Kerry Properties H1 Profit Drops 55% on Markdowns, Homebuying Weakness

Hong Kong’s Kerry Properties said first-half attributable profit fell 55 percent year-on-year to HK$788 million ($101 million), as asset revaluations and poor home sales took a toll on earnings at the builder controlled by the family of Shangri-La Hotel tycoon Robert Kuok.

Underlying profit, which strips out changes in fair value of investment properties, dipped 19 percent year-on-year to HK$1.4 billion for the six-month period, Kerry said Wednesday in a stock filing. The figure also excludes a one-off provision for certain land parcels in the New Territories’ Kwu Tung area, where the group reportedly spent nearly HK$500 million for 17 agricultural sites in 2021.

First-half revenue slid 8 percent year-on-year to HK$5 billion, burdened by a 16 percent drop in property sales revenue to HK$1.8 billion. Chairman and CEO Kuok Khoon Hua said Hong Kong home sales softened after a short uptick following the government’s scrapping of cooling measures in February, while buying sentiment “remained weak virtually across the board” in mainland China markets.

“Against this backdrop, the group delivered satisfactory results for the period,” said Kuok, who is Robert Kuok’s youngest son. “Our premium development properties sold reasonably well, while our office and retail portfolio delivered steady rental income in local currency terms. Meanwhile, our hotels performed steadily following a significant recovery last year.”

Mixed Sales Picture

Kerry’s first-half contracted sales totalled HK$7 billion, down 14 percent year-on-year, as an 82 percent dive in mainland China was partly offset by a 271 percent surge in Hong Kong.

The HK$1.2 billion in mainland contracted sales was smaller in scale because launches were confined largely to second- and third-tier cities, the developer said. The results stemmed chiefly from Wuhan’s River Mansion, which recorded HK$422 million in contracted sales during the period, and Shenyang’s The Arcadia, which chalked up HK$415 million.

Hong Kong contracted sales reached HK$5.8 billion and weighed heavily towards Mont Verra, with the ultra-luxury development in Kowloon Tong’s Beacon Hill area ringing up HK$4.8 billion. Coming a distant second was The Aster in Happy Valley, where the group inked HK$515 million in contracted sales. Kerry’s joint venture projects at Wong Chuk Hang MTR station, La Marina and La Montagne, saw a combined HK$516 million in attributable contracted sales.

Rental income from investment properties (excluding hotels) fell 3 percent year-on-year to HK$2.4 billion during the six months but was largely in line with year-earlier levels in local currency terms. Hotels reverted to norms after 2023’s rebound, registering a 3 percent year-on-year decline in revenue to HK$822 million.

Mainland Rich Offer Hope

Kerry expects residential demand in Hong Kong and mainland China to remain subdued on continued softness in business and consumer sentiment, unfavourable supply-demand dynamics and high interest rates, Kuok said.

The chairman observed a hopeful trend of high-net-worth and professional individuals and families from mainland China relocating to Hong Kong and representing “a potent buying force” for high-quality, well-located and immediately available residences.

“We remain optimistic about the longer-term prospects of our core markets and will continue to enhance the value and service that we provide to our customers,” Kuok said. “However, given our cautious approach, we will continue to prioritise financial discipline and the timely delivery of our projects under development.”

Among the notable residential transactions so far during the second half, a unit at Kerry’s Mont Verra sold in July for HK$250 million, or HK$56,167 per square foot, according to JLL’s latest Market Monitor report.

Transaction volume dropped to 826 units in Hong Kong’s primary market and remained stable at 2,897 units in the secondary market, resulting in an overall volume decline of 3.4 percent from June levels, the consultancy said.