Wharf Real Estate Inv Co

Good afternoon everyone. Welcome to World Rake Final Results presentation. I am Angela Ng from the IL team. You can download the PowerPoint presentation from the QR code on this LED wall. Our management presenting today includes Mr. Steven Ng, Chairman and Managing Director, and Mr. Horace Lee, Director. Before I go through the PowerPoint presentation, let me first invite the Chairman for an opening remarks.

Welcome to all of you and a very belated Happy New Year. last year 2025 was certainly not an easy year for investment properties in Hong Kong you all know about the oversupply and then the weak demand in spite of that we did as well as we could but the big difference last year was of course interest savings so the world was going through a strange time and continues to do so. Two weeks ago we started to write reports for today's board meeting and for the announcements. and then of course in the middle of it you all know what happened and so we had to quickly scramble and redo parts of it it's a great deal of uncertainty and if you attended some of our peers briefings results briefings two weeks ago and you if you were to ask them the same question today they may be giving you a very different answer in a way we're fortunate we have the benefit of being two weeks later but we still don't have the answer so with that I'd like to hand back to Angela and we'll chat afterwards thank you chairman

So let me start the presentation. The theme for the presentation is Market Challenges Dampen Group Profitability. First of all, let's take a look at the results highlights. In 2025, Hong Kong's economy showed tentative signs of improvement, but global risks and uncertainties continue to create external headwinds, which have weighed on the group's profitability. During the year, our underlying net profit delivered a solid 5% increase, dividend per share rose by 6% to $1.32, representing a year-on-year increase of 10% in the second half. This performance was supported by the group's ongoing deleveraging efforts, net debt fell to $32 billion and gearing reached a new low of 17.2%. As a result, interest costs declined significantly, more than offsetting the mild reductions in revenue and profit. Our investment properties portfolio remained resilient with an overall occupancy rate of 92%. NAV per share was $59.85 as at the year end, representing a 3% mild drop. and this slide highlights some economic indicators for the Hong Kong market. A rebound in the local stock market and residential property market supported by a more favourable interest rate environment provided a much needed lift to the business climate last year. Inbound tourism also became more vibrant with full year visitor rising 12% and a more diversified mix of visitors with non-Minglan visitors increasing by 15%. This positive momentum, combined with a stronger renminbi and improved local sentiment, helped retail sales turn positive in May last year, closing the year with a 1% increase. But despite these positive indicators, the overall consumption recovery remained uneven, posing a persistent challenge for landlords and the broader retail sector. In the second half of the year, Hong Kong's retail sales grew 5%, suggesting the market may be forming a new base. The recovery was mainly driven by discretionary spending. However, retailers' confidence remained fragile amid ongoing sector headwinds. As retail rent typically lacks retail sales, Harvard City's retail revenue grew by a more modest 2% during the same period. For the office market, although office leasing activities regained traction, downward pressure on rental rates did not ease as the market continued to absorb significant new supply. In 2025, our office portfolio maintained an occupancy rate of over 90%, outperforming the market. Our tenant retention also remains strong at over 80%. This highlights the advantages of our prime locations and the unique drawing power of mixed-use offerings Most notably, the Harbour City office cluster which is a key hub for insurance and wealth management We also continue to enhance the quality and appeal of our offices through ongoing upgrades As the market demand still lacks supply in Hong Kong, our Hong Kong IP revenue slipped by 2%. Hybrid City remained a key contributor, delivering a steady performance and accounting for around 80% of our Hong Kong IP revenue. For retail, the improvement in food traffic is yet to translate into stronger financial performance. Rental reversion remains challenging. Office revenue increased by 1% on improved occupancy, though negative reversion persists. And now let's take a look at the financial highlights. Our Hong Kong IP and hotel underlying net profit which is our core UMP increased by 7% driven primarily by over 600 million reduction in borrowing costs which more than offset the mild declines in revenue and operating profit The non-cash and unrealized IP revaluation deficit led to a group loss, but cap rates remain unchanged. Our dividend policy has been consistent since IPO. Full year DPS increased by 6% to $1.32. Given the volatile global economic outlook and uncertain interest rate trajectory, we remain vigilant and continue to prioritize a strong balance sheet and capital flexibility. While asset values declining, we continue to deleverage to keep gearing low. With 83% of debt in floating rate, we benefit from lower highball, reducing average interest costs by 1.5 percentage points to 4.1%. Interest cover remains strong and our financial health is affirmed by Moody's A2 rating with stable outlook. in the following slides we will walk through our performance of Hong Kong investment properties Firstly, Harvard City, which is a gem in our portfolio and also the best location for luxury and all brands looking to establish a strong presence or a flagship in Hong Kong. During the year, retail revenue remains stable with occupancy at 92%. Office revenue rose and occupancy increased to 91%, supported by sizable commitments from insurance and wealth management companies. The mall continues to deliver an optimal trade mix that meets the market needs. Here you could see the balance mix of trade at Harbour City and its retail rental was stable at $5 billion. During the year, a number of international and domestic brands expanded or made debut at Harbor City, including Louis Vuitton's expansion to four stories, Laopu Gold's second store in the mall, Urban Revival's Hong Kong Day Build and Brigade's Kowloon Day Build. for Times Square, it continues to rejuvenate the tenant mix. Louis Vuitton opened and the way we expanded. Trendy F&B options were also added on the basement level. Retail occupancy was 95% and office occupancy was 90% with high retention rate. then we will switch to our hotel portfolio which includes the three Marco Polo hotels on Canton Road and the Murray under Niccolo Brand The hotel sector is energized by a more vibrant inbound tourism market. The group's hotel revenue and occupancy both improved, although average room rates were behind expectation as customer remains price sensitive. The Canton Road hotels deliver solid results for both room revenue and non-room revenue, driven by new room categories and targeted promotions. The Murray also recorded double-digit growth in occupancy and red par. Also, we are proud that the Murray received the one Michelin key, recognizing its exceptional hospitality. and now we will go through our effort and performance in sustainability. Last year, the group's near-term science-based targets were approved by SBTI, which mark an important milestone for our sustainability efforts. Our efforts in ESG also earned us strong ratings and green building certifications, including LEED Platinum for Times Square and Harvard City's offices. Sustainable Financing made up 37% of financing as of December last year, while an accumulated total of $17.5 billion sustainability-linked loans has been arranged. More details about our ESG efforts could be found in the PowerPoint presentation. In the final part of the presentation, we will walk through the global and Hong Kong outlook which some of you may have already read in the results announcement released this afternoon. The current business environment is characterized by significant and accelerating global disruptions. First, geopolitical tensions and intensifying global conflicts are reshaping markets and compressing planning horizons for corporates. Second, rapid technological change particularly China's advancing innovation and pervasive influence of AI is creating new opportunities while disrupting the traditional ones. and finally the consumer markets are also evolving quickly, requiring retailers to adapt their strategies to demographic shifts and the rapid expansion of e-commerce. In this volatile environment, navigating instability and transformation becomes a primary challenge. and for Hong Kong, even though Hong Kong's economic recovery is gaining momentum, the outlook remains mixed. Global risk and external disruptions could slow the recovery pace. In addition, the broad challenges facing the local investment property sector continue to put pressure on asset productivity. Amid this ongoing disruption, the group will maintain low leverage and healthy financial position and remain prepared to navigate the headwinds ahead. So that concludes my presentation. We will now proceed to the Q&A section. A quick housekeeping note for the analysts before we begin. If you have any questions, please raise your hand. Our hotel staff will provide you with a microphone. And please identify yourself and state the organization you represent 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. Okay, so now may I invite the first question maybe from Cindy from City.