Small homes, high returns!
If you need proof of that, just ask CEC International, which has reaped handsome gains by selling several tiny residential units it has invested in over the past decade or so.
The small listed firm, which operates snack food shops under the 759 Store brand, sold 14 units for HK$62.6 million (US$8 million) in the past three months, capitalizing on the strength of the small residential units that saw a 15 percent surge in 2017 alone.
According to media reports, CEC sold six units in Tak Bo Garden, four units in Amoy Garden and three units in Jade Field Garden. All the three residential estates are located in and around Kowloon Bay and were developed between 30 and 40 years ago.
CEC bought these units from 2005 to 2010 at prices below HK$2 million, but has now sold them for around HK$5 million apiece. Altogether the units netted a profit of over HK$40 million for the firm, a near tripling when you look at the returns.
Chairman Lam Wai-chun said he has never envisaged that these small units, which his company had accumulated for staff residence purposes, could rise to the current price levels.
Given the huge price appreciation, CEC opted to cash out and take advantage of the residential property market when it is still at an elevated level, he said.
The move, indeed, appears to be quite smart.
Six out of Hong Kong’s top 20 housing estates saw their prices move up over 20 percent this year, Apple Daily noted recently, basing its estimates on mortgage valuation figures from the city’s top two banks — HSBC and Bank of China (Hong Kong).
Leading the pack was Kingswood Villa in Tin Shui Wai, the largest housing estate in northwestern part of New Territories which is about 30 minutes off Central. The housing estate was up 24 percent in price gains.
The other five estates were in Tung Chung, Tai Wai, Tseung Kwan O, Tuen Mun and Tai Po. They are all off urban centers in Hong Kong or Kowloon.
CEC disposal was part of a cash-generating move to revive the ailing snack shop chain 759, which ironically was hurt by sky-high rental costs.
For five years, the company diversified from electronic component manufacturing and focused on operating more than 200 retail shops. But it didn’t pay off financially, with the firm suffering its worst annual result in 38 years.
For the year ended April 30, 2017, CEC reported a HK$50 million loss, about 60 percent more than the loss posted in the previous fiscal.
Since then, the firm sold HK$115 million of investment property, including a HK$5 million deal in September for an industrial building in Kwun Tong.
CEC must surely be patting itself on the back for investing in property in the past. The investments have bailed the firm out of a bad spot – at least for the time being.
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