Hysan Development Co., Ltd. · HKEX:14
Hysan Development — H1 2016 Earnings Presentation
36 slides from Hysan Development's earnings presentation, Aug 3, 2016
Slide 1: Hysan Development 2016 Interim Results Analyst Briefing
Hysan Development 2016 Interim Results Analyst Briefing 3 August 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. 2016 Interim Results Highlights 3. 2016 1H Performance By Portfolio 4. Indicative Cap Rates 5. Hysan Business Update 6. Financial Position 7. 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: 2016 Interim Results Highlights
2016 Interim Results Highlights ● Turnover up 2.7% year-on-year; Recurring Underlying Profit up 1.3% ● Strong occupancy across our commercial portfolio (Retail: 99%; Office: 96%) against challenging global and local economic conditions ● Steady performance expected for full year, despite uncertain e
Slide 6: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● First half of 2016 proved to be a challenging one globally ● Hong Kong was adversely affected by strong headwinds from abroad, with socio-political volatility like the U.K.’s “Brexit” vote and the U.S.’s presidential election putting pressure on economic and
Slide 7: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● We had anticipated the normalisation of retail growth, and started our diversification strategy several years ago, but a general retail downturn did not spare any price category ● Thus Hysan needed to extract the most value out of its retail hubs ● Focused o
Slide 8: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● Focus on needs and wants of the Millennials with regards to their shopping habits, evolving mindsets, and reliance on social and mobile media ● Highlight omnichannel “online-plus-offline” experiences to “pull” in the shoppers; including testing a number of s
Slide 9: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● Aim to expand on the uniqueness of Lee Gardens with state-of-the- art buildings, concentration of flagships, abundance of street shops, and contrast of old lowrises which is fast changing to offer exciting food and beverage outlets, concept stores and smalle
Slide 10: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● Medium term targets: improve walkability and pedestrian safety in the area ● Explore provision of tunnels linking car parks ● Submitted applications to build two footbridges 10
Slide 11: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) Proposed Tunnels T2 T1 & T2 Lee Garden T2 Two Lee Garden One Lee T1 Garden Five L2 L1 Lee Proposed Footbridges Garden L1 & L2 Three 11
Slide 12: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) ● Set up Lee Gardens Association with neighbouring businesses as members ● Aim to have coordinated area-wide events, and provide forum to give input to and support future developments 12
Slide 13: Interim Results Highlights (con’t)
2016 Interim Results Highlights (con’t) 30/6/2016 30/6/2015 HK$'M HK$'M % Turnover 1,760 1,714 2.7% Recurring Underlying Profit 1,178 1,163 1.3% Underlying Profit 1,178 1,163 1.3% - Fair value change on investment properties located in ‧ Hong Kong (281) 1,116 n/m ‧ Shanghai* 2 10 -80.0% Reported Pro
Slide 14: Interim Results Highlights (con’t)
2016 Interim 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) 1H 2H 68.7 69.8 70.0 3,430 65.3 3,224 60.0
Slide 15: 2016 1H Performance: By Portfolio
2016 1H Performance: By Portfolio Turnover (HK$’M) 1,760 1,714 1,716 HK$146M (9%) HK$139M (8%) HK$139M (8%) HK$618M (36%) HK$625M (36%) HK$635M (36%) Residential Office Retail HK$950M (55%) HK$952M (56%) HK$986M (56%) 2015 1H 2015 2H 2016 1H 15
Slide 16: 2016 1H Performance: Retail Portfolio
2016 1H Performance: Retail Portfolio Market overview: Hong Kong Retail Sales ● 2016 first six months: overall decline of 10.5% when compared to same period 2015 ● Reflected fall in nearly all major categories, except food, alcoholic drinks and tobacco Type of retail outlet Jan-Jun 2016 (YoY) Jewell
Slide 17: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Retail portfolio turnover increased by Retail Portfolio 3.8% to HK$986 million Turnover HK$’M (2015 1H : HK$950 million) 1,200 3.8% Turnover rent of HK$28 million 1,000 (2015 1H: HK$50 million) 800 ● Occupancy: 99% as at 30 Jun 2016 600 (31 Dec 2015:
Slide 18: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Positive rental reversions in renewals, reviews and new lettings across the portfolio, with an average increase of around 10% in rental levels ● Continued to increase base rent while shifting focus from turnover rent 18
Slide 19: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Around 75% of retail leases expiring in 2016 have already been committed ● Total foot traffic rose around 5%, achieved against a fall in visitors’ arrivals ● Estimated overall tenant sales saw double-digit percentage decrease, heavily impacted by the e
Slide 20: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Hysan Place Around 5% foot traffic growth in 1H 2016 Gradually transformed into a more all-round retail venue, with more wellness and sports shops, including increased offerings for men A popular food and beverage destination with new Asian-theme
Slide 21: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Lee Gardens hub Lee Garden One foot traffic remained stable, while Lee Garden Two saw around 10% increase Growth attributed to strong offerings of children’s products and Kidz Connect activities Seasons provided fresh dining ideas and remained a
Slide 22: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Lee Theatre hub Around 15% increase in foot traffic Lee Theatre Plaza flagship stores and Leighton Centre “sports-themed street” remained popular Lee Theatre Plaza higher floor restaurants also well supported 22
Slide 23: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Street level pop-up stores at 25 Lan Fong Road saw Nike, Columbia and Gentle Monster showcasing creativity and diversity through limited edition items not found in existing shops ● Stores’ freshness and surprises lured shoppers to return time and again
Slide 24: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Latest marketing event helps consolidate our malls as gathering places for the community ● Very popular basketball star figurines exhibition, a 3-point shooting competition and other sports workshops to coincide with focus on sports during the Olympic
Slide 25: Retail Portfolio (con’t)
2016 1H Performance: Retail Portfolio (con’t) ● Expanded our projects on “online-plus-offline” ● Added variations to products to be sold, as well as delivery / pick up methods ● Included special beauty products’ services and limited-edition beverages sold online and delivered / collected at physical
Slide 26: 2016 1H Performance: Office Portfolio
2016 1H Performance: Office Portfolio ● Hysan’s office space accounts for more than 50% of its overall portfolio’s gross floor area ● Contributes 36% of its turnover 26
Slide 27: Office Portfolio (con’t)
2016 1H Performance: Office Portfolio (con’t) ● Office portfolio turnover increased by Office Portfolio 2.8% to HK$635 million Turnover (2015 1H: HK$618 million) HK$’M 800 ● Occupancy: 96% as at 30 Jun 2016 2.8% (31 Dec 2015: 99%) 600 ● Positive rental reversions in renewals, reviews and new letting
Slide 28: Office Portfolio (con’t)
2016 1H Performance: Office Portfolio (con’t) ● Banking and financial sectors ramp up demand in Central and Admiralty ● Hysan’s Causeway Bay portfolio offers up-to-date facilities, convenient transportation, and is in a district with exceptional retail and entertainment offerings ● Cost-effectivenes
Slide 29: Office Portfolio (con’t)
2016 1H Performance: Office Portfolio (con’t) ● Balanced tenant mix: Banking and Finance High-end Retailers Insurance Professional and Consulting Represented 53.1% of our office lettable floor area ● No single category took up more than 20% of total lettable area 29
Slide 30: 2016 1H Performance: Residential Portfolio
2016 1H Performance: Residential Portfolio ● Residential portfolio turnover Residential Portfolio decreased by 4.8% to HK$139 million Turnover (2015 1H: HK$146 million) HK$’M 200 ● Positive rental reversions with an -4.8% average rental increase of around 5% 150 ● Renovations carried out in one bloc
Slide 31: Indicative Cap Rates
Indicative Cap Rates ● No change in Cap rate from 31 Dec 2015 30 Jun 2016 31 Dec 2015 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 32: Hysan Business Update: Lee Garden Three
Hysan Business Update: Lee Garden Three ● Basement structure was completed in June 2016 and above-ground construction making good progress ● Project expected to be completed around Q4 2017 32
Slide 33: Hysan Business Update: Asset Enhancement Project
Hysan Business Update: Asset Enhancement Project ● Final phase of Lee Garden One ground floor lobby and higher floors retail space enhancement project successfully completed in middle of 2016 as scheduled ● New shop space will be handed over to incoming tenants from August 2016 onwards 33
Slide 34: Strong Financial Position
Strong Financial Position Low Gearing Strong Credit Rating ● Total Gross Debt: HK$5,125 million ● Net Interest Coverage: 21.6 times (31 Dec 2015: HK$4,875 million) (2015: 20.3 times) ● Net Debt to Equity: 3.4% (31 Dec 2015: 3.0%) ● Moody’s: A3; Standard and Poor’s: BBB+ Stable Debt Profile ● Fixed R
Slide 35: 2016 Outlook
2016 Outlook ● We anticipate continued volatility affected by global political and economic instability which will adversely impact local consumer sentiment for the foreseeable future ● Hysan’s quality offerings will still stand us in good stead while the economic climate remains uncertain ● As the
Slide 36: Thank you
— Thank you
Hysan Development Company — H1 2016 Earnings Presentation on 6ix