Wharf firms up balance sheet as Hong Kong home sales cushion profit slump

Wharf, a Hong Kong developer, is increasingly relying on the luxury home market in Hong Kong to offset losses in mainland China. In the first half, the company's Hong Kong development properties generated HK$1.35 billion in revenue, a significant increase from HK$475 million, with operating profit rising to HK$166 million, more than five times its previous level. This growth contrasted sharply with a 54% drop in revenue from mainland development projects, where a HK$547 million provision for impairment was recorded.

The improvement in Hong Kong's property market, driven by stronger buyer sentiment and transaction activity, provided a rare positive for the developer as China continues to struggle with its property downturn. The sale of one house at the ultra-luxury 1 Plantation Road project for HK$558 million, and the sale of 198 units at the Victoria Voyage project for HK$3.53 billion, contributed to the improved performance.

However, Wharf acknowledged the potential impact of China's tighter regulations on outbound direct investment, which could add uncertainty to the residential market. The company's mainland portfolio, which has been in a slow-moving phase since 2019, further reduced its attributable sales to 345 million yuan in the first half, down from 859 million yuan the previous year.

Wharf's chairman and managing director, Stephen Ng, noted that Hong Kong development properties are now generating more revenue than the mainland portfolio, reflecting the company's shift in investment focus. The company ended June with HK$6.2 billion in net cash, up from HK$2 billion at the end of 2025, allowing it to maintain shareholder payouts despite weaker headline earnings.

Wharf declared an interim dividend of HK$0.40 per share, double the payout from the previous year, including a HK$0.20 special dividend to celebrate its 140th anniversary.

Ng stated that Hong Kong property remains attractive for investment, with the company planning to invest in the Northern Metropolis if suitable opportunities arise. Overall, while the company's profit attributable to shareholders fell 91% to HK$48 million, underlying net profit dropped 17% to HK$1.70 billion, mainly due to a higher net revaluation deficit on investment properties.

Wharf's logistics infrastructure business faced challenges due to regional port competition and global trade disruptions, with Hong Kong throughput at Modern Terminals falling 6% to 1.6 million TEUs.