Wharf Real Estate Inv Co

Good evening, everyone. A very warm welcome to Wolf Rig Final Results Briefing. You may download the PowerPoint presentation from the QR code on the LED wall, and the webcast of the event will be uploaded to our corporate website afterwards. Our management today include Mr. Steven Ng, Chairman and Managing Director, Mr. Horace Lee, Director, and Angela Ng, Investor Relations Manager. Before the presentation and Q&A section, may I invite Mr. Ng to come to the stage for an opening remarks.

good afternoon ladies and gentlemen thank you very much for joining us tonight this evening i don't have much of an opening remark other than to welcome yourselves we've published our results at noon today over lunch time i think you've probably had a chance to look at it my colleague angela will take you through the powerpoint presentation i'd be happy to assist with answers to questions if you have any following the presentation and feel free to ask whatever you wish and I will feel free to answer whatever I wish. Thank you.

Thank you, Chairman. So the theme for the presentation is core businesses stabilize amidst doubling of interest costs. We are pleased to report resilient performance of our core investment properties and hotels businesses. Full year revenue from core businesses increased by 8% to $12.5 billion and operating profit increased by 12% to $9.5 billion. although business operations strengthened over the year. High interest rate weighed heavily on the group's bottom line and the segmental UMP dropped by 3%. With profit stabilization in second half, the second interim dividend is unchanged from 2022 at 61 Hong Kong cents per share, representing a full year DPS of $1.28 per share. IP valuation was stable at $228 billion, accounting for 93% of the group's assets. Our net debt decreased further by $8.8 billion to $36.3 billion, which is the lowest level since the company was listed in 2017. Gearing ratio improved by 4.6 percentage points year on year to 18.6%. The lifting of border restriction in early 2023 stimulate the recovery of Hong Kong's tourism and retail sectors Hong Kong retail sales increased by 16% year on year while Hong Kong hotel occupancies rose by 16 percentage points Driven by the retail recovery both Harbour City and Times Square experience increasing leasing demand and occupancies with the strategic management of tenant portfolio and effective marketing. Our malls in Hong Kong achieved outperforming year-on-year growth in sales. Also, the strategic realignment of brands on Canton Road high fashion frontage was well received among high spenders. This 530 meter high fashion frontage currently feature 16 top luxury brands which collectively generate over 10 billion in sales in 2023 I will share more on this later and for our Hong Kong IP performance, it regained positive growth and reported a 2% increase in revenue to 10.6 billion, with retail revenue increased by 8% to 7.3 billion. Spot rent has stabilized and turnover rent contribution increased by nearly 60%. In addition, amortization of the COVID rent relief is substantially completed. And now let's take a look at the financial highlights. Group revenue increased by 7% to 13.3 billion and operating profit increased by 13% to 10 billion. IP and hotels revenue increased by 8% and operating profit by 12%. However, the rise in borrowing costs by 1.1 billion to 2.3 billion weighed down the UMP. Core UMP of Hong Kong IP and hotels dropped by 3%. Our dividend policy is consistent at 65% of core UMP representing a full year DPS of $1.28. From this table, you can see that the year on year performance of revenue, OP and UMP in the second half was stronger than the first half. And IP evaluation was virtually unchanged as compared to the end of June. Despite the volatile business environment, the group maintained a premium Moody's A2 rating with stable outlook. net debt and gearing further improved. Average interest cost for the year was 5.4%, majority on floating rate debt. We are closely monitoring the high ball trends and we are prudently converting part of it to fixed rates. Interest cover was healthy at 4.4 times. In the following slides, I will walk through the performance of Harvard City, Times Square and the hotel portfolio. First, Harvard City, which accounts for 75% of our Hong Kong IP revenue. Driven by retail recovery, Harbor City saw a 10% increase in revenue to 9 billion and 13% increase in operating profit to 7.2 billion. Retail occupancy improved to 97% and retail rent has stabilized, also gradually increasing. Certain luxury brand already achieved high double digit sales growth versus pre-COVID. thanks to the drawing power of the mall. Office leasing demand improved among the insurance sector. Occupancy was maintained at 88% despite the weak leasing market. The three Marco Polo hotels on Canton Road also reported revenue improvement as inbound tourism gradually recovered. Our lineup of major crowd during events were footfall and attract foot traffic exceeding the 2019 level. With over 500 diverse tenants, Harbor City maintains a balanced mix of trades that caters to both local and tourists. Retail rental increased by 10% to 4.9 billion. During the COVID pandemic, we seized the opportunity to strategically realign the brand portfolio on Canton Road. As part of the initiative, we welcome the new flagships of eight top-tier luxury brands, namely Hermès, Dior, Fendi, Ferragamo, Miu Miu, De Beers, VCA, and Piaget. This 530-meter frontage showcases six top-tier luxury fashion and jewelry brands contiguously They collectively generate over $10 billion in sales in 2023 which accounts for around 2.5% of Hong Kong's total retail sales The sales performance is also on par with the 2018 level In addition, some of the key tenants are among the world's highest store sales, which is a testament to Harbor City's outstanding sales productivity. Overall, there were around 100 brands committed leases at Harbor City last year. Celine and Gucci also had vertical expansion within the mall. At the same time, Times Square Mall also made improvement Mall occupancy increased to 95% and retail revenue increased by 3% Office occupancy was 88% Then we will switch to our hotel portfolio which includes the Murray, our Forbes five-star hotel in Central under the Niccolo brand and also the three Marco Polo hotels on Canton Road Hotel segment turned around to operating profit in 2023 Occupancies improved notably during this Lunar New Year as average daily mainland visitors exceeded the 2018 level Prince Hotel completed renovation and fully opened in August And moving on to the outlook While there are positive signs of further recovery in inbound tourism, we recognize the increasing regional competition and the uncertain macro environment. In response to these challenges, the group continues to enhance the competitive edges of our IPs and hotels and actively supporting government campaigns aimed at boosting tourists and local spending. In the last part of the presentation, I will walk through our efforts in sustainability. The group has formulated the 2030 target to reduce environmental footprint and the progress has been on track. Additionally, the group consistently maintains good ratings with leading ESG rating agencies and actively pursues sustainable financing. We are proud to announce that Times Square achieved LEED Platinum certification for existing buildings This accomplishment reflects the group's commitment to ongoing AEI across our portfolio Furthermore, the Star Ferry fleet now includes three low-emission green ferries and has participated in the full electric ferry pilot program Youth Development is also our key focus, and we are dedicated to various business in community initiatives, including our flagship project, We Can. Continuous efforts were also made on promoting corporate governance, talent development, and workplace safety. That concludes my presentation. We will now proceed to the Q&A section. a quick housekeeping note before we begin. If you have any question, please raise your hand. Our hotel staff will provide you with a microphone. And please identify yourself and state the organization you present before asking the question. You may feel free to ask no more than two questions each time. Now may I invite Mr. Ng and Mr. Lee to come to the stage please. So now, may we take the first question from the floor? Kyle Choi, Bank of America.