Wharf Holdings Stock

Good afternoon, everyone. A very warm welcome to Wharf Holdings Interim Results Briefing. I am Angela from the IR team. You can download the PowerPoint presentation using the QR code displayed on this LED backdrop. Today, our management team includes Mr. Stephen Ng, Chairman and Managing Director; and Mr. Kevin Hui, Director and Company Secretary.

Before the PowerPoint presentation and Q&A section with the analysts, may I first share a few things about our backdrop. As some of you may know, we used to feature a different backdrop for each results presentation. This time, we are showcasing The Monet, our new luxury residential property on The Peak in Kowloon. And there is also a special message in the backdrop. This 140 year anniversary backdrop marks an important milestone in the Group's history. Founded in 1886, Wharf Holding today stands as the seventh company with the longest history in Hong Kong. So in celebration of this milestone, the Board has reserved to declare a special dividend of HKD 0.20 per share. Together with the interim dividend of HKD 0.20, total distribution doubled to HKD 0.40 per share.

So let's go back to the PowerPoint presentation. The headline is operating and underlying profit increased by 6%, excluding the investments. Since the last quarter of 2025, the Group has been unwinding part of the equity portfolio, which result in lower Investment Income during the reporting period. Excluding the Investment Income, group revenue increased by 2%, while operating profit and underlying net profit both increased by 6% despite a challenging operating environment. Mainland IP delivered stable results, while the shortfall in Mainland DP sales was covered by stronger contributions from Hong Kong properties. In addition, our Logistics business remains resilient despite the ongoing global disruptions.

So over the years, we remain focused in premium properties across Hong Kong and Chinese Mainland, which are the major contributors to our total assets, revenue and group revenue -- I mean, underlying net profit. Our earnings are underpinned by a substantial recurring income base from Investment Properties, Hotels and Logistics, while our Hong Kong residential development pipeline provides growth opportunities. And here shows more details on the financial performance, reflecting lower dividend income after unwinding part of the equity portfolio, underlying net profit decreased by 17%.

During the reporting period, Hong Kong DP contribution overtook Mainland DP, driven by higher sales recognition, while Mainland DP continued to be affected by a weak market condition and net provision. Mainland IP remained the largest and stable contributor, accounting for 67% of underlying net profit. Our listed equity investment amount to HKD 30 billion after partial disposal. The portfolio continued to preserve capital and generate dividend income. After recognizing a prudent investment property revaluation deficit of HKD 2 billion, group profit amount to HKD 48 million. So including the special dividend, the total dividend distributions doubled to HKD 0.40 per share.

The strong balance sheet remains one of our key strengths, and we have achieved net cash position since the end of 2025. Excluding the debt from Modern Terminals, net cash increased to HKD 8.6 billion, mainly resulted from the disposal of HKD 3.2 billion equity investment with HKD 0.4 billion of surplus. Average interest rate was 3.1%.

In the following slides, we will walk through the performances of our business segments. In Hong Kong, overall residential market saw meaningful gains in price and volume, supported by solid local demand and continued talent and capital flow. Attributable Hong Kong DP revenue increased remarkably to HKD 1.3 billion and operating profit to HKD 166 million, primarily from the sale recognition of House 1 at 1 Plantation Road, which is our ultra-luxury project on The Peak and Victoria Voyage, our 30% owned JV project in Kai Tak. Contracted sales increased to HKD 1.1 billion. At period-end, our Hong Kong residential land bank amounted to 2.7 million square feet with net book value of HKD 56.6 billion. Notably, this includes our valuable Peak Portfolio in Hong Kong and Kowloon. The Monet, our Peak project in Kowloon comprising over 400,000 square feet GFA is undergoing preparation for sale launch. Other key projects under development include Mansfield Road project on the Peak and Kowloon Bay redevelopment project.

Moving on to Mainland Development Properties. Following our significant reduction in exposure since 2019 and the continued weakness in the market, Mainland DP revenue declined to HKD 238 million and operating loss was reported. At period end, unsold stock was 0.7 million square meters and net book value amounted to HKD 15 billion. Our remaining stock is largely concentrated in office and the demand continue to be subdued. Net order book amounts to RMB 428 million, including the sales of Chengdu IFS apartment units, which are being progressively released for sale.

And for the Mainland Investment Properties, Mainland retail market remained soft in the first half. However, the group's retail revenue remains resilient, supported by the performance of our flagship IFS Malls. On the office side, vacancy remains elevated under prolonged oversupply. With a stronger Renminbi providing some support to our reported Hong Kong Dollar results, our Mainland IP revenue and operating profit both increased by 1% to HKD 2.3 billion and HKD 1.5 billion, respectively. The Group continued to optimize tenant mix to drive more performances at the IFS.

At Chengdu IFS, an arcade area is being converted and is expected to be complete later this year, introducing a refreshed lineup of brands. Excluding the area under conversion, occupancy stood at 97%. And at Changsha IFS, mall occupancy was 98%. Recent highlights include the expansion of HERMÈS and BRUNELLO CUCINELLI into duplex flagship. And POP MART is also set to open a regional duplex flagship later this year.

Moving on to Hotels. Wharf Hotels currently operate 16 hotels under Niccolo, Marco Polo and Maqo brands, mainly in Hong Kong and Chinese Mainland. Park Hyatt Changsha is the group's only hotel with outsourced management. Segment revenue increased by 4% and operating loss narrowed.

Turning to our Logistics Infrastructure. In Hong Kong, Modern Terminals' throughput declined under persistent pressure from overcapacity in South China and regional competition. Modern Terminals' revenue remained stable, but operating profit decreased. Against this challenging backdrop, the Group proactively secured new businesses, and they are scheduled to commence in the second half.

Looking ahead, let's turn to the general market outlook in Hong Kong and Chinese Mainland. While Hong Kong continues to benefit from talent and capital inflows, recovery in the Mainland remains relatively uneven with ongoing challenges in the property sector. At the same time, geopolitical tensions and external uncertainties continue to weigh on the economic outlook. Against this backdrop, we remain focused on maintaining a strong balance sheet and disciplined approach to navigate market volatility.

In the last part of the presentation, we will go through our efforts and performance in sustainability. Our sustainability efforts earned a strong ESG ratings and Green Building Certifications, including LEED Platinum. Last year, the Group's near-term science-based targets were validated by SBTi, which marked an important milestone for our sustainability journey. As of June this year, sustainable financing made up over half of our financing. More details about our sustainability efforts could be found in the PowerPoint presentation.

So that concludes my presentation. We will proceed to the Q&A section with the analysts.

[Operator Instructions] So now may I invite Mr. Ng and Mr. Hui to come to the stage, please. Let's have the first question from Karl, Bank of America.

Two questions. First is on the Hong Kong DP. Just curious what you're seeing in the marketplace, especially in the Luxury segment after some of the recent enforced action by Beijing in terms of taxation. And has that sort of changed the sort of potential buyer interest? And what does that mean for the timing of launch for your Kowloon Tong project?

And second is related to capital management after I think the shareholders were very happy with the hike in dividend payout for 1997 HK. And for 4.HK, the company's balance sheets are obviously very strong, and we do appreciate the special dividend in the first half. Just wondering now that you're closer to monetization for Hong Kong DP as well, is there any sort of intention to perhaps pay a special dividend to pay out some of the cash or step up some of the payout more tied to the IP earnings?

Okay. Good. Thank you. First question, we've seen no sign that buyers' interest in ultra-luxury properties in Hong Kong has changed. In fact, we've been in discussion with some buyers for some of our ultra-luxury properties on The Peak. And hopefully, we'll be close to some deals. They continue to be seriously interested in rare and valuable properties in Hong Kong. So that may be an interesting and favorable sign.

Capital management, yes, we do have a net surplus cash. And as I think Angela referred to in her presentation, we're looking at reinvesting it. How and where? Our first preference is Hong Kong and our other preference is properties. That's what we've been doing for years and years. In fact, you may or may not have noticed that a couple of weeks ago, there was an urban renewal project in To Kwa Wan. We submitted one of the bids, 1 of the 7 bids or so on. We didn't win. So maybe that's why I didn't catch a lot of people's attention. But we are bidding for land in Hong Kong. And if there are other good opportunities in Hong Kong, we would continue to bid. I can't guarantee you when we'll win, but that would be a good indication of where we would like to see our resources, cash resources invested in the coming future.

In the meantime, our Mainland DP business has been in the wind-down mode for some time, as you know. We don't have a lot of unsold stock left in the residential sector. And in the residential -- well I should say this, in the residential sector, which allow strata sale. We do have some residential stock, which is subject to on-block sale conditions. And that would become an institutional kind of sale rather than retail. As far as retail, residential, retail versus wholesale, as far as retail residential stock is concerned, we don't have a lot, and we don't see immediate opportunity to get back into that end of the market.

So in the meantime, we look at Hong Kong properties. The Board decided today to -- as a token of appreciation and to celebrate our 140th anniversary to pay a special interim dividend. We have not changed our dividend policy. We have not reviewed our dividend policy. This company and The Wharf REIC are two different companies. We are brother companies. We have different DNAs. We have different Boards, and we make different decisions. I don't think it would be fair to apply one company's direction to the other or vice versa.

The next question from Cindy, Citi.

This is Cindy from Citi. So first question, back to your dividend rationale. So wanting to better understand, like, say, for this time, why did you choose to make a special dividend apart from the anniversary any other reasons? And when reviewing that, why didn't you choose to increase your dividend policy? Why would you opt to maintain the stable dividend policy forward, or under what condition would you start to review your dividend policy? This is the first question.

The second question I want to touch a little bit on your Logistics business actually because I saw at your presentation just now, the mention of proactively securing new business to commence in the second half. Can you elaborate a little bit more on that? And also, has the shipping alliance restructuring impact stabilized for Hong Kong? And do you expect your operations to maybe bottoming out from second half this year or next year?

Thank you. The special interim dividend is precisely what it is, to celebrate the 140th anniversary, nothing more, nothing less. We didn't propose to the Board to review the dividend policy yet. And that is something we can look at in due course, although I don't want to lead you into or give you expectations because we haven't done that. We haven't thought about doing it.

As far as the terminal -- Container Terminal business is concerned, most of the "touch wood" most of the reorganization among the shipping companies is hopefully completed, at least this round. Hong Kong as a whole actually benefited from disruption in the Middle East in the second quarter. And we also picked up some ad-hoc volume during the second quarter. However, that's ad-hoc. What we referred to as new business in the second half has actually started. It started a little earlier than we had expected. It started in June, but it will come in progressively rather than all in one go. So the decline in Hong Kong volume in the first half has turned into a slight increase in July. And that's beginning to narrow the year-to-date decline. It may not necessarily be very high-yield business, but at least we get the business back. We get the volume back.

And with volume, we've got work to do, our staff and our contractors get busy, and that's the first step. So at this point in time, I think maybe it's still very difficult to predict whether by the end of the year, we'll be able to catch up to last year entirely because the new business is coming in progressively.

The next question from Mark, UBS.

This is Mark from UBS. I have two questions. I think the first question is also related to the special dividend. I think this year is to celebrate the 140th anniversary. But when I look back the historical report like 10 years ago and 20 years ago, we did not distribute any special dividend. May I know why we decided to issue the special dividend? And for the 1997, next year will be -- we marked the 10th anniversary. Should we expect a special dividend as well?

Yes. And the second question is more related to Stephen yourself because you have served the company for really a long time. This year, you are already 74 next year, turning above 75.

Thank you for reminding me.

Just on from a succession perspective, do we have any succession plan for both companies, et cetera?

Okay. Thank you. No, we not when we were 130 and not when we were 120. I didn't check, but I guess you must be right, you must have checked. And I'm not sure what we'll do in -- when are 150, but I'll leave it to the then Chairman to think about it. I am 74, and I feel healthy. And I'd like to continue to work. Frankly, I don't know what I should be doing without coming to the office. I still work hard. I'm one of the first employees to come into the office in the morning. Whether or not the Board will allow me to do so is a different matter, of course. And at the moment, if I were to run over by a bus tomorrow, hopefully not, obviously, there will be ways. It's -- it will be inconvenient, but the company will manage. That was the only question. Well, again, it's not a 1997 meeting. So I can't speak on behalf of Wharf REIC.

Yes. And I can confirm that Chairman is very hard working and very healthy. Please allow me to confirm. Yes. May we have the next question from Alpha, Goldman Sachs.

Two questions. The first one is you just mentioned you're more willing to deploy capital to Hong Kong DP, right? So I just wonder which districts will be more interested in replenish your land banking? And what's your appetite towards Northern Metropolis, which the government is very keen to develop?

The second question is on China retail. So I just wonder what's your outlook towards China retail sales growth in second half? And we actually note that the turnover rent in first half is actually lower year-on-year. So I wonder what are the key reasons?

Thank you. When we look at Hong Kong and Hong Kong as a whole, and Northern Metropolis is very much part of Hong Kong, and we will be including that in our studies. But we have no specific guideline whether we're investing in the East or West or North or South because Hong Kong is a small -- relatively small market. It also depends on the opportunity that arises or opportunities that arise. If it's a good opportunity, whether it's North, South, East or West, we will take a very serious look. Two weeks ago, as I said, this was Kowloon East, I guess, maybe Kowloon Central. There's something else this week, and that's Hong Kong Island. So there's no specific guideline, and we don't restrict ourselves to any one part of Hong Kong.

Retail in Mainland China, generally, the overall market in the first half was actually not as strong as a lot of people would have expected. And we don't see breaking out of it, the market breaking out of it in the second half yet. There's still a good deal of wait-and-see attitude. It may be because of the government subsidies last year. So once you've tasted government subsidy, you may have a tendency to wait for the next one. It's possible. I'm speculating. It's a little bit like clearance sale in Hong Kong or anywhere else. You wait for the clearance sale to get the best price. So -- but overall, the retail market in Mainland China, we think is -- we don't expect it to be breaking out of its mode in the first half.

[Operator Instructions] Jeff from DBS.

You mentioned that Wharf Holding submit a bid for the URA project in To Kwa Wan. Is this -- you submit a bid on your own or you collaborate with your sister company, or parent company Wheelock, in this tender? Also, if you look at the positioning of this project, it is slightly different from those projects, you are undertaking in Hong Kong, which is more high-end ultra luxury. In the future, when you decide to before they replenish the land bank, will you focus on high-end or you don't have any particular preference? What is the difference between Wheelock and Wharf Holding in terms of the land banking strategy? This is the first question.

The second question is related -- also a follow-up question on the China retail. The retail sales or tenant sales in China for your Mall declined in the first half. If so, is this something to do with the arcade conversion at Chengdu IFS?

Okay. Good. Thank you. The bid last week or 2 weeks ago, recent bid. It was submitted by Wheelock Properties on behalf of Wharf, 100%, all right? And that is what we expect to be the model in the immediate future, all right? We don't have a separate team. There is already an organization within Wheelock Properties, and they know the market well. They know how it works. So we will continue to work with them as our partner in that regard. But the capital will come from Wharf, in these cases, 100%.

Retail in Mainland China, in our case, this would partly address the question -- that the previous question as well. In our case, about a good part of Chengdu IFS was closed for conversion. So that affected the performance of retail at Chengdu IFS. And therefore, Chengdu IFS was -- or underperformed Changsha IFS. Changsha IFS grew well. Chengdu IFS, I think, slipped a little bit, partly because of the conversion. When the conversion is finished, hopefully, we'll be able to start to catch up.

Another factor which affected the Mainland IP performance, albeit a small factor, is that because we have started to sell the apartments in CD IFS, Chengdu IFS. So the occupancy in the service apartments will start to -- well, actually, not will, has started to slip because we're getting vacant possession of the units for amalgamation for sale. We don't -- we haven't sold too many units so far, but the next lot we will put in the market within the next few weeks. So we'll start to see more sale in Chengdu IFS. And it's a good price. We'll be able to -- we're able to get RMB 60,000, RMB 70,000 per square meter, which is good for that product. The ticket is typically close to RMB 20 million units -- RMB 20 million per unit, a good price. So that will help Mainland business.

[Operator Instructions] Mark from UBS.

I have a follow-up question regarding on the relationship with Wheelock as well. Because in the past, I think the speed of work is very clear. 1997 is focusing on Hong Kong IP, Wheelock is focused on mass. We are more like Hong Kong ultra-luxury and China DP. Just want to check how come -- what's the rationale that we are entering into the mass development market by ourselves now, but instead of Wheelock? Just want to -- keen to hear your thoughts. That's the first question.

The second question, I think, is regarding on the Equity Portfolio. Definitely, we have done some divestment. May I know what kind of asset we are retained within the portfolio? And in the statement, you mentioned a lot of things about AI. So do we think that we should switch part of our portfolio in investing in AI stock?

Okay. Short answer to your question is we have a much bigger balance sheet than Wheelock Properties, and we have capital to deploy. As the Mainland DP business continues to wind down, more capital will come back. And we're getting that. So we need to invest it anyway. And that is why we're coming into the Hong Kong DP business as well. But in between the two, Wharf public companies, listed companies, there would be little or no confusion with us what? One is a DP company, the other one is an IP company as far as Hong Kong is concerned.

The listed equities that we disposed of in the first half of the year, actually at the beginning of the year, were mainly low-yield stock. And what we continue to hold would tend to be higher-yield stock with one exception. And that exception, unfortunately, is -- hopefully, it will only be temporary in this green town. But we hold it as a strategic position. We've been holding it for 14 years. And -- but the fact they didn't pay any dividend for last year affected our dividend income.

Follow-up question from Cindy.

I got two follow-up questions. So the first is on your capital deployment. Is it fair to say that you don't want to remain in the net cash position? Or do you have any target gearing per se?

The second question is more theoretical, let's say, I want to gauge your feeling on how to narrow the NAV discount for this company because Wharf REIC, obviously, what they did is divesting some noncore assets increase shareholder return. So for you, what are the measures that you consider can be doable? Are you looking to maybe unlock value via asset -- any asset disposals or reorganize any business? Or how's your view into that?

Okay. Thank you. Okay. First of all, net -- being net cash positive is not a KPI, right? And we'll put the cash or the capital to use, but we hopefully will be looking for investment of good use, good quality, good return and so on. So -- and we don't necessarily need to turn assets before we can invest in something else. We obviously have debt capacity.

And your second question is very profound. What we typically do is we look for assets which have long-term value. The ultra-luxury properties on The Peak and to a lesser extent, The Monet in Kowloon, they don't turn over quickly. Holding periods are generally longer. And obviously, we need to balance that with the IRR. But we believe in good assets with long-term value, and that is what we will continue to look for. Obviously, if at the same time, we can give shareholders a better and better return, that would be very much our priority too. TSR, partly yield, partly share price. But TSR needs to be looked at in a longer horizon, not 3 months or 6 months. So that's how we look at it.

[Operator Instructions] Follow-up question from Alpha, Goldman Sachs.

So more of a housekeeping one. So given it's 140 years anniversary, will there be another final special dividend? How should I think about it?

I can't preclude that, but I cannot include it either. It's obviously something that the Board needs to consider, and that was not raised at today's Board meeting. And we won't need to deal with that until the Board meeting in March. We actually turned 140 on November 15. Remember that date. It's a Saturday this year, November 15. So technically, we are not 140 yet, but we will very soon. I will take your suggestion, if I may call it, and raise it with the Board in due course.

Another follow-up question from Jeff.

When we look at the borrowing cost in the first half, the effective borrowing cost is higher than a year ago. May I know the reason behind? Is this something changed with the debt profile?

No, it was because of an aberration "commercial aberration", not accounting aberration, commercial aberration last year because we did some hedging last year, which gave us a significant net reduction and the hedging is a lot more insignificant this year. But even at 3.1%, it's very respectable.

And a follow-up question from Karl Choi.

Two questions. First, just want to get a little bit more details regarding the relatively large China IP revaluation loss. Any cap rate changes or just the rental outlook? And second, going back to The Monet, any update on the launch timing?

Monet timing, likely to be in the second half, but it's -- well, a launch may not necessarily be the right term to use. It's not like selling MTR projects where we get 7,000 tickets or whatever. We're doing premarketing, soft marketing on a targeted basis. And we have some buyers who are already interested. But it is not -- don't expect a long queue in the sales office, for instance. But hopefully, we would be able to start to report some sales in the second half.

IP revaluation is mainly -- I think one factor relates to the lease expiration. We -- I think we reported on that last year -- 6 months ago. Some of our land leases are coming due in less than 20 years. Now typically, when the Mainland market opened for properties in the early to mid-1990s, leases of 40 years or even 50 years were offered. And 50 years from, let's say, 1995 would mean 2045, and that will be less than 20 years from now. There is still no clarity from central government about the extendability of these leases. In fact, increasingly, we're getting signals that these leases will not automatically be renewable like Hong Kong leases. Hong Kong leases, as you are familiar with, you get automatic renewal for 50 years, you pay an annual rent, no additional premium. But that doesn't seem to be the model that the Mainland is following.

In fact, we believe it is going to be more like the Singapore model. In Singapore, you get a leasehold for 99 years. And along the way, with government permission, you are allowed to top up the lease back to 99 years upon payment of a premium and they have a scale. So as these ground leases expire or move towards expiration, the value of these properties may be affected. And I think that's an important factor in the valuers' consideration.

If I may ask a follow-up question. I think both Guangzhou and Shanghai have rolled out pilots to allow landlords to renew for, I think, 20 years at some set prices. What's your initial thinking about that? Would you actually -- are there cases where you would think that it's actually not worth extending the lease and just walk away? Just curious about your early thinking.

Obviously, it depends on the price, and we'll have to do our numbers at that time. Some of these buildings may have to be redeveloped by then anyway. So it will possibly be a brand-new feasibility study.

If there is no more questions, I will now conclude the presentation. So thank you all for joining today, and the webcast will be uploaded on our corporate website afterwards. Thank you.

Thank you.

Good afternoon, everyone. A very warm welcome to Wharf Holdings Finance result briefing. I am Angela Ng from the IR team. You can download the PowerPoint presentation using the QR code displayed on the LED wall. Today, our management team includes Mr. Stephen Ng, Chairman and Managing Director; and Mr. Kevin Hui, Director and Company Secretary.

We will first go through the PowerPoint presentation and then open the floor to the analysts for a Q&A session with the management. The theme for the presentation this year is property write-down much lower in 2025. Let's take a look at the results highlights. As the headline suggested the group's investment properties revaluation deficit and development properties impairment provisions were altogether $3.5 billion less than the previous year, resulting in an increase of $3.3 billion in group profit.

And also with lower DP provision, underlying net profit increased by $1.3 billion during the year. Following the disposal of part of the long-term investment portfolio, the group turned to net cash by year-end. NAV per share was $48.01, representing an increase of 7%. We remain focused on our core businesses with over 60% of total assets are in premium properties across Hong Kong and Chinese Mainland.

Following the suspension of land acquisitions in Chinese Mainland since 2019, we have strategically shifted capital to Hong Kong projects. Those projects are gradually bearing fruit. During the year, the group has launched 1 Plantation Road at the Peak and Victoria Voyage JV project in Kai Tak. The Peak project in Kowloon, it's Long Chain Lane is preparing to launch.

Meanwhile, the investment properties in Chinese Mainland hotels and logistics infrastructure continue to deliver solid recurring income. And this slide shows more details on our financial performance. During the year, Mainland DP sales continued to contract, particularly for nonresidential properties, which is the main reason for the drop in group revenue and operating profit.

Underlying net profit increased by 47%, mainly driven by a significant reduction in Mainland DP provisions and a decrease in borrowing costs. Contribution from Hong Kong DP increased and that from logistics, the third largest contributor, also increased. However, these contributions were partially offset by a decline in Mainland IP. Inclusive of a lower IP revaluation deficit, group profit restored to $50 million.

Dividend per share remained unchanged at HKD 0.40, representing a payout ratio of 30% of UMP. The group has been proactively managing its financial position, achieving a net cash position by year-end following the disposal of $9.7 billion in equity investment. Net cash was $4.5 billion if excluding the debt from Modern Terminals, which is nonrecourse to the group.

As the group strategically converted debt to renminbi in the past few years, average interest cost remained low at 2.5% -- in the next few slides, we will walk through our business segments in the order of Hong Kong properties, Mainland IP, Mainland DP, hotels and logistics infrastructure. In Hong Kong, the group has been capitalizing on the improving property market sentiment to initiate project launches during the year. At the peak, following the penthouse at Mount Nicholson with record high average price for apartments, 1 Plantation Road recorded its first transaction in December. House 1 was sold for $558 million.

Meanwhile, our 30% owned JV project, Victoria Voyage, recorded total sales process of $2.8 billion after its launch in August. Attributable Hong Kong DP revenue increased to $1.1 billion and operating profit t $287 million. As at the end of last year, our Hong Kong residential land bank amount to 2.7 million square feet. Preparations are underway for the launch of 8 Longteng Lane, which is our Peak project in Kowloon.

Major projects under development include Mansfield Road project on the Peak and Kowloon Bay redevelopment project. Regarding the Mainland IP, Retail sales in China rose partly driven by the government-led trade-in programs and promotional events. Despite intensified competition in both online and offline, our flagship malls, Chengdu IFS and Changsha IFS continued to see solid occupancy of 97% and 99%, respectively, underpinned by critical mass and constant efforts on tenant mix and marketing.

On the office side, the supply-demand imbalance worsened. As a result, our Mainland IP slipped to [ HKD 4.4 billion ] and operating profit to [ HKD 2.9 billion ]. And moving on to Mainland DP. Subsequent to suspension of land acquisitions, available stock has been depleting, resulting in lower contracted sales. As a result, revenue declined to $1.4 billion and operating profit to $208 million.

Most residential inventory has been sold, while office stocks remains slow moving. Impairment provisions was made accordingly. At year-end, our DP stock was 1.2 million square meters. Net order -- excuse me, net book value amount to $15.9 billion. Moving on to hotel. Wharf Hotels currently operate 16 hotels under our own Niccolo, Marco and Maqo brands, mainly in Hong Kong and Chinese Mainland.

Park Hyatt Changsha is the group's only hotel with outsourced management. In Hong Kong, occupancy was supported by strong visitor growth with room rates trend improving in the second half. However, in Mainland -- in Chinese Mainland, despite the growth in domestic tourism, traveler spending pattern continued to pressure the performance. Segment revenue increased by 6% to $656 million and operating profit broke even.

Turning to our logistics infrastructure. Realignment of major shipping alliances further pressure Hong Kong shipping volume. Meanwhile, ongoing global disputes are reshaping cargo flow, and we continue to monitor the evolving trends and the opportunities that may present. Modern Terminals throughput in Hong Kong declined mildly by 6%. Overall segment revenue slipped to $2.1 billion and operating profit to $278 million.

Now I will go through our efforts and performance in sustainability. Wharf Holdings maintained strong ESG ratings and green building certifications, including A rating in MSCI ESG assessment, LEED Platinum and BEAM Plus, Professional Platinum ratings. Last year, the group's near-term science-based targets were approved by SBTi, which marked an important milestone for our sustainability journey.

Sustainable financing made up 50% of financing as of December last year, while an accumulate green or sustainability linked financing amount to $23.6 billion. More details on our ESG efforts could be found in the PowerPoint presentation. In the final part of the presentation, let's turn to the outlook. Global risk and disruption are significant and continue to accelerate.

In this volatile environment, navigating instability and transformation becomes a primary challenge. Based on current observations, Hong Kong's property market is regaining confidence, while Chinese Mainland property market is still a concern. Looking ahead, the group will continue to leverage its core strength and prudent financial management to navigate ongoing headwinds and sustain stable performance.

That concludes my presentation. We will now proceed to the Q&A section.

[Operator Instructions] Now may I invite Mr. Ng and Mr. Hui to come to the stage, please. Okay. I see the first question from Cindy.

This is Cindy from Citi. I have 2 questions. The first is wanting to understand your view of the Hong Kong ultra-luxury home market. What's your projection of volume price trend this year? And how do you assess the impact from the higher stamp duty for the units above HKD 100 million? So second question is actually on your cash position and long-term investment. So last year, obviously, very good return from stock investments.

Looking into this year, how would you like to use this chunk of cash? Would you consider, say, looking for some new investments, doing a little bit more shareholder return or maybe buying into some other stocks for future investment? And given the stock market volatility and the geopolitical risk you mentioned, would you rather say happy to hold on to your net cash or even liquid a little bit more of your long-term investment just to be super safe?

Thank you. Ultra-luxury properties in Hong Kong, we're positive about the outlook for that market. Already, we were beginning to see good interest from buyers in the second half of last year. And what happened in the Middle East the last 2 weeks, we believe will drive more capital and people, both capital and people, eastwards from the Middle East, both driving them back and on the other hand, retaining people who would otherwise consider going in the westerly direction.

So we are positive about that end of the market. And given that we have little or no debt pressure, we will not have to sell in a hurry. So if we get the right price, we'll deal. If we don't, we won't. I know this is 1 Plantation Road. And a lot of the slides you saw earlier in Angela's presentation actually come from that property. The #1 house is the one which is at the front at the lower tier. That's the one sold for $600 million -- $560 million, $91,000 per square foot. And that sale was completed a week ago. So the deal is done and completed.

We expect to see more transactions later this year. We will release additional units from this property to the market. The 2 tiers, you see a lower tier and an upper tier, the lower tier, there are 14 houses and in the upper tier, there's 6 houses. And the upper tier houses are bigger. And we've been getting indication of demand for the bigger houses. They are about 1,000 to 1,005 square feet bigger, as big as 7,002, biggest being 7,002. And if we can keep up the same kind of ASP per square foot, that will be good.

Now obviously, the stamp duty, additional stamp duty is a factor. But if all considered, we hope the positive factors will override the negative factors. Second question about capital management. Yes, we took advantage of a good market last year to realize some profit, which did not go into the P&L. It went directly to reserves. We are not in a hurry to reinvest it, particularly given the turmoil in the financial markets.

We consider the risk at the moment a little bit higher than we're prepared to take. So in the meantime, we are parking it in very -- basically very low-risk instruments, let me call them instruments. And we'd be in a position to either play offense or defense depending on how the macro environment goes. Defense, meaning still staying in low risk and offense if it looks like there's improvement in certain sectors of the market. So we believe we're in a good position to play our hand either way.

May we have the next question from Karl Choi, Bank of America.

Two quick questions. First, sort of furthering on the last question. When it comes to sort of businesses, given your comments about positive outlook for Hong Kong resi, I assume you wouldn't hesitate to put new capital to work in the Hong Kong DP side or the turmoil may actually keep you on the sidelines? And if so, would you consider going into the more mass market or you actually stick to only just a very sort of premium positioning that you have enjoyed on the DP side?

And on the China IP side, just to want to drill down a little bit, talk about still more oversupply. I think for Chengdu IFS, can you give us a little bit of update? I think if I'm not mistaken, one of your anchor tenants recently closed the store. Have you found a replacement? And if not, what's the strategy to backfill the space? And overall for sort of the rental income outlook in China, even though it's still -- from a competitive positioning, it's still challenging, but we've seen some rebound in retail sales and whether you can actually see some stabilization in rental income as a result.

Sure. Thank you. The property market is generally cyclical. And you may recall what happened at the end of 2017, that was when we demerged Wharf Real Estate Investment Company Limited. Shortly after that, we started to curtail our investment in Mainland DP, and we started to put a lot more capital into Hong Kong DP.

And the time has come for us to get some return from our Hong Kong DP investment. And that includes not only super luxury, the Kai Tak joint venture, for instance. It's a nice upper middle market project, and we started -- it's a joint venture, and we started to realize some of that project last year. And hopefully, some more will follow this year. So if the right opportunity comes along, we would be prepared to invest in Hong Kong DP projects other than superluxury because there are actually not that many superluxury new deals in the market. We can't just sit and wait forever.

But on the other hand, if there are no good opportunities, we're quite happy to continue to park the capital. Chengdu IFS, the anchor tenant space is being broken up into smaller units. It's being turned into Arcade. And we have already secured a number of tenants for some of the units. The conversion itself will take several months. So we still have a little bit more time to conclude the remaining leases. We expect the -- when -- on reopening, we expect good occupancy of the previously occupied space post-arcade conversion.

While on the subject of Chengdu IFS, this may not be very public information yet, but we have started to sell some of the apartments. In fact, we have achieved some sales shortly before Chinese New Year. And now that people are beginning to come back to work after Chinese New Year, we're expecting to sell some more of the residential units and at a good price, too.

So we're looking for different ways to recycle the capital. We don't have a very large unsold stock in residential, given that most of it was previously already sold and which is why we're releasing these apartments in Chengdu IFS. They are large apartments. Some of them are small currently, but we will make them bigger. So there will be like 200 square meter apartments, and we're selling upwards of CNY 10 million per unit. So again, some more capital coming back.

Well, generally, I think we'll see a flattish performance. We're beginning to see some recovery in the first 2 months of this year, but it's too early to say whether that's sustainable. So we're budgeting for flattish performance this year.

Please raise your hand if you have any question. Praveen from Morgan Stanley.

Let me ask some provocative question. Why is this company listed? This company doesn't provide dividend to the extent that other property companies do. It definitely is undervalued because it has so much cash, both in net cash position and the investment. The business fundamentals and performances have been relative to its peers, not as good, whether it's logistics, whether it's China real estate, whether it's provisions. I think as a private company, it could extract more value out of it. So I just wanted to get a thought.

And I have the second question on China net book value. I just wanted to clarify, is it China DP net book value of CNY 15.9 billion I saw in the presentation you had?

Yes.

I just wanted to get if I were to sell it over the next -- I'm just throwing a number 3 years, 5 years, doesn't matter. Would I really get $15.9 billion out of this or the amount that we really add value to the shareholder would be a lot less?

Good. provocative, and I agree with you. But it's listed. Well, I agree with part of what you say. What I don't agree with is your comment about underperformance, not entirely. If you look at our Mainland DP performance, you see many companies doing a lot worse than us, including some of our Hong Kong peers.

But you're obviously entitled to your view. We'll prove you wrong. The company has been listed for a long time. And we have very loyal shareholders. Some of them are very, very loyal, and we know who they are. And dividend is not necessarily what they're looking for. Ideally, we'd be able to pay more, but we've made it a very transparent policy of paying 30% of our underlying net profit.

In the past few years, our underlying net profit has been affected by the large write-downs. And this year, the write-downs are significantly lower than before. The write-downs reflect our view of what the DP assets are able to fetch in the marketplace. So my answer to your question about whether we can get $15.9 billion in the market, if we were to sell them in the next 3 or 4 years, has to be yes. Otherwise, we'd be misleading shareholders.

However, the question is whether or not we can sell all of it within the next 3 years. It's not price, it's liquidity. What remains in our portfolio, a large number of them -- a large proportion of it is office. We have written the offices down to a low ASP. But there may not be buyers for office, even if we were to write them down further. So the issue is not price. The issue is liquidity.

Now the market may change, but at the moment, that is the view. Net book value, yes, I covered that one. The fact that the write-downs have been declining, it reflects 2 things. A, the unsold stock has decreased in quantity and in value. And b, we've been sufficiently, call it, aggressive or conservative. If you look back at the last few years, we've written down probably close to $20 billion, $15 billion to $20 billion, something somewhere in that range. We've made big money in the past.

Now here, I'd like to clarify one thing, too, to provide some perspective. We, as a company, started to invest in Mainland properties about 30 years ago. Initially, it was a small amount. That was before the markets became big. Over the years, we have injected from Hong Kong into the Mainland, about HKD 120 billion of capital. You need to use equity to invest in the Mainland. We can borrow for construction. But in terms of land, it needs to be equity.

And over the years, we have pretty much repatriated the entire invested capital in Hong Kong dollars. Now the currency has fluctuated during the 30 years. But what's important for this purpose is that whatever amount we remitted into the Mainland has been fully repatriated or nearly fully repatriated. And what is left currently in the Mainland is profit. If we can realize $1 from it, we make $1 of profit. If we realize $2, it's $2 of profit. So at least in terms of capital preservation, I think we've done reasonably well. And then the upside is the remaining assets, the IFSs, and I'm including the IP, the IFSs, the remaining DP stock and so on and so forth, all of it.

Is there any more question from the floor? Jeff from DBS.

I have a follow-up question on the office in China. This HKD 15.9 billion net book value, can I assume that all are completed already? Or you still have some under construction or just a war land that's just a land pending development.

And also, are these office stock if completed, currently for leasing, are you generating some income from this office stock, which has yet to be sold?

Yes, they are either already completed or substantially completed. Because the market is soft, there are instances, where we don't put the final finishing touches to it yet. But the capital -- the bulk of the capital expenditure has been incurred, if that's the motivation of your question. We may -- in some cases, we don't finish some of these products because if you finish it, you start paying tax.

If you don't or at least you don't put the finishing touches to it, you defer the start of the tax payment. But the vast majority of the capital required has been incurred. And if it is finished, where possible, we would lease it. Good case in point is Changsha IFS. We have offices in T1 and T1 has been completed for 5, 6, 7 years. 5 years, more than 5 years before COVID. And we have tenants in there. So they are generating a certain income to us to at least cover the running cost.

Thank you. So maybe we have the question from Karl, Bank of America.

Two quick follow-ups. First, regarding the Chengdu IFS apartments. Can you remind us sort of how many units you have or in terms of square footages? And second is, if you can give us some question about -- so if you actually sold more of your investment portfolio year-to-date, given the strong performance up until recently? And third is, given the strong capital position that the company is currently and you have a lot of DP sales proceeds coming back, would you consider actually some special dividend as you book some of these projects?

Okay. The Chengdu IFS apartment block has a total GFA of about 70,000 square meters. At the moment, there are over 300 apartments, some of them smaller. But our reading of the market is that the best product for that market are larger units. And that is why we will be combining the smaller units into larger units for sale. So when all of that is done, the tower will include a total of 200 large units.

And we're not putting all of it on the market. We will continue to lease some of them. And depending on response from the sale, we will release more and more units into the market. Second question about the investment. Yes, we took advantage of the market and realized another HKD 2 billion of listed equities in the first 2 months of the year. But we stopped.

We -- depending on the market, we may do it again. But there is no target or anything like that. And your suggestion, either question or suggestion about special dividend, it is noted, I will bring it to the Board.

The next question from [ Griffin ], Citi.

Griffin Chen from Citi. So I mean just on the logistics and infrastructure. So there's a very obvious trend. Hong Kong is coming down, China is going up on your PBT. So what is your view on the outlook of the logistic properties exposure for our business, first of all.

Second question is on the other business. I think you consider other business more than property? I mean it can be done by yourself or you just invest in some company that is like especially operating. So what is your thought on the other business?

On other business, at the moment, our main expertise is properties, and that's what we will make our first priority. If there are other businesses for indirect investment, we would consider, but it would have to be something that we feel comfortable with.

Coming back to the first question, the container terminals. The issue about South China terminal business in South China is oversupply. There's been a lot of new supply, both in Shenzhen and particularly in Guangzhou and Nansha. And clearly, this area is now oversupplied. And we're competing with operators who are government-backed, either SOEs or some form of government subsidy.

A good case in point is Nansha. Nansha has been rising very, very rapidly in the last few years to the extent that Nansha is posing a serious threat to Shenzhen, not only to Hong Kong, but to Shenzhen. Nansha has overtaken Hong Kong already, but it is threatening Shenzhen. And the way they do it is they throw capital at it.

First of all, as you know, Nansha is located more than 100 kilometers up the river. And with all river estuaries, there's sediments and sediments tend to make the draft unsuitable for the bigger and bigger vessels of today. Hong Kong is a natural port with deepwater. Yantian is a natural port with deepwater. But on the western side of Shenzhen at the mouth of Pearl River, even our Da Chan Bay, which we operate in Shenzhen, we're having to dredge the basin and Shenzhen government has to dredge the channel that leads to our basin regularly.

In the case of Guangzhou, Guangzhou government has to dredge this 100-kilometer long channel and also the basin around the terminal area. So it's a huge cost. That's the first subsidy to the terminal. The second subsidy is Nansha offers an incentive for shipping companies to bring boxes to Nansha, in effect, buying market share. That's not something we can do. And that's why Hong Kong has lost a great deal of throughput.

Having said that, we still have just -- Hong Kong still has just under 10 million TEUs of annual throughput, which is no small number. It's still one of the largest outside of China, Mainland China. Outside of Mainland China, we're probably within top 5 or certainly within top 5. So it's a business which is important for Hong Kong, given the employment and so on and so forth. What we need is more support from the Hong Kong government and the central government to make Hong Kong -- the Hong Kong port still viable.

In the meantime, what we have been doing ourselves is to try everything we can to try and bring back some of the cargo that has been diverted. And we were actually having some success -- we signed up some new strings coming into Hong Kong, but then Iran broke out. And all shipping companies are putting new plans on hold. Now I hope it's a temporary hold rather than a complete cancellation. It's a bit disappointing because we are hoping to rebuild the downward trend to reverse the downward trend. But we may now have to wait a little longer.

Hopefully, the turmoil in the Middle East may give us a new opportunity as well. Because a little bit like the capital that's been going to Dubai and so on. Hopefully, some of the shipping companies will realize they may be putting too many eggs in too few baskets because in the past 10 years or so, some of the ports have become bigger and bigger and bigger, implying more and more eggs are put into them.

And it's when turmoil happens, that's when people look at diversifying the risks, and that may result in some cargo coming back to Hong Kong. So I'm not -- I can't be bullish about the Hong Kong terminal business, but I wouldn't write it off yet.

Thank you. In the interest of time, we will take the last question if there is any. [ Hao Sao ] from UBS.

This is [ Hao Sao ] from UBS. Can management share a little bit more on the retail sales performance in Mainland China shopping malls year-to-date? For example, the trends in footfall, tenant sales and any changes of tenant mix? And for the equity investment portfolio, what is the current composition and size of the group's equity investment portfolio? And how does management think about capital allocation across sectors? Will you consider any sector rotation like put more on to the U.S. AI names from property?

Okay. First of all, the investment portfolio, what was the size at the end of last year, I think $43 million, but that includes unlisted equities. The listed part is $34 billion, $35 billion at the end of last year. And it would have appreciated since then, but we sold about $2 billion. So it would be bigger than that.

I suppose I think -- I remember at the end of February, that portfolio had a value of about $33 billion or $35 billion, but that was end of February, 2 weeks ago. Since then, it's probably come down a little bit. We don't do rotation within that portfolio as such. It's long-term investment, and so we don't do a lot of trading. It's mainly in Hong Kong properties, some financial services, but mainly Hong Kong focused businesses. Retail sales in Mainland China last year rose by 5%, 3%, 4%...

National.

National. Nationwide, it rose by 5%, but our malls did not achieve that. Our malls actually lost some retail sales, and there are different reasons for it. The main ones being, first of all, the overall nationwide retail sales increase was -- a good part of it was driven by the trade-ins, the incentives, the trade-ins and the coupons.

And we don't carry as big a share of the merchandise lines subject to trade-ins, home appliances and so on. So our share of those main lines subject to trade-in is lower than our share in other categories. Another reason is the nationwide average retail sales increase was more significant in third and fourth and fifth tier cities and less so in first and second-tier cities.

And we're only in first and second. So it's -- in a way, it's the trade mix, therefore, in our malls as compared to the nationwide profile, which resulted in a decline in our case compared to the nationwide average. Another factor is, of course, competition. In Chengdu, in particular, new competition came in. And so we had to fight to retain our share. As I was saying 10, 15 minutes ago, we're seeing positive trend this year, but it's too early to conclude that we're going in the right direction.

So thank you, and thank you, everyone, for the questions. The webcast of the event will be uploaded to our official website tonight. So thank you again for joining us today, and thank you for your support.

Thank you.

Thank you.