Wharf Real Estate Inv Co

Good afternoon, everyone. Welcome to the webinar of Wolf Rig in Tron Results Briefing. I am Angela Ng, Investor Relations Manager. Our management team in the webinar include Mr. Steven Ng, Chairman and Managing Director, and Mr. Horace Lee, Director. Before the presentation and the Q&A session, We will start with an opening remarks by the chairman, Mr. Ng, please.

Thank you, Angela. Good afternoon, everyone. I'd like to open with a couple of slides before handing over to Angela. We're very thankful for President Xi's arriving in Hong Kong to celebrate the occasion of the 25th anniversary Hong Kong SAR. And we also were very thankful that in his official remark, he reaffirmed the national directive to ensure the solidarity of one country, two systems. Hong Kong must preserve its unique position and advantage. And in order to do so, expand open, convenient and expedient international connectivity. That's also very encouraging to us. And we interpret that to say that failure to do so would seriously detriment the national mandate to uphold Hong Kong's leading position as an international financial shipping and trade center. Of course, that would help to reinvigorate Hong Kong as Asia's world city. One country, two systems would serve as the bedrock for stability and prosperity. And this would improve our presence as international financial shipping and trading center. Reconnection with the world as well as with the mainland would bring promising new opportunities to Hong Kong. That's important to us because Hong Kong is our home. And as this chart shows you, 97% of our fixed assets are located in Hong Kong. 91% of our revenue is generated from Hong Kong. 97% of our taxes are paid in Hong Kong. and 100% of our charitable donations go to beneficiaries in Hong Kong. Of course, as you know, Hong Kong and the rest of the world, in fact, are faced with a number of macro challenges. They include the geopolitical tension which dominate the global agenda. Economically, quantitative tightening and interest rate hikes to tame inflation risk tipping the developed economies into recession. And structural diversification and reshoring of production supply chains would add fuel to inflation fire. And finally, the globalization, global restructuring of supply chains, and that all of that may weaken the demand for the production and logistics capacity supplied by China's. So this is not an easy world to navigate, but here we are, and we will do everything we can to continue to deliver results to our shareholders. With that, I'd like to hand over to Angela to take you through the rest of the PowerPoint presentation.

Thank you, Chairman. We will now focus on our results highlights. The group's revenue and operating profit were still hovering around the COVID low, and the early signs of slowing down the shock decline was due more to cost management than to Revenue Recovery. The unrealized IP revaluation deficit of over 5 billion pushed profit to a loss, and NAV dropped to less than 200 billion. Looking back to the first half, Hong Kong retail sales dropped by 2.6%, with inbound tourism still muted. local demand was hit by the fifth COVID wave before the easing of social distancing measures and distribution of government's consumption vouchers in the second quarter. To capture market recovery post fifth wave, I will most promptly launch an array of sales driven marketing campaigns on top of the successful more coupon program which was rewarded by a record revival in foot traffic and spending sentiments. We continue to proactively invest in strategic brand realignment and addition of brands to capture opportunities for tomorrow. The prominent Canton Road frontage has celebrated the opening of Dior's new flagship last Sunday. It will also welcome new flagship by PSA and Boncliffe and Arpels in the second half. Catering to the local-centric market, our innovative events and compelling voucher gamification are proven to be effective. The crowd-drawing robotic dinos exhibition was the first large-scale outdoor event in Hong Kong after the fifth wave. attracting half a million visitors. Our first of its kind, more coupons and surprise offers also continued to be favored by the local shoppers. Publicity rapidly regained momentum in business activities posed with wave, while Times Square is still facing fierce competition in a weak market. After three years of market adjustment, our Hong Kong retail revenue may finally be stabilizing. Retail revenue dropped narrow to 4%. As a whole, our Hong Kong IP occupancies were recovering, but negative reversion is still a concern. Revenue dropped narrow to 2% to 5.2 billion and the margin resilience was mainly driven by intelligence cost control, cost management. However, we see a rising pressure on office leasing under a slowing economy and new supply. Turning to the financial highlights. The group deliver a growth in UMP despite market headwinds thanks to the resilient IP performance and narrowing loss in hotels. Group UMP increased by 3% to 3.4 billion, while Hong Kong IP and hotel UMP increased by 5%. Group revenue decline was mainly led by the orderly exit from the low margin DP business of HCDL, which is our 72% of subsidiary. a non-cash IP revaluation deficit was reported, but cap rate remained stable. Dividend policy is maintained at 65% of UMPs from IP and hotels in Hong Kong, which represents a DPS of 70 cents, a 4.5% year on year growth. In the following slides, we will walk through the performance of our core assets as well as financial management and outlook. First, Harbour City, which accounts for 73% of our Hong Kong IP revenue. Driven by effects of more strategies, Harbour City witnessed recovery in local spending demand. More occupancy remained at 93%. on the office front. Harbor City strives to safeguard occupancy while maintaining rent at reasonable level. Office occupancy was 87%. As a whole, Harbor City revenue increased by 2% to 4 billion. The one stock shop retail selection of over 500 diverse tenants forms a unique critical mass at Harbour City attracting continuous leasing demand. You can see the breakdown of our rental income from the tree map diagram here. A balanced mix of fashion, leather goods, jewelry, beauty and accessories account for around 80% of rental income. The ongoing vigorous tenant selection helps to add impotence and control risk. The shopping destination continued to be sought after by the top tier brands during the time of COVID. With the addition of Dior flagship, the iconic canton road frontage showcases an unparalleled collection of world class luxury brands, including Chanel, Dior, Cucci, Amherst, and LV. Piaget and Van Cleef and Arpels have also chosen to open a new flagship on Canton Road in the second half. Store opening and expansion in Harbor City continue to be active, which enhance the mall's attractiveness. in view of the top local market in the first four months of this year. Canton Road hotels have launched various attractive packages to attract their use and long staying guests. Meanwhile, Prince Hotel has been soft reopened after renovation and the hotel started to cater to special business in June. Next, we will talk about Times Square. facing an intensifying competition in Causeway Bay. Times Square seized the chance to add aspirational brands to broaden customer base. Mall occupancy was 93%. Office tenants remained cautious and cost-conscious. Occupancy was steady at 90%. Then switching to our regional mall, Plaza Hollywood. enjoying a convenient location at Diamond Hill MTR station and public transport interchange. Plus the Hollywood achieved relatively stable demand. Occupancy was 93% and retail revenue was stable. Our core assets in Hong Kong also include the central portfolio comprising Villa House, Private House and the Murray Hotel. Office occupancies at Willard House and Harper House remained solid at 92% and 98%, while the retail premises were fully left. For the Murray, it consistently outperformed its competitive set in revenue yield and local demand has been recovering since the second quarter. The Luxury Hotel was proud to receive a new Forbes Travel Guide Five Star Award earlier this year. Then moving on to our Singapore assets on Orchard Road. Retail at Willow Place and Square Square is improving as daily lives in Singapore normalized. The rebound of business travel also brings optimism in economic growth. Moving on to the financial management. Net debt reduced to 46.8 billion. Total assets was 266 billion and hearing ratio was 23%. Average interest costs remain at 1.4% and interest cover was 13 times. The group maintained the premium Moody's A2 rating with stable outlook. Looking ahead, reconnection with the road and the mainline is the key to the group's IP and hotels performance. We will continue to closely monitor the rise in uncertainty in the macro environment and prepare for headwinds. In the last part of the presentation, I'll walk through our efforts in sustainability is a constituent in Hansen Corporate Sustainability Index with AA plus rating and also one of the top 50 ESG leaders in Hong Kong on Hansen ESG 50 Index. We are also named second top donor by the community trust for two consecutive years, recognizing our contribution during COVID Environmental protection and youth development remain the group's priorities. Our constant efforts to reduce greenhouse gas emission, air emission and waste to landfills continue to bear fruits with noticeable reduction, as you see from this slide. Star Ferry also made another step to launch the third low emission Green Ferry Silver Star. We continue to support young people by empowering them to achieve their full potential with a wide range of program, namely our flagship project weekend, the World Art Scholarship Sim and architectural design internship program, that concludes my presentation. Now we will come to the Q&A session. For analysts with any questions, please press the raise hand button on your Zoom control panel. So we already have several questions and we will have the first questions from CanGround City.