Hysan Development Co., Ltd. · HKEX:14
Hysan Development — FY2017 Earnings Presentation
35 slides from Hysan Development's earnings presentation, Feb 28, 2018
Slide 1: Hysan Development 2017 Annual Results Analyst Briefing
Hysan Development 2017 Annual Results Analyst Briefing 28. 2. 2018
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. 2017 Highlights 2. 2018 Outlook 3. 2017 Annual Results Highlights 4. 2017 Performance By Portfolio 5. Indicative Cap Rates 6. Hysan Business Update 7. Financial Position 3
Slide 4: 2017 Highlights
2017 Highlights ● Turnover increased by 0.4%; against a slight decline in Recurring Underlying Profit of 0.8% ● Reported Profit increase reflecting changes in fair value of investment properties ● Retail portfolio occupancy at 97%; Office portfolio occupancy at 96% ● Completion of Lee Garden Three f
Slide 5: Overview
Overview ● Reasonable growth in 2017 global economy ● Hong Kong’s economy echoed this positive sentiment ● Local retail sales saw uptick in growth ● Office leasing continued to be stable 5
Slide 6: Retail Changes
Retail Changes ● “Generational shift”: Millennials and Generation Z’ers are driving changes in the where, what, how and when products and services are delivered ● “Demographic change”: Mainland tourists and “New Hong Kong” residents, who came to settle in Hong Kong over the past 10 to 20 years, are
Slide 7: Retail Changes (con't)
Retail Changes (con’t) ● Technology advancements: Relentless growth of e-commerce, dominance of mobile technology, prevalence of social media 7
Slide 8: Retail Changes (con't)
Retail Changes (con’t) ● Brands and retailers, as well as online operators, are making moves to address these issues ● Hysan, as a landlord mall operator, needs to re-invent and re-imagine both strategically and operationally 8
Slide 9: Retail Changes (con't)
Retail Changes (con’t) ● Give shoppers “extra special” touch to make the shopping experience socially pleasant and interesting ● Customers now offered personalised and unique items and services ● Hysan started journey into new retail and will continuously adapt our offerings 9
Slide 10: Retail Changes (con't)
Retail Changes (con’t) Early workout at gym Heading into work Hysan Place for a quick A quick coffee to perk up Browsing in book store lunch before heading to a dinner party 10
Slide 11: Office Changes
Office Changes ● “Generational changes”: Incoming workforce want more fluid and mobile work style plus work in social setting Co-working space is growing and Hysan is increasing its office portfolio’s co-working space exposure to over 5% ● Multinationals opting to relocate to non-Central core ar
Slide 12: Hysan's Progress in 2017
Hysan’s Progress in 2017 ● Lee Garden Three completed in December 2017 First office tenants moved in Other multinationals from a diverse business background moving in Spaces, community-based co-working brand, establishing flagship here Retail podium welcomes food and beverage outlets and lif
Slide 13: Hysan's Progress in 2017 (con't)
Hysan’s Progress in 2017 (con’t) ● Marketing’s tenant collaboration received media attention, extensive footfall and healthy spending figures Revamped Louis Vuitton shop eslite summer programme Colourful I.T. showcase ● Loyalty clubs saw significant percentage growth of membership numbers and
Slide 14: Hysan's Progress in 2017 (con't)
Hysan’s Progress in 2017 (con’t) ● Office Continue to enhance an inclusive office community that fits the needs and demands of modern-day users Diverse office portfolio which includes sales, banking, finance and insurance, technology, health and wellness, as well as high-end brands Three NGOs
Slide 15: Looking Ahead
Looking Ahead ● Continue to support brands that offer classic luxury ● But also strengthen our commitment to promote lifestyle through food and beverage, as well as health and wellness, in an environment with a strong sense of community ● This will define the new retail where emerging consumers dema
Slide 16: Looking Ahead (con't)
Looking Ahead (con’t) ● Bring new initiatives to market with greater speed ● More digitalised and data-driven, and technology adopted at consumer level ● Maintain frequent dialogues with online retail operators and seek opportunities for partnerships ● Innovate and curate relevant content for Lee Ga
Slide 17: Looking Ahead (con't)
Looking Ahead (con’t) ● Trend of global economic expansion is likely to continue in 2018; Hong Kong economy also expected to continue to grow ● Lee Garden Three’s completion confirms our commitment to expand our lifestyle theme and curate the contents of the Lee Gardens community 17
Slide 18: 2017 Annual Results Highlights
2017 Annual Results Highlights 2017 2016 HK$'M HK$'M % Turnover 3,548 3,535 0.4% Recurring Underlying Profit 2,349 2,369 -0.8% One-off early surrender compensation income (net of effect of taxation and non-controlling interests’ shares) 142 - n/m Underlying Profit 2,491 2,369 5.1% - Fair value gain
Slide 19: Annual Results Highlights (con't)
2017 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) 69.8 72.5 1H 2H 3,430 3,535 3,548 68.7 3,224
Slide 20: 2017 Performance: By Portfolio
2017 Performance: By Portfolio Turnover (HK$’M) 3,535 3,548 HK$274M (8%) HK$264M (8%) -3.6% HK$1,292M (36%) HK$1,359M (38%) +5.2% HK$1,969M (56%) HK$1,925M (54%) -2.2% 2016 2017 Retail Office Residential 20
Slide 21: 2017 Performance: Retail Portfolio
2017 Performance: Retail Portfolio Market overview: Hong Kong Retail Sales ● 2017 full year: overall increase of 2.2% when compared to 2016 ● Retail sales improvement reflecting an improvement in inbound tourism and resilience of local consumption demand Type of retail outlet Jan-Dec 2017 (YoY) Jewe
Slide 22: 2017 Performance: Retail Portfolio
2017 Performance: Retail Portfolio ● Retail portfolio turnover decreased by 2.2% to HK$1,925 million (2016: HK$1,969 million) Retail Portfolio Turnover ● Occupancy: 97% as at 31 Dec 2017 (31 Dec 2016: 99%) HK$’M 2,200 ● The portfolio going through a process of tenant mix 2,000 -2.2% adjustment: 1,80
Slide 23: 2017 Performance: Retail Portfolio (con't)
2017 Performance: Retail Portfolio (con’t) ● Total foot traffic decreased by around 5%, due to some major renovation and fit out work for new tenants Improvement seen towards the end of the year ● The estimated tenant sales for 2017 saw single-digit percentage increase, when compared to 2016 23
Slide 24: 2017 Performance: Retail Portfolio (con't)
2017 Performance: Retail Portfolio (con’t) ● Newly joined tenants included Brunello Cucinelli, Zeiss Vision Center by Puyi Optical, Cha Ling, i.t blue block, BRICK LANE, The PHO and IPPUDO ● In early 2018, we welcome 10 Shanghai and Sushi Ta-ke 24
Slide 25: 2017 Performance: Retail Portfolio (con't)
2017 Performance: Retail Portfolio (con’t) ● Show-stopping events at Hysan’s portfolio ● Hong Kong’s most international sporting event Rugby Seven’s Fan Walk attracted overseas fans and local visitors Fan Walk’s dining and shopping promotions brought customers and sales to Hysan’s restaurants and
Slide 26: 2017 Performance: Office Portfolio
2017 Performance: Office Portfolio ● Office portfolio turnover increased by 5.2% to Office Portfolio Turnover HK$1,359 million (2016: HK$1,292 million) HK$’M ● Occupancy: 96% as at 31 Dec 2017 1,600 1,400 +5.2% (31 Dec 2016: 96%) 1,200 ● Positive rental reversion in renewals, reviews 1,000 800 and n
Slide 27: 2017 Performance: Office Portfolio (con't)
2017 Performance: Office Portfolio (con’t) ● Hysan’s office space accounts for more than 50% of its overall portfolio’s gross floor area ● Contributed 38% of its turnover 27
Slide 28: 2017 Performance: Office Portfolio (con't)
2017 Performance: Office Portfolio (con’t) ● Causeway Bay is one of the most sought-after areas for multinational and local corporations ● Lee Garden Three pre-leasing slowed down somewhat in second half of 2017, but close to 55% of its office space committed for rental 28
Slide 29: 2017 Performance: Office Portfolio (con't)
2017 Performance: Office Portfolio (con’t) ● Balanced tenant mix showing the portfolio’s diversity: Professional and Consulting Banking and Finance Insurance Semi-Retail The four above categories representing around 50% of our office lettable floor area ● No single category took up more th
Slide 30: 2017 Performance: Residential Portfolio
2017 Performance: Residential Portfolio ● Residential portfolio turnover decreased by 3.6% to HK$264 million (2016: HK$274 million) Residential Portfolio Turnover ● Positive rental reversion on renewals, reviews HK$’M 350 and new lettings 300 -3.6% ● Occupancy: 75% as at 31 Dec 2017 250 (31 Dec 2016
Slide 31: Lee Garden Three Project
Lee Garden Three Project ● Completed in December 2017 ● Promotes environmental friendliness and work-life balance ● Roof Top Garden and a Sky Garden with a 100 metre long running track 31
Slide 32: Tai Po Lo Fai Road Project
Tai Po Lo Fai Road Project ● Design development in good progress, statutory submissions ongoing ● Site formation and foundation works will start in Q2 2018 32
Slide 33: Indicative Cap Rates
Indicative Cap Rates ● No change in Cap rate from 31 Dec 2016 31 Dec 2017 31 Dec 2016 Retail • Lee Garden One 5.00% 5.00% • Lee Garden Two 5.25% 5.25% • Lee Garden Three 5.00% - Office • Lee Garden One 4.25% 4.25% • Lee Garden Two 4.75% 4.75% • Lee Garden Three 4.25% - Residential • Bamboo Grove 3.7
Slide 34: Strong Financial Position
Strong Financial Position Low Gearing Stable Debt Profile ● Total Gross Debt: HK$6,176 million ● Fixed Rate Debt: 74.9% of the total gross debt (31 Dec 2016: HK$6,305 million) (31 Dec 2016: 73.4% of the total gross debt) ● Net Debt to Equity: 5.0% ● Average Debt Maturity: 4.3 years (31 Dec 2016: 5.4
Slide 35: Thank you
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Hysan Development Company — FY2017 Earnings Presentation on 6ix