SHKP Profit Tumbles 20% to $2.4B as Hong Kong Slump Hits Portfolio

Sun Hung Kai Properties reported a full-year attributable profit of HK$19 billion ($2.4 billion), down 20 percent, as Hong Kong’s largest developer saw its property portfolio drop in value amid the city’s prolonged real estate slump.

The builder controlled by the Kwok family posted an unrealised fair-value loss on investment properties of HK$2.4 billion for the year to the end of June, reversing a fair value gain of HK$221 million in the previous fiscal year, according to results released Thursday.

The blue-chip developer’s underlying profit, which ignores the fair-value change of investment properties, dipped 9 percent to HK$21.7 billion. Profit generated from property sales plunged 30.5 percent to HK$7.9 billion as attributable contracted sales reached HK$37.5 billion.

In his chairman’s statement, Raymond Kwok said the world economy was still clouded by a host of headwinds, including trade tensions, elevated interest rates and inflation pressure.

“The upcoming US presidential election may also pose uncertainties to the geopolitical landscape,” Kwok said. “Nevertheless, the beginning of an interest-rate-cut cycle for selected advanced economies and a clearer rate-cut path should pave the way for economic growth.”

Unrecognised Sales Pile Up

SHKP’s recently launched Hong Kong projects include Yoho West Phase 1 in Tin Shui Wai, The Yoho Hub II in Yuen Long and Cullinan Harbour Phase 1 in Kai Tak, with all receiving a “positive market response”, the developer said in a release.

The group’s unrecognised contracted sales in Hong Kong stood at HK$24.9 billion at the end of June, with HK$19.6 billion expected to be recognised in the current fiscal year.

In mainland China, SHKP projects offered for sale included Shanghai Arch Phase 3 and the third batch of residences at Hangzhou IFC (River East). Unrecognised contracted sales from mainland projects totalled RMB 12.6 billion ($1.8 billion) at the end of June, with RMB 8 billion expected to be recognised in the new fiscal year.

In the Hong Kong office market, the group’s mega-project atop West Kowloon station is set to bring steady cash flows and rental income starting in the next one to two years, SHKP said. The office portion of the development, called International Gateway Centre, secured UBS as the tenant for an entire block to house the Swiss banking giant’s regional headquarters.

“The uncertain economic outlook remains a drag on office demand in Hong Kong,” Kwok said.

Cultivating Land Bank

During the fiscal year, SHKP added three residential sites to its land bank in Hong Kong through lease modifications, spanning a total gross floor area of 1.5 million square feet (139,355 square metres).

The group expects to receive cash compensation of HK$1.9 billion for the government’s resumption of its lots in the Kwu Tung North/Fanling North New Development Area. Another batch of lots in the Hung Shui Kiu/Ha Tsuen New Development Area has also been resumed, with compensation of HK$2.7 billion, and SHKP is applying for land exchange for other lots in the area.

“The group will continue to adhere to its prudent financial discipline, maintain its sizeable recurring income from its rental portfolio and non-property businesses, and capitalise on its strong reputation for delivering high-quality properties to achieve high asset turnover for its property development business,” Kwok said.

In an analysis, Morningstar said pressure on SHKP’s property sales and margins would likely persist in the near term — irrespective of a US Federal Reserve decision to start cutting interest rates later this month — as buyers may choose to wait for mortgage rates to fall to a more affordable level before entering the market.

“That said, we expect property sales booking to pick up from fiscal 2026 and segmental operating margins to gradually improve back to our long-term, unchanged, estimate of 40 percent by fiscal 2028,” the researcher said.