Sun Hung Kai Properties Ltd

XMUN:SHG

Good afternoon, and welcome, everyone. Before we begin, I would like to extend my warmest wishes to wish everyone a happy year of Horse. Go ahead, [indiscernible]. Now let's start with the group's financial review. Please note that all figures are in Hong Kong dollars unless stated otherwise.

For the 6 months ended December 2025, the group's underlying profit was $12.2 billion, representing a year-on-year increase of 16.7%. This growth was mainly driven by higher profits from sales of trading and investment properties, together with lower finance costs. The group's leasing and other recurring income remained resilient during the period. After factoring in that effect of realized fair value gains from the sale of investment properties and a net revaluation loss on investment properties. The reported profit came in at $10.2 billion, an increase of 36.2% year-on-year. The underlying earnings per share was $4.21, while reported earnings per share was $3.54.

Turning to dividend. The Board has declared an interim dividend of $0.98 per share, an increase of 3.2% from $0.95 last year.

Moving on to the profit breakdown by segment. In property development, the group recorded a profit of about $4.9 billion, representing a substantial increase of 94.9%. This was primarily driven by higher profit recognition from our projects on the Mainland.

Turning to property rental. The group's net rental income remained broadly stable at around $9 billion. As a slight 1.2% decline in Hong Kong was largely offset by a 1% increase from the Mainland portfolio. Hotel business recorded an operating profit of $428 million, an increase from $377 million reported in the same period last year. Profit from other business came in at about $2.3 billion, reflecting an 11.7% year-on-year decrease. Taken together, this brings the group total operating profit for the first half of fiscal year 2026 to $16.5 billion, representing a 14.3% increase year-on-year.

Turning to our financial position. Net debt stood at $83.6 billion as at the end of December 2025 with the gearing ratio improving to 13.5% from 15.1% in June last year. Interest cover for the period came in at 8.7x compared with 5x a year ago. As always, the group upholds prudent financial management. The net debt has been reduced further since its peak in December 2023. Net finance cost for the period decreased by 37% year-on-year, driven by lower bad and average cost of borrowing. The group is in a strong financial position with sufficient resources to seize land opportunities in Hong Kong.

We will also maintain flexibility in a fast-changing operating environment. Details on the group debt mix are outlined in the table here for your reference. Our debt maturity profile was also well balanced. Long-term financial strength is driven by 4 key pillars: First, a sizable and stable recurring income stream. Second, growth from new completions but leverage our reputable brand to drive a premium sales strategy. And fourth, ongoing portfolio reviews to enhance returns and improve asset turnovers.

Now let's turn to our land bank in Hong Kong. As of the end of December last year, the group's total land bank in Hong Kong was about 57.3 million square feet of attributable GFA A detailed breakdown of our completed properties and those under development is shown in the pie charts here on this slide.

Turning to land bank replenishment. The group continued to replenish our whole land bank through various channels at reasonable costs to support our future growth. In this slide, we highlight the 3 sites we acquired through various means including tender, lease modification and land exchange.

Now let's turn to the property development business in Hong Kong. During the period, the group recognized property sales of $26.5 billion in Hong Kong, representing a 65% increase year-on-year. Development profit came in at around $2 billion. Profit margin was 8% due to the booking of Cullinan Sky Phase 1. We expect the book sales margin to recover later. Moreover, if we include around $1.8 billion of underlying profit generated from the sale of Dynasty Court and Shouson Peak, the overall profit margin would have been 13%. Contributed sales [indiscernible] recognized totaled $22.2 billion, of which around $10.8 billion is expected to be recognized in the second half of this financial year.

Turning now to Hong Kong residential. Driven by stronger demand from end user and investors, Hong Kong primary residential market saw higher transaction volumes and a modest price recovery. The group achieved contracted sales of about $17.4 billion in Hong Kong during the period. Since January 2026, strong sales from Sierra C Phase 2 contributed an extra $9 billion. Major contributors to our contracted sales in the first half of this financial year are shown in the table. This map provides an overview of our new projects to be launched in the next 10 months. We have built a strong pipeline, which is diverse to cater to homebuyers across all segments and preferences.

In addition, we will continue to offer unsold units from completed projects as well as selected loan core properties when ready. The next section is our Hong Kong rental portfolio. During the period, the group's gross rental income remained broadly flat year-on-year at about $8.8 billion. Overall average occupancy remained stable at around 92%. The office portfolio held steady while the retail portfolio recorded a slight decline in rental performance. In contrast, residential leasing grew 10% year-on-year, driven by a steady increase in both rents and occupancy. Our retail portfolio continued to perform well, achieving an average occupancy of 94%. Meanwhile, the group malls registered year-on-year growth of tenant sales. The group will continue to leverage the shopping mall loyalty program, The Point, to increase customer stickiness with upgraded design and functions. Our VIP program, The Points Gold was launched, offering exclusive services to premium customers. For our office portfolio, overall occupancy was maintained at a high level of 91%. Notably, occupancy of IFC increased to 98% with support from the finance industry. The group continued to carry out asset upgrades to enhance quality of our office classes.

We are excited to launch IGC, an iconic new office project that will support West Cullinan's transformation into Central 2.0. IGC is still gateway connecting Hong Kong, Mainland and the world, ideal for big corporations to expand into Mainland or to go global. The Landmark is unique in this excellent transport network served by 4 MTR lines and directly connected to Hong Kong's only high-speed rail station. The 2 twin broad towers spent 2.6 million square feet with 1 tower handed over to key tenant UBS in early this year. IGC sets new centers for more than workplace, achieving the world's highest screen centers, while connecting rescale with us terraces and walkways. The residential leasing portfolio for higher rents and occupancy, it helps the group to capture rising demand from incoming tenants and students. [indiscernible] on top of NCR Champotran transformed hotel rooms into [indiscernible] suitable for [indiscernible]. In the next 2 to 3 years, the group's recurring income base will be expanded as new investment property come on stream, including 2 completed malls in Talon as well as IGC and [indiscernible] Square towers project.

Turning to our property business on the Mainland. As at the end of December 2025, the group's total land bank on the Mainland was 64.6 million square feet in terms of attributable GFA. The pie chart on this slide provide a detailed breakdown of our completed properties and properties under development.

As for property development business on the Mainland, the group recognized property sales on the Mainland increased year-on-year to about $5.9 billion, driven by higher residential sales volume. Development profit rose to $2.9 billion with a satisfactory profit margin. About $4.1 billion of contracted sales have yet to be recognized. Some $4 billion is expected to be recognized in the second half of this financial year. During the period, the group achieved contracted sales of over RMB 1.3 billion on the Mainland. Major contributors included the service apartment at Cuerden West located in River West of Hangzhou IFC. Several projects will be launched over the next 10 months. On our Mainland rental portfolio, during the period, the group's gross rental income from the Mainland rental portfolio held steady at about $3.1 billion. In RMB terms, it was down 0.8% to RMB 2.8 billion. An increase in income from retail portfolio after a decrease in office rental.

On the Mainland, our integrated projects feature complementary components and excellent assets to public transport. Our retail portfolio for a proactive approach to boost attractiveness, driving high occupancy and resilient performance. Meanwhile, our office portfolio with its premium quality and comprehensive amenities continue to appeal to multinational companies. Our property investment portfolio will expand further with the completion of 3 ITC in Shanghai in the first half of this year. The completed office tower has attracted a diverse mix of tenants while the recently completed Tab is drawing interest from multinational corporations. Shopping mall ITC Mason will open in phases from first half this year. Hotel and Shanghai ITC will see its grand opening in March this year.

Let's turn to our hotel business. During the period, the group's total portfolio performed well. Revenue increased 3% year-on-year to $2.8 billion. Operating profit increased 14% year-on-year to $428 million. Luxury hotel in Hong Kong recorded a strong increase in RevPAR. The [indiscernible] Shanghai [indiscernible] achieved record high room rates. The Royal Garden [indiscernible] is the rebranded hotel above MTR Changan station with 366 upgraded guestrooms.

Moving on to ESG initiatives. The groups remain committed to sustainability development. For details of these key initiatives and sustainability performance, you may refer to these slides or the appendix at the back.

Next, I will summarize the market and business prospects. In Hong Kong, steady economic growth continues under 4 centers and hot framework despite geopolitical headwinds, robust IPO activities and supportive policies are strengthening its Hong Kong position as international financial and wealth management centers with expected U.S. rate cuts, rising rents and prices. Home purchase demand is also gaining traction. In key Mainland cities, growth will be supported by high tech investments and stronger ASEAN trade cooperation.

Ongoing efforts to advance opening up and domestic consumption should lift consumer confidence. Our favorable mortgage environment and balanced housing measures will further support market stability. As for the group's business prospects, with our strong financial position, we will continue to seize opportunities to replenish our Hong Kong land bank while maintaining prudent financial management. On development front, we will leverage our long-standing reputation to achieve premium pricing and rapid sales. We strengthened our brand through quality and innovation, building premium homes with portal design and modern facilities.

With a strong pipeline in place, we will continue to roll out a residential projects, unsold units and non-core properties as they become ready. On property investment. We will sharpen the competitiveness of our portfolio and drive future recurring income. Besides enhancing our existing properties, New projects such as IGC in Hong Kong and 3 ITC in Shanghai will start to generate additional rental income gradually. I will end this presentation by summering highlights from the Chairman's statement. Regardless of economic ups and downs, the group continued to pursue new investments and add new landmarks to Hong Kong Skyline, with change comes opportunity. and the group is ready to adapt to new circumstances, like the successful cases of IFC and ICC, the group is confident that IGC can help us capture opportunities from economic transformation of Hong Kong. The group will use the latest technologies to deliver high-quality properties and services to enhance the quality of living.

This will fill the growth of the company and Hong Kong alike, building sustainable communities that align with Hong Kong's further integration with national development. This is the end of my presentation. Thank you.

Thank you for joining the briefing session again. Let me first introduce the panel members. Starting from your left, Mr. KW Lo, Member of the Executive Committee; Mr. Allen Fung, Executive Director; Mr. Christopher Kwok, Executive Director; Mr. Victor Lui, Deputy Managing Director; Mr. Raymond Kwok, Chairman and Managing Director; Mr. Mike Wong, Deputy Managing Director; Mr. Adam Kwok, Executive Director, Mr. Frederick Li Group Chief Accountant. May I now invite our Chairman and Managing Director, Mr. Raymond Kwok Cor to share the key message of today's briefing. Mr. Kwok, please.

[Operator Instructions]

I now have the first question, please. the gentleman on your right side in the first row, please.

Yes, maybe I answer the first 2 questions on the residential first. Yes, we allow that the Hong Kong residential market was entering into a new phase of recovery from second half of last year, primarily transaction reached 20,000, which is a record over the decade. While our sensor wins is also strengthening met the inflows of talents and overseas students. Actually, the rand was speaking in last year already. although the pace of growth has been slowed down a bit in recent months, they may due to seasonal factors.

I think positive [indiscernible] carry will continue to attract a lot of investors and end users, entering into the market, including those vendors. Although the U.S. interest rate remain unchanged recently, I think the low mortgage rate will happen later this year due to the drop of HIBOR and that will also create strong support for the end users. And we also have an improving supply-demand situation due to the slowing on construction and government sales.

Actually, the inventory for sale, whether under construction or completed is dropping. So I think on all the factors, the market will continue to do well for the rest of the year. And since we are only in the first year of recovery, normally in past history, pubicycle, will last for a few years. So I think the strong momentum will continue with sustain further. On our sales target, apart from our sales recently on CRS Phase II in the coming 10 months, which are a number of projects to be launched [indiscernible] Phase 2 of Kulun harbor and our [indiscernible] South project and our treatment residential project links to the [indiscernible] station. In the second half of the year, that would be our [indiscernible] and also our [indiscernible] project linked to the [indiscernible] NPL station. And lastly, the Funing project in Jurong at the end of the year. As I said, both the Saba project and the [indiscernible] residential project are belonging to medium-sized. So we would like to keep our sales target on FY '26 as [indiscernible].

Okay. IGC is a rare project in terms of the scale, connectivity, Chairman mentioned about the fact that the project actually is being served by 4 railway lines and one is serving the mainland. From there, to Shenzhen, Futian, it's only 15 minutes. We've been the CBD of Shenzhen and not to mention connecting to other cities into the Mainland. And also, we have the Airport Express Rail, which is next or seamlessly connected to IGC. They will bring tourists, visitors to the airport in less than 30 minutes. And also, the other to local NPL lines as well that will bring people closely each other to well to home. So with this connectivity, the unique design the build quality and also the sustainability credentials. The project is world class. And that's why we have seen the interest about the project has been going up in the recent months. And we are -- we have just delivered the whole tower, Tower 2B to our [indiscernible] UBS last month. And we have a lot of interest in the pipeline, talking to us about various sizes. And these people, they are mainly from the financial services sector, insurance companies wealth managers, fund managers, things.

We believe that we will be having the leasing progress well on track. Traction has already been taken place. So we are very confident about doing much better to us the next few months into the later part of the year. So year-end, we are very confident about the leasing situation. About ASP, the RT Square project, which is next to the water located inside the West Carlin Cultural District. And this is a very unique proposition. If you look at the fact that it is surrounded by performance, venues, exhibition halls and a lot of cultural stuff. And also it's next to the water, and it's a lot of open spaces. It has already become a very good location in West Cullinan. And we see the beat is going up. More and more people is visiting the West Carlo Cultural District. We have also seen a lot of interest from the commercial sector about AST, given all the credentials that I've just mentioned. It is targeted to be ready by 2027. So we believe the leasing is also taking shape. And also because if you look at the recent activities in the financial market in fact of capital.

And these are all good factors contributing to the office leasing market as a whole. And you may aware that occupancy level in core business districts has gone up. Net take-up of about 1.8 million square feet has been recorded in 2025. That's quite a big contrast to what we have seen in the last few years. So the situation has been improving. More and more activities are going to happen in the pipeline already. So it's short and AST, we see the breezing progress will be doing well in the coming months in this year.

Can I have the next question, please? The gentleman on the right side, the [indiscernible].

So I answer the first question first. On our pricing strategy, we are always adhering to the current market condition. In last month, we have quickly disposed almost 1,500 units in Phase I of [indiscernible] fetching a total sales of over $9 billion. We have a moderate price increase to achieve such a tick up while for our luxury project like those in Kaiteki Kolek, like Cullinan sky, Cullinan Harbour has slightly improved, we have also made adjustment on price increment. So you can see that our pricing strategy is always flexible and efficient. And of course, under the ground to achieve the balance of volume and margin.

Regarding our development margin, as I said, as market improves, we have also some price increment on our luxury project like Victoria Harbour, Cullinan, Sky, Cullinan Harbor. And looking ahead, our 2 projects like [indiscernible] and also the [indiscernible] residential project. They are of relatively lower land costs that can deliver a higher profit margin for us. And as I mentioned earlier, we are allowed in the first year of the public cycle recovery. And I think the strong momentum will extend further. So we are well positioned on a healthy development margin on our projects in the coming future. Regarding asset disposal, apart from our IP Dynasty Court, which we are selling low. For the time being, we don't have other plans to dispose our rental properties.

However, including noncore asset disposal, we will continue to review our portfolio from time to time and also monitor closely the investment market.

Yes, I want to mention that long, the conversion of student hospital is belonging to those grades commercial properties with low quality, low occupancy and which does not apply to our portfolio. And as you know, our tone service apartment, invest Cullinan is doing well and we are able to attract premium tenants like those talents and also overseas students, especially those post-graduate students

[indiscernible].

Gentlemen in the left side in blue [indiscernible] in this first row.

I think for China, most of our bookings this year that the interim year came really from our signature niche projects, right? It really came a lot from -- such our files in there, we call it [indiscernible] Geneva. And for the next coming half interim year or the fiscal year, whether we can continue that those very niche premium demanding product depends on also if we can get the price by the [indiscernible] government and so on. So obviously, we get the price per well continue to release it selectively because it's very, very aware and [indiscernible] and it's -- you don't have that in China anymore. The other ones, Hangzhou, IFC, the Hangzhou Colony [indiscernible] Victor doesn't give the color to name easily to any of projects. So for the Hangzhou service to get the Colonnese West and [indiscernible] East names that hopefully will be a good decent margin for us, too.

For the interest of time, we will now have the last question, please. The gentlemen in the second row.

Yes. Thank you for your question. On ITC project in Shanghai. [indiscernible] already achieved over 80% occupancy. And we are seeing that the trend is going strong. I think it's same as Hong Kong. Major space users in Shanghai, they are going after a good quality project. And for ITC, we have very good connectivity. We got 3 metro lines connecting the project. And we have a big sizable mall coming up and we got the Andes hotel going to be officially opened very soon. And we believe all these are positive factors that will contribute to the success of this project, particularly on the office leasing side.

Now [indiscernible] has already been completed in the end of last year. We have already signed up a couple of tenants, and we are still talking to many other tenants, big ones, small ones and profile of these people spending from retail, professional services, financial services and et cetera.

And we have seen the trend actually is coming back. Shanghai being the economic center of China. So it's not a surprise to us to see that, particularly our project is of such a high quality in terms of size as well and in a very special location in [indiscernible], which is both historic and both as a modern as you name it, that neighborhood has it. So we are confident that the leasing will continue to pick up, particularly for Tobi. It's been the tallest building in Puxi area, so we are doing something on the rooftop as well to make sure that we can capture the -- actually the advantage of that particular project in respect to both visitors, whether they are coming just for a local to Shanghai site visit or they are potentially our future tenants.

So we're going to do something on the top floor and the more is upcoming or lead to my colleagues to to go through that. But I think we believe that the project will be successful and we have full confidence in that.

Ladies and gentlemen, this concludes today's analyst briefing. Thank you for coming again, and hope you enjoy the presentation. Please stay and we have some refreshment outside. Thank you.