----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

**March      31, 2007**

**No      **
**x**

**0-26573**

**PHYSICAL      PROPERTY HOLDINGS INC.**

| **Delaware**                                                                  |   | **98-0203281**                                   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (IRS                Employer Identification No.) |

**40/F      Tower One, Times Square**

**No.      1 Matheson Street, Causeway Bay**

**Hong      Kong**

**(011)      (852) 2917-0000**

**Yes **
**x**

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**PHYSICAL PROPERTY HOLDINGS      INC.**

**Form      10-Q for the period ended March 31, 2007**

**TABLE      OF CONTENTS**

|                                          |                                                                                                                         |                                                                                                                                                               | **Page**                            |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
| PART                I - FINANCIAL INFORMATION |                                                                                                                         |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                1 - FINANCIAL STATEMENTS                                                                                 |                                                                                                                                                               |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          |                                                                                                                         | Condensed                Consolidated Statements of Operations for the three-month periods                ended                March 31, 2006 and 2007 (Unaudited) | 3                                   |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          |                                                                                                                         | Condensed                Consolidated Balance Sheets at December 31, 2006 and March 31, 2007                (Unaudited)                                            | 4                                   |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          |                                                                                                                         | Condensed                Consolidated Statements of Cash Flows for the three-month periods                ended                March 31, 2006 and 2007 (Unaudited) | 5                                   |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          |                                                                                                                         | Notes                to Financial Statements                                                                                                                       | 6                -                8 |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                RESULTS OF OPERATIONS | 9                                                                                                                                                                  |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                RISK                            | 12                                                                                                                                                                 |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                4 - CONTROLS AND PROCEDURES                                                                              |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
| PART                II - OTHER INFORMATION    |                                                                                                                         |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                1 - LEGAL PROCEEDINGS                                                                                    |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF                PROCEEDS                           |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                3 - DEFAULTS UPON SENIOR SECURITIES                                                                      |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                  |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                5 - OTHER INFORMATION                                                                                    |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          | ITEM                6 - EXHIBITS AND REPORTS ON FORM 8-K                                                                     |  12                                                                                                                                                           |
|                                          |                                                                                                                         |                                                                                                                                                               |                                |
|                                          |                                                                                                                         | SIGNATURES                                                                                                                                                         | 13                                  |

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**PHYSICAL      PROPERTY HOLDINGS INC. AND SUBSIDIARIES**

|                                                                                                                                                                                      |   |   |   | Three                months ended March 31 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------------------------------------------|--------|
|                                                                                                                                                                                      |   | *Note* |   | 2006                                       |   | 2007 |   | 2007 |   |
|                                                                                                                                                                                      |   |   |   | **HK$**                                    |   | **HK$** |   | US$ |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |
| Continuing                Operations                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |
| **Operating                Revenues**                                                                                                                                                     |   |   |   |                                       |   |   |   |   |   |
|                     Rental income                                                                                                                                     |   |   |   |                                       |   | 193 |   |   | 170 |   |   | 22 |   |
| **Total                operating revenues**                                                                                                                                               |   |   |   |                                       |   | 193 |   |   | 170 |   |   | 22 |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| **Operating                Expenses**                                                                                                                                                     |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
|                    Rent and related expenses                                                                                                                               |   |   |   |                                       |   | (31 | ) |   | (31 | ) |   | (4 | ) |
|                    Depreciation                                                                                                                                            |   |   |   |                                       |   | (71 | ) |   | (71 | ) |   | (9 | ) |
|                    Other selling and administrative expenses                                                                                                               |   |   |   |                                       |   | (48 | ) |   | (15 | ) |   | (2 | ) |
| **Total                operating expenses**                                                                                                                                               |   |   |   |                                       |   | (150 | ) |   | (117 | ) |   | (15 | ) |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Profit                from operations                                                                                                                                                     |   |   |   |                                       |   | 43 |   |   | 53 |   |   | 7 |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| **Non-operating                expenses**                                                                                                                                                 |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
|                    Interest expenses                                                                                                                                       |   |   |   |                                       |   | (144 | ) |   | (122 | ) |   | (16 | ) |
| **Total                non-operating expenses**                                                                                                                                           |   |   |   |                                       |   | (144 | ) |   | (122 | ) |   | (16 | ) |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Loss                before income taxes                                                                                                                                                   |   |   |   |                                       |   | (101 | ) |   | (69 | ) |   | (9 | ) |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Provision                for income taxes                                                                                                                                                 |   |   |   |                                       |   | -- |   |   | -- |   |   | -- |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Loss                from continuing operations                                                                                                                                            |   |   |   |                                       |   | (101 | ) |   | (69 | ) |   | (9 | ) |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Discontinued                Operations                                                                                                                                                    |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Net                (loss) profit attributable to discontinued operations                   (including gain on disposal of subsidiaries of HK$65,234 (2006:                Nil)) |   |   | 3      |                                       |   | (6,113 | ) |   | 56,585 |   |   | 7,254 |   |
| Net                (loss) profit and total comprehensive (loss) income                                                                                                                    |   |   |   |                                       |   | (6,214 | ) |   | 56,516 |   |   | 7,245 |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| (Loss)                Profit per share of common stock                                                                                                                                    |   |   |   |                                       |   | (0.62 | ) |   | 3.41 |   |   | 0.44 |   |
|                                                                                                                                                                                      |   |   |   |                                       |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares of common stock outstanding (in                thousands)                                                                                |   |   |   |                                       |   | 10,000 |   |   | 16,591 |   |   | 16,591 |   |

**The      financial statements should be read in conjunction with the accompanying      notes.**

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**PHYSICAL      PROPERTY HOLDINGS INC. AND SUBSIDIARIES**

|                                                                                                                                                                                                                                                                 |   |   |   | As                of             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                 |   | Note   |   | December                31, 2006 |   | March                31, 2007  (Unaudited) |   |
|                                                                                                                                                                                                                                                                 |   |   |   | **HK$**                          |   | **HK$** |   | US$ |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |
| **ASSETS**                                                                                                                                                                                                                                                           |   |   |   |                             |   |   |   |   |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |
| **Current                assets**                                                                                                                                                                                                                                    |   |   |   |                             |   |   |   |   |   |
|                    Cash and bank balances                                                                                                                                                                                                             |   |   |   |                             |   | 2,436 |   |   | 31 |   |   | 4 |   |
|                    Marketable securities, collateralized                                                                                                                                                                                              |   |   |   |                             |   | 1,750 |   |   | -- |   |   | -- |   |
|                    Trade receivables                                                                                                                                                                                                                  |   |   |   |                             |   | 19,067 |   |   | -- |   |   | -- |   |
|                    Other receivables                                                                                                                                                                                                                  |   |   |   |                             |   | 8,396 |   |   | 18 |   |   | 2 |   |
|                    Rental and utility deposits                                                                                                                                                                                                        |   |   |   |                             |   | 32,983 |   |   | 9 |   |   | 1 |   |
|                    Prepayments to vendors and suppliers and other current                assets                                                                                                                                                       |   |   |   |                             |   | 6,753 |   |   | 2,078 |   |   | 266 |   |
|                    Inventories                                                                                                                                                                                                                        |   |   |   |                             |   | 2,814 |   |   | -- |   |   | -- |   |
|                    Income taxes recoverable                                                                                                                                                                                                           |   |   |   |                             |   | 2,094 |   |   | -- |   |   | -- |   |
| **Total                current assets**                                                                                                                                                                                                                              |   |   |   |                             |   | 76,293 |   |   | 2,136 |   |   | 273 |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
|                    Marketable securities, collateralized                                                                                                                                                                                              |   |   |   |                             |   | 990 |   |   | -- |   |   | -- |   |
|                    Bank deposits, collateralized                                                                                                                                                                                                      |   |   |   |                             |   | 10,543 |   |   | -- |   |   | -- |   |
|                    Due from a stockholder                                                                                                                                                                                                             |   |   |   |                             |   | 4,557 |   |   | -- |   |   | -- |   |
|                    Property, plant and equipment, net of accumulated depreciation                of                    HK$284                as of March 31, 2007 (2006: HK$343,370)                                              |   |   |   |                             |   | 124,157 |   |   | 3,046 |   |   | 391 |   |
|                    Goodwill, net                                                                                                                                                                                                                      |   |   |   |                             |   | 6,791 |   |   | -- |   |   | -- |   |
|                    Lease premium for land, net                                                                                                                                                                                                        |   |   |   |                             |   | 8,430 |   |   | 8,378 |   |   | 1,074 |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
| **Total                assets**                                                                                                                                                                                                                                      |   |   |   |                             |   | 231,761 |   |   | 13,560 |   |   | 1,738 |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' (DEFICIT) EQUITY**                                                                                                                                                                                                    |   |   |   |                             |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
| **Current                liabilities**                                                                                                                                                                                                                               |   |   |   |                             |   |   |   |   |   |   |   |   |   |
|                    Short-term bank loans                                                                                                                                                                                                              |   |   |   |                             |   | 6,170 |   |   | -- |   |   | -- |   |
|                    Long-term bank loans - current portion                                                                                                                                                                                             |   |   | 4      |                             |   | 1,536 |   |   | 1,088 |   |   | 139 |   |
|                    Due to a stockholder                                                                                                                                                                                                               |   |   |   |                             |   | -- |   |   | 848 |   |   | 109 |   |
|                    Trade payables                                                                                                                                                                                                                     |   |   |   |                             |   | 2,878 |   |   | -- |   |   | -- |   |
|                    Other payables                                                                                                                                                                                                                     |   |   |   |                             |   | 50,718 |   |   | 235 |   |   | 30 |   |
|                    Obligations under capital leases - current portion                                                                                                                                                                                 |   |   |   |                             |   | 568 |   |   | -- |   |   | -- |   |
|                    Deferred income - current portion                                                                                                                                                                                                  |   |   |   |                             |   | 124,301 |   |   | -- |   |   | -- |   |
|                    Deferred liabilities - current portion                                                                                                                                                                                             |   |   |   |                             |   | 1,649 |   |   | -- |   |   | -- |   |
|                    Income taxes payable                                                                                                                                                                                                               |   |   |   |                             |   | 248 |   |   | -- |   |   | -- |   |
|                    Taxes other than income                                                                                                                                                                                                            |   |   |   |                             |   | 7,604 |   |   | -- |   |   | -- |   |
| **Total                current liabilities**                                                                                                                                                                                                                         |   |   |   |                             |   | 195,672 |   |   | 2,171 |   |   | 278 |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
|                    Deferred income - non-current portion                                                                                                                                                                                              |   |   |   |                             |   | 78,463 |   |   | -- |   |   | -- |   |
|                    Deferred liabilities - non-current portion                                                                                                                                                                                         |   |   |   |                             |   | 4,443 |   |   | -- |   |   | -- |   |
|                    Obligations under capital leases - non-current portion                                                                                                                                                                             |   |   |   |                             |   | 114 |   |   | -- |   |   | -- |   |
|                    Long-term bank loans - non-current portion                                                                                                                                                                                         |   |   | 4      |                             |   | 7,755 |   |   | 7,413 |   |   | 950 |   |
|                    Minority interests                                                                                                                                                                                                                 |   |   |   |                             |   | 452 |   |   | -- |   |   | -- |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
| **Stockholders'                (deficit) equity**                                                                                                                                                                                                                    |   |   |   |                             |   |   |   |   |   |   |   |   |   |
|                    Common stock, par value US$0.001 each, 100                million shares of stock     authorized; 26,809,353                (2006: 11,481,283) shares of stock issued                and outstanding |   |   |   |                             |   | 90 |   |   | 210 |   |   | 27 |   |
|                    Additional paid-in capital                                                                                                                                                                                                         |   |   |   |                             |   | 2,066 |   |   | 6,606 |   |   | 847 |   |
|                    Accumulated other comprehensive losses                                                                                                                                                                                             |   |   |   |                             |   | 2,062 |   |   | -- |   |   | -- |   |
|                    Accumulated losses                                                                                                                                                                                                                 |   |   |   |                             |   | (59,356 | ) |   | (2,840 | ) |   | (364 | ) |
| **Total                stockholders' (deficit) equity**                                                                                                                                                                                                              |   |   |   |                             |   | (55,138 | ) |   | 3,976 |   |   | 510 |   |
|                                                                                                                                                                                                                                                                 |   |   |   |                             |   |   |   |   |   |   |   |   |   |
| **Total                liabilities and stockholders' (deficit) equity**                                                                                                                                                                                              |   |   |   |                             |   | 231,761 |   |   | 13,560 |   |   | 1,738 |   |

**The      financial statements should be read in conjunction with the accompanying      notes.**

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**PHYSICAL      PROPERTY HOLDINGS INC. AND SUBSIDIARIES**

|                                                                                                                   |   |   | **Three                Months Ended March 31** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                                                                   | Note   |   | 2006                                           |   | 2007 |   | 2007 |   |
|                                                                                                                   |   |   | **HK$**                                        |   | **HK$** |   | US$ |   |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |
| **Cash                flows from operating activities**                                                                |   |   |                                           |   |   |   |   |   |
|                     Net (loss) profit                                                              |   |   |                                           |   | (6,214 | ) |   | 56,516 |   |   | 7,245 |   |
| Adjustments                to reconcile net (loss) profit to net cash provided by operating                activities: |   |   |                                           |   |   |   |   |   |   |   |   |   |
|                     Minority interests                                                             |   |   |                                           |   | 493 |   |   | 7 |   |   | 1 |   |
|                     Depreciation                                                                   |   |   |                                           |   | 12,885 |   |   | 7,142 |   |   | 916 |   |
|                     Gain on disposal of property, plant and equipment                              |   |   |                                           |   | (2 | ) |   | -- |   |   | -- |   |
|                     Gain on disposal of subsidiaries                                               |   |   |                                           |   | -- |   |   | (65,234 | ) |   | (8,363 | ) |
| Changes                in working capital:                                                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |
|                     Trade and other receivables                                                    |   |   |                                           |   | 5,043 |   |   | (1,743 | ) |   | (223 | ) |
|                     Deposits, prepayments and other current assets                                 |   |   |                                           |   | (3,384 | ) |   | 661 |   |   | 85 |   |
|                     Inventories                                                                    |   |   |                                           |   | 361 |   |   | 166 |   |   | 21 |   |
|                     Trade and other payables                                                       |   |   |                                           |   | (15,335 | ) |   | (9,926 | ) |   | (1,273 | ) |
|                     Deferred income                                                                |   |   |                                           |   | 19,597 |   |   | 17,849 |   |   | 2,288 |   |
|                     Deferred liabilities                                                           |   |   |                                           |   | (1,368 | ) |   | (338 | ) |   | (43 | ) |
|                     Income taxes payable/recoverable                                               |   |   |                                           |   | -- |   |   | 773 |   |   | 99 |   |
|                     Taxes other than income                                                        |   |   |                                           |   | (261 | ) |   | (310 | ) |   | (40 | ) |
| **Net                cash provided by operating activities**                                                           |   |   |                                           |   | 11,815 |   |   | 5,563 |   |   | 713 |   |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |   |   |   |   |
| **Cash                flows from investing activities**                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |
|                     Acquisition of property, plant and equipment                                   |   |   |                                           |   | (2,663 | ) |   | (904 | ) |   | (116 | ) |
|                     Sales proceeds from disposal of marketable securities                          |   |   |                                           |   | 1,540 |   |   | -- |   |   | -- |   |
|                     Sales proceeds from disposal of property, plant and                equipment   |   |   |                                           |   | 3 |   |   | -- |   |   | -- |   |
|                     Disposal of subsidiaries                                                       |   | 6      |                                           |   | -- |   |   | (3,911 | ) |   | (501 | ) |
|                     Increase in bank deposit, collateralized                                       |   |   |                                           |   | (1,139 | ) |   | (28 | ) |   | (4 | ) |
|                     Due from a stockholder                                                         |   |   |                                           |   | 374 |   |   | (2,446 | ) |   | (314 | ) |
| **Net                cash used in investing activities**                                                               |   |   |                                           |   | (1,885 | ) |   | (7,289 | ) |   | (935 | ) |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |   |   |   |   |
| **Cash                flows from financing activities**                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |
|                     Settlement of short-term bank loans                                            |   |   |                                           |   | (7,903 | ) |   | (66 | ) |   | (8 | ) |
|                     Proceeds from long-term bank loans                                             |   |   |                                           |   | 510 |   |   | -- |   |   | -- |   |
|                     Repayment of long-term bank loans                                              |   |   |                                           |   | (272 | ) |   | (346 | ) |   | (44 | ) |
|                     Capital element of capital lease rental payments                               |   |   |                                           |   | (72 | ) |   | (267 | ) |   | (34 | ) |
| **Net                cash used in financing activities**                                                               |   |   |                                           |   | (7,737 | ) |   | (679 | ) |   | (86 | ) |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                                    |   |   |                                           |   | 2,193 |   |   | (2,405 | ) |   | (308 | ) |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at beginning of period                                                        |   |   |                                           |   | 2,443 |   |   | 2,436 |   |   | 312 |   |
|                                                                                                                   |   |   |                                           |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of period                                                              |   |   |                                           |   | 4,636 |   |   | 31 |   |   | 4 |   |

**The      financial statements should be read in conjunction with the accompanying      notes.**

----

**PHYSICAL      PROPERTY HOLDINGS INC. AND SUBSIDIARIES**

**1.      BASIS OF PRESENTATION**

----

**2.      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**

**3.      DISCONTINUED OPERATIONS**

|                                                                     |   | THREE                MONTHS ENDED MARCH 31 |     |
|--------------------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                                     |   | 2006                                       |     | 2007 |   | 2007 |   |
|                                                                     |   | **HK$**                                    |     | **HK$** |   | US$ |   |
|                                                                     |   |                                       |     |   |   |   |   |
| Turnover                                                                 |   |                                       | 109,388  |   |   | 77,881 |   |   | 9,985 |   |
| Operating                costs                                           |   |                                       | (115,044 | ) |   | (85,824 | ) |   | (11,003 | ) |
| Finance                costs                                             |   |                                       | (495     | ) |   | (1,065 | ) |   | (137 | ) |
| Other                income                                              |   |                                       | 531      |   |   | 366 |   |   | 47 |   |
|                                                                     |   |                                       |     |   |   |   |   |   |   |   |
| Loss                before taxation                                      |   |                                       | (5,620   | ) |   | (8,642 | ) |   | (1,108 | ) |
|                    Taxation                               |   |                                       | --       |   |   | -- |   |   | -- |   |
|                                                                     |   |                                       |     |   |   |   |   |   |   |   |
| Loss                before minority interest                             |   |                                       | (5,620   | ) |   | (8,642 | ) |   | (1,108 | ) |
|                    Minority interest                      |   |                                       | (493     | ) |   | (7 | ) |   | (1 | ) |
|                                                                     |   |                                       |     |   |   |   |   |   |   |   |
| Net                loss                                                  |   |                                       | (6,113   | ) |   | (8,649 | ) |   | (1,109 | ) |
| Gain                on disposal of subsidiaries                          |   |                                       | --       |   |   | 65,234 |   |   | 8,363 |   |
|                                                                     |   |                                       |     |   |   |   |   |   |   |   |
| Net                (loss) profit attributable to discontinued operations |   |                                       | (6,113   | ) |   | 56,585 |   |   | 7,254 |   |

**4.      LONG-TERM BANK LOANS**

| PRINCIPAL |    | INTEREST                RATE |                                       | MATURITY |
|-----------|---------|------------------------------|--------------------------------------------|----------|
| **HK$**   | **US$** |                         |                                       |     |   |
|      |    |                         |                                       |     |   |
| 8,501     | 1,089   |                         | HK$                prime, HK$ prime - 2.6% |     | 2013 |

| PRINCIPAL |   | PAYABLE                DURING THE                FOLLOWING PERIODS |
|-----------|--------|--------------------------------------------------------------------|
| HK$       | US$    |                                                               |   |
|      |   |                                                               |   |
| 1,088     | 139    |                                                               | 2007 |
| 7,413     | 950    |                                                               | 2008                - 2013 |
| 8,501     | 1,089  |                                                               |   |

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**5.      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION**

|                                                                                                                     |   | THREE                MONTHS ENDED MARCH 31 |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                     |   | 2006                                       |   | 2007 |   | 2007 |   |
|                                                                                                                     |   | **HK$**                                    |   | **HK$** |   | US$ |   |
|                                                                                                                     |   |                                       |   |   |   |   |   |
| **Cash                paid for:**                                                                                        |   |                                       |   |   |   |   |   |
|                     Interest expenses                                                                |   |                                       | 495    |   |   | 1,120 |   |   | 144 |   |
|                                                                                                                     |   |                                       |   |   |   |   |   |   |   |   |
| **Non-cash                operating, investing and financing activities:**                                               |   |                                       |   |   |   |   |   |   |   |   |
|                     Acquisition of property, plant and equipment under capital                leases |   |                                       | 848    |   |   | -- |   |   | -- |   |
|                     Repayment of amount due from a stockholder through share                exchange |   |                                       | --     |   |   | 4,660 |   |   | 597 |   |

**6.      DISPOSAL OF SUBSIDIARIES**

|                                                                                    |   | **HK$** |     | US$    |   |
|-----------------------------------------------------------------------------------------|--------|---------|----------|--------|--------|
|                                                                                    |   |    |     |   |   |
| **Net                assets disposed of:**                                              |   |    |     |   |   |
|                     Property, plant and equipment                   |   |    | 114,925  |   |   | 14,734 |   |
|                     Investments                                     |   |    | 2,740    |   |   | 351 |   |
|                     Inventories                                     |   |    | 2,648    |   |   | 339 |   |
|                     Trade and other receivables                     |   |    | 79,760   |   |   | 10,226 |   |
|                     Cash and bank balances                          |   |    | 14,482   |   |   | 1,857 |   |
|                     Trade and other payables                        |   |    | (284,059 | )      |   | (36,418 | ) |
|                     Minority interest                               |   |    | (459     | )      |   | (59 | ) |
|                     Accumulated other comprehensive losses          |   |    | (2,062   | )      |   | (264 | ) |
|                                                                                    |   |    | (72,025  | )      |   | (9,234 | ) |
|                                                                                    |   |    |     |   |   |   |   |
|                     Profit on disposal of subsidiaries              |   |    | 65,234   |   |   | 8,363 |   |
|                     Goodwill realized upon disposal of subsidiaries |   |    | 6,791    |   |   | 871 |   |
|                                                                                    |   |    |     |   |   |   |   |
| Total                consideration                                                      |   |    | --       |   |   | -- |   |

|                                                    |   | **HK$** |   | US$    |   |
|---------------------------------------------------------|--------|---------|--------|--------|--------|
|                                                    |   |    |   |   |   |
| Cash                consideration                       |   |    | --     |   |   | -- |   |
| Cash                and cash equivalents disposed       |   |    | (3,911 | )      |   | (501 | ) |
|                                                    |   |    |   |   |   |   |   |
| Net                outflow of cash and cash equivalents |   |    | (3,911 | )      |   | (501 | ) |

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**ITEM      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF      OPERATIONS**

----

|                                      |   | **Three                Months Ended March 31,** |      |
|-------------------------------------------|--------|-------------------------------------------------|-----------|
|                                      |   | **2006**                                        |      | **2007** |   |
|                                      |   |                                            |      |   |   |
| Operating                Revenues         |   |                                            | 100.00    | % |   | 100.00 | % |
|                                      |   |                                            |      |   |   |   |   |
| Total                operating expenses   |   |                                            | 77.72     | % |   | 68.82 | % |
|                                      |   |                                            |      |   |   |   |   |
| Operating                profit           |   |                                            | 22.28     | % |   | 31.18 | % |
|                                      |   |                                            |      |   |   |   |   |
| Loss                before income taxes   |   |                                            | (52.33    | %) |   | (40.59 | %) |
|                                      |   |                                            |      |   |   |   |   |
| Provision                for income taxes |   |                                            | --        |   |   | -- |   |
|                                      |   |                                            |      |   |   |   |   |
| Net                (loss) profit          |   |                                            | (3,219.69 | %) |   | 33,244.71 | % |

**THREE      MONTHS ENDED MARCH 31, 2007 (UNAUDITED) COMPARED TO THREE MONTHS ENDED MARCH      31,      2006 (UNAUDITED)**

----

|                                                                                                                                     |   | (in                thousands)Three                months ended March 31 |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                                     |   | 2006                                                                    |   | 2007 |   | 2007 |   |
|                                                                                                                                     |   | **HK$**                                                                 |   | **HK$** |   | US$ |   |
|                                                                                                                                     |   |                                                                    |   |   |   |   |   |
| Cash                purchases of property, plant and equipment                                                                           |   |                                                                    | 2,663  |   |   | 904 |   |   | 116 |   |
| Non-cash                property, plant and equipment purchases financed through capital                lease                obligations |   |                                                                    | 848    |   |   | -- |   |   | -- |   |
|                                                                                                                                     |   |                                                                    |   |   |   |   |   |   |   |   |
| Total                capital expenditures                                                                                                |   |                                                                    | 3,511  |   |   | 904 |   |   | 116 |   |

|                                                                                                                  |   | (in                thousands)Three                months ended March 31 |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                  |   | 2006                                                                    |   | 2007 |   | 2007 |   |
|                                                                                                                  |   | **HK$**                                                                 |   | **HK$** |   | US$ |   |
|                                                                                                                  |   |                                                                    |   |   |   |   |   |
| Capital                expenditures for purchases of property, plant and equipment                                    |   |                                                                    | --     |   |   | 904 |   |   | 116 |   |
| Capital                expenditures for maintenance and updating existing centers and corporate                office |   |                                                                    | 3,511  |   |   | -- |   |   | -- |   |
|                                                                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |
| Total                capital expenditures                                                                             |   |                                                                    | 3,511  |   |   | 904 |   |   | 116 |   |

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**ITEM      3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**ITEM      4 - CONTROLS AND PROCEDURES**

**PART      II - OTHER INFORMATION**

**ITEM      1 - LEGAL PROCEEDINGS**

**ITEM      2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS**

**ITEM      3 - DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5 - OTHER INFORMATION**

**ITEM      6 - EXHIBITS AND REPORTS ON FORM 8-K**

| 31     | Certification                of the Chief Executive Officer and Chief Financial Officer Pursuant                to                Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of                1934 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                     |
| 32.1   | Certification                of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS.                1350                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002      |
|   |                                                                                                                                                                                                                     |
| 32.2   | Certification                of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                               |

----

**SIGNATURES**

**PHYSICAL      PROPERTY HOLDINGS INC.**

| May                21, 2007 | ***/s/                Ngai Keung Luk***             |
|-----------------------------|-----------------------------------------------------|
|                        | Ngai                Keung Luk                       |
|                        | Chairman                and Chief Executive Officer |
|                        |                                                |
| May                21, 2007 | ***/s/                Darrie Lam***                 |
|                        | Darrie                Lam                           |
|                        | Chief                Financial Officer              |

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