(Yicai) Aug. 14 -- The recovery in Hong Kong's property market drove a 59 percent surge in CK Asset Holdings' revenue in the first half even though high land costs weighed on profitability at the conglomerate’s property development business.

Revenue came in at HKD40.31 billion for the six months ended June 30, according to the company’s unaudited financial report released yesterday. The surge was mainly driven by the sales of two residential projects in Hong Kong that were completed last year, as well as the sale of remaining units at several projects in the Chinese mainland.

Underlying profit rose 5 percent to HKD6.6 billion (USD850 million), but when the one-off gain from the sale of British assets is included and concurrent impairment and investment losses are excluded, profit jumped 38 percent to HKD8.7 billion.

Profit from property sales stood at just HKD765 million (USD97.5 million), with a gross profit margin of just 3.5 percent. Related revenue, including from joint ventures, nearly tripled to HKD21.6 billion (USD2.8 billion) from a year ago.

Profit and gross profit margin at CK Asset's developer business were under pressure mainly due to projects' relatively high land acquisition costs, which led to lower project gross profit margins, said Simon Man, general manager of the company's accounts department.

Sales and prices in the Hong Kong real estate market showed a significant recovery in the period, Man pointed out. Demand for high-end luxury homes remained strong, supported by local and mainland buyers, he added.

Due to the market upturn, CK Asset expects to continue launching new projects in the second half, having already obtained pre-sale approvals for several projects, including for the first and second phases of the Victoria Blossom housing project in Kai Tak and for two others in Yuen Long.

Despite the recovery, Man remains cautious on the outlook for Hong Kong's property market. "The various negative factors and uncertainties that are weighing on the property market and the broader economy persist,” he said. “If property prices remain at their current levels, the final gross profit margin of other ongoing projects may fall short of expectations.”

CK Asset’s shares [HKG: 1113] finished 6.4 percent lower at HKD45 (USD5.73) each in Hong Kong today, paring the stock’s gain so far this year to 14.5 percent.

The group will continue to focus on acquiring assets that generate stable recurring cash flows, said Ronald Chiu, a member of its executive committee and director of special projects. Its core investment strategy targets heavy asset projects in developed markets, as they feature long-term contract cash flows and benefit from stable local legal systems, he noted.

At the same time, CK Asset will selectively and cautiously assess opportunities to invest in Hong Kong residential development sites and undeveloped land assets in the mainland, Chiu pointed out.

Editors: Tang Shihua, Martin Kadiev