Swire Pacific is betting on healthcare investments in mainland China and Indonesia as an area of growth while Hong Kong’s office property market is likely to remain soft for the year.
The Hong Kong-based conglomerate reported record underlying profit of HK$36.2 billion (US$4.6 billion) for 2023, nearly eight times better than the HK$4.7 billion it earned in 2022, mainly thanks to the post-Covid uplift from its aviation unit Cathay Pacific Airways, it said in a filing with the Hong Kong exchange on Thursday.
Cathay reported its first annual profit in four years on Wednesday, netting HK$9.8 billion in 2023, compared with a net loss of HK$6.6 billion in 2022.
Real estate arm Swire Properties saw profit rise by a third to HK$11.6 billion, while aircraft maintenance and engineering firm Haeco posted 86 per cent growth in recurring profit, buoyed by improved sentiment in the aviation industry. The beverage business, Swire Coca-Cola, on the other hand, had flat recurring profit, the company said.
Extraordinary gains in the year included those on the HK$22.9 billion sale of the Swire Coca-Cola business in the US in September, as well as Swire Properties’ sale of 12 floors at One Island East in Quarry Bay to the Securities and Futures Commission for HK$5.4 billion.
Swire Pacific is ramping up its investment in healthcare following an agreement in December with the Indonesia Investment Authority for a joint investment in Indonesia Healthcare Corporation. The hospital group in Southeast Asia’s most populous nation owns a majority stake in 37 hospitals and 66 clinics.
Earlier this month, the conglomerate acquired a controlling stake in DeltaHealth, a Shanghai-based healthcare provider specialising in cardiovascular treatments. Swire Pacific took a minority stake in the company in 2021.
“In 2024, we are striving to build on last year’s achievements across all our businesses through our long-term strategy of investing in our core markets,” said Guy Bradley, Swire Pacific’s chairman. “Regarding our healthcare business, we will seek investment opportunities in the Chinese mainland and Southeast Asia [that] have demonstrated profitability and have the potential for future growth.”
Swire Pacific proposed a second interim dividend of HK$2 per share for its A shares and HK$0.40 per share for its B shares, to be paid on May 3.
Swire Pacific’s A shares gained 1 per cent to HK$67.20 on Thursday, as its B shares gained 0.4 per cent to HK$10.50.
Swire Properties’ profits mainly came from rental revenue, which increased by 10 per cent, reflecting a retail segment that is improving as Covid-19 restrictions become a distant memory.
The office sector, on the other hand, “is expected to remain subdued in 2024, on the back of weak demand and increased availability”, said Tim Blackburn, Swire Properties’ CEO. “Increasing competition [in] Central and Kowloon East will continue to exert downward pressure on rents across our portfolio. However we expect our office spaces, with their industry-leading ESG [environmental, social and governance] certifications and excellent amenity provisions, will continue to benefit from the ‘flight-to-quality’ trend.”
Two Taikoo Place , the newest addition to the developer’s portfolio in eastern Hong Kong Island, was 62 per cent leased as of December. Other office buildings had occupancy rates between 88 and 98 per cent.
“We’re very pleased with the progress we’ve been making in Taikoo Place, specifically with Two Taikoo Place , in terms of building occupancy,” Blackburn said at a results briefing on Thursday. “We’re very happy with the quality of the tenants that we have secured in Two Taikoo Place … Currently, we’re at 62 per cent. We will continue to build up occupancy for the balance of this year, and I think we’ll get to some sort of stabilisation in 2025.”
Swire Properties declared a second interim dividend of HK$0.72 per share, to be paid on May 2.
Swire Properties shares gained 0.9 per cent to HK$16.46 on Thursday.
