The net loss for the first half was HK$992 million ($128 million), or HK$0.28 a share, compared with a profit of HK$5.65 billion, or HK$1.45, a year earlier, New World said in a statement today. The reporting period ended Dec. 31.

Hong Kong home prices fell 25 percent from last year’s peak as the city’s economy contracted the most since 1998. Rents and office values dropped as companies cut jobs to lower costs, reducing demand for space. New World said today there are “signs of stabilization” in the market and the company plans to sell more than 1,200 homes over the next 12 months.

“This smoothes concerns that property sales for New World would ease,” Kenny Tang, executive director of Redford Securities Co. in Hong Kong, said today. With New World booking sales from the Harbour Place residential project in the second half, “profit should improve substantially,” Tang said.

New World dropped 0.7 percent to HK$6.89 in Hong Kong trading. The shares have fallen 12 percent in 2009, extending last year’s 72 percent decline. The Hang Seng Property Index, which doesn’t include New World, has lost 4.6 percent this year.

Asset Writedowns

The company wrote down the value of its financial assets by HK$330 million and booked a revaluation deficit of HK$2.35 billion on its investment properties, compared with a gain of HK$2.12 billion a year earlier. Excluding these items, profit was HK$1.02 billion, New World said.

The assets that were written down included shares held at Citic Resources Holdings Ltd. and Xinjiang Xinxin Mining Industry Co., Alex Chow, New World’s chief financial officer, told reporters at a briefing today.

New World may still be pressured by the potential for lower revaluations, as rents continue to fall, said Manfred Ho, a Hong Kong-based analyst at BOC International Ltd.

“There will still be some revaluation deficits, especially for offices” that New World will book in its second half, Ho said before the earnings announcement.

Lower Office Rents

Prime office rents in Hong Kong, which are the world’s most expensive, fell 17 percent in January from last year as owners sought to retain tenants amid a recession, Colliers International said in a report last month.

“Rents are on a downward trend,” Henry Cheng, managing director of New World and Cheng Yu-tung’s son, said at today’s briefing. “We aren’t affected by much as our two office projects in Central have an occupancy rate of more than 90 percent and most leases aren’t expiring.”

New World, manager of the Hong Kong Convention and Exhibition Centre, holds Hong Kong’s Grand Hyatt and the Manning House office buildings among its investments.

New World Development will pay a first-half dividend of 9 cents, down from 18 cents a year earlier.

The builder also invests in roads, power generation, transportation, telecommunications and retailing. Chairman Cheng is the fifth-richest person in Hong Kong in Forbes Magazine rankings, tied with fellow real-estate tycoon Joseph Lau, with an estimated wealth of $4 billion.

First-half profit at New World China Land Ltd., 71 percent owned by New World Development, declined 59 percent to HK$374 million, the company said in a separate statement today.

Revenue from property sales in China fell 39 percent to HK$547 million as prices declined, New World China said. Rental earnings rose to HK$190 million from HK$170 million.

NWS Holdings Ltd., New World’s public works and transportation unit, said first-half profit slumped 64 percent to HK$813 million as it wrote down the value of its investment properties and financial holdings by HK$290.5 million.

NWS also booked a provision of HK$32 million after buyers defaulted on more than 300 units of Harbour Place, Cheng said at the briefing. The unit, which also runs duty-free shops, ferry services and bus services, said overall sales fell 7.6 percent to HK$8.66 billion.

 SOURCE: Bloomberg