Passengers head for the exit after getting off an MTR train yesterday in Hong Kong. The city's railway operator posted a jump of 43 percent in underlying earnings in the first half of the year. CNS

HONG KONG: The city's railway operator MTR Corporation said it will tender the sites in the Kowloon Southern link and Nam Cheong station before the first quarter of 2010, after reporting a 43 percent surge in underlying net profits boosted by improved apartment sales.

For the six months ended June 30, underlying earnings excluding investment property revaluation gains jumped to HK$3.9 billion from HK$2.7 billion.

The railway operator booked HK$2.15 billion in profits from its property development, compared with HK$348 million last year, as it benefited from property sales in The Harbourside at Kowloon station, The Palazzo in Fotan and The Capitol in Lohas Park, Tseung Kwan O.

Change in fair value of investment properties, however, decreased to HK$712 million in the first half of 2009, compared with a much more significant property revaluation surplus of HK$2.08 billion in 2008. The mark-downs also dragged MTR's first-half net earnings down 4 percent.

The company's net profits for the six months ended June 30 dropped to HK$4.50 billion, from HK$4.69 billion in 2008.

Revenue of the first half leaped 1.2 percent to HK$8.63 billion, while operating profit from railway and related businesses before depreciation and amortization increased marginally to HK$4.80 billion.

"Earnings generated from the sales of Lake Silver (luxury apartments at the Wo Kai Sha station) will be booked in the second half," Ho said, "We will also launch a presale for the first-phase property project at the Tai Wai maintenance centre."

Sales of the two residential projects in Wo Kai Sha and Tai Wai have been put on hold, because of falling property prices in 2008.

MTR, 76 percent owned by the Hong Kong SAR government, tendered five units of The Habourside yesterday to test market response, Ho said. Hang Lung Property, MTR's developing partner of The Habourside, is also selling the high-end property units in the meantime.

"We have communicated with Hang Lung and negotiated to sell our own units with our own prices, in order to give adequate information to our buyers," Ho said.

President of BMI Funds Management Patrick Shum said the improving property market sentiment will be a boost to MTR's earnings in the second half.

"If the property market remains prosperous, MTR shares may climb to a level between HK$32 and HK$35," Shum said.

He expects the railway's patronage and advertising income will remain sluggish amid the weak economic circumstance.

For the first half of 2009, MTR recorded a total patronage of 726.4 million, advancing 0.7 percent, in which the domestic service increased 0.3 percent to 586.7 million.

However, patronage of cross-boundary and airport express services dropped 0.4 percent and 11.5 percent respectively.

Chief executive officer Chow Chung Kong said patronage decreases in airport express happened very quickly in May, as the H1N1 influenza adversely impacted air passenger numbers.

"The decrease has been stabilized," Chow said, "The gap is now decreasing rather than increasing."

Shares in MTR yesterday dropped 0.35 percent, or HK$0.1, to close at HK$28.25, moving against the benchmark Hang Seng Index, which finished up 0.69 percent, or 144.69 points, at 21,074.21.

(HK Edition 08/12/2009 page4)