Henderson Land's profit inched up by 5% to HK$5.29b

Thanks to robust China sales.

Henderson Land delivered strong 1H15 results, with profit growing to HK$5.29bn, a 5% increase YoY.

According to a research note from Jefferies, this was mainly driven by 27%/10%/4% growth in profit from property sales/net rental/profit shared by HK China Gas, offsetting the 95% YoY decline in net gain on disposal of non-core investment properties.

Robust China sales also came as a surprise. Revenue from property sales in 1H15 saw 16% growth YoY, thanks to delivery of more completed projects in both HK and China, such as High Park, The Hemisphere, 39 Conduit Road & High Point.

Here's more from Jefferies:

The total attributable contract sales in both HK and China in 1H15 amounted to HK$8.8bn, up 5% YoY. It highlighted the robust sales performance in China with contract sales up 88% YoY to HK$3.5bn.

Stable cash flow from rental income: Thanks to positive rental reversion, higher rents on news leases and additional contribution from the newly completed "Henderson 688" in Shanghai, gross rental income recorded 11% growth YoY. The occupancy rate of its core rental properties in HK maintained at 98% as at Jun 15 despite weakening retail market.

HKCG delivered stable performance: HKCG continued to deliver stable performance which helps to smooth out HDL's overall results. Its stable business in HK and expansion in China is likely to increase HDL's earning visibility since it made up c27% of HDL's GAV based on our estimates.

Strong financial position: Owing to the stable cash inflow from the rental business and HKCG, HDL lowered its net debt over shareholders' equity to 13.5% only, -2.2ppt due to debt repayment. With more than HK$10bn cash on hand coupled with HK$13bn banking facilities as of Jun 15, we believe HDL is in a good position to capture the market opportunities if land price becomes cheaper.