Sun Hung Kai & Co. Limited · HKEX:86
Sun Hung Kai & — FY2017 Earnings Presentation
27 slides from Sun Hung Kai &'s earnings presentation, March 2018
Slide 1: Sun Hung Kai & Co 2017 Annual Results Announcement
Sun Hung Kai & Co 2017 Annual Results Announcement
Slide 2: Important - Disclaimer
Important - Disclaimer By attending or viewing this Presentation you are agreeing to be bound by the terms and restrictions set out below. The information contained in this presentation and the accompanying slides and materials (the “Presentation”) is confidential. You must not re-distribute, reprod
Slide 3: 2017 Results Highlights
2017 Results Highlights Attributable Profit Basic EPS HK$1,824m +64% HK$0.84 +67% Return on Equity BVPS 9.7% +360bp HK$9.02 +9% Strong growth across various asset classes Continued improvement in UAF Increased investment returns 3
Slide 4: Segments Assets and Contribution (HK$m)
Segments Assets and Contribution (HK$m) Pre-tax Assets Profit Change • UA Finance (58%) - unsecured lending in HK, 16,032 1,445 +99% Consumer Finance China, individual consumers • Market leader in HK • Leverage on our know-how and network 15,937 1,082 +129% Principal Investments • Equity, debt and r
Slide 5: Balance Sheet
Balance Sheet Others 1,709 2,096 Others Goodwill and 3,267 Non controlling $9.02 BVPS (+9.5%) intangibles 3,972 1,646 interest Assoc, JV Net gearing 46.4% Refinanced USD notes and Investment Assets* completed largest issuance since 13,451 Shareholders MTN set up 19,427 Equity 40m shares repurchased
Slide 6: Capital Structure and Funding (HK$m)
Capital Structure and Funding (HK$m) Total Assets and Leverage Interest Cover 37,422 32,561 37% 33% 5.8 67% 63% 4.1 2016 2017 2016 2017 Total Equity Total Liabilities Funding Structure Net Gearing 11,928 10,122 5,312 8,131 46.4% 20.3% 4,810 3,797 2016 2017 2016 2017 Banks and other borrowings Notes
Slide 7: Business Segments
an Ae RA PR Se SJ SUN HUNG KAI & CO. LIMITED Business Segments
Slide 8: Consumer Finance
Consumer Finance 2017 Segment Result Highlights Profit doubled (HK$m) 2017 2016 Change Successful China restructuring Revenue 3,122 3,024 3% Record profit in HK Finance Costs 202 244 -17% Normalising charge off ratio with Total Bad Debts healthy trend towards year-end Expenses 297 929 -68% Op Costs
Slide 9: Performance since 2015
Performance since 2015 Gross Loans – China (HK$m) Charge-off Ratio 13.2% 12.7% 5000 4000 9.4% 7.9% 7.6% 3000 6.2% 2000 1000 0 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 Cost-to-income Ratio Pre-tax contribution (HK$m) 40.1% 38.3% 37.2% 37.2% 35.9% 36.1% 822 5
Slide 10: Stabilising Credit Quality
Stabilising Credit Quality Ageing analysis for loans past due Composition of Total Bad Debts Expenses but not impaired, as % gross loans (HK$ Million) 2017 2016 12.5% Amounts written off (772) (1,066) Recoveries 163 160 2.2% Charge Off (609) (906) 9.2% >180 As annualised % of avg gross 6.6% 10.0% 1.
Slide 11: UAF - Hong Kong
UAF - Hong Kong Continued improvement in market share both by value and customer share Still very benign market with low unemployment Gross loans + 3% Record profit Operation Highlights 2017 2016 Return on Loans 32.9% 31.8% Charge-off 4.8% 5.6% Gross Loans (HK$m) 6,544 6,374 Avg balance per loan(HK$
Slide 12: UAF – Mainland China
UAF – Mainland China Restructuring successfully completed, 85 branches in operation 2017 vs 2014: Harbin:3 75% number of loans dispersed Shenyang: 7 28% costs Beijing: 4 Dalian:6 2017: Tianjin: 2 128,744 new loans (+46%) Qingdao: 4 Jinan: 3 Gross loans +50% O2O approach Chengdu: 4 Shanghai: 7 Wuhan:
Slide 13: O2O Approach
O2O Approach Online Reach + "last mile" personalised service: Partnerships Own platform Branch Network May 2017 RMB 500m + originated Started Feb 2018 13
Slide 14: Principal Investments
Principal Investments Principal Investments Portfolio 2017 Investment return: 18,000 15,937 Public Equity 7.8% (blended^) Private Equity 19.8% 15,000 2,110 Public Debt 3.8% (blended^) 10,731 Private 12,000 3,223 Private Debt 13.4% Real Estate Real Estate 7.5% 9,000 1,633 - Public 3,513 Credit HK$1,0
Slide 15: Public Equities
Public Equities 17% of total portfolio, HK$2,768m 16.6% return excluding PPDai strategic investment portion Focused strategy on global medium and large cap positions Emphasis on Greater China, Australia, North America Satisfactory YTD trend PPDai Strategic Investment: Classified as Available for Sal
Slide 16: Private Equity
Private Equity 27% of total portfolio, HK$4,323m 19.8% investment return Successful co-investment strategy Focused on increasing exposures to our strategic competencies: financials, fintech, health care, tech etc 2017 new investments in financials and fintech in North America Using our consumer fina
Slide 17: Public Credit
Public Credit 22% of total portfolio, HK$3,513m 5.5% return excluding liquidity management products Multi strategy long/short approach Identify mispriced/ undervalued fixed income opportunities Global portfolio for corporate and sovereign bonds Sectors: property, financials, oil and gas, metals and
Slide 18: Private Credit
Private Credit 20% of total, HK$3,223m 13.4% return 11% growth in term loans Interest income +26% to HK$425m Provision ~2.8% of portfolio Likelihood of future recovery; helping one of the borrowers on business restructuring To focus on fee income via collaboration with affiliates and partners 18
Slide 19: Real Estate
Real Estate 13% of total, HK$2,110m 7.5% return Focus: Legacy Hong Kong commercial real estate Minority interest in two residential development projects (HK, Australia) Global special situation investments (prime commercial, hospitality) Strong metrics and underlying performance of assets Forex hedg
Slide 20: Mortgage Loans
Mortgage Loans Results Summary (HK$m) 2017 2016 Passed $2B mark in 2nd full year Revenue 124.4 55.7 of operation Operating Costs (43.9) (38.6) Top ranked non-bank 1st mortgage provider (no. of new Cost to Income (% Rev) 35.3% 69.3% loans) Finance costs (42.3) (12.3) Bad and doubtful debts (3.2) (3.0
Slide 21: Financial Services
Financial Services Segment PBT HK$118.6m (-35%), on lower SHKF stake accounting gains Underlying performance of the two major businesses improved AUM surpassed HK$100b In second full year of operation Expect synergy gains to accelerate Expanded from corporate customers after re-brand segment to cons
Slide 22: Strategy and Outlook
an Ae RA PR Se SJ SUN HUNG KAI & CO. LIMITED Strategy and Outlook
Slide 23: Full Fledged Investment Platform
Full Fledged Investment Platform HK$37.4B total assets Committed to generate long term capital growth for shareholders From 2015 Asset platform that 2007 – 2015 combines our heritage, Consumer network and financial Finance strength Leading Financials as core + global Up to 2006 independent investmen
Slide 24: Track Record of Capital Return (HK$m)
Track Record of Capital Return (HK$m) 2010: HK$4.04b distribution HK$9.9 billion returned to shareholders through 1,000 distribution and share buybacks 800 600 400 200 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Buybacks Dividends 24
Slide 25: Value Accretion
Value Accretion 12 250 11.6% IRR to shareholders including DPS and cumulative BVPS 10 increase $9.02 200 8 150 6 $ 5.43 100 4 50 2 - 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 BVPS (HK$, LHS) DPS (HK cents, RHS) 25
Slide 26: Outlook
Outlook Loan businesses (consumer finance, mortgage loans) positive barring any disruptive market developments. Growth in loan balances toward year end strengthens revenue base Investments well positioned with sufficient liquidity Continue to improve capital efficiency 26
Slide 27: Contact: Nancy Chen, CFA Head of Investor Relations
Contact: Nancy Chen, CFA Head of Investor Relations +852 3748 2823 nancy.chen@shkco.com 27