Midland Holdings Limited · HKEX:1200
Midland — FY2023 Earnings Presentation
36 slides from Midland's earnings presentation, May 30, 2024
Slide 1: Midland Holdings 2023 Annual Results
MIDLAND HOLDINGS 2023 Annual Results
Slide 2: Disclaimer Statement
MIDLAND-Disclaimer Statement Disclaimer Statement The information and materials contained in this document (the “Materials”) are general in nature and for internal circulation and reference only. Whilst reasonable care has been taken in preparing the Materials, no representation or warranty of any k
Slide 3: Agenda
MIDLAND-Agenda Agenda Financial Highlights Business Overview Prospects Q&A 3
Slide 4: 2023 Annual Results Highlights
2023 Annual Results Highlights
Slide 5: 2023 Final Results Highlights
MIDLAND-Financial Highlights 2023 Final Results Highlights 2023 2022 YoY (HK$’000) (HK$’000) Revenue 4,082,694 3,115,143 + 31.1% Operating Costs* 4,121,854 3,720,313 + 10.8% Operating Loss (33,896) (591,572) - 94.3% Loss for the Year (41,916) (533,971) - 92.2% 5 * Excluded other income and gains, bu
Slide 6: Sharp Narrowing of Loss
MIDLAND-Financial Highlights Reasons for the Narrowing of Loss • Loss sharply narrowed by over 92% Sharp Narrowing of Loss • Market transaction value fell 4.5% Reasons for the sharp decline in loss 01 The Group’s stable market share in Hong Kong 02 Efforts towards streamlining the Group’s businesses
Slide 7: Key Financial Highlights – Revenue
MIDLAND-Financial Highlights Key Financial Highlights – Revenue Year 2023 vs 2022 • Revenue of the HK residential market increased 34% while that from Mainland operation (agency fee only) increased 2% • Revenue from secondary markets decreased Primary homes Secondary homes Rental China properties Ma
Slide 8: Changes in Costs
MIDLAND-Financial Highlights Frontline Staff Salaries Changes in Costs (HK$’000) Decrease in average HK$ 695,159 number of frontline Advertisements & Promotions HK$ 520,304 - 25.2 % staff YoY (HK$’000) HK$ 117,043 Expenses on digital areas HK$ 103,107 2022 2023 - 11.9 % unchanged but that on YoY tra
Slide 9: Changes in Costs
MIDLAND-Financial Highlights Changes in Costs Impairment of Receivables Rebate Incentives: To Customers (HK$’000) (HK$’000) HK$ 1,203,622 HK$ 9,250 Impairment only Because of the HK$ 5,611 (write back) N/A accounted for 0.2% of + 109.9 % outperformance of the local the total revenue HK$ 573,354 YoY
Slide 10: HK Operation: Negotiations on Leases
MIDLAND-Financial Highlights HK Operation : Negotiations on Leases Negotiated favorable leasing terms Closed Relocation Renewed with Rental Increase Renewed with No Change in Rent Renewed with Rental Reduction 100% 2.9% 1.3% 6.0% 7.1% 7.7% 5.6% 8.5% 11.4% 11.7% 16.0% 11.8% 12.9% 27.3% 26.3% 15.7% 26
Slide 11: Key Financial Highlights – Variable Vs Hard
MIDLAND-Financial Highlights Key Financial Highlights – Variable Vs Hard Variable Costs Hard Costs Staff Commissions Rebate Incentives: To Customers Frontline Staff Salaries Non Sales Salaries Rebate Incentives: To Co-operative Estate Agents Impairment of Receivables Advertisements & Promotions Rent
Slide 12: Increase in Net Cash
MIDLAND-Financial Highlights Increase in Net Cash 2022 2023 ($’M) 451 Cash 532 228 Bank Loans + Borrowings 170 38 Receipt From Customers 27 Net Cash 185 and Bank Balance 335 12
Slide 13: Business Overview
>. Business Overview
Slide 14: Gross Commission Rate
1.70% *Local Market 1.48% 1.64% 2.32% 2.41% MIDLAND-Business Overview 2.25% 2.25% 2.24% 2.43% 2.71% 3.20% 2.88% 3.01% 3.79% 3.38% As a % of New Property Price Gross Commission Rate* 3.42% 4.12% 4.66% 4.01% 4.22% 6.09% 1.60% 1.64% 1.67% 1.62% 1.59% 1.62% 1.52% 1.49% 1.49% 1.50% 1.52% 1.48% 1.48% 1.53
Slide 15: Contraction in HK
MIDLAND-Business Overview Contraction in HK Number of Local Branches Number of Staff in HK (Not including Midland ICI) (Not including Midland ICI) 450 7,000 406 386 386 5,721 5,621 370 400 362 358 6,000 348 5,026 5,023 4,910 4,753 320 350 4,683 317 311 304 4,445 4,416 297 4,365 4,266 5,000 281 272 3
Slide 16: China Division: Continuous Cost Control
50 100 150 200 250 300 350 0 273 189 224 285 282 258 MIDLAND-Business Overview 322 230 254 269 296 277 273 262 264 256 245 223 209 Number of Branches in China 212 190 134 136 82 60 50 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 3,947 2,513 3,443 3,443 China Division : Continuous Cost Control 2,964 3
Slide 17: Initiatives
MIDLAND-Business Overview Initiatives 1 Downsized branch network, negotiated favorable lease terms, and optimized frontline staffing levels. 2 Initiated changes to the composition of the board of directors being effected with the goal of injecting fresh perspectives and expertise. For the Mainland o
Slide 18: Prospects
Prospects
Slide 19: 2023: Decline in both Transactions volume and value
MIDLAND-Prospects 2023 : Decline in both Transactions volume and value Residential Transaction Volume Residential Transaction Value ($ billion) 80,000 800 Decreased 70,000 4.5% y-o-y 700 Decreased 60,000 600 4.5% y-o-y 45,050 43,002 50,000 500 408 389 40,000 400 30,000 300 20,000 200 10,000 100 0 0
Slide 20: Demand is expected to strengthen
MIDLAND-Prospects Demand is expected to strengthen Cancellation of all demand-side management measures Rate Implications All buyers now pay the same Buyer's Stamp Duty (BSD) 7.5% concessionary stamp duty rate of HK$100-4.25% regardless of New Residential Stamp Duty (NRSD) 7.5% residency status, and
Slide 21: Scale of Stamp Duty
MIDLAND-Prospects Scale of Stamp Duty Transacted Value Ad Valorem Stamp duty (AVD) More than Not more than $0 $3,000,000 $100 $3,000,000 $3,528,240 $100 + 10% of excess over $3,000,000 $3,528,240 $4,500,000 1.5% $4,500,000 $4,935,480 $67,500 + 10% of excess over $4,500,000 $4,935,480 $6,000,000 2.25
Slide 22: Long-Term Supply will be undermined
MIDLAND-Prospects Long-Term Supply will be undermined 22
Slide 23: Private Housing Supply exceeded 100K
23 2023 Q4 109,000 18,000 20,000 71,000 2023 Q3 107,000 20,500 18,500 68,000 2023 Q2 105,000 19,000 17,000 68,000 2023 Q1 107,000 24,500 17,500 65,000 2022 Q4 105,000 23,000 16,000 66,000 2022 Q3 95,000 17,000 15,000 63,000 2022 Q2 98,000 17,000 14,000 66,000 2022 Q1 99,000 15,000 14,000 70,000 2021
Slide 24: Upcoming Supply
MIDLAND-Prospects Upcoming Supply Presale Consent Approved Pending Approval of Launched but unsold but not yet launched Presale Consent ~20,500 ~19,800 ~9,200 ~49,500 units units units units 50K units new supply Source：Midland Research Centre, Lands Department Presale consent information is as of th
Slide 25: Loosening of Mortgage Conditions
MIDLAND-Prospects Loosening of Mortgage Conditions - Suspension of the interest rate stress testing requirement for property mortgage lending that assumes a 200-basis-point rise in the mortgage rate. Before 28.2.2024 28.2.2024 and after Self-Use Residential $15M or below 70% $15M or below 70% proper
Slide 26: 11 times Sales activities have responded strongly to the relaxation
MIDLAND-Prospects 24/25 Budget ~626 cases (1.1.24-27.2.24) About 2 months ~11 cases per day before the announcement of Primary Market Increased by 24/25 Budget About 1 month ~4,235 cases (28.2.24-31.3.24) ~128 cases per day 11 times after the announcement of 20 40 60 100 120 140 160 180 0 80 04/04 -
Slide 27: Price stabilization
130 135 145 150 160 165 175 180 140 155 170 * As of 8.4.2024 11/16 12/16 1/17 2/17 3/17 4/17 MIDLAND-Prospects 5/17 Source：Midland Research Centre 6/17 7/17 8/17 9/17 10/17 11/17 12/17 1/18 2/18 3/18 4/18 5/18 6/18 7/18 8/18 9/18 Price stabilization 10/18 11/18 12/18 1/19 2/19 3/19 4/19 5/19 6/19 7/
Slide 28: Talents Recruitment Programs
MIDLAND-Prospects TALENTS RECRUITMENT PROGRAMS 140,000 135,049 Total Top Talent Scheme Pass Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents 120,000 Immigration Arrangements for Non-local Graduates Technology Talent Admission Scheme Admission Scheme for Mainland Ta
Slide 29: Numbers of Dependants coming through various talent schemes
MIDLAND-Prospects Numbers of Dependants coming through various talent scheme in the first 10 month of 2023 Number of dependants ( under the age of 18) through various talent scheme in the first 10 month of 2023 Top Talent Scheme Pass 24,815 (52.25%) Quality Migrant Admission Scheme 12,711 (26.76%) A
Slide 30: Moving in VS Moving Out
MIDLAND-Prospects Moving in VS Moving Out 160000 140000 Talents coming to HK via various programs 120000 No of BNO Visa Approval 100000 80000 60000 40000 20000 0 2021 2022 2023 Source：Hong Kong Immigration Department, Home Office UK 30
Slide 31: Rental Market already benefited last year
MIDLAND-Prospects Rental Market already benefited last year Change in Prices Change in Rents 1997 +19.0% +0.9% 1998 -38.2% -17.2% 1999 -2.4% -5.5% 2000 -18.6% -5.2% 2001 -8.2% -3.7% 2002 -11.3% -14.2% 2003 +3.4% -6.7% 2004 +29.0% +14.3% 2005 +2.7% +13.3% 2006 +2.9% +2.8% 2007 +21.3% +20.2% 2008 -12.
Slide 32: Rental yield has significantly improved
MIDLAND-Prospects Rental yield has significantly improved Yields of Class A Private Residential Units (saleable area less than 40 m2) 4.0% 12/2012 1/2024 3.5% 3.3% 3.3%* 3.0% 2.5% 2.3% 2.0% 1.5% 1.0% 12 13 14 15 16 17 18 19 20 21 22 23 24 * Provisional figures Source：Rating and Valuation Department
Slide 33: Property Demand: Mainlander Vs Local
MIDLAND-Prospects Property Demand : Mainlander Vs Local Note： *Comparison between the first 9 months of Year 2023 and Year 2022 English and Romanized names are the subject in determining if a buyer is mainlander; Only known cases are considered in calculation, and company cases are excluded; Figures
Slide 34: Involvement of Mainlanders by Volume
MIDLAND-Prospects Involvement of Mainlanders by Volume Primary Market Secondary Market 35% 30.2% 30% 24.0% 25% 21.4% 20% 15% 10.9% 11.7% 8.8% 10% 7.4% 8.6% 5% 0% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Note： 1) English and Romanized names are the subject in determining if a buyer is mainlander; 2)
Slide 35: Involvement of Mainlanders by Value
MIDLAND-Prospects Involvement of Mainlanders by Value Primary Market Secondary Market 45% 40.0% 40% 37.0% 35% 33.1% 30% 25% 18.7% 20% 15.8% 15% 12.9% 11.2% 9.7% 10% 5% 0% Note： 10 11 12 13 14 15 16 17 18 19 20 21 22 23 1) English and Romanized names are the subject in determining if a buyer is mainl
Slide 36: Thank You
Thank You