Discounted sales eat into profits; Cheung Kong's Hong Kong property sales revenue plummeted over 70% last year.

Hong Kong’s real estate market has gone through fluctuations and is set to fully recover by 2025, yet the wealthiest individual, Li Ka-shing, under his Cheung Kong Group (01113.HK), did not achieve ideal gains in this round of market recovery.

On March 19, Cheung Kong Group released its 2025 financial report, showing revenue of HKD 57.935 billion during the reporting period, a year-on-year growth of 27.25%; the profit before revaluation of investment properties was HKD 11.96 billion, with earnings per share of HKD 3.42, a year-on-year increase of 2.7%. After accounting for the impact of investment property revaluation, Cheung Kong’s profit attributable to shareholders in 2025 was HKD 10.847 billion, with earnings per share of HKD 3.1, a decline of 20.3% compared to the previous year.

Specifically, property sales, as Cheung Kong’s main business, confirmed sales revenue of HKD 20.449 billion in 2025, a substantial year-on-year increase of 105%; the revenue realized was HKD 2.733 billion, a year-on-year growth of 23.7%.

Among these, sales revenue in Hong Kong reached HKD 8.957 billion, while mainland China contributed HKD 6.306 billion, with overseas markets such as Singapore and the UK contributing nearly HKD 5.2 billion, all showing an increase of over 50% year-on-year.

However, in terms of earnings, the contribution from the Hong Kong market saw a decline, achieving HKD 2.73 billion, a drop of over 70%. Cheung Kong stated that this was mainly due to multiple discounts offered to promote sales in response to the previously weak market conditions, as well as provisions made for losses in the sales of Blue Coast and Blue Coast II.

The two projects were sold at a discount by Cheung Kong in 2024. At that time, the average selling price of the projects was around HKD 21,900 per square foot, which was equivalent to a 30% discount compared to the surrounding second-hand housing prices and about 22% lower than the cost of around HKD 28,000 per square foot. This sales strategy was referred to as “bottom pricing,” quickly making the Blue Coast project the “most popular” new development in Hong Kong at that time, resulting in rapid sales.

Currently, Cheung Kong no longer needs to promote through significant discounts. Since 2025, the Hong Kong real estate market has entered a recovery phase, and property prices have also been restored. This trend has continued, with Morgan Stanley releasing a report stating that in the first two months of this year, mainland buyers purchased 2,600 units in Hong Kong, a year-on-year increase of 91%, with a total transaction amount of HKD 28.2 billion, a year-on-year increase of 136%. Industry forecasts suggest that Hong Kong property prices will continue to rise this year.

When discussing the outlook for Hong Kong’s real estate market this year, Cheung Kong’s management also stated that as Hong Kong’s economy stabilizes, the residential property transactions in 2025 are gradually regaining momentum, “the government’s reduction of property stamp duty rates, low mortgage rates, and developers adjusting prices are all factors that enhance the attractiveness for citizens to enter the market, providing support for the overall residential property market.” Based on this, Cheung Kong will also promote a series of new projects to market this year.

However, such market conditions have not made Cheung Kong more aggressive in acquiring land. When asked if he was interested in bidding for the nine residential land plots to be launched by the government in the next fiscal year, Li Ka-shing’s eldest son, Victor Li, Chairman and Managing Director of Cheung Kong, stated that as long as the returns are reasonable, they would participate in the bidding. “In bidding or any acquisition and merger transactions, the group has always adhered to ‘financial discipline’ and does not hold a ‘must-win’ mentality; it will absolutely not blindly chase prices, as the return rate determines everything.”

As of the end of 2025, Cheung Kong holds approximately 65 million square feet of developable land reserves (including developers’ rights in joint development projects, but excluding agricultural land and completed properties), of which 6 million square feet, 56 million square feet, and 3 million square feet are located in Hong Kong, mainland China, and overseas, respectively.

Cheung Kong’s investment in British pub businesses has become an important source of its performance. During the reporting period, this business achieved revenue of HKD 26.227 billion, a year-on-year increase of 7%; the annual profit was HKD 1.933 billion, a year-on-year increase of 9%. However, affected by weak consumer sentiment, inflationary pressures, and high labor costs, the industry continues to face operational and cost challenges. Cheung Kong recognized an asset impairment of HKD 1.62 billion for the British pub business, resulting in a profit of HKD 313 million after deducting asset impairments.

Despite having ups and downs in business operations, Cheung Kong, adhering to a “buy low, sell high” strategy, has been able to cash out at high levels in asset investments. At the end of February this year, three listed companies under the Cheung Kong group, including Cheung Kong itself, jointly sold 100% of the equity of UKPN, the UK power grid company, for a total transaction amount exceeding HKD 110 billion. “Compared to our original investment, this sale of UKPN realized nearly six times the return,” Victor Li revealed.

By the end of 2025, Cheung Kong had cash on hand amounting to HKD 41.7 billion. With the completion of the aforementioned transaction, Cheung Kong’s liquidity will be further strengthened. When asked about future development plans, Victor Li stated that the group will continue to focus on investing in countries that respect contractual spirit, have a sound legal system to protect investors, and possess long-term stable cash flow projects. “If there are quality projects that meet our IRR requirements, we will generally be interested. The focus remains on the project’s profit returns and the costs required.”

(This article was sourced from Yicai.)