CTF Services Limited

Good afternoon, everyone. Thank you for joining CTF Services Ltd Financial Year 2026 Annual Results Analyst Briefing. I'm Sylvia, the Head of Group Investor Relations. In today's meeting, our management presentation will cover the financial and operational performance for the period provide updates on our five major business segments and further elaborate on our strategic initiatives. A Q&A section will follow the presentation. For participants joining us via webcast, please submit your questions at any time by clicking the question mark icon on the left-hand side of your screen. Our management team will receive them directly on the iPad. Without further ado, may I now invite our Executive Director, Group Co-CEO, Mr. Gilbert Ho. and our Executive Director, Group COFO, Mr. Jim Lam, to kick-start today's meeting. Thank you.

Okay, let me have a quick introduction on our results. So for financial year 26, we continue to have a very stable year, I would say. It's not particularly strong, but it's a very stable year. We have done a number of acquisitions and also a number of disposals. I will talk about the numbers later on and Jim will elaborate on the operations as well as the numbers. But overall, as I said, we have a very solid financial year 26. In terms of the expansions, the financial services showed a very strong momentum and it became the largest AOP contributor. That replaced our road segment as the top AOP contributor. We continue our capital recycling. We disposed some of the assets. We deployed our capital into two focus areas, namely our financial services as well as our logistics segments. As you may also know, during the year we issued the convertible bond and all of them has now been converted. So we restored our public flow and also that We enable us to go back into the Hang Seng Composite Index as well as renew our Stock Connect eligibility. As you can expect, our DNA or our business is always a very strong cash flow generation. That continues to be the case. We lower, actually lower quite a bit on our net gearing ratios and have ample of liquidity for us to redeploy and expand into the two core areas that I mentioned before, the logistics sector as well as the financial services sector. Dividends. We uphold our sustainable and progressive dividend policy. I think this is the 24th year. This is the 24th year consecutively we distribute our dividends. We will talk about the dividend part later on. So on AOP, we delivered a strong result with HK$4.59 billion of AOP increased year by year by 3%. In terms of profit attributable to shareholders, it increased by 11% to HK$2.393 billion. As you can see in the chart here, 32% of the AOP actually coming from the financial services now, and 31% coming from road segments, followed by logistics, 14%, and then constructions, and then last but not least is our facility management. So this basically summarises the entire years of capital recycling that we have done. I will first talk about the monetisation and the disposal first. In October 2025, we first issued the exchangeable bond of HK$2.2 billion to exchange into our shareholding in Shaotong. exchangeable bond, the coupon is 0.75%, it's due 2028. So that actually allowed us to monetise the stock without actually selling it, we can capture the upside and in the meantime we have a very low funding cost funds for us to do our acquisitions. And then between 2025 and 2026, within this entire year, we have done a number of disposal within our strategic investment segments. That total of around HK$1.3 billion. That consists of a number of different investments, small and big. So in the old days, we have done very much a number of PE investments as well as VC investments. So here are the process. coming from Toast Investments. Then in July 2026, we completed the disposal of one of our Toros, the Cherno Expressway. That came back with RM1.6 billion, as well as, I think very importantly, it consolidated the net debt of around RM1.7 billion. So I think that actually is very important to us because that substantially lowered our net gearing ratios. So in addition to the monetization as well as the disposal, we have done a number of acquisitions throughout the year. In November last year, we acquired 13% in USMART. This is actually a very important step. Not only that, it expanded our financial services platform. These acquisitions, although it's only 13%, only account for half a year, already contribute around 30 million, right? 35 million of AOP just for this half year. And then between December 2025 and January 2026, we consecutively acquired four logistic properties, one in Greater Bay and four in the Yangtze River Delta, so around the Shanghai area. And then in April, we invested in a battery energy storage platform in Finland. Then in July 2026, we completed our acquisitions of 65% in Blackhorn. Again, that is a very important step in building up our ecosystem in the financial services platform. It enhances the entire capability for us to cross-sell to our policyholders and offer more wealth management products to our customers. Last but not least, in September 2026, we completed another acquisition of logistic property in the Yangtze River Delta. We also invested in an AI data centre in September 2026. In fact, we just issued a press release for our investment in a data centre project in Johor, in Malaysia. So that actually marked our first overseas investments of data centre in this month. Very importantly, I have to say that most of the investment, if not all, we don't invest in greenfield investment. So we only invest in brownfield or mature assets. So basically all the investment that we do, no matter it is warehouses or data centre, is already making cash flow. It is very important to us that we don't take any construction risk. It is really not the nature of our company. If we go to the strategic priorities and outlook, I will very quickly go through this. As I said, financial services will be one of the core segments that will grow. We will continue to expand. We will also look into overseas markets such as Singapore. We will continue to enhance the wealth management platform. Now we have CTF Live, we have Blackhorn, we have USMART. We will continue to utilise all these different units to give more choices for our customers. We will also keep an eye open to see whether there are any acquisitions suitable for this particular ecosystem to expand in this financial services sector. For toll roads, I said in the last analysis briefing that we are not going to expand further in toll roads. And in fact, after that, we dispose one of the toll roads. We will continue to see whether there are opportunities to monetise at a good valuation any of these toll roads. I think one of the key words here is about good valuations. All of them still generate very good cash flow, unless we get good valuations. I don't see the needs of immediate disposal, but if we get the right valuations, we have no hesitation to dispose in this juncture. Logistics. I think the idea, as I said, is to continue to expand in this particular area. Hong Kong, for ATL, we already increased the occupancy rate from 70 odd percent now to around 85 percent by the end of last financial period, which is 30th of June. We will continue to strengthen the operations of ATL. and increase its occupancy rates. We will look for value acquisitions. So we've already done four over the last few months. We'll see whether there's any other opportunities. I think it is very important that, I mean, Over the last 10 years, there's a period where there's many people chasing for assets in the logistics sectors. We are not those type of people. We don't chase assets. We only do the acquisition when we see value. So now although some of the people exiting the sector it is not because it is really not because the entire sector outlook has been affected it is because some of the funds reached the end of the fund life they have different reasons so we only do acquisitions again when we see value in it long-term value and good locations at the end of the day logistic is about locations location location locations locations So all the focuses of this is in the GBA area as well as in the Yangtze River Delta. Constructions, we have now four platforms, Sunshine Astor, Yen Em, Hiep Hing, Wai Bro, Gong Hing As you can see from the government policies, they are very focused on the northern metropolis. How we see it is, especially in the very initial phase, it will benefit Waibo doing the foundation work. This is actually very much stated already in the five years plan, as well as in the policy address last week. So we think we can definitely capture that particular market, Waibo being the top, not the top field, the top top. I think we can capture all these opportunities in the Northern Metropolis. In fact, over the last year, Hip Heng already is doing some of the projects in the Northern Metropolis. We continue to see the recovery in the residential market as well. Some of the property developers have already started bidding land again, so we are very positive about the construction segments. We will continue to do well, especially that we are in the top part of the cake, where we can actually capture the most value out of this particular sector. Last but not least is the facility management. That includes where you're situated here, the HKCEC, GHK, and KTSP. The CEC operationally continues to be good, but the result is a little bit affected because of the depreciations where we have only a few years left in the concessions. So while the operation is good, we will continue to hit by the high depreciations. We will start the negotiations or discussions with the government on the next concession period for HKCEC. For GHK, GHK now marks I think the sixth year, the seven years of its operations. It started operating in 2017, grand opening in 2018. It turns into positive EBITDA in 2021. Now this year it's AOP. In fact, the AOP grew four times from last year, which Jim will talk about. We will continue to see this. This will continue to do well. We will focus on the expansion of the clinics, which drives a lot of the patients from our clinics to our hospitals. We'll expand, continue to expand on the clinic as well. We opened one of the clinics in MOT in last year. We will look for more expansions this year. The aim of opening the clinics really is not about the clinic itself. It's to channel the patients into the hospital where they can do high value operations. KTSP, where we only own 25%. This is the second year in its operations. They've already done, I think, over 100 events, including concerts and sports. It meets all the KPI. We do see that it will continue to do well, although this is still the REMMA phase, so it is still in the AOL phase, but we definitely will... We enjoyed what we call the 城市經濟 from the government. We will see how we can actually do better and improve the operational efficiency. Okay, now I will pass it on to Jim on the financial updates.

First, a very quick recap on the key financial numbers. Attributable operating profit up 3% to 4.3%. Profit attributable to shareholders up 11% to $2.4 billion. Adjusted EBITDA, which is a proxy of operating cash flow before tax and interest, increased by 1% year-on-year to $7.4 billion. Total equity remains very ample, further $1.3 billion as of June 2026, comprising of cash on hand $20.8 billion. and Andron Committa Banking Facility, 10.5 billion. Net gain ratio decreased by 9 percentage point year-on-year to 28% and net debt balance decreased by 20% year-on-year to 11.7 billion. In terms of the debt mix, we turned more bullish on the RMB exchange rate about 18 months ago. Since then, we've been gradually reducing our RMB borrower exposure, resulting in a lower percentage of the RMB debt to total debt. The ratio was 46% in June this year versus 62% a year ago. We believe such move will allow us to benefit from a stronger The borrowing cost remains stable at 4.1%, which is unchanged compared with last year. We have done quite a lot of refinancing last year. We did 14.2 billion of refinancing last year, which resulted in our debt maturing within the next 12 months from June this year to 7.9 billion, compared with over 9 billion 12 months ago. The majority of this 7.9 billion we expect will be refinanced by December this year. We continue to maintain a very diversified funding channel. We have a banking facility of total 35.5 billion onshore and offshore, of which about 10.5 billion remained undrawn. We have two outstanding US dollar bonds. We have issued an exchangeable bond, exchangeable into our approximately 10% stake in Socheng Holdings, which was issued in September last year. and we have also issued three tranches of pendant bonds since 2022. We repaid the first tranche at its maturity in May this year, which is consistent with our strategy to reduce exposure to the RMB borrowings. We maintained our A-plus credit rating with JCR and the outlook was upgraded from stable to positive. We also maintain our AAA rating with the domestic rating agency, China and then He. As mentioned, our lagering ratio decreased from 37% to 28% in June this year, which was due to, first, the issuance of a $2.2 billion exchangeable bond, second, reclassification of the $2 billion lead debt associated with Chang Li Expressway to help for sale as of 30 June 2022 because we signed the SPA to dispose this expressway in May. Conversion of approximately $1 billion of convertible bonds and finally, disposal proceeds of approximately $1.7 billion. The majority of it comes from the disposal of various strategic investments. Page 14, despite the challenging macro environment both in Hong Kong as well as the mainland, we managed to increase our attributable operating profit, profit attributable to shareholders as well as return on equity over the past four years, which reflected our successful portfolio optimisation strategy as well as our shareholder friendly dividend policy. We have committed to our sustainable and progressive dividend policy since fiscal 2019. Today we announced a 4% increase in our final DPS to 33 cents on a comparable basis. When I say comparable basis, it means we will adjust the FY25 final and interim DPS number to reflect the 1 for 10 bonus issue completed in December 2025. So together with the $0.28 interim dividend, total dividend this year would be $0.61, and that represents a 3% increase year on year. We announced another 1 for 10 bonus issue. The purpose, just like last year, is to further increase the stock liquidity. Our stock's daily turnover volume has increased substantially by about 1.4 times to over $2 million US dollar allow, thanks to the increase in research coverage by the major investment banks, as well as the free percentage point increase in our fee flow as a result of the CB conversion. Next, I will talk about the performance of each of our four major segments. I will start with Financial Services. As Gilbert mentioned, Financial Services has become our largest AOP contributor for the first time, overtaking the ROSE segment. The AOP increased by 19% year-on-year to $1.5 billion, and CDF Life represented the vast majority of this 1.5 billion AOP, although use back that we acquired in November last year also contributed lightly to the AOP of the segment. The earnings growth was strengthened mainly by the robust CSM release from CDF Life, which increased by 21% year-on-year to $1.4 billion. We have also seen a strong increase in both our APE as well as MBP, meaning New Business Premium. 7% for APE and 74% increase for New Business Premium. Regarding APE and new business premium, we want to go a little bit deeper because there has been a major shift in the product mix. I think it happened not just to us but also to other life insurance company. in Hong Kong as well as a result of the new commission spreading route introduced by IAEA effective from the 1st of January 2026. So in the first half of the fiscal year 2026, we saw a lot of multi-pay insurance policies. So it can be, you know, 2-pay, 5-pay, 10-pay. But, you know, moving into the second half of this fiscal year, because of the new commission spreading route, a lot of the insurance company, including us, are selling the majority of their product in the form of single premium, which when you translate that into APE calculation, the APE will only account 10% of the single premium The APE only increased 10% of the single premium, which substantially reduced the APE number for the second half of this fiscal year. That's why we did not mention new business premium in the past. Now we think it's important for investors to also look at new business premium, which is defined as 100% of the single premium together with the annualized first year premium. Having said all this, we think this year you will be quite misleading and not meaningful to look at the year-on-year growth of APE and new business premium between FY26 and FY25. Instead, we will urge you to focus more on the VOMB dollar, because no matter if it's single premium or it's multi-paid premium, at the end you will generate the same VOMB. So we think VOMB Growth is the most important metric that you should focus on in fiscal year 2026. Our view NB dollar increased by 30% year-on-year to 1.3 billion, which is driven by, sorry, the margin also increased from 30% to 37%, which is driven by, as I mentioned earlier, the shift to single-paid premium and also the successful repricing of our flagship product called the My Wealth series. The CSM balance of CDF Life increased by 22% year-on-year to $11.3 billion, which is quite impressive considering the strong CSM release during the year. The embedded value also increased by 12% year-on-year to $28.4 billion. The survency ratio for CDF Life stood at 285% which have already taken into account a $0.6 billion of dividend remittance. We believe 285% is one of the highest, if not the highest, among all the major insurance companies in Hong Kong. Because of the very high survency ratio, we actually think CDF Life is in a very strong position to argue for a further increase in its dividend payout ratio to the listed company. Over the past two years, CDF Live paid out about 50% of its profit as dividends. So we think there's room for further improvement in the dividend pay ratio going forward. In terms of the performance of different channels, the agency channel saw a 10% increase in APE and 85% increase in MBP. The partnership channel increased its APE by 16%, and MBP by 138%. As mentioned by Gilbert just now, in addition to focusing on the CNV business, we are also developing the overseas business, meaning we establish Establish relationship with broker to focus on international high-level customers. During the year our APE from this overseas customers increased by 40% year-on-year and now the overseas customer already accounted for slightly less than 10% of a total APE for fiscal year 2026. In terms of the AUM or Total Asset Under Management for the insurance company increased by 17% year-on-year to 106 billion. Like in the past, most of this investment were allocated to investment greater bonds and also we continue to maintain a very diversified geographical exposure, 45% in Asia. and Oceana, 40% in North America and 12% in Europe. The strategy of our investment is to generate sustainable risk-adjusted long-term return in order to support the fulfillment of its obligation to the policyholders. The fixed income portfolio continues to see a small increase in its recurring investment yield to 4.59% in FY26. First of all, we believe there are a lot of new business opportunities in the wealth management industry in Hong Kong. And with the recent acquisition of 30% stake in YouSmart, which is a digital brokerage, and 65% in Blackhorn, which is and external asset management together with the core CDF life insurance business. We think our financial service segment is now in a position to offer integrated financial solutions covering both wealth accumulation as well as protection and retirement. I would move on to Rose. I'm out of time so I will try to finish within the next 10 minutes.