Sun Hung Kai & (HKEX:86) Q4 2026 Earnings Call

0:00 Good afternoon, everyone. Welcome to the annual results and this briefing. Before we dive in, I'd like to take a moment to wish you all of your very happy mid-autumn festival in advance. And as usual, we will start with the group's financial review. Please note that all the numbers are in Hong Kong dollars unless stated otherwise. For the year ended June, 2026, The group's underlying profit was $22.9 billion, a year-on-year increase of 4.6%. This growth was mainly driven by higher profits from property development in Hong Kong and lower finance costs.

0:46 The group's leasing and other recurring income remained resilient during the year. After factoring in net effect of realized value gains from the sale of investment properties and a net devaluation profit on investment properties. The reported profit came in at $21.4 billion, an increase of 11.1% year-on-year. The underlying earnings per share was $7.89, while reported earnings per share was $7.39. As for dividends, The Board has recommended a final dividend of $2.93 per share, an increase of 4.6% from $2.80 last year.

1:38 Together with interim dividend of $0.98, total dividend per share for the full year will be $3.91. To break down the profit by segment, The profit for property development was about 8.3 billion, largely stable year on year. Increased contribution from Hong Kong offset decline from the mainland. For property rental, the group's net rental income increased slightly by 1% at around 18.6 billion, which includes a 1% decrease in Hong Kong and a 6% increase on the mainland. Hotel business saw an operating profit of $728 million, an increase from the $615 million in the last financial year.

2:35 Profit from our other businesses came in at about $4.6 billion, reflecting a 6.5% decrease year-on-year. All together, this brings the group's total operating profit for this financial year to $32.2 billion. which remains stable year on year. Turning to our financial position. As of 30th June, 2026, the group's net debt stood at 67.6 billion. Hearing ratio improved to 10.7% from 13.5% in December last year. Interest cover for the period came in at 8.5 times.

3:24 compared with six times a year ago. The group as always upholds prudent financial management. Net debt and net gearing ratio have declined further since the peak in December 2023. With its strong financial position, the group is well positioned to capture land acquisition opportunities in Hong Kong. The group also remains a top-rated real estate company in Hong Kong. Due to lower debt and cost of borrowing, the group's net finance costs have gone down by 33% year-on-year. The group's debt mix is outlined in the table.

4:12 We have also achieved a balanced debt maturity profile. Moving on to our Hong Kong land bank, As at the end of June 2026, the group's total land bank in Hong Kong was about 56.4 million square feet of attributable GFA. The pie chart shows a breakdown of our completed properties and those under development. During the year, the group added three sites to its land bank through various channels. They are shown in the table. After the financial year ended, the group was awarded the tender for Tuen Mun A16 Station Package 2 property development just last week.

5:04 This Package 2 will provide over 5,500 units to be developed and sold in phases in an orderly manner. Located in a mature community in Tuen Mun South, The project comes with a podium more and over excellent transport links. Let's turn to the property development business in Hong Kong. During the year, the groups recognized the profit from property development reached 4.6 billion in Hong Kong, a significant 44% increase year on year. Margins started to improve since the second half of FY2026, driving the full year level to 11%.

5:55 When we include the underlying profit from the sale of Dynasty Court and Susan Peake, margin was a higher 16% and we expect the book sales margin to improve gradually. About 22.8 billion of contracted sales has yet to be recognized that includes around 21 billion to be recognized in FY2027. During the year, the Hong Kong residential market continued to recover. Primary market transactions were active. The group achieved the contracted sales of about 38.1 billion in Hong Kong. Major projects contributing to the sales are shown in the table here.

6:45 We will launch a diverse mix of projects to appeal to potential buyers. Major projects to be launched in the next 10 months are shown on the map. The next section is our Hong Kong rental portfolio. During the year, there was a modest increase in the group's gross rental income. Overall average occupancy remained stable at around 92%, High occupancy rates and new contributions support office rental. Retail portfolio held firm. Rental rates and occupancy increased for residential leasing. Our Hong Kong retail portfolio achieved an increase in tenant sales.

7:37 Occupancy reached 95%. The group carries out several strategies to strengthen our performance. They are listed on this slide. The group also adapts quickly to market trends and keeps changing the tenant mix. Tenant sales increased thanks to strong demand for jewelry and watches. As inbound tourism continues to grow, our most-in-tourist area outperforms in the portfolio. We enhanced customer loyalty through the program The Points. Overall member spending increased by 27% year-on-year.

8:24 The growth in VIP member spending was even stronger. To facilitate drivers, the group will continue to install more EV fast chargers in its properties. For our office portfolio in Hong Kong, Overall occupancy remains stable at 90%. Both IFC and ICC achieve high occupancy, thanks to new leases from big companies and in-house expansion. Even so, the recovery in office market remains uneven, with some sub-districts outperforming the overall market. International Gateway Centre is our latest landmark in West Kowloon.

9:13 Two pairs of office towers provide super-grade A office space. The towers offer great A plus rail transport links, smart technologies, and high green standard. The podium mall, Stage IGC, is going to open in phases from late 2026. Initially, the mall will provide restaurants and shops for office tenants High Street Rail passengers, as well as West Kowloon visitors. But we have more than IGC in West Kowloon. Our many projects help to make the district a world-class hub.

9:58 Artist Square Towns Project AST is under development in the West Kowloon Cultural District. Together with IGC, this new project will join the ICC two luxury hotels, and a mall to form a commercial cluster spanning 8 million square feet. They complement each other and create great synergies. To strengthening our recurring income, we will focus on ramping up occupancy for new projects. They include IGC in West Towloon, The Angle in Kun Tong, and Kulun Sky Mall in Kai Tak. Many projects are on the way, including the Moore Stage IGC and AST in West Kowloon.

10:49 Turning to our property business on the Chinese mainland. As at the end of June, 2026, the group's total land bank on the mainland was 64.7 million square feet in terms of attributable GFA. Again, the pie charts break down our completed properties and properties under development. Moving on to property development business on the mainland. During the year, the groups recognized that property sales on the mainland increased to about 10 billion due to higher sales volume. Operating profit was 3.7 billion. Over the next 10 months, The groups will launch new residential projects across different cities.

11:39 About $0.8 billion of contracted sales have yet to be recognized. All of them are expected to be recognized in FY2027. Moving on to our rental business on the mainland. During the year, the group's gross rental income from the mainland rental portfolio increased 5.2% to about 6.5 billion. In RMB terms, it went up 1.5% to RMB 5.6 billion. An increase from retail portfolio offset a decrease in office rental. On the mainland, our integrated projects with great transport efforts provide dynamic commercial space.

12:30 The retail and office component complement each other and create synergies. At our landmark ITC project in Shanghai, Office Tower B was completed during the year. It has attracted keen interest from major companies. ITC Mall will open in phases from the second half of 2026 starting with a floor connect to Metro Station. Hotel enters Shanghai IPC held its grand opening in March, 2026. The hotel is ramping up its occupancy. The expanding portfolio is expected to bring rental income for the group.

13:16 In FY2026, the group increased its stake to fully own the IGC Mall in Guangzhou. and Conrad Guangzhou Hotel, bringing additional income. Major projects are in the pipeline. Park Central Guangzhou South, a new mall in Guangzhou, will open by end of 2026. Another new mall in Hangzhou IFC will open in phases from the second quarter of 2027. Let's turn to our hotel business. During the year, revenue from the hotel portfolio increased 4% year-on-year to $5.5 billion.

14:01 Operating profit increased 18% year-on-year to $728 million. Luxury hotels in Hong Kong outperformed. At the rebranded Royal Garden Kowloon East, renovations will be completed soon. On the mainland, the Ritz-Carlton Shanghai Pudong achieved record high room rates. Moving on to sustainability. We remain committed to ESG. Please refer to this slide and the appendix for more details. Next, I will summarize the market and business prospects.

14:48 In Hong Kong, Trade and domestic demand will drive steady economic growth. Incoming talents and executives will support housing demand while the city's super connected role will help support office demand. On the mainland, we expect strong exports and policy measures to support resilient economic growth. Measures for improving quality of homes will foster healthy development of the housing markets As for the group's business prospects, with our strong financial position, we can replenish the Hong Kong land bank when opportunity arise.

15:34 We will maintain prudent financial management as always. On property development, with our trusted brand, we will drive sales through quality and innovation. With a strong launch pipeline in place, we will continue to roll out new residential projects catering to diverse buyer segments. On property investment, we will adopt proactive strategies to upgrade our existing properties and aim for high occupancy. New projects like IGC in West Kowloon are expected to generate rental income gradually. I will end this presentation by highlighting a quote from the Chairman's statement.

16:22 The group will continue to invest in the city's future through building landmark projects that foster both economic advancement and social progress. By harnessing technologies to enhance productivity and competitiveness, the group will deliver quality properties that are modern and customer-centric, meeting the evolving needs of residents and talents. Guided by its time-tested strategies, and Long-Term Vision. The group will continue to strive for sustainable long-term growth while contributing to further development of the city it proudly calls home. This is the end of my presentation, thank you.

17:07 Thank you for joining the briefing again. Let me introduce the panel to you. Starting from your left, Mr. Henry Lam, member of the E-Safety Committee. Mr. K. W. Low, Member of the Executive Committee Mr. Alan Fong, Executive Director Mr. Christopher Cork, Executive Director Mr. Victor Lui, Deputy Managing Director Mr. Raymond Cork, Chairman and Managing Director Mr. Mike Wong, Deputy Managing Director Mr. Adam Kwok, Executive Director Mr. Eric Chung, Executive Director Mr. Frederick Lee, Good Chief Accountant May I now invite our Chairman and Managing Director, Mr.

18:03 Raymond Kwok, to share the key message of today's briefing. Mr. Kwok, please.

18:09 Good afternoon. Ladies and gentlemen, thank you for joining today's polls results briefing. Before we go into the Q&A session, let me highlight some of our key developments. Although the global economic environment remained volatile and uncertain, the group continued to achieve business growth. For the year under review, we achieved strong contracted sales in Hong Kong of about $38 billion in attributable terms. Over the next 10 months, We are going to launch more new projects, providing mainly small to medium-sized units. They include a new phase of Sierra Sea, and new projects in Tung Shing Lei, Tai Wei, Kutong North, and City 1 in Sha Tin.

19:03 As you may already know, we are excited about our successful bid last week for the Tuen Mun A16 Station Package 2 property development project. This large-scale residential project is next to a future MTR station, making it one of the few new railway topside projects located in a very mature community. Together with the Package 1 project we won late last year, we are confident that we will build another landmark residential cluster Offering comprehensive amenities and exceptional transport connectivity in Hong Kong. With our strong financial position, we will continue to replenish our land bank when good opportunities arise.

19:56 Meanwhile, the Group is moving forward with eight projects in the Northern Metropolis, which will provide some 10,000 US Central Units in Essential, Commercial and Transport We shall continue to support this strategic development, closely monitor any updates and explore potential opportunities. On property investment, we are furthering the transformation of West Kowloon into a unique hub of financial services, wealth and asset management, art and culture, retail, Leisure and Entertainment in Hong Kong.

20:43 Our IGC office towers atop the high-speed rail station were completed during the year. We've handed over one tower to our tenant UBS earlier this year. A number of renowned insurance companies and multinational corporations, including AXA, have also committed to leasing space in IGC. The podium mall at ITC has been named Stage ITC and will open in phases starting from the end of this year. The Artist Square Towers next to M Plus Museum will be completed in 2027. As part of its continued investment into the West Kowloon Commercial Cluster, we also plan to upgrade and renovate two luxury hotels These new projects are joining ICC, our two luxury hotels and the shopping mall to form a commercial cluster of around 8 million sqft.

21:49 With fewer new supply of Super Grade A offices in Hong Kong over the next few years, we expect our IGC and the Artisan Square Towers will be able to capture tenants-at-demand for their upgrade and future expansion. For our retail portfolios in Hong Kong, tenant sales went up and the malls maintained high occupancy. We re-blended a mall in Kowloon East and named it The Angle. Jobs are opening gradually. Our loyalty program, The Point, achieved a strong growth in terms of member spending. The growth in spending was even stronger for the VIP program, The Point Gold.

22:38 For our mainland properties, the group achieved attributable contracted sales of about $2.2 billion. Tenant sales at major malls grew steadily. In Shanghai, our ITC Mall will open in phases from the second half of 2026. The new ITC Tao Bee is the tallest building in Puxi. This office landmark has started taking in tenants. In Guangzhou, our group increased its stake in the IGC Mall and Conrad Guangzhou Hotel at Tin He Plaza to 100%. We will continue to ride on their prime locations and mature operations to further enhance their business performance and overall asset value.

23:26 Looking ahead, The group has full confidence in the long-term prospects of the nation and Hong Kong. Under the National 15th Five-Year Plan, Hong Kong will further strengthen its role as an international financial centre, as well as its role as a superconductor and a super value adder. And Hong Kong is going to announce its first Five-Year Plan soon, which will serve as a strategic blueprint for the city's economic development. We will capitalize on these opportunities and continue to develop landmark projects, providing modern and user-centric properties and services that not only foster economic advancement, but also build a better community for Hong Kong.

24:17 Thank you. Thank you, Mr. Korg. Without further ado, let's open the floor for questions. Before raising your questions, please identify yourself and the company you represent. Now let's have the first question, please. The gentleman in the left side.

24:37 Thank you. This is Carl Chen from J.B. Morgan. First of all, very much look forward to seeing our new office in Hattie Square next year. Okay, so I have four questions. The first one is about the Hong Kong residential market. Just curious, right, because we have seen a very good year. Home prices have been up by 12%, 30% year to date. But we do see more potential overhangs or headwinds in the second half. For example, the U.S. interest rate is still quite uncertain whether there may be a hike. And also, in mainland China, there could be a bit more tightening in the cross-border investment control. Just curious in this context, for Seng Hong Kai, how should we consider the pricing strategy? Would we consider doing a bit more price adjustment to stimulate sales? and especially for Kutong project, how would this affect our strategy in Kutong? And also just generally, what's our general outlook for the Hong Kong home price and volume for this year and maybe next year as well? So that's my first question on the Hong Kong residential market.

25:38 The second question is about Hong Kong DP contractor sales. Just curious, after exiting our target this year, what's our latest Hong Kong DP contractor sales target in the next financial year? And for the long term, what would be the reasonable long term normalized annual sales level in your opinion? So that would be my second question on HKDP. The third question is about margin. So I think our investors are really glad to see that we see a bit more improvement in HKDP margin. Just curious what's our guidance for the next financial year and maybe for the next few years as well? And because we all remember that in the good old days, we used to have more than 30% margin, right? Just curious, do you think a return to more than 30% margin is realistic in the near term or medium term?

26:29 So that would be my third question on margin. And my fourth question, my final question is about capital allocation. So what's our latest guidance on dividend? And would management consider revisiting the dividend policy? For example, would you consider shifting to maybe based on rental income or maybe just like for some other companies, they may just adopt a progressive absolute DPS. So would that be something management may consider changing in the near future? And finally, do we have any plans to issue new shares, convertible bonds, warrants to optimize the capital structure in the near term? So that would be my four questions. Thank you very much.

27:11 I've answered the first three questions regarding the market. The Hong Kong residential market remains in strong momentum in the first half of this year. I think it's quite natural to see that our transaction modulated a bit in recent months. But when we look back at the history of Hong Kong, each public cycle should last for a couple of years, and we are only at the very initial stage of recovery. And backed by the influx of talents and students, we have also seen that a vibrant leasing demand even came earlier in this summer. Actually, our residential rents have exceeded the previous peak in 2019 and the upward trend continues.

28:04 This will induce more investors on buying collect and also renters becoming home buyers. As the demand for residential accommodation sustain, and notably, the infancy for sale among developers are also shopping. That will support the pricing of new projects. I would expect more volume in the coming months due to a couple of new projects. So overall, we would expect that the market would continue to perform solidly for the rest of the year and the next. Regarding the tightening of the capital outflows, I think it will only hinder Sze Wai Lee & Co Ltd for quite long and may even set up local company here.

29:28 Example, I've seen that we have a couple of transactions in Victoria Harbour and Cullinan Harbour. If those capital from the mainlanders, they are actually becoming Hong Kong permanent resident already. So overall, as long as Hong Kong remain attractive as an international financial centre and wealth management sector, and together with the low tax regime and very limited supply of high quality development, I think our market can sustain in a similar strong momentum in the longer run. On our sales plan, we have a very successful launch of Lime Spark in Chin Van earlier this year, Garden Regency, which is also very well received.

30:26 In the coming 10 months, we have a couple of projects, namely the Sierra Sea Phase 2 Sea in this month, and also the Tong Hsing Lee Project Phase 1A next to the Yoho Mall at the end of the year. In the first quarter of next year, it would be our Tai Wai residential project, and also the Koo Tong Phase 1. In second quarter, it would be our Siu Leung Yuen project next to the MTR station and also the Tong Seng Lee project Phase 1B. Apart from this, you may also note that we shall continue to dispose our luxury units like Kuala Lumpur Sky and Harbour and also Victoria Harbour in the Lock Point Coastal. You may also notice that we have created a lot of transactions on premium price of the area.

31:17 We have achieved a total sales of $38 billion in last financial year, which is exceeding our target. And for this year, we are setting our target as $33 billion, taking into consideration of some uncertainties of pre-sale approvals. Certainly, we hope we can get all our sales content earlier so that we can put more revenues on sales. On the margin, I think currently, under the current market conditions, I think a 30% price margin may not be realistic. As you know, land sales have been very, very competitive.

32:03 But overall, as I said, for mass projects, we have like Sierra Sea and Tong Seng Lee project, which we can aim for a quicker market. As a turnover and for luxury project we have Kulinan Harbour and Victoria Harbour. Overall I think we can achieve a good and reasonable margin in the long run. The last question on Kutong. We are going to launch the first phase of the Kutong project next to the station in early next year. Our project is occupying the most prominent location among all the peers as being closest to the MTR station and also with a public transport interchange below. Apart from this, we also have a sizeable commercial space which provides a very comprehensive amenity, different amenities and also a vibrant lifestyle for all our buyers. So we are very confident on the future launch of the project.

33:13 Thank you.

33:15 For the residential sales market in Mainland, in the Mainland, Adam, would you like to comment? The Mainland residential market, yeah.

33:26 I think overall, in the Mainland, I think you all are aware that the government has been coming out with more and more supportive policies for good homes, and to stabilize the market. On top, there's also use of MPF. The China equivalent of Shebao that they could use and get cheap mortgages and so on and also there's a relaxation of all the price restrictions basically and all the sales restrictions. Of course there's a new rule that we can talk about later in August 28th but I think overall these since second quarter we've seen a strong recovery well in especially in tier one cities and in strong developers and I think that flight to quality will just continue with buyers gravitating towards are all reputable and financially strong developers and also in prime locations.

34:16 Fortunately for us, our projects are mostly in tier one cities. In the next 10 months, Victor and the team will launch a few premium projects. And one is after the success of Hangzhou, including the residents and the Cluton West Service Apartments, Cluton East on the east side, will be launching a brand new service office and it's already selling and it's quite well. Also, hopefully, subject to government pre-sales, we'll be able to launch Lake Geneva, Shou Chou, Wu Pin Sei Gui, which have sold very, very well in previous cases. Of course, Chang Hai Arch, which have sold very well, will launch some houses. And then new projects we'll launch is Zhou Vo Town in Chengdu.

35:02 And then obviously our focus is also remaining inventory, especially in Guangzhou and Foshan. So we have a strong pipeline coming up and a lot of that is in the tier one cities. Thank you.

35:13 On your fourth question about dividend policy, it's always been our policy to pay 50%, 40 to 50% of our earnings per share. With rising earnings, we should be paying more dividend if we continue with the dividend policy of 40 to 50%. In any case, I think it has been our policy and we need Thank you. May I have the next question please? The gentleman in the grey blazer.

36:10 Thank you, management. This is Mark from UBS. I got four questions. I think the first question is regarding to our upcoming new office. We are moving to the IGC on next month. So first of all, first question is related to West Kowloon. So what is the latest leasing and rent update for IGC and Art Square? And what is our expected office contribution? The second and third question I would combine, what is the rental reversion outlook and tenant sales for Hong Kong office and retail, maybe breakdown by the types of asset and location as well. And lastly, the question is about on the capital recycling. So are we planning to acquire any retail asset, for example, MTLC is planning to sell maybe the CityLink or Popcorn. Are we interested in buying that?

37:01 And also following the dynasty codes, are we planning to further divest any IP in Hong Kong or maybe even in China? Thank you.

37:10 Well, there are many questions asked. Maybe KW, can you respond to the question on the IGC?

37:16 Yes, Chairman. I'll try to answer the first question about West Kowloon IGC. You know, a very warm welcome to you moving into You're a very exciting home in West Kowloon. No other developments in Hong Kong matches IGC and Artist Square in terms of the unique combination of the gateway connectivity. Obviously, train connections to both locally, regionally, and also to the international market. And the scalable because of the size, because of the floor plate, and the footprint is very scalable, very high quality, you know, grade A office supply over there.

38:12 And also the entire neighborhood, in fact, is a next generation workplace, you know, with flexibility and also the amenities, the greens, the outdoor, and a lot of things that we are still working on. And perhaps lastly is The industry-leading sustainability. So we got all the accreditations that very discerning end users, I'm sure including UBS, they're looking for. They are all there. So in short, that will make West Kowloon, ASE, IGC, the clear choice for corporations that simply demand the best.

38:58 So far tenants' commitment from the financial and wealth management sector has already taken place and is going up. And also we have banks, asset management companies, funds insurance company, you know Mr Chairman mentioned EXA and you know maybe to name a few more AIA Sun Life FWD and so on they have already committed you know coming into the project and given the scale of ISRD IGC project we believe occupancy will be achieved through a safe approach we were getting there while FY27 will mark the initial revenue base. We expect a steady and meaningful ramp-up in subsequent years.

39:54 Now, turning to AST, it's on track for completion in 2027, with anchor tenant JP Morgan is committing, or is already committed to 250,000 square feet in that particular project. And that represents 37% of the office through Toa Office GFA of AST. And this, without doubt, is a strong vote of confidence in the AST project.

40:27 Eric, can you put some colours on how to check IGC?

40:31 And then maybe Henry, later you respond to the question about IGC more.

40:39 To change IGC, Eric.

40:41 Okay, I think the more important points to notice, because everyone is talking IGC, you know, it's good quality, and I think UBS and J.P. Morgan can take office there. I'm sure that you have studied all this, our specification and also our quality. But I think more to the point is, I think mentioned by Chairman Peevesy, Actually, the West Kowloon is going to be a very important area, not sort of a replacing central, but because of the connection to the Big Bay area, so it's a unique position. As an example, I think the reason why all these insurance companies are taking offices there is because, I mean, nowadays the times are coming from the Big Bay area, from Guangdong and everywhere, because of our unique connection to China, even to Changsha, it's within three hours.

41:30 So also I think you'll possibly notice, Seng Huang Kai actually owns over 7 million square feet of offices in that area with two very prestigious hotels. And what we're going to do in the next phase is actually connecting all this, our previous portfolios together, physically and also, you know, theoretically too. We are actually building an AI All the management centres in ICC, and that centre, apart from managing ICC, will also manage ICC and also the portfolio in West Kowloon. That will be sort of like a regional management centre which not only will make our building more sustainable, more green, and also it will help our tenants to connect and use each other's facilities, which possibly will be a first in Hong Kong. So we actually are in the process of building that and then it will possibly be completed by the end of this year. Then we will have a big announcement and then what we are doing in West Kowloon and how we're going forward and our vision of building not the next central but another central which probably we know serving different types of clients.

42:48 As Eric mentioned, the IPC is a very unique project in Hong Kong. You can also see many other comparables actually. It is a gateway connecting to the Hong Kong mainland and the world. It's sitting on the top of the high-speed train station, convenient access to the four lines as well. It's further enhanced by 1.5 km, what we call the skywalk, connecting the project to the waterfront and the surrounding communities. Phase 1 of the mall is scheduled to be open the end of this year. And the leasing program is well in check. I'm happy to mention that almost all the space in Phase 1 mall is fully electrified now.

43:37 So that in the first phase, it will provide some eateries and other without options to our office tenants and visitors. To open, in addition, in the Phase 1, we also open the... will be dropped off on the ground floor so that it will further facilitate visitors to and from the high-speed train station and malls as well. In more, I think, more fashion, lifestyle and restaurant will be coming to Feizhou when it is targeted to open in the end, in the late 2027 as well. Thank you.

44:19 And also your question on Dynasty Court. For Dynasty Corp, we still have a number of premium units for sale and currently we don't have any plan to dispose out the IP. However, we shall keep our portfolio in active review in line with the market condition.

44:40 Thank you.

44:45 On the retail, on the rental reversion for the retail portfolio for last financial year, we've seen that The pressure on rental reversion has moderated and we expect the trend to continue to improve in the coming year, riding on the fact that the retail sales at our malls have outperformed the market, especially in the last six months, with Jewelry and F&B trades showing particularly strong performances, while our occupancy also remains high. I think in the coming year, we are CW, maybe you can comment on the reversal aspect.

45:57 The grey office market has seen meaningful improvement particularly in core areas including West Taolung and Central and our office portfolio continue to benefit from this gradual recovery trend and for example a spot lens that I see in trending upwards Continuously and occupancy is now very close to 100%, if not 100. And ICC maintains a very strong tenant base of global investment banks and financial institutions with stable rents and robust occupancy of now at around 92%. And we remain positive on the 12-month outlook.

46:46 The market definitely has been improving and we believe it will continue to do so. Current momentum is encouraging and while positive rental reversion will take time to materialise, we expect it to gain traction as the recovery importance across more sectors is not just restricted to the financial services sector which are very hot at the moment. but certainly we have also seen recovery in other perhaps manufacturing in other business sectors across the board. So we believe this will continue and that will improve the overall market situation in the coming months.

47:41 So that's about the overall Hong Kong office market. Thank you.

47:46 And on the prospect of buying more retail properties, of course, I think we would like to expand some of our clusters, especially retail clusters that are very successful. But I think we have to follow our financial discipline. And also, we need to buy when there is an opportunity to upgrade and also to buy at a reasonable price, yeah. That's why I think always we like to keep some dry powder to make sure that when the right opportunity arises, we always have the dry powder to be ready. Thank you. Thank you. The next question please. The gentleman here.

48:33 Thank you. This is Gretchen Chen from Citi. So I have four questions on the mainland China business. The first is about the residential sales. So given We just mentioned we have a very visible pipeline, which is our Mainland DP contract sales target, as well as the margin guidance for financial year 2027. And we have a few changes in the P-Sales regulation, how would you feel the impact to the Mainland market in China and our business. Second thing is on the land banking. So the high-end residential property has been set up very well in tier one cities. You consider to replenish any land bank in the T1 cities? The third one is more on the ITC.

49:19 So can you please share some pre-lacing updates for the three ITC Tower B and the ITC Moore? When do you expect them to deliver a meaningful profit contributions? And lastly, it's more on the commercial land lease renewal. So Guangzhou and Shanghai has recently classified their renewal mechanism for the commercial land use rights. So how many of our investment portfolio in mainland China is approaching to the land lease expiry? And how do management assess the impact of the land premium payment upon renewal as well as on the asset valuation? Thank you.

49:58 For the red mainland residential sales, Adam, can you comment? Sure, thanks.

50:05 I think So I think on your point, your first question is on deep new margin guidance, right? And given that we have quite some, I think it really depends when you buy the land. Fortunately, well, good for us that we actually, the last time we saw some land was in 2021.

50:22 So we haven't chased the market high.

50:24 And you can see a lot of mainland developers making provisions nowadays are usually lands bought in the past two years and so on. And so thankfully, our entry time by large is good. and that on the positive side, with the market recovering, we are using this window to sell our inventory more. I expect post-tax a healthy double-digit 15s margin for our mainland divan projects overall. Of course, some of the more premium stuff that we had, we'll sell for higher margins like the Suzhou Villa, but of course, that's also subject to the government, hopefully, more and more encouraging signs to relax the price. In terms of the regulations recently, I think August 28th, I think there's a few things we haven't noticed. First is that it will be painful for many developers.

51:12 I think that the crux is that they are releasing all the pre-sales funds. Well, there's no more pre-sales ongoing, and the banks are releasing the mortgage and the funding only at completion, right? So this delays and shifts the timeline of cash collection by at least two years. The old model of high leverage, scale first model will be much slower and it will focus more on handover quality and so on. So I think the survival of the fittest is probably the right face. And so I think the industry consolidation, which is happening already, will just rapidly increase. Fortunately, I think for us, this means there's a flight to quality. I think a flight to quality to a lot of the SOEs that we all know and some specific developers hopefully like us. and so I think buyer confidence and purchasing power as well as actually let's not forget availability of bank financing because now all the projects needs to find a bank a specific nominated bank to provide financing right so I think not only the buyer's confidence purchasing but the bank's financing will flow to developers that have that they trust so and then the last point I would make is the supply-demand dynamics I think with these new laws I think this will improve the supply-demand dynamics and have better price expectations because Obviously, developers will be more cautious in buying land, and they'll be probably less aggressive in buying land, so there'll be less supply. It will help the whole supply-demand situation, and also will give the inventory some time to clear out. So, and I think most importantly, this will help greater protection for the home buyers, right? I think that's the point of the policy to begin with, and

52:46 thankfully, the flight to quality will help us, and a lot of the stuff we're selling now actually are already eaten out. They're already completed projects, so we are not that affected by it. Thanks.

52:56 On the land lease expiry issue, Eric, can you?

53:01 Firstly, actually we don't have any building in China that has an imminent problem of land lease release. Secondly, I think that is actually a recommendation, not yet a policy. So we have talked with a number of friends in both FOE and SOE and also applied sector. I think everyone is adopting wait and see sort of approach to this. And I think also Chinese government is very proactive. I think they will sort of examine this to see the market reaction and then maybe it will change in future.

53:36 I can comment on the retail portion.

53:44 Leasing is progressing in line with our staged opening plan. So following the earlier opening of the F&B zone in the office section, we recently opened the Metro-linked floor, which provides a variety of F&B trades, grab-and-go zone, some fashion and some lifestyle options as well. And since the opening of the Metro line, which actually connects directly into the office, We've seen a clear uptake in the traffic at our mall. We will expect that meaningful profit contribution will come later in the later part of 2027 as we open more of the mall and events begin to stabilize.

54:34 I think we remain long-term very positive about this shopping mall given its KW, can you comment on the ITC Tower B?

55:07 The building, obviously, in itself is already a landmark because it's the tallest building in Pusis with 370 meters tall. It also benefits from superior transport connectivity. Christopher just mentioned opening the connection with the metro station. It's serving three metro lines, and line number one, actually, is the most popular one. Linking the south and north, so the number of passengers is the highest. And also how it has the most superior specifications in the market.

55:55 And that will meet the most stringent technical and quality requirements. You know of discerning you know tenants and making it ideally suited for the fastest growing industry and we believe we include high-tech manufacturing, AI, biotech and etc. Of course financial and professional services including legal they all find you know the project you know very decent one and So actually we are in talk with many of these people at the moment, some already committed and some are, we believe, about to commit with various sizes coming from different directions. Of course due to the scale, the occupancy, we believe will be faced.

56:46 So I think in short, we can say that the leasing activity is gaining traction and We believe that will help the leasing of the project in the coming year future and we will see definite improvement in the occupancy with the mall which is a big part of the entire ITC project and the traffic connectivity we believe is as a whole is unique in the market. And of course, Xu Jia Hui is a historic part of Shanghai with lots of stories, but a wealth of history about Shanghai.

57:34 And that makes the whole neighborhood very interesting. And not to mention the opening of our Enda Hotel that's already serving the neighborhood. And we have seen You know, many of our tenants, hopefully future tenants as well, they are using the hotel facilities over there for one reason or another. So, you know, that hotel, you know, actually will serve, you know, not just, you know, business tenants, but also, of course, you know, other people, you know, travelling to Shanghai and prefer to stay in a location where it's very rich, you know, in heritage and enjoy, of course, you know, the design of the Enda Hotel and also the entire project. So the gradual opening of different parts of the ITC project will be very welcome by the business community as the general community as a whole.

58:32 Eric, you are the project director for our ITC project. Can you share with the audience your vision of ITC in Shanghai?

58:42 I think working a big project in China, you look at a few things. The number one is the real district. I think KW said Xu Chao Kuei is one of the most important districts in Shanghai. I think the more important is the local government. The district is willing to work with us. I think if you go to Xu Chao Kuei today, you will see that actually they have built a lot of infrastructures and actually revamping all the existing SOE buildings to make this a new center. I think the whole districts Upon our completion, as well as the renewal of all the older buildings together with the government building, all the inbound structures, I think it would be one of the most attractive areas for business in the whole of Shanghai. That's number one. Number two is actually the building quality.

59:29 I think just like UBS and J.B. Morgan, our ASD and IGC project, our first tenant for the Taobi is actually Amazon. They are actually having seven laboratories within our premises, taking over 100,000 square feet. So their requirement actually is no less than YouTube. So it's very difficult and I think if we can accommodate Amazon's laboratories, I think we can accommodate everyone. That's very important too. The third one, actually, apart from the sea metro connection, which is all under one roof, it's a seamless connection, and the government actually is planning to do two more, building two more lines connecting the Siu Chau Kueh District to our meeting. So I think in future, there will be, in five years time, there will be five lines. So it will become really a very, very important district. I'm not saying that it's passing on, So overall, I think we have a vision 10 years ago. I think basically we have delivered the hardware.

1:00:34 And in the next 1-2 years, we will deliver the software. We will deliver the tennis. Thank you.

1:00:55 And by the way, the Enders Hotel is the best one I've ever visited. Enders Hotel. If you haven't visited, you should visit. It's a very nice hotel. The best Enders I've ever visited. Thank you. Thank you. Any other questions? The gentleman on the right-hand side.

1:01:17 Hi. It's Simon Chung from Goldman Sachs. I have three questions. Two in Hong Kong, one in China. The first one is, you mentioned you have eight projects in Northern Metropolitan, but we noticed that you did not participate in the Hong Shui Kieu projects. What are the key considerations? Would you have any appetite to maybe beat more projects going forward? That's the first one. The second one, Big Development Bureau has recently launched Fulness Port Racial Pilot Scheme. What would be your considerations in terms of maybe ramp up your big development projects in Hong Kong? And then the last one is more on your rental properties. Just broadly speaking, how you are seeing the retail sales and the rental reversion trend in China? for both retail as well as office.

1:02:09 In particularly, I think for some of your office project like Hangzhou IFC, Guangzhou Southern Station project, what is your outlook over there?

1:02:19 Thank you.

1:02:23 Maybe I'll deal with two questions on Northern Metropolis and the urban area renewal incentive recently promulgated by the government. Firstly, the Northern Metropolis, I'm sure everybody is knowing that this is a grand vision, great initiative, pushed by Hong Kong government. And as mentioned by our chairman, we are undertaking to deliver about 10,000 domestic units with all the supporting commercial and transport facilities. But one thing I would like to mention is All these projects are being built mostly from those panels or leases where the premium is relatively low.

1:03:14 We enter the market in a low market so that we're expecting despite there might be a challenge on the market for the northern metropolis when the infrastructure or the community is not fully developed but the good thing is that we enter the market low Secondly, you mentioned about Hong Shui Kieu, why we didn't bid for the first project. Indeed, we tried hard to find one, but we couldn't. Then we chose not to bid, because we couldn't submit a competitive bid. On the urban area, the Member recently promulgated a policy to incentivise for In the old and dilapidated area in the urban areas in the districts, they try to give 20% bonus for the landowners.

1:04:17 Obviously, we welcome the relaxation of this policy, but as our land bank, we do not have too much land bank in this regard. But obviously, we are very open-minded and we welcome this policy and we are looking for Projects which when cases arise, but obviously we will stick to our financial discipline.

1:04:43 Actually on the Hong Shui Kieu site, we did spend a bit of time in trying to locate a good partner. Eric, do you care to comment?

1:04:49 Yeah, I think you know the detail of the tender is very different. It's not a very straightforward sort of land bidding tender. You need to find a partner with a certain type of industry. And we tried very hard to locate that and then we talked with a lot of people, you know, and then somehow, you know, we cannot make the mathematics work. So we decided not to pay them.

1:05:12 I think this brings up a good point because the partner also brings up the development cost for, say, a ENT building in Northern Metropolis is not cheap. And they have to undertake some of that cost, right? And so... If the reforms we're talking about in electrical is happening, which is part of it is reforming the building standards and material and having new breakthrough new building codes, I think that would overall hopefully help the attractiveness of the area.

1:05:44 I think for the mainland retail market, if you just read the headline news, I think the sales momentum is a pretty mixed picture across But fortunately, our portfolio continues to hold on quite strong. Tenant styles in our major malls in Shanghai, Nanjing, Guangzhou as well, all achieved decent growth, outperforming the market. And we've seen our portfolio continues to hold up, and there's a mild positive rental reversion. So in particular, I think for Shanghai IFC Mall, which is our most important mall. It continues to command a leading market position as a premium mall in Shanghai and it achieved double-digit growth in sales as well as rent reversion and maintains a high equity.

1:06:37 Of course, I think it's not, we're not saying it's an easy market, right? There's a lot of competition and so I think the teams have to work extra hard in this market. But I think we believe that On top of leasing, we put more resources into strengthening our ERP program, refining our tenant mix, and working together with the tenants to drive up their sales and organize better events and attract more traffic to the mall. That will help. And at the end of the day, I think when there's oversupply, which is a fact in every single market, at the end of the day, I think All our important office projects are integrated projects with first class hotel,

1:07:52 with good mall and with excellent railway links and also in established locations in tier 1 city or tier 2 city. I think our formula of building a sizeable integrated project with a scale and also with a hotel, office, mall and railway link actually is a proven formula. I think increasingly, I think over time, I think it would be a proven successful formula. And Actually, even on top of the hotel, we may consider building some tiles of service apartments for rental. So therefore, I think the projects that we have and we are finishing are all those projects that will succeed over the long term. Thank you.

1:08:41 Thank you. This concludes today's analyst briefing. Thank you all for coming and hope you enjoyed the presentation. There are some refreshments outside. Please stay and enjoy.