New World Development

Hello, friends of the investment world. Welcome to the All-Year Employee Online Analysis Conference of the New World Economic Year 2023. I am Patrick Chong, the Director of the Investment Relations, the host of today's conference. First, let me introduce the managers of the conference, including the Vice President and Executive President of the New World Economic Year, Mr. Zheng Zhiguang, Adrian. If you have any questions, please type them in the chat box in the webcast. We will pick some questions to answer. Please welcome Adrian.

First of all, I would like to clarify that the market is in a very sensitive state. There are also a lot of outside rumors that have caused a lot of vibrations. There are rumors about the loss of wealth in the market. I suspect that someone has borrowed the opportunity to control the market. We have a three-month blackout period, so we cannot take any actions in the market. and made some false statements. But we immediately made a statement and reported it to the law enforcement agency. So I hope that with this opportunity, we can explain it once and for all. Secondly, we can tell everyone about our future strategies. First of all, the financial strength of the New World is very stable. The reserve of cash is very strong. The first-hand cash can be used for funds up to 910 billion HKD. In addition, in the past six months, the group has received a low-cost bank loan of 3 billion HKD. The interest rate is also at a high of 1.1%. and the total interest rate of the group is 4%. We can see that our financing capacity is quite strong. There are many rumors out there, saying that our bank has cut lines. I can tell you that the group has been doing business with 60 banks for a long time, for almost 50 years. Our relationship with those 60 banks is very good. At this moment, in the next 50 years, we don't have a company that will cut the credit line. So I don't understand why this rumor came out. There is no such possibility in the future. In the future, we will have a very strong commitment to deliver. First, we will speed up our tax reduction. We are preparing to pay back our debt, including our permanent debt. Now, in this high-tech environment, we can also buy at discount rates to increase our profit, reduce our gearing, and provide support to the second-tier markets. Secondly, we have always done a good job in the optimization of CAPEX and OPEX to reduce the cost. Thirdly, the fiscal year of 2023 is a difficult one. There are a lot of challenges, and our gearing is relatively high. However, the good news is that our large-scale investment projects have entered the final stages. For example, Eleven Skies, K-11 in Shenzhen. So in the fiscal year of 2024, our capital investment in CapEx will be greatly reduced. Our goal is to... In the past few years, we have invested a lot of recurring income. Now, we are at the end of the tunnel. We are slowly entering the recovery period to harvest these regular income. Our goal is to reach half of the regular income of the group by 2026. And future companies will continue to use different forms of corporate action to release our value and improve our shareholders' returns. Let me remind everyone, At the end of February, I mentioned that there will be a series of corporate actions to unlock the value of our shareholders. The launch of a new stock is the first step of our corporate action. And the fifth one is, I will say it again, the company absolutely does not need to raise funds. No credit, no compensation. Sixth, we will continue to sell our non-core assets, manage our financial affairs, treasury management, interest rate hedging, increase in RMB loans, etc. We will continue to manage our treasury management and non-core disposal.

Thank you, Adrian. Let me first talk about the financial performance of the company in 2023. As you all know, the global economy is still facing many challenges, such as the price increase and the depreciation of the RMB. This has affected some of our business performance. In terms of financial performance, our revenue and core profits have increased by 40% and 21% respectively this year. This is mainly because In the 1st and 2nd period, we had 1.56 billion Hong Kong dollars, and our K-11 performance was very strong. However, due to the inflation and depreciation of the RMB, the annual interest rate fell by 5%. Since our domestic business is huge, we were also affected by the FX translation of the RMB exchange rate calculation. which led to an increase in debt and a decrease in profit. As for our financial situation, as Adrian said, our company is very stable. Until this fiscal year, we have used a total of HK$940 billion, including HK$5.5 billion in cash. Each share of our stock is HK$3 billion. In addition, each of the mid-term stocks has sent HK$4.6 billion. In addition, each of the new projects has sent HK$1.59 billion. Our entire year's stock will reach HK$2.35 billion. In the year 2023, although the overall environment is still challenging, but there are some significant growth in our business. First, in terms of industrial development, in Hong Kong, we have $15.6 billion invested in the 1st and 2nd period of the housing market this year, which has led to nearly twice the increase in Hong Kong's industrial development revenue. In terms of mainland China, we have been focusing on the core regional strategy of a one-way city, as well as the impact of the brand, our contract sales price reached the target of NT$1.5 billion in the entire year. In terms of business investment, our K11 performance is mainly due to our unique business model in the cultural circle. In terms of capital investment, we have always controlled capital investment, which is always lower than our budget. In the second and third fiscal year, our capital investment, CapEx, was used less than HK$120 billion in the budget, only HK$240 billion. So, compared to the initial budget of HK$360 billion, we have greatly reduced one-third of it. Moreover, we expect that in the second and fourth fiscal year, we will continue to greatly reduce our CapEx to less than HK$150 billion. In addition to the final stage of the large-scale investment project, we believe that the future will greatly reduce the cost of construction. Now, let's talk about property investment. Our overall revenue has increased by 4%. Among them, Hong Kong's property investment revenue has increased by 10% year-on-year. This is mainly due to the improvement of the retail environment and the social media market after the overall opening and cancellation of all epidemic prevention measures. China has been affected by the COVID-19 pandemic in the past six months, as well as the decline in RMB, which has led to a decline in the company's revenue. The performance of K11 is very strong. The revenue and distribution performance have increased by 12% and 16%. K11 in mainland China has been fully restored. In the second half of 2023, sales and revenue growth have increased by more than one-tenth. In the past two to three years, Shanghai's K-11 shopping malls and office rents have remained at more than 90%. Our Group's financial stability and financing capacity are very strong. We have established long-term cooperation with 60 banks, and each bank supports us. so we have sufficient transparency and can enjoy very low financing costs. For example, in terms of Hong Kong financing, from March to June 2023, we received a low-interest loan of HK$3.8 billion. Of this HK$3.8 billion, HK$2.2 billion belongs to re-financing, and HK$8 billion belongs to new loans. In terms of interest rates, We are the same as in the past with the bank and industry hybrid with a value of 1.1 lei. In terms of domestic financing, we have mentioned that we will increase domestic financing. Why? Because RMB loans are lower than overseas costs. We have successfully reduced our financing costs with low interest rates. We have also reduced our risk to RMB. to avoid the risk of the depreciation of RMB to us. Recently, we have received a lot of untaxed loans in the police force, from 2.8% to 3.2%. We have also issued RMB bonds in the police force, including CNBS, Hongmao, and the cost of issuing them is only around HK$3 billion. We have successfully reduced the cost of financing of our entire ship, At the end of June, as I mentioned earlier, our active capital was HK$940 billion, including HK$5.5 billion in cash, and HK$390 billion in bank credit. According to the above factors, even though the HIBOR has increased significantly, the average financing cost of the second and third years has dropped from the predicted 4.9% to the actual 4%. compared to the average cost of financing in the last half of 2023. Compared to our common income, it accounts for 70% or even 80% of our total income. Because we focused more on the development of the industry, our common income was only 20% of our total income five years ago. This is easily affected by the current trend. Therefore, in the past five years, our group has actively transformed to increase our recurring income and ramp up our investment and property combination. We have successfully increased our recurring income in the past few years. However, there have been many unpredictable challenges in the process. For example, in the past few years, due to the impact of the pandemic, there have been continuous increase in the cycle, the decline of RMB and geopolitical problems, and delayed our plans. But don't worry. Our large-scale investment projects are now entering the final stages, including 11Sky and K11Ecoast in Shenzhen. The future capital investment will be greatly reduced. These large-scale investment projects will also be completed at a separate stage next year, which will bring huge and continuous revenue to the Group. We are confident that in 2026, we will increase the proportion of net profit to more than 50% of the total profit. We have made three commitments to investors at the press conference in February. First, to speed up the recovery and strengthen the confidence of investors. Recovery has always been our focus. In the past year, according to the plan, We will talk about the details in detail in the next few pages. In the future, we will continue to implement the project of going public. In addition, in the past few years, our investment in rental properties, the proportion of regular revenue will continue to increase. I am confident that we can speed up the process of going public. Secondly, we have mentioned that the management team will not use public stocks or any type of stock rights to collect capital. As Adrian said, we have fulfilled our promise for the past two to three years. We will continue to stick to it in the future. Thirdly, we have said that we will use corporate action to release the value of different businesses, and improve the shareholding of shareholders. We can also use this opportunity to contribute. As Adrian said, we have received a contract for the acquisition of a new business in our subsidiary. If we succeed, it will help us to focus on our company's strategic focus and release value, and also provide us with cash flow. We will continue to improve the shareholding in different stages at different times through corporate action. In terms of speeding up the supply and demand, we have three major measures. First, to optimize capital expenditure and revenue expenditure. In terms of capital investment, As I mentioned in 2023, our CapEx has decreased by 120 billion, and we only used 240 billion. Compared to the beginning of the year, we provided 3.6 billion, which has significantly decreased by one-third. As we enter the final stage of the project, such as 11Sky, which we spent almost 50 billion HKD on every year, and K11E Coast, which has almost been completed, we can greatly reduce the cost of construction. In addition, in terms of land reserves, we have plenty of land reserves, especially farmland. So we can take advantage of the recent low price of farmland reserves. We do not need to buy land at a very high price in the market, which helps us to significantly reduce CapEx. As you can see in this picture, in fact, in the past three years, the actual capital investment has been less than before. As for our capital investment budget for the fiscal year of 2024, it has been significantly reduced compared to the fiscal year of 2023.