Mainland Chinese developer Jiayuan says Hong Kong micro flats profitable despite price cuts, reports 23 per cent rise in interim profit

Lam Ka-sing

The mainland Chinese property developer behind Hong Kong’s smallest micro flats ever – smaller than a car park at 128 sq ft – said the development was profitable even after it cut prices by as much as 38 per cent to as low as HK$1.73 million (US$220,514) per unit in July.

Jiayuan International, which acquired a 70.1 per cent stake in the TPlus project from Hong Kong retail magnate Tang Shing-bor for HK$657.5 million in May 2018, said it and Tang had generated about HK$1.1 billion in revenue from the sale of 339 units. The joint venture has generated about HK$115 million in profits, excluding marketing and interest costs.

“In the [new] price list … there may be some discounts for some of the flats, for example for buyers who pay within a shorter time frame. But for some of the flats, we have increased prices,” Cheuk Hiu-nam, joint company secretary and executive director at the developer, said during a results briefing in Hong Kong on Tuesday. “So overall, [the profit] is not very much different from what we originally expected. There is not much impact.”

The company reported a 22.7 per cent increase in core net profit to 1.06 billion yuan for the six months ending June 30, in a filing to the Hong Kong stock exchange. It did not recommend any interim dividend, as opposed to the 10 HK cents for the same period last year. Its shares fell 1.5 per cent to close at HK$3.25 on Tuesday.

“The project cycle was also very short. The deal [with Tang] was completed in July last year, but it has [almost] been sold within one year,” Cheuk said. “We have recovered all the cost in a reasonable period of time. So this is quite a good choice of investment.

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“We have already drawn in about HK$1.1 billion, so we are not in a hurry to sell [the remaining eight special flats on high floors]. We will sell them for good prices through tender,” she said.

The company will continue investing in Hong Kong and partnering with local developers, even though it was not very familiar with the market, said Shum Tin-ching, Jiayuan’ chairman.

Cheuk said the company had “quite good cooperation with Tang Shing-bor”, but “[further investment] depends on the kind of projects we would like to do”, and the company finding some more experienced players.

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Elsewhere, Shimao Property Holdings, the mainland Chinese developer chaired by billionaire Hui Wing-mau, reported on Tuesday its core profit attributable to shareholders for the first half had risen by 20.6 per cent year on year to 5.31 billion yuan.

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