Hysan Development Co., Ltd. · HKEX:14
Hysan Development — FY2015 Earnings Presentation
33 slides from Hysan Development's earnings presentation, Mar 8, 2016
Slide 1: Hysan Development 2015 Annual Results Analyst Briefing
Hysan Development 2015 Annual Results Analyst Briefing 8 March 2016
Slide 2: Disclaimer
Disclaimer This document has been prepared for general information purposes only, and is not, and should not be construed as an offer to sell, or a solicitation of an offer to buy any securities. Information and estimates contained and opinions expressed herein have been complied in good faith by Hy
Slide 3: Agenda
Agenda 1. Hysan Portfolio 2. 2015 Annual Results Highlights 3. 2015 Performance By Portfolio 4. Indicative Cap Rates 5. Lee Garden Three 6. Lee Garden One Asset Enhancement Project 7. Financial Position 8. 2016 Outlook 3
Slide 4: Hysan Portfolio - One of the largest commercial landlords in Causeway Bay
Hysan Portfolio - One of the largest commercial landlords in Causeway Bay The Hysan Portfolio – 4.1 million sq.ft. (GFA) of high-quality retail, office and residential space (excluding Lee Garden Three, which are currently under development) Retail Hysan Place: trendy gathering place for younger cr
Slide 5: 2015 Annual Results Highlights
2015 Annual Results Highlights ● Turnover up 6.4% year-on-year; Recurring Underlying Profit up 5.5% ● Strong office and solid retail performances ● 2015 total distribution of dividends is HK132 cents per share, up 7.3% 5
Slide 6: Annual Results Highlights (con't)
2015 Annual Results Highlights (con’t) ● In a worldwide context, 2015 was more volatile and difficult than expected due to economic and political factors ● Locally, decline in retail sales, especially in the luxury sector, gathered pace ● A stronger commercial office market was aided by tight supply
Slide 7: Annual Results Highlights (con't)
2015 Annual Results Highlights (con’t) ● Hysan anticipated retail market would normalise after past decade’s strong growth ● Pursued strategy of diversification by pivoting portfolio towards mid to affordable market ● Leveraged on children’s offerings and in sport and lifestyle products ● Enhanced f
Slide 8: Annual Results Highlights (con't)
2015 Annual Results Highlights (con’t) ● Continued to fine-tune positioning of three hubs: each represents approximately one-third of our retail portfolio in size ● Provided unique and satisfying experience (U.S.E.) to delight and surprise tenants, shoppers and other visitors 8
Slide 9: Annual Results Highlights (con't)
2015 Annual Results Highlights (con’t) 2015 2014 HK$'M HK$'M % Turnover 3,430 3,224 6.4% Recurring Underlying Profit 2,283 2,163 5.5% Underlying Profit 2,283 2,163 5.5% - Fair value change on investment properties located in ‧ Hong Kong 616 2,732 -77.5% ‧ Shanghai* 4 7 -42.9% Reported Profit 2,903 4
Slide 10: Annual Results Highlights (con't)
2015 Annual Results Highlights (con’t) Recurring rental income from high quality investment properties Sizeable portfolio of high quality investment properties Steady turnover growth Book value of investment properties (HK$’billion) Turnover (HK$’million) 68.7 69.8 1H 2H 3,430 65.3 3,224 60.0 3,063
Slide 11: 2015 Performance: By Portfolio
2015 Performance: By Portfolio Turnover (HK$’M) 3,430 3,224 285 (8%) 287 (9%) -0.7% 1,136 (35%) 1,243 (36%) +9.4% 1,801 (56%) 1,902 (56%) +5.6% 2014 2015 Retail Office Residential 11
Slide 12: 2015 Performance: Retail Portfolio
2015 Performance: Retail Portfolio Market overview: Hong Kong Retail Sales ● 2015: overall decline of 3.7% when compared to 2014 ● Reflected fall in luxury items (e.g. the sales of jewellery and watches) ● Mid-priced and basic products still recorded growth Type of retail outlet Jan-Dec 2015 (YoY) J
Slide 13: Retail Portfolio (con't)
2015 Performance: Retail Portfolio (con’t) Hysan Place: trendy gathering place for younger crowds Hysan Place Lee Gardens hub Lee Theatre hub Lee Gardens hub: elegant and Lee Theatre hub: urban fashion and luxury premium spaces sporty lifestyles 13
Slide 14: Retail Portfolio (con't)
2015 Performance: Retail Portfolio (con’t) ● Retail portfolio turnover increased by Retail Portfolio 5.6% to HK$1,902 million Turnover HK$’M (2014 : HK$1,801 million) 2,400 2,200 Turnover rent of HK$71 million 2,000 +5.6% 1,800 (2014: HK$93 million) 1,600 1,400 ● Occupancy: Fully-let as at 31 Dec
Slide 15: Retail Portfolio (con't)
2015 Performance: Retail Portfolio (con’t) ● Positive rental reversions in renewals, reviews and new lettings across the portfolio, with an average increase of around 25% in rental levels ● Also reflected our continued strategy to increase base rent 15
Slide 16: Retail Portfolio (con't)
2015 Performance: Retail Portfolio (con’t) ● Total foot traffic in Hysan’s portfolio rose around 5%; achieved against a fall in overseas visitors coming to Hong Kong in 2015 ● Estimated overall tenant sales increase in retail portfolio was around 10% in 2015, when compared to 2014; and outperformed
Slide 17: Retail Portfolio: Hysan Place
2015 Performance: Retail Portfolio (con’t) ● Hysan Place Around 20% growth in estimated tenant sales Refining tenant mix with the addition of themed unisex sports and leisure offerings o lululemon athletica, The North Face, adidas and others o DFS T Galleria’s beauty concept floor, and LINE’s fi
Slide 18: Retail Portfolio: Lee Theatre hub
2015 Performance: Retail Portfolio (con’t) ● Lee Theatre hub Around 5% increase in estimated tenant sales Lee Theatre Plaza lower floor anchor stores and upper floor food and beverage outlets performed well Sports and lifestyle stores in Leighton Centre also saw good tenant sales growth Foot
Slide 19: Retail Portfolio: Lee Gardens hub
2015 Performance: Retail Portfolio (con’t) ● Lee Gardens hub Around 10% decline in tenant sales attributable to the slowing down of tourist spending, depressed consumer sentiment due to local stock market volatility and life cycles / distribution strategies of a few brands Hub’s food and beverag
Slide 20: Estimated Retail Revenue Contribution Percentage by Price Point
2015 Performance: Retail Portfolio (con’t) Estimated Retail Revenue Contribution Percentage by Price Point 24% Luxury 33% Mid-Price 43% Affordable 20
Slide 21: Retail Lease Expiry Profile (As at 31 December 2015)
2015 Performance: Retail Portfolio (con’t) Retail Lease Expiry Profile (As at 31 December 2015) 35% 30% 25% 20% 15% 31% 23% 24% 22% 10% 5% 0% 2016 2017 2018 2019 and beyond 21
Slide 22: 2015 Performance: Office Portfolio
2015 Performance: Office Portfolio ● Office portfolio turnover increased Office Portfolio by 9.4% to HK$1,243 million (2014: HK$’M Turnover HK$1,136 million) 1,600 1,400 ● Occupancy: 99% as at 31 Dec 2015 +9.4% 1,200 (31 Dec 2014: 98%) 1,000 800 600 1,243 1,136 400 200 0 2014 2015 Turnover 22
Slide 23: Office Portfolio (con't)
2015 Performance: Office Portfolio (con’t) ● Positive rental reversion in renewals, reviews and new lettings with an average rental income increase of around 30% ● Office space vacancies tightened in Central due to strong Mainland China financial firms’ demand ● Being a genuine alternative to Centra
Slide 24: Office Lease Expiry Profile (As at 31 December 2015)
2015 Performance: Office Portfolio (con’t) Office Lease Expiry Profile (As at 31 December 2015) 40% 35% 30% 25% 20% 36% 15% 25% 10% 21% 17% 5% 0% 2016 2017 2018 2019 and beyond 24
Slide 25: 2015 Performance: Residential Portfolio
2015 Performance: Residential Portfolio ● Residential portfolio turnover saw a small drop of 0.7% to HK$285 million Residential Portfolio (2014: HK$287 million) HK$’M Turnover ● Positive rental reversion in renewals, 400 reviews and new lettings with an 350 average rental income increase of 300 arou
Slide 26: Residential Portfolio (con't)
2015 Performance: Residential Portfolio (con’t) ● Renovation project ongoing ● Continued to improve services and facilities for a superior international living experience ● Occupancy at 89% as at 31 Dec 2015 as units were vacated for renovations (31 Dec 2014: 97%) 26
Slide 27: Indicative Cap Rates
Indicative Cap Rates ● No change in Cap rate from 31 Dec 2014 31 Dec 2015 31 Dec 2014 Retail Lee Garden One 5.00% 5.00% Lee Garden Two 5.25% 5.25% Office Lee Garden One 4.25% 4.25% Lee Garden Two 4.75% 4.75% Residential Bamboo Grove 3.75% 3.75% Property under development Lee Garden Three
Slide 28: Hysan Business Update: Lee Garden Three
Hysan Business Update: Lee Garden Three ● Piling, excavation and other foundation works completed in Q1 2016 ● Project expected to be completed in late 2017, slightly earlier than the previous estimation of early 2018 ● Around 200 parking spaces will be added, which will help attract shoppers to our
Slide 29: Hysan Business Update: Lee Garden One Asset Enhancement Project
Hysan Business Update: Lee Garden One Asset Enhancement Project ● First phase revamping ground floor lobby and adding three elevators completed in July 2015 ● Second phase constructing new shop space already commenced; project anticipated to be completed in the middle of 2016 ● Will improve the acce
Slide 30: Strong Financial Position
Strong Financial Position Low Gearing Strong Credit Rating ● Total Gross Debt: HK$4,875 million ● Net Interest Coverage: 19.5 times (31 Dec 2014: HK$6,457 million) (2014: 17.1 times) ● Net Debt to Equity: 3.0% (31 Dec 2014: 4.2%) ● Moody’s: A3; Standard and Poor’s: BBB+ Stable Debt Profile ● Fixed R
Slide 31: 2016 Outlook
2016 Outlook ● 2016 will see continued adjustments, particularly in high-end retailing ● Volatility in currency and equity markets, and a slower China growth will contribute to a challenging year 31
Slide 32: 2016 Outlook (con't)
2016 Outlook (con’t) ● Hysan’s resilience comes from its diversified and balanced portfolio, as well as balance sheet strength ● The Group is uniquely placed to capture opportunities as Hong Kong benefits from the continuing development of China ● Hysan will deliver another year of steady performanc
Slide 33: Thank you
{ iat + 2 Pad - ) Hysani#i
Hysan Development Company — FY2015 Earnings Presentation on 6ix