Link Real Estate Investment Trust · HKEX:823
Link Real Estate Investment Trust — The Link Real Estate Investment Trust — H1 2014/15 Earnings Presentation
43 slides from Link Real Estate Investment Trust's earnings presentation, Nov 12, 2014
Slide 1: Expanding horizons, exploring new opportunities
Expanding horizons, exploring new opportunities Interim Results Presentation 2014/2015 12 November 2014 2014/2015 Interim Results P.1
Slide 2: Interim Highlights
Interim Highlights 2014/2015 Interim Results P.2
Slide 3: Delivering Sustainable Growth
Delivering Sustainable Growth • Revenue up 9.6% yoy to HK$3,830M Healthy financial growth • NPI growth of 10.6% yoy to HK$2,783M • Steady reversion rate of 23.6% Positive performance indicators • Average unit rent of HK$43.6 psf, up 8.5% yoy • Value of portfolio of HK$125,486M, up 14.2% (1) Enhanced
Slide 4: Delivering TUR growth to unitholders
Total Unitholders’ Return (“TUR”) Delivering TUR growth to unitholders 5-Year Compound Annual Total Return Comparison (2) 5-Year Movement DPU Unit Price of The Link REIT 4.4% (1)(3) 26.6% (1)(3) HK$ HK cents 50 300 DPU CAGR: 14.6% (5) 45 Unit Price CAGR: 21.3% 250 40 35 200 30 25 150 $325 20 100 (1)
Slide 5: Major Achievements
Major Achievements • Continue to improve tenant mix Asset Management • Margin continue to expand • Completed 2 projects Asset Enhancement • Maintain strong pipeline till 2020 • Acquired Lions Rise Mall Asset Investment • Disposed 9 smaller properties to streamline portfolio • Issued US$500M 10-year
Slide 6: Asset Management
Asset Management Improved tenant mix driving sustainable rental growth Introduce Improve Support Refine innovative service tenant tenant mix marketing standards sales campaigns Newly Joined Tenants Existing Tenants Expansion 2014/2015 Interim Results P.6
Slide 7: Asset Enhancement
Asset Enhancement Ongoing process to improve and create value Serves local community Refurbishment Size and layout constraints Ageing properties Limited tenant choices Poor property conditions Outdated design District growth potential Repositioning Synergy with nearby properties 2014/2015 In
Slide 8: Asset Enhancement: Project pipeline extending to 2020
Asset Enhancement Project pipeline extending to 2020 Completed Refurbishment Projects Hoi Fu Shopping Centre Mei Lam Commercial Centre Capex: HK$39M ROI (1) : 19.1% Capex: HK$87M ROI (1) : 17.8% BEFORE AFTER BEFORE AFTER Project Pipeline Target Completion Year Project Pipeline 2014 2015 2016 2017 20
Slide 9: Asset Enhancement: Projects underway
Asset Enhancement Projects underway to enhance portfolio value Tin Shing (1) Long Ping (1) HK$212M/ early 2016 (2) HK$196M / late 2015 (2) Refurbishment Repositioning Lung Cheung HK$353M / late 2015 (2) Yau Oi / On Ting HK$477M / late 2014 (2) Tsing Yi Un Chau HK$140M / mid 2015 (2) HK$66M / lat
Slide 10: Asset Investment – Acquisition in Hong Kong
Asset Investment – Acquisition in Hong Kong Provide synergistic benefits with existing assets Lions Rise Mall Lung Cheung Wong Tai Sin Lions Rise • Allow development of a Positioning Mid Mass-mid Mid coordinated retail cluster Target Primary + Secondary Catchment Primary • Potential upside Customers
Slide 11: Asset Investment – Acquisition in Mainland China
Asset Investment – Acquisition in Mainland China Paving the way for inorganic growth Economy Income Emerging Consumer Urbanisation growth growth middle class Demand Seeking opportunities in Mainland China, initially within Pearl River Delta Diligent project assessment and prudent deal structuring In
Slide 12: Proposed acquisition of Longgang Vanke Mall
Asset Investment – Acquisition in Mainland China Proposed acquisition of Longgang Vanke Mall Signed MOU on 10 Nov 2014 for exclusive due diligence Target Property Retail centre, certain street shops and car parks of an integrated mixed-use development Location Longcheng Street, Longgang District, Sh
Slide 13: Asset Investment – Disposals
Asset Investment – Disposals Enhance value by streamlining the portfolio Continue to evaluate our portfolio performance Focus management resources on our larger assets Disposal Criteria: Relatively smaller assets in portfolio Lack of synergistic benefits with the rest of our portfolio Limited
Slide 14: Capital Management
Capital Management Active approach to strengthen financial capability Unit buybacks Neutralise future DPU loss from disposals Total amount used: HK$888M Units bought back: 19.4 million at average price of HK$45.6 per unit Taken advantage of the low interest rate environment to lock-in low fund
Slide 15: Financial and Operational Performance
Financial and Operational Performance 2014/2015 Interim Results P.15
Slide 16: Financial Performance
Financial Performance Solid performance supporting distribution growth 6 months 6 months ended ended 30 Sep 2014 30 Sep 2013 YoY HK$’M HK$’M % Revenue 3,830 3,493 9.6 % Net property income 2,783 2,517 10.6 % Total distributable income 1,926 1,854 3.9% Discretionary distribution (1) 128 - N/A Total d
Slide 17: Revenue Analysis
Revenue Analysis Continuous growth in retail and car park revenues HK$’M 4,000 +13.2% +7.4% 3,830 3,800 +12 +8.8% +96 +9.6% 3,600 +229 3,493 Improved utilisation 3,400 Strong reversion rate 3,200 3,000 0.0 2,800 Sep 13 Retail Car Park Others Sep 14 2014/2015 Interim Results P.17
Slide 18: Retail Income Performance
Retail Income Performance Maintaining steady growth (HK$’M) For the six For the six months ended months ended 3,500 30 Sep 30 Sep 3,000 2014 2013 2,831 2,602 158 2,500 145 NPI margin (%) 73.2 72.9 379 335 2,000 Reversion rate (%) 23.6 23.6 1,500 2,122 2,294 1,000 As at As at 500 30 Sep 31 Mar 0 2014
Slide 19: Tenant Performance
Tenant Performance Resilient growth with majority in non-discretionary trades (3) Tenant Gross Sales(1) Retail Trade Mix by Monthly Base Rent YoY (%) 16.0% 17.1% 24.8% 14.0% 13.3% 12.0% 8.3% 10.1% 10.0% 9.3% 8.3% 11.3% 8.0% 6.0% 6.2% 22.6% 5.2% 1.3% 6.0% 4.3% 14.6% 4.0% 2.0% Food and Beverage Superm
Slide 20: Car Park Income Performance
Car Park Income Performance Strong demand supports growth For the six For the six months ended months ended Utilisation (HK$’M) Rate (%) 30 Sep 30 Sep 1,500 100% 2014 2013 91.7% NPI margin (%) 70.7 68.8 86.4% 90% Car park income per 1,738 1,529 1,000 80% space per month (HK$) 825 729 216 70% 185 As
Slide 21: Property Expense Analysis
Property Expense Analysis Continue to reduce expense to income ratio HK$’M Increase in electricity 1,100 tariff and higher- than-normal temperature during summer months +2.6% 1,047 1,050 +11.2% +7 +23.3% +3.4% +12 +6 (1) +37 Increase in rateable +7.3% 1,000 +3.4% value 976 +9 Higher long term 950 in
Slide 22: Property Valuation
Property Valuation Cap rate compression to reflect recent market transactions (HK$'M) 160,000 • Robust car park performance and lower cap 140,000 125,486 rates supported value increase 120,000 109,899 22,994 • Average valuation per space of HK$294K 100,000 18,654 80,000 60,000 Retail property value
Slide 23: Capital Management
Capital Management Low funding cost and headroom to support growth initiatives Debt Highlights As at 30 Sep 14 31 Mar 14 Undrawn Gearing 11.0% 11.0% facilities Unsecured bank loans 19.8% HK$3.16B HK$3.56B 17.6% Average Facilities Maturity 5.2 yrs 3.7 yrs Total Secured loan(1) Fixed Rate Debt/Net Deb
Slide 24: Strategy and Outlook
Strategy and Outlook 2014/2015 Interim Results P.24
Slide 25: Strategy Going Forward
Strategy Going Forward Multi-growth drivers supported by solid capital management • Continue to upgrade and expand tenant mix Asset Management • Diligent cost control to increase margin • Capitalise on districts with growth dynamics Asset Enhancement • Extend pipeline and explore more opportunities
Slide 26: Change in REIT Code
Change in REIT Code Opportunities to participate in property development Hong Kong REITs are now allowed to participate in property development activities, with investment size limited to <10% of Gross Asset Value Propose to undertake property development and related activities in respect of develop
Slide 27: Outlook
Outlook Resilient growth in retail sales of non-discretionary trades in Hong Kong Large portfolio with high operating leverage provides stable income Prudent capital management strategy underpins solid base for growth Disciplined and cautious growth strategy Consistent performance producing sustaina
Slide 28: Investor Information
Investor Information Interim Distribution Distribution period April 2014 – September 2014 Last day of trading on a “cum” basis 24 November 2014 Ex Distribution date 25 November 2014 27 November – 1 December 2014 Distribution book close (both days inclusive) Record date for entitlement to cash 1 Dece
Slide 29: Global Recognitions
Global Recognitions 2014/2015 Interim Results P.29
Slide 30: Appendix
Appendix 2014/2015 Interim Results P.30
Slide 31: Additional Data 1: Income Statement Summary
Additional Data 1: Income Statement Summary 6 months ended 6 months ended 30 Sep 2014 30 Sep 2013 YoY HK$’M HK$’M % Revenues 3,830 3,493 9.6 Property operating expenses (1,047) (976) 7.3 Net property income 2,783 2,517 10.6 General and administrative expenses (286) (106) 169.8 Interest income 14 14
Slide 32: Additional Data 2: Distribution Statement Summary
Additional Data 2: Distribution Statement Summary 6 months ended 6 months ended 30 Sep 2014 30 Sep 2013 YoY HK$’M HK$’M % Profit for the year, before transactions with Unitholders 17,032 7,075 140.7 Change in fair values of investment properties (14,761) (5,211) 183.3 Gain on disposal of investment
Slide 33: Additional Data 3: Revenue Analysis
Additional Data 3: Revenue Analysis Percentage contribution 6 months ended 6 months ended 6 months ended 30 Sep 2014 30 Sep 2013 YoY 30 Sep 2014 HK$’M HK$’M % % Retail rentals: Shops (1) 2,294 2,122 8.1 59.9 Markets / Cooked Food Stalls 379 335 13.1 9.9 Education / Welfare / Office / Ancillary 73 67
Slide 34: Additional Data 4: Expenses Analysis
Additional Data 4: Expenses Analysis Percentage contribution 6 months ended 6 months ended 6 months ended 30 Sep 2014 30 Sep 2013 YoY 30 Sep 2014 HK$’M HK$’M % % Property managers’ fees, security and 276 267 3.4 26.4 cleaning Staff costs 196 159 23.3 18.7 Repair and maintenance 102 99 3.0 9.7 Utilit
Slide 35: Additional Data 5: Financial Position & Investment Properties
Additional Data 5: Financial Position & Investment Properties Financial Position Summary As at As at As at HK$’M 30 Sep 2014 31 Mar 2014 30 Sep 2013 Total Assets 129,932 113,466 104,294 Total Liabilities 19,322 17,115 16,382 Net Assets Attributable to Unitholders 110,610 96,351 87,912 Units in Issue
Slide 36: Additional Data 6: Valuation
Additional Data 6: Valuation As at As at As at 30 Sep 2014 31 Mar 2014 30 Sep 2013 Retail properties (HK$’M) 102,492 91,245 84,460 Car parks (HK$’M) 22,994 18,654 16,527 Total (HK$’M) 125,486 109,899 100,987 Income Capitalisation Approach – Capitalisation Rate Retail properties 3.40 – 5.80 4.40 – 6.
Slide 37: Additional Data 7: Retail Portfolio by Valuation
Additional Data 7: Retail Portfolio by Valuation Retail properties valuation Retail rentals Average monthly unit rent Occupancy rate HK$’M HK$’M HK$ psf % Retail properties(1) As at 6 months ended As at As at As at As at 30 Sep 2014 30 Sep 2014 30 Sep 2014 31 Mar 2014 30 Sep 2014 31 Mar 2014 1-10 27
Slide 38: Additional Data 8: Portfolio Metrics
Additional Data 8: Portfolio Metrics As at As at 30 Sep 2014 31 Mar 2014 Change Average monthly unit rent (psf pm) Shops HK$ 43.8 HK$ 42.3 3.5% Overall (ex Self use office) HK$ 43.6 HK$ 42.1 3.6% Occupancy rate Shops 96.4% 96.6 % (0.2ppts) Overall 94.4% 94.4 % 0.0ppts 6 months ended 6 months
Slide 39: Additional Data 9: Lease Expiry Profile
Additional Data 9: Lease Expiry Profile (As at 30 September 2014) As % of total IFA As % of monthly base rent Year 2014/15 15.4 17.7 Year 2015/16 28.6 30.3 Year 2016/17 and Beyond 45.9 47.6 Short-term Lease and Vacancy 10.1 4.4 Total 100.0 % 100.0 % 2014/2015 Interim Results P.39
Slide 40: Additional Data 10: Key Credit Metrics by Rating Agencies
Additional Data 10: Key Credit Metrics by Rating Agencies As at As at S&P Moody’s 30 Sep 14 (3) 31 Mar 14(4) (A / Stable) (A2 / Stable) Total debt / total assets 11.0% 11.0% N/A < 30% Debt / debt and equity (1) 9.5% 9.8% < 35% N/A FFO(2) / debt (annualised) 35.3% 39.3% > 15% N/A EBITDA interest cove
Slide 41: Additional Data 11: Credit Profile – Strong Credit Metrics
Additional Data 11: Credit Profile – Strong Credit Metrics Total Debt (1) / Total Asset Total Debt / EBITDA >30% – Moody’s rating trigger >5.0x – Moody’s rating trigger Buffer Buffer 3.0x 3.2x 3.0x 16.0% 2.8x 15.2% 2.5x 13.6% 11.0% 11.0% 10/11 11/12 12/13 13/14 1H 14/15 10/11 11/12 12/13 13/14 1H 14
Slide 42: Additional Data 12: Credit Profile – Credit Ratings
Additional Data 12: Credit Profile – Credit Ratings A2 / Stable A / Stable Good market position and sizable portfolio of Resilience to economic downturns retail assets in Hong Kong Demonstrated track record in enhancing asset High operating stability quality Consistently improving profitab
Slide 43: Disclaimer
Disclaimer This document has been prepared by The Link Management Limited in its capacity as the Manager (the “Manager”) of The Link Real Estate Investment Trust (“The Link REIT”) solely for use at the presentations/meetings held in connection with the 2014/2015 Interim Results announcement and ma
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