Cheung Kong's revenue fell 27% to HKD31.1b

But its earnings remained impressive.

According to Maybank Kim Eng, Cheung Kong reported a set of better-than-expected FY12A results after market closed yesterday. Revenue dropped 27% YoY to HKD31.1b, 10.8% below market’s expectation but core net profit (net of revaluation again and net of disposal gain/loss) rose 14% YoY to HKD28.2b, inclusive of Hutchison Whampoa (HWL)’s contribution.

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The figure is 18% higher than consensus of HKD23.9b (range of HKD22.3-26.9b) and surpassed the high end of expectations. CKH’s own earning excluding HWL’s contribution rose 8% YoY to HKD14.2b, which is 14-29% higher than street estimates.

Disposal gains, development and rental contribution are the key contributors to earnings growth. Final DPS unchanged at HKD2.63, translating into a FY DPS of HKD3.16, or historical yield of 2.8%.

We believe the company will continue to adopt fast asset turnover approach in launching HK and China development project, and continue to dispose of non-core investment properties.

For development project, CKH has already set an aggressive HK/China contracted sales target of HKD35-40b. Of the HKD30b sales target in HK, 5,238 units will be available for sale under 5 projects.

The Rise (402-unit Kwok Shui Road Project in Kwai Chung) and Ph 3 of LOHAS Park (1,628-unit in Tseung Kwan O) will be put on sale once pre-sale consent is granted.

On financial front, net gearing remained at low level of 7.3% which in turn will fund CKH’s future acquisitions, particularly HK land purchases through tenders and auctions.