Sun Hung Kai Properties Ltd posted higher profit for the second half of fiscal 2026, driven by a sharp jump in Hong Kong property development gains and steady rental income, while management warned that historical double-digit margins are no longer realistic amid tough land pricing.
The company reported an underlying profit of HKD 22.9 billion, up 4.6% from a year earlier, and a reported profit of HKD 21.4 billion, up 11.1%. Total operating profit came in flat year-on-year at HKD 32.2 billion. Underlying earnings per share were HKD 7.89; reported EPS was HKD 7.39.
On the strength of the results, the board proposed a final dividend of HKD 2.93 per share, up 4.6% from HKD 2.80, bringing the full-year payout to HKD 3.91 per share. The company stated its target payout ratio remains at 40% to 50% of earnings per share.
"Although the global economic environment remained volatile and uncertain, the group continued to achieve business growth," Chairman and Managing Director Raymond Kwok said. "With rising earning, we should be paying more dividend if we continue with the dividend policy of 40%-50%."
Property development in Hong Kong was the standout segment. Recognized profit from the division rose 44% year-on-year to HKD 4.6 billion, contributing to an overall segment profit of approximately HKD 8.3 billion.
Net rental income increased slightly by 1% to around HKD 18.6 billion. Gross rental income from the Mainland rose 5.2% to HKD 6.5 billion (RMB 5.6 billion), while Hong Kong rentals dipped 1%. Hotel operating profit climbed to HKD 728 million from HKD 615 million, with revenue up 4% to HKD 5.5 billion. Other businesses contributed about HKD 4.6 billion, down 6.5%.
Sales momentum in the Mainland supported the outlook. Recognized sales rose to around HKD 10 billion, with operating profit of HKD 3.7 billion and attributable contracted sales reaching about HKD 2.2 billion.
Hong Kong contracted sales for fiscal 2026 reached HKD 38.1 billion, exceeding targets, while unrecognized contracted sales stand at approximately HKD 22.8 billion — including around HKD 21 billion expected to be recognized in fiscal 2027.
The company's balance sheet remains robust. Net debt stood at HKD 67.6 billion as of June 30, with a gearing ratio of 10.7%, down from 13.5% in December 2025. Interest coverage improved to 8.5 times from 6.0 times a year earlier, and net finance costs fell 33%. Management confirmed there are no plans for new share issuance, convertible bonds, or warrants.
Occupancy rates held firm across the Hong Kong portfolio: overall rentals at around 92%, retail at 95%, and office stable at 90%. The company's land bank totaled about 56.4 million sq ft of attributable gross floor area in Hong Kong and 64.7 million sq ft on the Mainland.
Looking ahead, fiscal 2027 contracted sales guidance for Hong Kong was set at HKD 33 billion, adjusted down from the prior year's actual. Management noted it expects to book around HKD 21 billion from Hong Kong and HKD 0.8 billion from Mainland projects. Kwok cautioned that historical development margins above 30% are "not realistic" under current competitive land pricing, adding that Mainland residential projects should yield mid-teens post-tax margins.
"When we look back at the history of Hong Kong, each property cycle should last for a couple of years, and we are only at the very initial stage of recovery," Deputy Managing Director Victor Lui said.
Several major projects are scheduled over the coming months, including SIERRA SEA Phase 2C launching in September, the Stage IGC Podium Mall in West Kowloon opening from late 2026, and Artist Square Towers completing in 2027 with JPMorgan committed to 250,000 sq ft.
Shares were trading at US$15.40, up 2.33% from the previous close, on Thursday.
