Wharf Holdings Limited

Good afternoon, everyone. A very warm welcome to Wolf Holdings' interim results briefing. I am Angela from the IR team. You can download the PowerPoint presentation using the QR code displayed on this LED backdrop. Today our management team includes Mr. Steven Ng, Chairman and Managing Director, and Mr. Kevin Ho, Director and Company Secretary. Before the PowerPoint presentation and Q&A section with the analysts, may I first share a few things about our backdrop. As some of you may know, we used to feature a different backdrop for each results presentation. This time, we are showcasing the MONAT, our new luxury residential property on the peak in Kowloon. and there is also a special message in the backdrop. This 140 years anniversary backdrop marks an important milestone in the group's history. Founded in 1886, Wolf Holding today stands as the seventh company with the longest history in Hong Kong. So in celebration of this milestone, the board has resolved to declare a special dividend of 20 cents per share, together with the interim dividend of 20 cents, total distribution doubled to 40 cents per share. So let's go back to the PowerPoint presentation. The headline is operating and underlying profits increased by 6%, excluding investments. Since the last quarter of 2025, the group has been unwinding part of the equity portfolio, which results in lower investment income during the reporting period. Excluding the investment income, group revenue increased by 2% while operating profit and underlying net profit both increased by 6%. Despite a challenging operating environment, Mainland IP delivered stable results while the shortfall in Mainland DP sales was covered by stronger contributions from Hong Kong properties. In addition, our logistics business remains resilient despite the ongoing global disruptions. So over the years, we remain focused in premium properties across Hong Kong and Chinese mainland, which are the major contributors to our total assets, revenue and group revenue, I mean underlying net profit. Our earnings are entertained by a substantial recurring income base from investment properties, hotels and logistics, while our Hong Kong residential development pipeline provides growth opportunities. and here shows more details on the financial performance. Reflecting lower dividend income after unwinding part of the equity portfolio underlying net profit decreased by 17%. During the reporting period, Hong Kong DP contribution overtook Mainland DP driven by higher sales recognition while Mainland DP continued to be affected by a weak market condition and net provision Mainland IP remained the largest and stable contributor accounting for 67% of underlying net profit Our listed equity investment amounted to $30 billion after partial disposal. The portfolio continued to preserve capital and generate dividend income. After recognizing a prudent investment property revaluation deficit of $2 billion, group profit amounted to $48 million. So including the special dividend, the total dividend distributions doubled to 40 cents per share. The strong balance sheet remains one of our key strengths, and we have achieved net cash position since the end of 2025. Excluding the debt from modern terminals, net cash increased to $8.6 billion, mainly resulted from the disposal of $3.2 billion equity investment with $0.4 billion of surplus. Average interest rate was 3.1%. In the following slides, we will walk through the performances of our business segments In Hong Kong, overall residential market saw meaningful gains in price and volume, supported by solid local demand and a continued talent and capital flow. Attributable Hong Kong DP revenue increased remarkably to $1.3 billion and operating profit to $166 million. primarily from the self-recognition of House 1 at 1 Plantation Road, which is our ultra luxury project on the peak, and Victoria Voyage, our 30% owned JV project in Kai Teh. Contract sales increased to $1.1 billion. At period end, our Hong Kong residential land bank amounted to 2.7 million square feet with net book value of $56.6 billion. Notably, this increased our valuable peat portfolio in Hong Kong and Kowloon. The more need, our peak project in Kowloon comprising over 400,000 square feet GFA is undergoing preparation for sale launch. Other key projects under development include Mansfield Road project on the peak and Kowloon Bay redevelopment project. Moving on to Mainland Development Properties. Following our significant reduction in exposure since 2019 and the continued weakness in the market, Mainland DP revenue declined to $238 million and operating loss was reported. At period end, unsold stock was 0.7 million square meters and net book value amounted to $15 billion. Our remaining stock is largely concentrated in office and the demand continues to be subdued. Net order bulk amounts to RM428 million including the sales of Cheng Ju IFS apartment units which are being progressively released for sale. And for the mainland investment properties, Mainland Retail Market remains soft in the first half. However, the group's retail revenue remains resilient, supported by the performance of our flagship IFS malls. On the office side, vacancy remains elevated under prolonged oversupply. With a stronger Renminbi providing some support to our reported HKD results, our mainland IP revenue and operating profit both increased by 1% to HKD2.3 billion and HKD1.5 billion respectively. The group continue to optimize talent mix to drive more performances at the IFS. At Chengdu IFS, an arcade area is being converted and is expected to be complete later this year. Introducing a refreshed lineup of brands Excluding the area under conversion, occupancy stood at 97% And at Changsha IFS, more occupancy was 98% Recent highlights include the expansion of Hermes and Brudano Cucinelli into Duplex flagship And Port Mart is also set to open a regional Duplex flagship later this year. Moving on to hotels, Wharf Hotels currently operates 16 hotels under Niccolo, Marco Polo and Marco Brands, mainly in Hong Kong and Chinese mainland. Park Hyatt Changsha is the group's only hotel with outsourced management. Settlement revenue increased by 4% and operating loss narrowed. Turning to our logistic infrastructure. In Hong Kong, Modern Terminal's throughput declined under persistent pressure from overcapacity in South China and regional competition. Modern Terminal's revenue remained stable but operating profit decreased. against this challenging backdrop. The group proactively secure new businesses and they are scheduled to commence in the second half. Looking ahead, let's turn to the general market outlook in Hong Kong and Chinese mainland. While Hong Kong continues to benefit from talent and capital inflows, recovery in the mainland remains relatively uneven, with ongoing challenges in the property sector. At the same time, geopolitical tensions and external uncertainties continue to weigh on the economic outlook. Against this backdrop, We remain focused on maintaining a strong balance sheet and disciplined approach to navigate market volatility. In the last part of the presentation, we will go through our efforts and performance in sustainability. Our sustainability efforts earned us strong ESG ratings and green building certifications, including LEED title. Last year, the group's near-term science-based targets were validated by SPTI, which marked an important milestone for our sustainability journey. As of June this year, sustainable financing made up over half of our financing. More details about our sustainability efforts could be found in the PowerPoint presentation. So that concludes my presentation. We will proceed to the Q&A section with the analysts. A quick housekeeping note before we begin. If you have any questions, please raise your hand. Our hotel staff will give you a microphone. And please introduce yourself and state the organization you represent before asking the question if I did not do so. You may feel free to ask no more than two questions each time. So now may I invite Mr. Ng and Mr. Hui to come to the stage please. Let's have the first question from Carl, Bank of America.

Hi, two questions. First is on Hong Kong DP. Now just curious what you see in the marketplace, especially in the luxury segment after some of the recent imposed action by Beijing in terms of taxation, and has that sort of changed the potential buyer interest, and what does that mean for the timing of launch for your current project? Capital Management Hike & Dividend Payout HK1997 Just wondering, now that you're closer to monetization for Hong Kong DP as well, is there any sort of intention to perhaps pay a special dividend to pay out some of the cash, or step up some of the payout, more time to the IPOs?

Okay, good, thank you. First question, we've seen no sign that Buyers' interest in ultra-luxury properties in Hong Kong has changed. In fact, we've been in discussion with some buyers for some of our ultra-luxury properties on the peak, and hopefully we'll be close to some deals. They continue to be seriously interested in rare and valuable properties in Hong Kong. So that may be an interesting and favorable sign. Capital management. Yes, we do have a net surplus cash. And as I think Angela referred to in her presentation, we're looking at reinvesting it. How and where? Our first preference is Hong Kong. and our other preference is properties. That's what we've been doing for years and years. In fact, you may or may not have noticed that a couple of weeks ago there was an urban renewal project in To Kwa Wan. We submitted one of the bids, one of the seven bids or so on. We didn't win, so maybe that's why it didn't catch a lot of people's attention. but we are bidding for land in Hong Kong and if there are other good opportunities in Hong Kong we would continue to bid I can't guarantee you when we'll win but that would be a good indication of where we would like to see our resources, cash resources invested in the coming future In the meantime, our mainland DP business has been in the wind down mode for some time, as you know. We don't have a lot of unsold stock left in the residential sector. And in the residential, well I should say this, in the residential sector which allow strata sale, We do have some residential stock which is subject to en bloc sale conditions. And that would become an institutional kind of sale rather than retail. As far as retail versus wholesale, as far as retail residential stock is concerned, we don't have a lot. and we don't see immediate opportunity to get back into that end of the market. So in the meantime, we look at Hong Kong properties. The board decided today to, as a token of appreciation and to celebrate our 140th anniversary to pay a special interim dividend. We have not changed our dividend policy. We have not reviewed our dividend policy. This company and Wolf REIC are two different companies. We are brother companies. We have different DNAs. We have different boards. And we make different decisions. I don't think it would be fair to Excuse me. to apply one company's direction to the other or vice versa. Excuse me, thank you.

The next question from Cindy City.

Thank you. This is Cindy from Citi. So first question back to your dividend rationale. So wanting to better understand, like say, this time why did you choose to make a special dividend apart from the anniversary? Any other reasons? And when reviewing that, why didn't you choose to increase your dividend policy? Why would you opt to maintain the stable dividend policy forward? Or under what condition would you start to review your dividend policy? This is the first question. The second question I want to touch a little bit on your logistics business actually because I saw at your presentation just now they mentioned that proactively securing new business to commence in second half. Can you elaborate a little bit more on that and also has the shipping alliance restructuring impact stabilized for Hong Kong and do you expect the operations to maybe bottom out from second half this year or next year? Thank you.

Thank you. The special interim dividend is precisely what it is to celebrate the 140th anniversary. Nothing more, nothing less. We didn't propose to the board to review the dividend policy yet. And that is something we can look at in due course, although I don't want to lead you into or give you expectations. Because we haven't done that, we haven't thought about doing it. As far as the container terminal business is concerned, most of the reorganization among the shipping companies is hopefully completed, at least this round. Hong Kong as a whole actually benefited from disruption in the Middle East in the second quarter. And we also picked up some ad hoc volume during the second quarter. However, that's ad hoc. What we referred to as new business in the second half It's actually started. It started a little earlier than we had expected. It started in June but it will come in progressively rather than all in one go. So the decline in Hong Kong volume in the first half has turned into a slight increase in July. and that's beginning to narrow the year to date decline. It may not necessarily be very high yield business but at least we get the business back, we get the volume back and with volume we've got work to do. Our staff and our contractors get busy and that's the first step. At this point in time, I think maybe it's still very difficult to predict whether by the end of the year we'll be able to catch up to last year entirely because the new business is coming in progressively.

Thank you. The next question from Mark UBS.

Thank you, management. This is Mark from UBS. I have two questions. I think the first question is also related to the special dividend. I think this year is to celebrate the 140th anniversary. When I look back the historical report like 10 years ago and 20 years ago, we did not distribute any special dividend. May I know why we decided to issue the special dividend? And for the 1997, next year will be marked the 10th Thank you for reminding me.

No, not when we were 130 and not when we were 120. I didn't check, but I guess you must be right. You must have checked. And I'm not sure what we'll do when we're 150, but I'll leave it to the then chairman to think about it. I am 74 and I feel healthy. And I like to continue to work. Frankly, I don't know what I should be doing without coming to the office. I still work hard. I'm one of the first employees to come into the office in the morning. Whether or not the board will allow me to do so is a different matter, of course. And at the moment, if I were to run over by bus tomorrow, hopefully not, obviously there will be ways. It will be inconvenient, but the company will manage. That was the only question, wasn't it? Well, again, it's not a 1997 meeting, so I can't speak on behalf of Wolverine.

Yes, and I can confirm that Chairman is very hardworking and very healthy. Please allow me to confirm. May we have the next question from Alpha Goldman Sachs?

Thank you. Thank you for taking the question. Two questions. The first one is, you just mentioned you are more willing to deploy capital to Hong Kong DP, right? So I just wonder which districts will be more interested in replenish your land banking and what's your appetite towards northern metropolis which the government is very keen to develop? The second question is on China retail. So we just wonder what's your outlook towards China retail sales growth in second half. And we actually note that the turnover rent in first half is actually lower year on year. So we wonder what are the key reasons.

Thank you.

Thank you.

When we look at Hong Kong as Hong Kong as a whole and Northern Metropolis is very much part of Hong Kong and we will be including that in our studies. But we have no specific and so on. So, it's a very serious guideline, whether we're investing in the East or West or North or South, as Hong Kong is a small, relatively small market. It also depends on the opportunity that arises, or opportunities that arise. If it's a good opportunity, whether it's North, South, East or West, we will take a very serious look. Two weeks ago, as I said, this was Calvin There's something else this week and that's Hong Kong Island so there's no specific guideline and we don't restrict ourselves to any one part of Hong Kong. Retail in mainland China generally the overall market In the first half was actually not as strong as a lot of people would have expected. And we don't see breaking out of it, the market breaking out of it in the second half yet. There's still a good deal of wait and see attitude. It may be because of the government subsidies. CHIANG CHIANG CHIANG But overall, the retail market in mainland China, we don't expect it to be breaking out of its mode in the first half.

Thank you. Please feel free to raise your hand on Jeff from DDS.

Hi management, you mentioned that Worth Holding submitted a bid for the URA project in 2.1. Is this your, you submitted a bid on your own or you collaborate with your sister company or parent company, VLaw, in this tender? Also, if you look at the positioning of this project, it's quite different from those projects you are Undertaking in Hong Kong which is more high-end ultra luxury in the future when you decide to before they replenish the land bank will you focus on high-end or you don't have any particular preference what is the difference between VLOG and walk holding in terms of the land banking strategy this is the the first question this kind of question is related also follow-up question on the China ETF retail sales or tenant sales in China for your mall retired in the first half? If so, is this something to do with ERK conversion at Chengdu IFX?

Okay, good, thank you. The bid last week, or two weeks ago, I think, recent bid, it was submitted by Wheelock Properties on behalf of Wolf, 100%, all right? And that is what we expect to be the model in the immediate future. We don't have a separate team. There is already an organisation within Wheelock Properties and they know the market well, they know how it works, so we will continue to work with them as our partner in that regard. But the capital will come from Wharf, in these cases 100%. Retail in mainland China In our case, this would partly address the previous question as well. In our case, a good part of Chengdu IFS was closed for conversion. So that affected the performance of retail at Chengdu IFS, and therefore Chengdu IFS underperformed Changsha IFS. Changsha IFS grew well, Chengdu IFS I think slipped a little bit, partly because of the conversion. When the conversion is finished, hopefully we'll be able to start to catch up. Another factor which affected the mainland IP performance, albeit a small factor, Is that because we have started to sell the apartments in CDIFS, Chengdu IFS so the occupancy in the service apartments will start to, well actually not will, has started to slip because we're getting vacant possession of the units for amalgamation for sale. We haven't sold too many units so far But the next lot we'll put in the market within the next few weeks. So we'll start to see more sale in Chengdu IFS. And it's a good price. We'll be able to get 60,000, 70,000 RMB per square meter, which is good. For that product, the ticket is typically close to 20 million RMB per unit. Good price. So that will help our mainland business.

Thank you. If you have any questions, please feel free to ask. Mark from UBS.

Thank you management. I have a follow-up question regarding on the relationship with Wheelock as well. Because in the past, I think the state of work is very clear. 1997 is focusing on Hong Kong IP. Wheelock is focused on mass. We are more like Hong Kong, like ultra luxury and China DP. Just want to check how come, what was the rationale that We are entering into the mass development market by ourselves now, but instead of wheel lock. Yeah, just want to hear your thoughts. That's the first question. The second question I think is regarding on the equity portfolio. Definitely we have done some divestment. May I know what kind of asset we are retained within the portfolio? And in the statement, you mentioned a lot of things about AI. So do we think that we should switch part of our portfolio in investing in AI stock?

Thank you.

Just the outlook, because...

Oh, okay. Short answer to your question is we have a much bigger balance sheet than we are properties. And we have capital deployed. As the mainland DP business continues to wind down, more capital will come back. And we're getting that. So we need to invest it anyway. And that is why we're coming into the Hong Kong DP business as well. But in between the two world public companies, listed companies, there would be little or no confusion who does what. One is a DP company, the other one is an IP company, as far as Hong Kong is concerned. The listed equities that we disposed of in the first half of the year, actually the beginning of the year, We're mainly low yield stock and what we continue to hold would tend to be higher yield stock with one exception and that exception unfortunately is hopefully it will only be temporary and that's Green Town. But we hold it as a strategic position. We've been holding it for 14 years. But the fact they didn't pay any dividend for last year affected our dividend income.

Thank you. Follow-up question from Cindy.

So the first is on your capital deployment. Is it fair to say that you don't want to remain in the net cash position? Or do you have any target gearing per se? The second question is more So for you, what are the measures that you consider can be doable? Are you looking to maybe unlock value via any asset dispensers or reorganize any business? How do you feel into that? Thank you. Okay, thank you.

First of all, being net cash positive is not a KPI. We'll put the cash or the capital to use, but we hopefully will be looking for investment of good use, good quality, good return and so on. And we don't necessarily need to turn assets before we can invest in something else. We obviously have that capacity. And the second question is very profound. What we typically do is we look for assets which have long term value. The ultra luxury properties on the peak and to a lesser extent the Monet in Kowloon. They don't turn over quickly. Holding periods are generally longer. And obviously we need to balance that with the IRR. But we believe in good assets with long term value. And that is what we will continue to look for. Obviously if at the same time we can give shareholders a Better and better return, that would be very much our priority too. TSR, partly yield, partly share price. But TSR needs to be looked at in a longer horizon, not three months or six months. So that's how we look at it.

Thank you. Is there any questions? Follow-up question from Alva Goldman Sachs.

Thank you. So more of a housekeeping one. So given its 140 years anniversary, will there be another final special dividend? How should I think about it?

I can't preclude that. But I cannot include it either. It's obviously something that the board needs to consider and that was not raised at today's board meeting. And we won't need to deal with that until the board meeting in March. We actually turn 140 on November 15th. Remember that date. It's a Saturday this year, November 15th. So technically we're not 140 yet, but we will very soon. I will take your suggestion, if I may call it, and raise it with the board in due course.

Thank you. Another follow-up question from Jeff.

Let me look at the borrowing cost in the first half. The effective borrowing cost is higher than a year ago. May I know the reason behind? Is this something changed with the debt profile?

No, it was because of an aberration, quote-unquote, commercial aberration, not accounting aberration. Commercial aberration last year because we did some hedging last year which gave us a Thank you. And follow-up question from Kao Choi.

Two questions. First, just want to get a little bit more details regarding the relatively large China IP revaluation laws. Any cap rate changes or just the rental outlook? And second, going back to the Monet, any update on the launch timing?

Monet timing likely to be in the second half, but it's well, a launch may not necessarily be the right Yen Tsui-Hsieh Pre-marketing, soft marketing on a targeted basis. And we have some buyers who are already interested. But it is not, don't expect a long queue in the sales office for instance. But hopefully we would be able to start to report some sales in the second half. IP evaluations mainly... I think one factor relates to the lease expiration. I think we reported on that six months ago. Some of our land leases are coming due in less than 20 years. Now, typically, when the mainland market opened for properties in the early to mid-1990s, leases of 40 or even 50 years were offered. And 50 years from, let's say, 1995 would mean 2045. And that would be less than 20 years from now. There is still no clarity from central government about the extendability of these leases. In fact, increasingly we're getting signals that these leases will not automatically be renewable like Hong Kong leases. As you are familiar with, you get automatic renewal for 50 years. You pay an annual rent, no additional premium. But that doesn't seem to be the model that the mainland is following. In fact, we believe it is going to be more like the Singapore model. In Singapore, you get a leasehold for 99 years. And along the way, with government permission, you are allowed to top up The lease back to 99 years upon payment of a premium and they have a scale. So as these ground leases expire or move towards expiration, the value of these properties may be affected. And I think that's an important factor in the valuers consideration.

If I may ask a follow-up question. I think both Guangzhou and Shanghai have rolled out pilots that allow landlords to renew for, I think, 20 years at some set prices. What's your initial thinking about that? Are there cases where you would think that it's actually not worth extending the lease and just walk away? Just curious about your early thinking.

Obviously, it depends on the price. and we'll have to do our numbers at that time. Some of these buildings may have to be redeveloped by then anyway. So it will possibly be a brand new feasibility study.

Thank you. If there is no more questions, I will now conclude the presentation. So thank you all for joining today, and the webcast will be uploaded on our corporate website afterwards. Thank you.

Thank you.