The MTR logo is displayed at one of the company's train stations in Hong Kong. The city's subway operator posted a 5.7 percent underlying profit fall in the first half on Monday as the MTR was hit by lower property income. Jerome Favre / Bloomberg

MTR Corp, the city's subway operator that gets income from real estate projects, said first-half underlying profit declined 5.7 percent as lower property sales earnings and a fall in revaluation gain more than offset an increase in rail and retail income.

Underlying profit, which excludes investment property revaluations and deferred tax, fell to HK$4.12 billion ($531 million) in the six months ended June 30, from HK$4.4 billion a year earlier, the company said in a statement to the Hong Kong stock exchange on Monday.

Net profit for the six months ended June fell by a bigger 33 percent to HK$5.86 billion from the HK$8.78 billion a year earlier due to smaller revaluation gain.

For the six months period, the company posted a revaluation gain of HK$1.74 billion, sharply lower than the revaluation gain of HK$4.41 billion a year earlier.

Earnings at MTR, one of Hong Kong's biggest owners of unoccupied residential sites, have been hurt as a slowdown in the mainland economy dampened demand for apartments in the city where home prices have gained more than 80 percent since early 2009. At least three sites sold by the government this year have fetched less than surveyors' estimates.

MTRC, 77 percent-owned by the city's government, has the right to develop commercial and residential properties above some of its train stations. It also owns and operates a number of shopping malls and commercial buildings.

The subway operator sells land to developers for a cut of the profit. With the city's developers booking earnings from the sale of uncompleted homes, MTR was able to recognize its share.

Income from property development decreased to HK$627 million from HK$1.45 billion after MTR booked sales at projects including Festival City, a development above a railway station in the city's north, the company said.

Profit also was affected by a 4.6 percent increase in total operating costs to $10.6 billion as expenses at its Hong Kong transport operations increased.

Revenue in the period rose 6.1% to HK$17.15 billion from HK$16.17 billion, thanks to steady growth in passengers.

Domestic passenger traffic increased 4.5 percent while fare revenue recorded 8.2 percent growth in Hong Kong. The company is also expanding its railway businesses in some mainland cities including Beijing and Shenzhen.

MTR said it will put up for tender at least three sites over the next six months: Long Ping, Tai Wai and Tin Shui Wai.

The company will pay a first-half dividend of 25 Hong Kong cents per share, unchanged from a year earlier.

China Daily - Agencies

(HK Edition 08/14/2012 page2)