthy" surge in property prices that's turned the city into the world's most expensive housing market.
"If prices goes up every day, and a lot of people can't afford to buy, this would be unhealthy," Mr Li said after his flagship developer Cheung Kong Holdings Ltd reported lower property sales on Tuesday. "The Hong Kong government has said it wants a stable market."
Mr Li's comments come after Cheung Kong last month sidestepped government curbs on home sales by selling hotel rooms, before Hong Kong Chief Executive Leung Chun-ying widened the restrictions to include commercial property. Cheung Kong this month became the first major developer to cut prices at an apartment project, with Deutsche Bank AG forecasting home value in the city may decline as much as 20 per cent over two years.
"We expect Cheung Kong to be more responsive in adjusting prices to suit the prevailing market conditions," Deutsche Bank analysts Jason Ching and Tony Tsang wrote in a report on Tuesday. The company "has a very good track record of expanding market share, even in difficult markets."
Cheung Kong shares rose 0.44 per cent to close at HK$113.70 yesterday.
The earnings statement came after the market closed on Tuesday. Net income for 2012 fell 30 per cent to HK$32.2 billion (S$5.1 billion), beating the HK$25.7 billion average estimate of 11 analysts surveyed by Bloomberg.
Hong Kong's home prices have doubled in the past four years on record low mortgage rates, a lack of new supply and an influx of mainland Chinese buyers, raising concerns that housing is becoming unaffordable for the general public.
Chief Executive Leung has made available more land for public housing, imposed extra tax on foreign buyers and doubled stamp duty on all property transactions since taking over in July. HSBC Holdings and Standard Chartered have also led banks in raising mortgage rates in the city after the Hong Kong Monetary Authority tightened risk rules last month.
"Property sales have slowed down recently," Mr Li, 84, said. "The government wants a stable market. If the policy provides stability and land and home prices are stable, then it should be a good thing." Cheung Kong last month raised HK$1.4 billion selling all 360 rooms at its Apex Horizon hotel project. Following the sale, the government said in a statement it will inspect the development to ensure the rooms aren't being used as residences.
A day later, the government doubled the stamp duty tax on all properties of more than HK$2 million and raised mortgage down-payment requirements, its first set of measures aimed at non-residential properties, including hotel rooms, offices, shops, and carparks.
Mr Li, who opened a plastic flower factory after World War II, began investing in Hong Kong real estate in 1967 after riots from China's Cultural Revolution depressed prices to build Cheung Kong into a company with a market value of US$34 billion.
Nicknamed "superman" by the local media for his investing prowess, Mr Li forecast in 2007 that China's stock-market bubble would burst and in 2009 predicted the rally in Hong Kong home prices. The Shanghai Composite Index lost 65 per cent in 2008, the most among the world's 10 biggest stock markets.
Cheung Kong on Tuesday reported 2012 profit excluding contributions from unit Hutchison Whampoa Ltd. rose 6 per cent as rental income growth offset a decline in home sales.
Profit excluding Hutchison increased to HK$19.1 billion from HK$18.1 billion a year earlier, the company said. Contribution from property sales fell to HK$10 billion from HK$11.2 billion a year ago as it booked sales in projects including La Splendeur and Le Chateau.
Mainland China, where Cheung Kong has projects in cities including Shanghai and Guangzhou, contributed HK$4.7 billion, or almost half of the company property sales profit last year.
"I get the sense that they're more upbeat on their mainland China businesses," said Lee Wee Liat, Hong Kong-based analyst at BNP Paribas SA. "They're hedging themselves. If Hong Kong doesn't sell that well, China's going to bring up the numbers."
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