Ctf Services Ltd S/Adr

Limited Financial Year 2025, and it results in an analyst briefing. I'm Sylvia, the head of Group Investor Relations and Corporate Communications. Thank you for joining us today, both online and in person. Due to the impact of the very strong typhoon, we have to delay the analyst briefing to today, and we truly appreciate your flexibility and also continued support. Our senior management will walk you through the overview of the resource highlight, and also the outlook of each of our five business segments, and also our strategy moving forward. And the Q&A session will follow. For those joining us online, please click on the question mark icon on the left-hand side of your screen, and you will be able to submit a question, and our management will address it later. Without further ado, may I now invite our Executive Director and Group Co-CEO, Mr. Gilbert Ho. and Executive Director and Group Chief Operating and Financial Officer, Mr. Jim Lam to kick-start the meeting. Thank you.

Thank you. Again, thank you everyone for joining our presentation today. I understand it messed up everyone's schedule, but unfortunately we can't do the presentation yesterday. So, first of all, the Financial year 25 was a stable year for us. We continued our effort to redefine and strengthen the group business portfolio. As you can see, we have done a number of acquisition as well as disposal. We also renamed our insurance segment to financial services segment. And obviously because of a couple of the acquisitions, and we will explain also later on that will be one of the focus on the fast growing wealth management business. Okay, sorry, sorry, okay. Okay, and also with the logistic warehouses, we also renamed, or I would say rebrand, give the logistic asset a brand, called CDF Logistics, to leverage the strong brand equity of Charter Cook. We will continue to grow these particular segments and drive synergies across different portfolios, so that the tenant's mix can actually can move across different assets. In the capital market, we have issued a number of convertible bonds with the initial aim to increase our public flow and hopefully to also enhance the liquidity of our stock. We will obviously talk about the diploma shares as well as the EB that we issued yesterday, later on. We also maintain the sustainable and progressive dividend policy and we continue to have a very consistent dividend distribution to our shareholders. In terms of the portfolio optimizations, as I mentioned, we have done a number of divestments throughout the financial year 2025. We have very timely disposed of the free-duty businesses. We also disposed one of the investment that the group invested in 2011, Heaver Group, we disposed it earlier this year. Last but not least, we also dispose of our investment in Italy, which is a solar farm investment, which we invested in 2018-19. In terms of the strategic advancement, as I mentioned, we have renamed the insurance segments into financial services segments to reflect its expanded scope. With the two new members that we acquired throughout the year, first of all, the USEMARC in that group, as well as the Black Coin Group, which is focusing on external asset management. We also established, through CTF Live, we also established a Bermuda operations to serve the high net worth clients who want offshore insurance policies. For the logistics segments, as I said, we will grant the asset of the logistics segments to have a consistent brand name of CDF Logistics. We will also, going forward, target the undervalued logistics assets in two main areas. One is the Greater Bay areas, the other is the Yangtze River Delta, which is around the Shanghai areas. So for the investors who are looking into our stock, I think the key investment features when you're looking at CDFS, first of all is the operational excellence across our very diversified business portfolio. All of them actually has very similar characteristics with stable cash flow and resilient earnings. you can see from the results that even during the trade war, at the geopolitical tensions, we still deliver a relatively stable result for 2025. With the expansion of differential surfaces, we hope that we can actually leverage on a very strong brand name of Chardai Folk and also a very strong network of Chardai Folk group to deliver unparalleled surfaces to our different clients within the differential surfaces segments. We continue to do portfolio optimizations. As you can see, since 2018, we have done a series of portfolio optimizations and it's not the end. In fact, we just done one portfolio optimization yesterday, which we'll talk about later on. Obviously, the aim is to maximize long-term shareholders' value. Jim will talk about the financial management and the diversified sources of funding, which is actually one of the foundations of our quantitative expansions of the group. Dividend policy, which I'm not going to talk about further. I think the actions say it all. We continued our dividend distributions for 22 consecutive years, and it's counting and will continue. Last but not least, about our independent management team. All of us has been with the group for quite some years now. So for 2025, our AOP up 7% year-on-year to $4.4, $4.5 billion. That actually includes two business, which is Free Duty and Waikiki. If we exclude that two business, our AOP actually has gone up by 9% to $4.5 billion. In terms of each business segments, role segments, the AOP is $1.4 billion, decreased 8% year on year, which I will actually explain a little bit about that later. If we exclude Let's put it this way, if we're just looking at the operating rows, which is, because we have four rows which the concession period has expired throughout the year, if we exclude that four rows, the AOP actually has gone up by 1%. Financial services, which for this financial year only has CDF insurance, has gone up by 29% to $1.24 billion. Logistics business, the AOP has gone up by 3% to $740 million. Constructions, $790 million, our AOP. If we exclude Waiki, it slightly decreased by 7% because of the project completions of the construction business. Facility management is $89 million. Because free duty was disposed in the middle of the financial years, which was completed by the end of 2024 in December, if we exclude the free duty business, the AOP actually was increased by 16%. Last but not least, our strategic investment has increased by over 1,000% to $237 million. So, looking ahead, the different business segments on roads, we do see the changes in the road segments because of, first of all, of the economic situation and also the shifting traffic pattern. Second, the rising competition of newly developed roads. So, I think from a long-term perspective, we are unlikely to further expand on the road segments. However, we will try to enhance the earning of our existing row portfolio, including some expansions on our current rows, if we can find that the return of such expansion actually makes sense. On the financial services segment, CDF lies, as I mentioned, establishes permitted operations to provide insurance products for high net worth individuals. We definitely will continue to boost our agency force, which I will talk about later. And also upon the completion of USMART as well as Blackhorn, we will use that to expand on a very holistic wealth management platform, which hopefully with all the different financial services units can actually work together to build our entire wealth management platform. And last but not least is to utilise the strength of CTF Group for Crossout about the different wealth management products including insurance, brokerage as well as the external asset managers services of Blackhorn. For logistics, we will continue. to diversify the tenant base for both the logistic properties in Hong Kong as well as in China to offer more flexible arrangements to attract both short-term and long-term tenants. We will look for acquisitions in this space, especially in the GBA as well as Yangji River data which is around the Shanghai area, for some undervalued logistic assets. For our construction business, we will continue to grow and gain market shares on the Hong Kong recovering construction market. As all of you know, a number of large construction contractor has closed down. So from our perspective, it is a time for our city of construction group to gain market share in this respect. We will also explain later on that you can see the portion of government related projects has increased from 40 odd percent to now 61 percent of our entire construction in progress. So that we will continue to focus on the government projects, especially the latest policy address has strengthened the effort in delivering the northern metropolis construction developments. The facility management, the three parts, the CEC, GHK as well as KTSP, I think we will continue to leverage on the government initiatives in supporting mega events in both CEC as well as KTSP and for GHK, which we will explain also later on, that we now achieve AOP, meaning that it finished its RAMA phase and is now that going into a phase of fast growing development, we will continue to expand its healthcare network in Hong Kong to diversify its revenue stream and also capture more patients from different areas in Hong Kong. I will pass it to Jim to talk about the financial first and then we will talk about the different business segments updates.

Sure, thank you Gilbert. FY25 financial results. As Kevin mentioned, AOP for this year increased by 7% year-on-year to $4.5 billion. Adjusted EBITDA, which is a proxy of our cash flow generation for the year and included dividend received from our joint ventures and associated company increased by 1% to $7.3 billion. Profit attributable to shareholders increased by 4% year-on-year to $2.2 billion. The board approved final ordinary dividend of $0.35 per share, which is the same as last year, including the interim ordinary dividend of $0.30 per share and also the one-off interim special dividend of $0.30 per share. Total dividend for the year amounted to $0.95 per share. Even if we exclude the special dividend, the ordinary dividend for the year of $0.65 per share generate 8.3% dividend yield for the stock based on the latest closing price, which is quite attractive. Cash on hand amounted to $20.2 billion. We have committed and drawn back the facility of $9.6 billion. So total available liquidity is close to $30 billion. Lead debt balance was 14.7 billion, which translates into a lead gearing ratio of 37%, which is more or less the same as a year ago. Lead debt to adjusted EBITDA ratio is two times, which suggests now we remain in a very healthy financial position. As you know, we have strategically shifted a substantial portion of our debt to the lower cost renminbi borrowing since E2023. This helped us to save our interest expenses and also it will serve as a lateral hatch against our renminbi denominated asset. As of 30 of June, 2025, our renminbi debt to total debt ratio actually furthered to 62%. Renminbi liability to renminbi asset increased to almost 80%, and the fixed rate debt now accounted for about 70% of our total debt. Because of the increase in proportion of renminbi borrowing and also the decrease in HIBOR during the year, We have weakness decline in average borrowing cost from 4.7% in fiscal 2024 to 4.1% in fiscal 2025. We do expect our interest rate average borrowing cost to continue to come down in fiscal 2025 given expected interest rate cut, given expected third interest rate cut in the U.S. and the moderate declining interest rate in the mainland. Debt maturity profile, we had about $35 billion of gross debt as of 30 June 2025, of which about $9.4 billion, or 27%, will mature in the coming 12 months. We've been negotiating with banking partners for refinancing of the debt that will fall due within the next 12 months, and we expect the majority of the refinancing will be done before December 2025. We have quite a diversified sources of funding. We have bank loans, both onshore and offshore. We have issued US dollar in Hong Kong. We have issued panel bonds in the market in mainland. And we have also issued two convertible bonds this year in order to restore our fee fraud. Heart of the press is the 2.2 billion EB transaction announced last night. This chart shows the movement of our lag-grain ratio since 2019. Back in 2019, we had flat cash position. Then the lag-grain ratio increased to 31% due to the acquisition of CDF Life. Thanks to the strong cash flow generation and to some extent non-core disposal process, our lag-grain ratio has been gradually coming down to just 8% in fiscal 2023. From the general offer by CDFE, our giving ratio increased to 35% due partly to the payment of a special dividend of $6.5 billion and also partly to the redemption of our public PERP with an amount of US dollar $1 billion, which is also associated with the acquisition of CDF Life because the PERP was issued in fiscal year 2019. As I mentioned earlier, the net gain ratio in fiscal 2025 is 37%. Our target net gain ratio remain unchanged, 40% to 45% in the near to medium term. Despite the headwind to the macroeconomy built in Hong Kong and the mainland, we've been able to grow our AOP, cash flow, as well as that profit from 2023 to 2025. And we are also improving our return on equity. thanks to the more optimal capital structure. We've been paying, we have a very long dividend track record. We've been paying dividend for 22 consecutive years. We have adopted the current progressive and sustainable dividend policy since fiscal 2019 and we gradually increased our ordinary DPS from 58 cents per share in fiscal 2019 to the current 65 cents per share. We paid out special dividend one in the fiscal year 2024 and the other one in the fiscal year 2025. And for the current year, we have given the shareholders a script option for the final ordinary dividend for fiscal year 2025. We also announced a one for ten bonus issue. The purpose of both is to increase the liquidity and trading volume of our stock. As you know, we have issued two CBs. The primary purpose is to restore the public fraud of the company. We issued the first CB, 780 million, in January 2025, and upon its maturity in July, approximately 27 percent of the CB were converted, and we managed to increase our public fraud to about 24.4 percent. Because it's still below the 25% minimum requirement, as a result we purchased the remaining outstanding CB and issued new CB with an amount of $518 million. As of today, part of that $850 million CB has been converted and our latest public flow is about 24.5%. So we are confident that the outstanding CB will get converted because the current share It's about the conversion price by quite a wide margin. And upon full conversion of the 850 million CB, our FIFO will be able to increase to 26.4%, which is about the 25% minimum requirement.

Maybe Jimmy can talk about the – I helped you on this. Maybe you can talk about the exchangeable bond first.

Okay, sure. We announced exchangeable bond transaction last night. The key terms include the size of the bond is 2.2 billion. The coupon is 75, 0.75% per annum. The maturity date is three year with the put in two year by the investor. It is exchangeable into our 10% stake in Socheng Holdings. We issue the EB at a 3% premium so that we will get a total process of 2.3 billion. If we manage to dispose all the CB due to the conversion, we will be able to generate a gain of about 1.2 billion. 1.1, 1.2 billion pre-tax. I think the beauty of this CB transaction is that we are able to take advantage of the very hot CB market in Hong Kong by issuing the CB at so-called negative yield, meaning that we fetch free dollar from the investors and we will give out 0.75% coupon every year. So at the end of free year, in case the EBIT does not get converted, we will still be in that gain of about 0.75%. The reason, you know, why we decided to issue the CB is because, first, you know, you allow us to dispose of our stake at a premium. The premium is 5 percent to the latest closing price. And also, as I said, right, if we are not able to get converted on the EB, we'll still be able to, you know, acquire the funding at a negative yield.

Thank you Jim. Next I will talk a little bit about the business operations of each of the segments. Let me just give me a bit of time to go back. Okay, so first of all, the road segment, as I mentioned, the AOP has decreased 8%, but if we exclude the four roads, the Guangzhou City North Lane and the three toll roads in Shanxi, the AOP of the operating roads actually has a 1% increase year on year. In terms of the traffic, it increased 2%. However, there is a decrease in the long distance traffic, which actually leads to a 2% decrease in the total revenue. for our remaining concession period is about 12 years. As I mentioned at the very beginning, I don't think we will heavily invest in the toll roads, in the expansions. We probably will look at enhancing the income of the existing toll roads by expanding the existing toll roads. Obviously on each particular investment of expanding, we will calculate the return in deciding whether to expand the current toll roads in order to get the extension of the concession period. But it is unlikely that we will acquire any new toll roads in the near future. For the financial services segment, we have rebranded the CDF insurance into CDF into the financial services segments and throughout the year we have leveraged on the CDF brand rather than the Yeah, sorry, I forgot already. The old FT Live brand. So we can actually leverage very much on the CTF jewelry popularity in China to sell as insurance products. Going forward, as I mentioned, we will develop the integrated wealth solutions platform for the entire services. For the city of life, the AOP increased by 29%, CSM release increased by 28% to $1.1 billion and the CSM balance and net of reinsurance also increased by 30% year on year to $9.2 billion. which actually position us for a very consistent and sustainable profit recognition going forward. The investment yield on the fixed income portion also increased by 0.1% to 4.6%. So on the details of the operations, the APE decreased by 27% because our financial year actually spending across the second half of 2023 to the first half of 2024. So that has actually an impact on the operations. pent up demand for COVID-19 for the second half of 2023. So it has a relatively high base that actually attribute to the decrease in the APE. And also because, but if you're looking at the three years CAGR, the increase was actually quite significant on the 23%. The real MP also got impact by the same reason. But looking again on the three years CAGR, it also is around 24%. The real MP margin increased 3% to 30%. Our solvency ratios actually still maintain at a very strong position at 279% even after the dividend distributions to us in the middle of this year. The embedded value which is essentially the value of the insurance company increased by 90% to 25 billion Hong Kong dollars. So the APE, when you're looking at the APE as I mentioned there was this effects of the pent up demand in 2023 and financial year 2024. But if you break it down to look at the performance of each channel, Our agency channel actually performed very strongly. So if you're looking at the agency, the AP from agency actually increased by 48%. And looking at the quality, the agency productivity increased also by 48%. The persistency of the agency also increased by 23%. And new recruits increased 24% year on year. So this actually is a result of the transformation of the agency force over the last few years. And you can see the difference of the transformations actually improved the KPI of the agency channel. In 2025 we expect the agency channel will continue to grow in the coming years. So looking at each parameters, the investment portfolio AUM increased to 91 billion Hong Kong dollars. All the other investment criteria has not changed with the majority in bonds and also the majority of the bonds is in A- or above. So the two acquisitions that we have done in March 2025 and August 2025, including the acquisition of Usemark and the acquisition of Blackhorn is basically the backbone of our expansion in the financial services segments. Catering to serve the high net worth clients, essentially to try to form a mini ecosystem within the financial segments. so that we can actually blend all the different products together to cross-sell our clients within the different companies. Next is our logistics with the three different portions, the ATL, the seven logistic properties in China, as well as CUIRC. So in the logistic asset and management segments, ATL in Hong Kong, the occupancy rate is 80%. the average rental increased by 8%. So you can see the occupancy rate actually decreased from 96% to 80%. The reason, probably I've explained in the half year result as well. The reason is actually very simple because during the year we have the renewal of one very big client within the premises and the determinations of the next five years rental is actually by the average rental of the existing clients. That's why we need to keep the existing rental high. And by that we give up some of the lower rental tenants. That actually drives the occupancy rate down. And we now have already determined the next five years of this big tenant, so we can actually ramp back up the occupancy rate. Our target is to go back up to about 85% by the end of this year for ATL. For the seven logistic properties, the overall occupancy rates maintain at 87%. One to note is the Suzhou property. As you can see here, the occupancy rate of Suzhou properties decreased to 40%. The reason of that is we terminated our tenant, what we call the sub-tenant. The reason is the sub-tenant. We mix the Chinese and English together. The sub-tenant, because they are in financial difficulties, so they are not actually servicing, they are not actually doing their work. So we terminate that sub-tenant. We directly manage our tenant now. And we already, we terminate that tenant in April. And by now, in August, we already increased back the occupancy rate from 40% to above 60%. So we do expect it will go back to above 80% by the end of this year. I mentioned before, going forward, we'll continue to look for undervalued logistics opportunities in mainland China, particularly in GVA, as well as the Yangtze River Delta. The target is to look for fully occupied asset at above 8% cap rate. So this is the target for our acquisitions in this particular space. So it's very simple. We look for undervalued assets with strong cash flow. CUIRC, in which we own 40%, the AOP increased by 23%, throughput increased by 10%. It is a very strong year for CUIRC. We do expect that it will continue, because it continues to be supported by the Belt and Road initiatives. And the new expansion room sheet terminal will finish by the end of this year. So we do foresee that the result of CISU will continue to grow. Next is our construction segments. Our construction segments maintain a very steady AOP, despite probably all of you think they're very stagnant residential market in Hong Kong. We completed the acquisition of St. John Esther earlier this year, and we've already contributed positively to our profitability. The gross value of contracts on hand decreased 8% to $58 billion because throughout the last financial years, we basically finished the entire Cataspot Park, so that actually decreased the contracts on hand. The backlog increased 24%. The new water contracts also increased by 9% to $23.9 billion. The type of projects now stood at 61% government related projects. That actually increased from 48% to 61%. Probably some of you will be curious, how many of those projects are New World related? 8% of them are new world related. I need to give you a little bit of light in this. First of all, there is no pressure for us to get or to take any new world related projects. It's all independently negotiated. So from our perspective, from CDSS perspective, we won't. We won't sacrifice our profit or margin to do projects for related parties. I think the bottom line for us is we will maintain our profit margin if we do any of the related party projects. So this 8% actually were projects that we got from , one of the previous, the construction contractor for new world projects. Going forward, whether we will do any newer related projects is definitely going to be a competitive bidding process for us. Again, it's not necessary for us to do any newer projects. And for those who are concerned about the payment of New World projects, I can rest assured all of you that the two projects that we got from New World, one is a pavilion farm, the other is state pavilion. Both of them already got enough cash in the stakeholder accounts to pay our construction costs. So we're sure there's no issues on their payment on our construction expenses. So the CDF construction group, now we have a complete suite of different services, including the engineering and building constructions for Hip Heng, the foundation of Wibro, the concrete products suppliers of Gong Heng, as well as the electric and mechanical engineering services of Esther. For constructions industry, I think as a whole, we're still very positive, as you can see from the recent policy address, that the very strong emphasis has been put in the northern metropolis and we definitely will be benefiting from them. And we will continue to focus on government related projects. One thing that probably is sad for others is there has been a close down of a number of contractors throughout the year, but that will actually benefit HIP HING as less competitors are in the field going forward. Last but not least is the facility management business, which comprises the GHK Hospital, Commission Center, as well as KDSP. GHK, as I mentioned, we own 40%. First time since its opening, it contributed positively to our AOP. EBITDA increased by 23%, and the patient volume also continued to increase. with the regularly utilized bag increased from 313 to 337. The average occupancy rate maintained at 64%. As some of you know or probably don't know, the GHHA actually also comprises of a network of clinics. We have now six clinics and different services within the network. So we have clinics in both central, the western district and also the southern districts. We also have a pharmacy, we also have laboratory services, and we are going to open another medical services centre in Central, in MLT, later this year. So all of these actually serve as a channel to get patients into the hospitals. and also to free up some spaces, valuable spaces within the hospitals so that they can actually serve the patient off-site from other service centers. Next is the CEC. The AOP declined mainly because of the decrease in F&B revenue due to fewer banquet events and also downscaling of some of the trade exhibitions. Going forward, I think CEC will definitely expand on the emphasis on conventions as well as conferences, which will require physical attendance rather than the traditional trade shows. We will also get the government support on many events to bring in more non-traditional type of industries, including the recent Bitcoin conferences and all these different new conferences to Hong Kong. Oops, KTSP, KTSP in which we own 25%, because of the pre-opening expenses, it recorded an AOL during this financial year. So since the official opening of KTSB on the 1st of March, already more than 30 sports and entertainment events held in the park, with over 1 million attendance to the main stadiums and more than 7 million visitors to the entire park. As you probably know, within the park there is a shopping mall of around 700 square feet. The occupancy rate is around 80% by the end of the financial year. Now it is already over 90% as we speak. So we do expect the result of KTSB will continue to grow. So I will pass on to Karen to speak a little bit on ESG.

Hello, thank you. I'm pleased to share an update on our ESG progress for FY2025. Since we introduced Breakthrough 2050, our ESG strategic framework last year, I'm happy to report that all our key targets remain on track. In particular, I would like to highlight two major achievements. 39% of our bonds and loan facility are now coming from green financing. And we have achieved a 19% reduction in scope 1 and 2 emissions compared to our FY2023 baseline. So let me now walk you through what this number means in context and how they reflect our broader ESG journey. So our usual rating provides a snapshot of how we are performing across key sustainability dimension. I'm proud to say we have maintained strong standing across all major rating. This result reinforce our commitment to transparency, accountability, and continuous improvement. With that foundation, let's take a closer look at some of the operational highlights driving this performance. So in our upcoming year-to-year report, we have expanded our GHG infantry disclosure to provide a clearer picture of our admission hospitals. This allows us to tailor decarbonization strategy to each person's unit, operational and strategic context. So when you look at the number, you can see that scope 1 and 2 emissions are largely concentrated in on-site operation at Hiep Heng and HML, which is the Hong Kong CEC operation, making up 86% of our direct emission. Meanwhile, scope-free admission, primary from investment and procurement, account for 97% of our total footprint, underscoring the importance of engaging our value chain. So with this deeper understanding of our admission profile, we have been able to allocate resources more effectively and accelerate our impact. Hiep Heng and City of Life have now received SBTI validation for their near-term target, In FY205, we achieved a 90% reduction in scope 1 and 2 emission compared to FY203. This effort aligned with our goal to reduce emission by 50% by 2035. So we have listed out some of the decarbonization levers that we are going to focus for each business segment. So I am going too technical at this point. Let's now zoom in on how our business units are driving the transition through some technology. In construction, digital transformation is a key enabler. We are integrating tech across the project lifecycle. A standard example is a hip-hang distance tower crane command system, which combines MIC, AI, IoT, and remote control technology. This innovation not only enhances safety and efficiency, but also helps attract younger talent and promotes lean data-driven practices. So when you look into our report, you can have some more insight of this new innovation. So we also use tech for our operation. Communication is critical to supporting our people and communities, and technology is helping us to do that even better. Our digital platform now provides real-time well-being support, safety updates, and engagement tools for employees anytime, anywhere. In particular, for construction workers, Hibhing Connect has become a key tool. Over 77% of registered construction workers in Hong Kong are now using it to access safety records and site entry for all Hibhing construction sites. We have also launched Goal Hong Kong CEC, a virtual queuing system that reduces traffic congestion in Wan Chai area by allowing trucks to enter only when loading bay are available. So we're using this kind of digital tool to improve not only communication, but also safety, efficiency, and community impact. So in our role operation, we have continued to modernize with AI monitoring, electronic tooling, and mobile payment like WeChat Pay and Alipay. This upgrade reduce congestion, enhance user experience, and support our green mobility goal. By embedding technology into our operations, we are now delivering services more effectively and managing resources more efficiently. Now let's shift gears and look at how we are capitalizing on opportunities through responsible investment. So in FY2025, we mobilized HK$18.5 billion in sustainability linked loans and green debt financing, representing 39% of our total debt financing. We also partnered with Reset Carbon to procure green electricity certificate in China, following a rigorous due diligence process. This is not only support our own emission target, but also contribute to broader renewable energy transition in the region. So we recognize that how we allocate our capital plays a critical role in the transition. That's why we have embedded ESG into our investment criteria, ensure capital flows to initiatives that build resilience and mitigate climate and social risks. We have implemented an ESG due diligence checklist at the investment planning stage to identify and address potential risk area. Our exclusion list ensures zero exposure to non-ESG-aligned sector. At CTF Live, we have adopted Mars Climate, a Bloomberg NEF power model that assess transition risk and opportunity under various climate scenario. In FY2025, we have invested HK$3 billion in ESG label bonds, which accounted for 5.2% of our total bond investment. Additionally, we allocate HK$4.5 billion to ESG fund, representing 34% of our mutual fund and ETF investment. Importantly, 100% of our credit and equity research report incorporated ESG assessment, reinforcing our commitment to responsible and resilient investment. So, to quickly wrap up my update, I want to emphasize that we know that ESG is not just a reporting exercise. It's a continuous process that requires cohesive effort across the group. We have been actively creating platforms like our internal ESG conference, project funds, and leadership workshops to engage colleagues at all levels. This year, we have further strengthened our effort by appointing 45 impact leaders from across all business units. They serve as key drivers in embedding our ESG strategy into day-to-day operation. So together, they form a powerful network of change agents, helping us embed ESG thinking into everyday decisions and drive measurable progress across the group. So as we look ahead to FY2026 and beyond, We invite all stakeholders to engage with us, challenge us, and collaborate in shaping a more sustainable, resilient future. So that's it for me. Thank you.

Thank you, Gilbert, Jim, and Karen for the insightful presentation. We are now moving to the QA session, and please state your name and organization before saying your questions. Thank you. Jeffrey Kahn from CLSA.

Thanks for the presentation. So my first question would be, can you give us some updates on the roads? Probably from some media we saw there could be some potential disposals happening . So just want to hear any updates or what's happening behind the door.

Thank you. Okay. First of all, actually, there's a lot of questions about toll roads on the Internet, which I will answer it together as well. There has been news, I think on Bloomberg or wherever, about the road disposal. I think... given that we have very good real assets. So there has been approaches from different parties about our total assets. From our perspective, we have a very strong cash flow with all our total assets. I mean, from our perspective, there is no immediate needs of disposing any of those. Obviously, if the price is right, if the price is good, then we might selectively dispose some of them, but only if we think it makes sense from a price perspective. And there is no immediate plan of what the articles mentioned about the entire total portfolio. There is no such plan. On the internet, there is this question.

There is a question online saying that right now, the duration, the remaining duration is only 12 years. And then for the road business segment, if we do not invest further, so will it contract? Or in other words... When the duration or when the maturity is reached, are we going to just extend the concession period by means of expansion or modification? If we are to invest, how much do we need to invest? Okay, two points here. First of all, for every road, before the end of the concession period, we need to... calculate whether we want to put in place expansion or modification. Every road is in different situation. If we use Guangzhou North Ring as an example, back then we discussed with the government to see whether there can be expansion and alteration to extend the concession period. However, the cost of expansion and alteration is too high. Guangzhou North Ring is in the center of Guangzhou City. And if expansion and alteration is to take place, we have to make use of the site on which other people might be building properties. We have to first acquire those sites before we can start expansion and modification. Even if the place is not within the city center, there are other parallel roads. Will that be an impact on future traffic? Are there any slip roads or branches to be built that may affect road traffic? Regarding the province, if we build a new road or if we do expansion, how much is the cost? In each province, to do this work, the requirements are different. So when we do... An overall calculation, the thing is very straightforward. We look at future vehicle flow and whether the return makes sense. If it doesn't make sense, we won't do it. We will not, for the sake of maintaining a big road portfolio, blindly invest to maintain or the 13 rows there is not a need for us to do that so the answer is correct on one hand if we do not do expansion or modification if we don't buy new rows then of course the concession period will continue to fall that's the fact but still there are still 12 years to go secondly for the decision about expansion or modification it all depends on investment return if the investment return doesn't meet the standard then we would rather use the money for other investments Is there any question?

Thanks for the question. So my next question would be logistics. So you highlighted some factors that may have impacted the occupancy and probably your target by year end for Hong Kong and Suzhou. So just want to maybe hear your thoughts about from 80%, let's say in Hong Kong to 85%, we probably are quite confident on that. Based on what you are seeing in the market and how we determine the rent, how difficult would you say it would be from 85 to 90 plus percent for the occupancy, let's say in Hong Kong, maybe for the next 12 to 18 months? Just want to maybe hear assessment around this.

Okay. That's a very good question. I think first of all, it's definitely not going to be easy. The Hong Kong warehouse market, although we are in a very, very good location in Kwai Chung, but at the same time, the tenant has actually changed over the last 20, 30 years. Less than 50% of our tenants are transshipment tenants. So basically we are serving like So our biggest tenant, we're talking about dairy farm, we've got Coca-Cola, we've got Wellcome, so it's all about domestic consumptions. So when we're talking about the next 12 to 18 months, hopefully the economy is going And especially domestic consumptions needs to get better, right? Before we can actually say that our warehouse will have tenants. And give you another example, one of the tenants is Zaza. So with the tourists coming in and they need to buy things. to ensure that the retail market goes well and accordingly our warehouse will go well. In terms also of the supply, there will be new supplies but not in the next 12 to 18 months. There will be still quite some time before the new warehouse from ESL is coming out to the market. So we think that the main driver will still be a stabilising domestic consumption market and I think we are confident to get back to 90%. But 85% shouldn't be a problem because we strategically didn't lower our rents for the last 12 months. So with our premium locations, facilities, we are very confident to get back to 85%. You can talk about constructions now.

Yeah, actually, my first question is really about construction. So, on Xincheng that we acquired, of course, it's good to see it is contributing positive profit, but strategically, can you help us understand how it has added value to HIPPING, maybe from project building point of view, and maybe specifically, How is it different by sitting under CDF group before acquisition and now sitting under CDFS? Is there any change in the strategic value on this asset? That would be helpful.

I guess this is something that all of you would very like to hear. Although it is sitting at CDFD group, All of us, despite all of you probably wouldn't imagine, all of us actually working very independently without influencing each other. So putting that company into CTFS group, we can actually do all the tendering together, especially the design and build contracts. Because, just to give you a little bit of sense about the design and build contract, Design and build contract, meaning that when you submitted the tender, You actually need to know all the costing of different components. In a design and build tender, you have the construction component. You also have the M&E component. So if you don't have that arm, you need to guess or you need to actually have that other contractor coming in as a joint venture partner to submit together the tender. That one problem is you probably need to give some of your profit margin to that tenderer, to that M&E tenderer. And you don't have the full collaborations on the tendering process. Now we have all the costing base of the different components. We can actually submit a more competitive tender and actually can calculate the costing more accurately. So we do see We do see that there is a very competitive advantage in having a full suite of different services. There is only two big construction group having that. One is us, one is Cameron. So in order to pick for high value contracts, because usually design and build contracts are higher margin. So in order to pick for these higher margin projects, we think it is beneficial to have this M&E arm. in this particular area. And when you're looking at more deeply into St. John Astor, more than 60% of the Hong Kong hospitals are built by the M&E team. So we do, we will going forward have a competitive advantage in this project because we have this experience with St. John Astor being in the team.

Thank you, Gilbert, and thank you, Jeffrey. We received a question online regarding the total business. So if we do not further invest in the total portfolio, then the concession period will continue to go down. Then how will this impact the sustainable and progressive dividend policy?

Okay. First of all, the next May, toll road concession expiry is 2029, which is the Hangzhou Ring Road. So there's still a little bit of time. And I think from now until then, first of all, there will be continued growth in different business segments that you can actually see the trajectory of the different business segment is already on a growing trend, especially on the financial segments, which is CDF Live. And I also mentioned that we will look for very creative acquisitions in the logistics segments. The first most important criteria in this area is a strong cash flow in any of the acquisitions. So we are very confident that we can actually replenish both the profit and the cash flow that we will going to lose in probably five years' time from some of the term rose expiry.

Besides, the ordinary dividend only accounts for about 50% of operating cash flow. So there is room for us to reinvest the remaining 50% of operating cash flow each year into new acquisitions.

Thank you. Gilbert and Jim. So Ethan from HSBC.

Thank you. I do have a few questions on mind. First of all, on your presentation, page 30, on your construction business, on your lower left chart, it says that 61% of your projects are government-related. Is that based on your existing projects on hand, or was that based on revenue already incurred in your financial year 2025? That would be my first question.

Existing project on hand.

Oh, got it. Okay, so that reflects basically 61% of your order book. I think so. Yeah, okay, got it. So that would be reflected into revenue in the future. It will be mainly driven by government-related projects. Thank you very much. And my second question will be on your dividends. I just want to kind of get a better understanding on your progressive dividend strategy. Does that mean that your core or regular dividend will be maintained on a... dividend per share basis irrespective of the bonus shares being allocated, you know, on this year and whether or not that 10 to 1 bonus shares will continue to recur in the next financial year. So that would be quite key, right? I'm just trying to think, you know, what is the total cash return that shareholders would bring back on an ongoing basis, on a multi-year basis.

Okay, maybe I can talk about it more qualitatively and then Andrew can talk about it more quantitatively. I think first of all, in terms for the current year, first of all in the current year, we We are looking at the DPS. We are looking at the DPS continue to be at 65 cents total, like 35 cents for the final dividends. And I think there will be no changes on that for the current year. Going forward, whether the DPS for a full year basis, whether we're going to keep at 65 cents per share, or there will be any changes to that because of the 10 to 1 bonus issues. We're still internally thinking about that. I think I would say, okay, without discussing internally, I would say it wouldn't, because we're talking about 10% increase in our shareholder base. So without changing the DPS, we're talking about 10% increase in the dividend. So, I think we will be more looking at assuming every single shareholder getting the bonus shares, not selling their bonus shares. You will have the absolute amount of return on your shareholding. Stay the same. Okay, so conversely, so there will be a decrease in the DPS. Okay, but we still haven't decided yet. I mean, we haven't discussed it in the board going forward on that. The next questions about whether there will be a continuous policy on whether there will be a fuller shares every single year, okay. I think we actually mentioned that in the press conference. The reason of having the bonus shares is to create a more liquid shareholder base. So we hope the increase of the number of shares will actually enhance the liquidity of the stock going forward. It's not going to happen in one single year. So we do hope We do think it will be a continuous policy, so it will continue to do this. Again, whether we're going to maintain the DPS, we still haven't discussed that in the board. Maybe Jim can actually supplement that as well.

Actually, I don't have much to add. So the primary purpose of the bonus issue is to increase the liquidity and trading volume of the stock.

Got it. Because if I understand this correctly, with the dividend, on the final year, the $0.65 you gave, with the additional 10% additional shares, that shows a kickback, the yield, at least for the next few months to go, is going to be quite attractive. Assuming equity value is not going to go down, then I think that itself, the return for sure is actually quite attractive. So I'm just starting to think whether or not that return could be sustained. And when you think about progressive, you know, are you – maybe it's a question that, you know, it's the same question to ask basically, you know, whether or not are you thinking of maintaining your dividend per share continuously by enhancing return for shareholders through bonus shares or should we say the bonus shares is still going to be a one-off for this year?

I think first of all it's unlikely to be one-off. As I said it's going to be a continuous policy as we see it as of now.

I think we can only assure you at this point that the total amount of dividend in absolute term will not be lowered. But whether or not the DPS will be lower or not, we haven't decided yet.

Got it, got it, got it. Okay, makes sense, makes sense. And my final question would be about your financial sector. You've done quite a number of things alongside with CTF Life. I just want to see how optically or how do I understand the synergy could be created between FT Life, USmart, and Blackhorn together in the next couple of years, how much accretion that we could estimate or imagine at least qualitatively where that's going to come from.

I think first of all in terms of numbers, it would be very difficult to actually give any exact numbers as of now, given that we still haven't even completed transactions, but I think the logic or the vision is actually to have our high number of clients at our CDF live to be able to buy their other wealth management products within our own ecosystem. In a very blunt way, is to lock their money within our own ecosystem. So they have $10 spent already, $5 in CDF Life, they can spend the other $5 at Blackhorn and at Newsmark. So the idea is actually very simple from our perspective. The main growing sectors in Hong Kong, as you can actually see from all the different banks, HSBC, Stanchart, everyone, whether they are actually doing it or not, they are actually saying that they are growing the wealth management segment. We are doing exactly the same. The difference is We already have a very large pool of policyholders with CTF live and we are having individually servicing each of these policyholders. And you like it or not, we basically contact all these policyholders every single year. I don't see HSPC contacting me every single year. Like that. I mean obviously we have this very good touch point that we can actually grab all these different clients and sell them our other wealth management product at Newsmart. This is something that I think is very likely to do. Vice versa, obviously it's a relatively small amount. I think platform currently has around 3,000 something high-level clients. Vice versa, obviously we can do exactly the same. And we have the biggest suite of wealth management platform. and products to sell, we can obviously use our other clientele, including China Book Jewelry and Rosewood and all the others, to give them services and also sell them our wealth management products. So it is a very lucrative way. I can't really quantify that, but at least this is the vision. I know, I have been talking about that for the last five years, but now with with the reality that the platform actually built up with a stronger team of agency force, they are actually very hungry to have more products for them to sell to ensure all these clients stay within our own ecosystem. So it is something that I see that it is going to come in the next few years.

Thank you, management, and thank you, Edmund. So this is the end of our analyst briefing, and thank you so much for joining us. Have a nice evening. Thank you.