Sun Hung Kai Properties Limited (16) Earnings Call Transcript & Summary

Welcome to Sun Hung Kai Properties FY 2024 Interim Results Analyst Briefing. I would like to wish you all a wonderful year of the dragon. As usual, I'll give you an overview of the results and the performance of our business, followed by Q&A sessions with our senior management. Let me start my presentation with the group's financial review. Please note that all figures are in Hong Kong dollars, unless otherwise stated otherwise. For the 6 months ended 31st December 2023, the group's underlying profit amounted to $8.9 billion, decreased by 6% year-on-year. The decrease in underlying profit was mainly due to lower property development profit from the Mainland, which was largely offset by the increase in profits from property rental, hotel and other non-property business. . In [indiscernible] valuation gain of around $432 million on investment properties. The reported profit increased by 9% year-on-year to $9.1 billion. The underlying earnings per share was down 6% to $3.07. While reported earnings per share was up 9% to $3.16. On dividend, the Board of Directors has declared an interim dividend of $0.95 per share, decreased by 24% from the corresponding period last year. This slide shows the profit breakdown by segment. The group's property development profit dropped by 39% to around $2 billion. As mentioned, it was mainly due to lower sales volume of residential units on the Mainland. On Rental business, the group's net rental income increased by 5% to around $9.3 billion. The increase was driven by 3% growth in net Rental income from Hong Kong portfolio, and 11% increase in net Rental income from the Mainland portfolio. With the return of mega events and the revival of inbound tourism in Hong Kong, the Group's hotel business continued to recover and recorded operating profit of $430 million, compared to an operating loss of $63 million for the same period of last year. Profit from other business also increased by 5%, and the Group saw total operating profit for the period under review will stand slightly to $14.3 billion. On financial position, as at the end of last year. The Group's net debt amounted to [ $128 ] billion, while net gearing ratio was 21.2%, and also explain the reasons for the higher net gearing ratio in the next slide. In recovery for the past 12 months was around 5.4x, compared to 8.8x a year ago, mainly due to much higher interest expenses. The net gearing ratio temporarily exceed 20%, and there were 2 reasons for that. Firstly, during the period under review, the Group has made payment of the final dividend for last financial year. Secondly, a substantial portions of the Residential sales proceeds in Hong Kong have not been received during the period. We expect to receive Residential sales process of over $20 billion, in the next few months, and the net gearing ratio will be reduced markedly by the end of this financial year. The Group will continue to stick to the prudent financial management discipline and focus on cash flow management, including strict control on CapEx with highly selective approach in Landbank replenishment and strengthening of recurring income from Property Investment portfolio and non-property businesses. We also aim to achieve fast asset turnover for the Property Development business. To achieve a better alignment of the Group's RMB denominated assets and liabilities, the Group has been utilizing more RMB-denominated borrowings, which already accounted for 16% of total debt. As at the end of 2023, about 41% of the Group's total borrowings were either fixed rate debt or RMB voting rate debt. The Group is one of the best rated developers in Hong Kong, as evident by an A+ rating with stable outlook by S&P and A1 rating with negative outlook by Moody's and has continued to maintain excellent banking relationship with abundant banking facilities and enjoy easy assets to debt capital market. Let's move on to the performance of different business segments. As of the end of last year, the Group's total bank in Hong Kong was about 58.8 million square feet, of attributable GFA, comprising 36.6 million square feet of completed properties and 22.2 million square feet of properties under development. Among the completed properties, Retail portfolio accounted for 33%. And while Offices accounted for 30% of the total. For properties under development, about 15.3 million square feet worth of Residential property for sales, of these 2.1 million square feet have been dissolved. During the period under review, the group added 2 residential sites, with a total GFA of about 1 million square feet through lease modifications. These 2 sites in [indiscernible] are located near to the group's existing properties, such as [indiscernible]. The Group will continue to adhere to its prudent financial discipline, including a highly selective approach in Landbank replenishment. Turning to the property development business in Hong Kong. For the period under review, the Groups recognized property sales in Hong Kong increased 25% year-on-year to $3.6 billion, mainly derived from the sales of completed residential units. Development profit was up only 3% to over $1.2 billion because of the lower development margin. Personal debt or Residential project for sales to be completed in FY 2024, are scheduled for handover in the second half of this financial year. Contracted sales not yet recognized amounted to $32.8 billion, of which around $22.4 billion is expected to be recognized in the second half of this financial year. Hong Kong financial market continued to be affected by elevated interest rates and uncertain economic outlook during the period under review, and we achieved about 9.6 billion contracted sales in Hong Kong, of which $5.8 billion came from YOHO West Phase 1 and $2.2 billion from the sales from previous stock. [indiscernible] map, upcoming launches in the next 10 months will include a wide range of Residential projects across the territories, including mass market projects such as NOVO LAND Phase 3 and Tune Mun and YOHO West Phase 2 and luxury projects, such as Cullinan Sky and Cullinan Harbor in Kai Tak, such diversified product mix will appeal to different potential homebuyers. Next, let me discuss about our Hong Kong Rental portfolio. During the period under review, the Group's well-diversified Rental portfolio in Hong Kong continue to achieve stable overall occupancy at around 93% a record modest increase in rental income. The increase was mainly driven by higher gross Rental income from Hong Kong Retail portfolio, we achieved positive Rental regression and accounted for 52% of total Rental income in Hong Kong. However, such an increase was partly offset by lower Rental income from the Office portfolio. The Group has built a close and long-term relationship with tenants and customers and adopt proactive approaches, such as ongoing asset and service enhancement to attract customers. [indiscernible] has enabled the group to respond swiftly to market trends and achieve a stable occupancy of 95%. The tenant and train mix of the Group's mall is constantly refined and now with prevailing market trends, we continue to collaborate with our tenants and business homes, to initiate promotional offers and activities. Pets and family facilities were introduced through refurbishing outdoor areas, as several of the Group's malls. For example, the Woodtop area, a New Town Plaza in Sha Tin was reconfigured as the Dino Park, the first and the largest dinosaur themed outdoor playground in the city, has rapidly gained popularity as a hot spot for families, boosting the malls, traffic and tenant sales. The Group has leveraged the point, the integrated loyalty program [indiscernible] before and enhanced software experience. Recently, the points are [indiscernible] its mobile app interface to further enhance user experience. Instant Point [ earns ] was a new service, allowing members to earn points immediately after purchase with a simple QR code scanning. In addition, the Points members can enjoy free EV supercharging through points redemption. Despite a challenging office leasing market, the Group's quality office portfolio, particularly its landmark IFC and ICC, continue to benefit from flight to royalty trend. This, together with this high green building standards, professional management services and a group strong relationship with tenants, help the Group to maintain a satisfactory occupancy of about 92%. The Group has continued to embrace innovation to enhance its property investment portfolio. TOWNPLACE WEST KOWLOON, the group's brand-new service apartment is the latest show-case. Shop opening in October 2023, this 843 room development over the hybrid short and long-term leasing model, with diverse room mix and smart system. It provides hotel class service on demand, catering to the festival accommodation needs of young talent and professionals from different parts of the world -- Market response for the first batch of rooms is encouraging, and many of the guests are young professionals. From the near to medium term, the Group recurring income base will be further expanded. [ YOHO mix ] and [ Yuen Long ] and a shopping mall, the Millennity in Kwun Tong are scheduled to open this year. In the medium term, the high-speed [indiscernible] terminals development will be completed in FY 2026. All these new projects create strong synergy in the Group's existing properties in the vicinity. Next, let me talk about our property business on the Mainland. As of the end of last year, the Group's total Landbank on the Mainland was 67.2 million square feet of GFA on an attributable basis, comprising of about 21 million square feet of completed properties and over to 46 million square feet of properties under development. Among the completed properties, 44% of them were shopping centers and 38% were premium offices. Moving on to the Property Development business on the Mainland. During the [ premium ] review, the Group's recognized property sales on the Mainland fell by 60% year-on-year to about $1.6 billion, mainly due to lower sales volume of Residential units. As of the end of last year, there were unrecognized [indiscernible] amounted to $6.1 billion. For the first half this financial year, the Group achieved a country sales of over RMB 3 billion on the Mainland, mainly coming from the sale of Residential portion at Hangzhou IFC. As shown in the table here, the Group's launch pipeline over the next 10 months include 3 projects of total attributable GFA of 850,000 square feet. Now let's move on to the discussion of the performance of our Mainland Rental portfolio. During the period of review, the Group's gross Rental income from Mainland Rental portfolio increased by 12.2% year-on-year, to about $3.1 billion or up 15.5%, in RMB terms to RMB 2.9 billion, which is also the highest Rental income achieved on the Mainland in the first half of the financial year. The increase was mainly driven by over 21% Rental growth in Retail portfolio in RMB terms, partially offset by 3% depreciation in RMB during the period. The Group's Retail portfolio on the Mainland continued to perform well with positive Rental reversion. Sha IFC Mall house a variety wide array of internationally, acclaimed retailers from across the globe and continue to sustain high occupancy. Despite a challenging Office Leasing markets on the Mainland, the Group's Grade A offices at Sha IFC, Sha ICC and the first 2 phases of ITC achieved satisfactory occupancy. For the occupancy of the newly completed 3 ITC Tower A is ramping up with satisfactory pre-leasing rate. The Group's several integrated projects under development will further bolster the recurring income stream. The most anticipated sections of the Nanjing IFC Mall, consisting of top tier brands was soft open early this year. The shoppers are attracted by the more curated collections of retailers' choices and striking store fronts designs, the mall also complements with 2 Grade A office towers and Andaz Hotel, within the compress. In Shanghai, 3 IPC and [indiscernible] is a much anticipated project to be completed in the near future. Construction work of the 370-meter tall, office skyscraper Tower B, is scheduled for completion by early 2025. Both Tower B and the completed Tower A are decided to be world-class [ green ] spaces and have already obtained platinum precertification and certification from lead respectively. The 2.6 million square foot mega shopping mall, ITC [ Major ] is scheduled to open in phases from 2025 onwards, that cover the Group's Mainland Rental portfolio. The next item to be discussed is our Hotel Operations. The Group hotel offer business in Hong Kong continued to recover return of megatrends and the revival of inbound tourism. On the Mainland, Ritz-Carlton Shanghai Pudong, also achieved an encouraging performance during the period. As a result, the operating profit of the Hotel segment amounted to $430 million compared to an operating loss of $63 million for same period last year. For new hotels, the business of Andaz Nanjing Hexi Hotel, at Nanjing IFC has been ramping up since it's opening in April, last year. While Four Seasons Hotel Suzhou, the first four season hotel in Gansu province, opened in December 2023. Let's turn to our ESG initiatives. The Group is committed to obtaining a net goal or patterns ratings for its new major commercial properties, [indiscernible] and the shopping mall under LEED achieved, a well [ core platinum ] certification, the first work certification for an office/retail development in Hong Kong. The group also integrates smart technology into its operations to reduce energy consumption, carbon emission and promote green construction, green energy transformation and green commuting actively. In fact, we are the first developer in Hong Kong to purchase and use fully electric construction equipment. The Group makes the most of these resources to enhance social well-being and we recently lent a site in Yuen Long to the government for the constructions of light public housing. We continue to support a wide range of spots for territory activities and nurturing the young generation through different means. For more information about our ESG performance, please refer to the appendix of this PowerPoint or our website. Next, I will discuss the market and business prospects. In Hong Kong, the uncertain external environment and elevated funding costs will continue to wait on investment sentiment in the near term. Further policy realizations, rising home brands and potential rate cuts to benefit the Residential market. Various government initiatives will support recovery of inbound tourism and consumer sentiment. Quality office buildings we will perform amid the trend of flight-to-quality, although supply issue may persistently weighed on office rents. On the Mainland, the central government has implemented a policy that are conducive to stabilizing expectations, growth and employment. And this, together with the proactive fiscal policy and prudent monetary policies should help strengthen the solid foundation for stability and improvement. Initiatives in promoting technological innovation and expanding domestic demand to take the lead in supporting sustainable long-term economic development. Moving on to our business prospect. The Group placed strong emphasize on cash flow management, and we'll continue to adhere to prudent financial discipline. Including the implementation of strict control on CapEx, stick to highly selective approach in Landbank replenishment, generate cash flow from property investment portfolio and nonproperty businesses, launching new residential project for sale, [indiscernible], et cetera. Over the next few years, Several of the Group's new investment properties are coming on stream, creating a new source of recurring income. In the near term, [ NOVO mix ] and the shopping mall believe the Millennity, in the Hong Kong are scheduled to open in 2024. On the Mainland, contribution from new projects, including Nanjing IFC Mall and 3 ITC in Shanghai, will further bolster the group's recurring income stream. Over the medium and long term, major integrated projects such as the High speed Rail, West Kowloon Terminus development in Hong Kong and Hangzhou IFC will also contribute to the Group's recurring Rental income. As in the past, the Group will capitalize on its premium brand and strong reputation for delivering high-quality properties to achieve fast asset turnovers for this property development business. Large-scale well diversified product mix with good transportation network will continue to appeal to potential buyers. Finally, I would like to wrap up my presentation with a message, extracted from the Chairman's statement. For over half a century, the group has navigated through various economic cycles and crisis alongside Hong Kong. Its culture of continuous learning and decades of experience in weathering storm, have [ inducted ] the group with resilience to cope with difficult times and emerge as a visionary developer, consistently fostering innovation in this pursuit of excellence. The Group's unrecurring commitment to quality over the years has earned as a trusted brand. This together with its seasoned management and strong team spirit among staff members, make up an integral part of the group's valuable assets. This, along with the Group's prudent financial principles, time test business strategy, strong execution ability and a corporate culture of moving with times, serve as a pillar of it's solid foundation and business sustainability. This concludes my presentation. Thank you very much for your attention. Thank you.

So thank you, Brian. The Q&A session will start soon, in a few minutes. So thank you for joining us for the Q&A session. Let me first introduce the panel members. Starting from your left, Mr. Brian Sum, associate member of the Executive Committee, General Manager, Corporate Planning; Mr. Christopher Kwok, Executive Director; Mr. Allen Fung, Executive Director; Mr. Victor Lui, Deputy Managing Director. Center is our Chairman and Managing Director, Mr. Raymond Kwok, Mr. Mike Wong, Deputy Managing Director; Mr. Adam Kwok, Executive Director; Mr. [ Kowk ], will be joining us shortly; and Mr. Frederick Li, Group Chief Accountant. May I now invite the Chairman and Managing Director, Mr. Raymond Kwok, to share with us the key messages of today's results announcement. Mr. Kwok, please?

Okay. Thank you all for coming. During the period under review, the Group faced the challenges of an uncertain economic outlook and the high interest rate environment, which had an impact on business development. In the face of the challenging macro environment, the Group placed great emphasis on cash flow management and prudent financial discipline including maintaining a tight control on capital expenditure and being highly selective in Landbank replenishment. These measures, coupled with the Group's robust and sizable recurring income generated from a quality property investment portfolio and on property businesses have helped put the company in good stead to withstand adverse economic conditions. During the period, we launched YOHO West Phase 1 in Yuen Long, NOVO LAND Phase 2A in Tsuen Mun and University Hill near the Chinese University of Hong Kong, for sale. The units were well received, reflecting buyer's continued strong confidence in our group's developments. As always, the group will launch new projects for sale, when they're already. Over the next 10 months, major Hong Kong projects on offer will include the YOHO Hub 2 in Yuen Long, the third phase of NOVO LAND in Tsuen Mun, the second phase of YOHO West in Tin Shui Wai, the first phases of a Cullinan -- Sky and Cullinan Harbor in Kai Tak and the first phase of a large-scale project in Sai Sha, near Ma On Shan. The Group will also put up for sale it's unsold completed residential units and some of its noncore properties, including the recently renovated [ Dancourt ] in mid-levels. On the Mainland, a new phase of Shanghai Arch in Shanghai and new batches of the joint venture development, Hangzhou IFC will be put on the market for sale. The Group's diversified property investment portfolio remained a reliable source of substantial recurring income. Many of the Group's offices and shopping malls are part of an integrated project, complementing each other and benefiting from transport interchanges and large-scale residential developments in the vicinity. In addition, the group's leasing teams stay up to date with market trends and regularly refine the trade and tenant mix of the malls to keep abreast of customer needs. Our loyalty program, The Point, an integrated loyalty program for SHKP Malls, has recently revamped its mobile app. A new service called Instant Point Earn was introduced to further enhance shoppers' experience, drive footfall and boost tenant sales. Furthermore, pet and family-friendly facilities were introduced to boost traffic and expand the customer base. For office buildings, the Group has consistently pursued asset and service enhancements ensuring they meet stringent international and local corporate environmental requirements. Over the years, many of our office buildings have attained top ratings of green building certifications. The Group is growing its property investment portfolio to bolster recurring income base. The Group service apartment project TOWNPLACE WEST KOWLOON, soft opened in October 2023. Market response to the first batch of rooms was very encouraging with many young professionals from the mainland and abroad being attracted to the hybrid short- and long-term leasing model. Including this development, the Group's portfolio of service apartments now provides a total growth floor area of over 1.2 million square feet offering diverse types of lodging in various locations to incumbent talents from different parts of the world. YOHO Mix and extension of the group's flagship YOHO Mall in Yeun Long, and the shopping mall, beneath the Millennity in Kwun Tong are scheduled to open in 2024. In the medium term, the High Speed Rail West Kowloon Terminus development and Artist Square Towers project, nearby will join the Group's ICC and 2 luxury hotels to form a unique commercial cluster in Hong Kong. With this proximity to the West Cullinan Cultural District, exceptional transport connectivity and business opportunities brought by an increasing number of visitors using the High Speed Rail. This commercial cluster is expected to become a distinctive hub in the Greater Bay Area, and we offer a wide range of commercial, retail, cultural and entertainment options. On the Mainland, our Nanjing IFC is the group's third IFC complex on the Mainland. The mall within the complex had a soft opening in January this year, with a positive response from the market, serving as a unique one-stop destination for shopping, entertainment and leisure, the more houses a selection of high-tier brands, including some that are new to Nanjing. Meanwhile, construction is currently underway for our Hangzhou IFC, another integrated landmark project by the Group that oppose the IFC brand of excellence. In Shanghai, the flagship IFC [ Mason ] Mall will open in phases, starting from 2025 onwards. Prudent financial management is an important pillar underpinning the Group's sustainable growth. The Group has placed great emphasis on cash flow management. At the end of 2023, the Group's Hong Kong contracted sales yet to be recognized amounted to HKD 32.8 billion. Among this, about HKD 22.4 billion is expected to be recognized in the second half of this financial year. In addition, the group will further strengthen its recurring income stream and continue its proactive leasing management to strengthen the competitiveness of its property investment portfolio. A number of measures have been implemented to control construction costs without compromising on quality. The overall construction expenditure for its Hong Kong projects has already reached its peak and is expected to come down in the next few financial years. Looking ahead, Hong Kong will continue to benefit from robust institutional frameworks, a sound common law system, a simple and low tax regime, free flow of capital and well-functioning exchange rate system under one country systems. These enduring advantages, coupled with the pool of professionals are difficult to replicate worldwide and have supported Hong Kong's prominent position as a major international financial center. The legislation of Article 23 of the basic law is now underway. This future legislation, together with the national security law will bring safety, stability and a favorable business environment to Hong Kong. With the support of the motherland, Hong Kong will continue to thrive as a global superconnector. The Group has strong confidence in the long-term prospects of both Mainland and Hong Kong. Finally, for over half a century, Sun Hung Kai Properties has navigated through the ups and downs alongside Hong Kong and has overcome various challenges, including the Asian financial crisis and the global financial crisis. With an unwavering commitment to quality, the Group has established itself as a trusted brand, whilst continuously pursuing innovation, supported by our seasoned management a dedicated team of staff, prudent financial discipline, agile business strategies and strong execution ability. Our group is poised to continue delivering premium properties and services in Hong Kong and on the Mainland, meeting the diverse needs of our customers. Thank you.

Thank you, Mr. Kwok. We will now open the floor for questions. [Operator Instructions] So may I have the first question? So the gentleman in the second row on my right-hand side, please.

Karl Choi from Bank of America. I have 3 questions. First is on Hong Kong DP, in light of today's move by the government to relax property measures, just want to ask management's views about the outlook for the Hong Kong property market, especially property prices this year. I think some investors are concerned that Hong Kong could be facing a multiyear downturn in the residential sector. Just wondering what the -- your views are? Second is on China DP. Just want to get an update on the Guangzhou South ICC station, given the market downturn, any risk about impairment. And third is about the dividend, dividend policy. I think the group recommitted to a 40% to 50% payout ratio last time. I think the market sort of assumed that it will be most likely more at the high end, around 50% for fiscal '24 at least. Just want to ask about that, especially in light of management's comments on capital on cash flow management. Would it be -- is it possible that actually could be more at the lower end this year? And then we reset the dividend and then try to maintain a stable dividend beyond 2024 or dividend will be just more volatile going forward depending on DP booking?

Yes. On the first question, on the [ extensive ] market, certainly, we welcome the announcement of the government today on the relaxation of the controlling measure of what we call the spicing measures on stamp duty. And together with the relaxation of [indiscernible] mortgages by the HKMA, I think this would activate the public chain as a whole and also energize our residential sales later this year leading to a quicker recovery of the market. You have already seen in December last year that we have an overwhelming sales in our YOHO WEST project. Clearly, there is a pent-up demand in the market. Adding to the fact that there are still over 60% of homeowners have paid up their mortgages. And interest may peak later this year. So together with [indiscernible], the TTPS and the [indiscernible] of the government together also the employment and the migrant policy of the government are very well received. We have observed from the government rental index that [indiscernible] wins are rising steadily and the search is continuing. So overall, we are expecting that there would be a more active market in this year, probably an increase in volume and transaction. Regarding the public prices, as we are still on the course of economic recovery, I think public prices may rise just moderately in the range of 5% to 10% each year.

I think in terms of Guangzhou South Station, I say, obviously, apart from -- I think, from Beijing, Shanghai and Hangzhou, residential ourselves is still relatively stable, I think all other parts of China, including Shenzhen, Guangzhou, of course, is affected. But I think, honestly, with recent sentiments, we see some pickup and that with a strong boost in the recent announcement of measures, we expect the property sales market in these places to pick up, including Guangzhou. And obviously, the recent relaxation from Hong Kong buyers being able to just easily transmit down payment and so on. has given us more interested bias in Hong Kong. And I would like to add that, to be honest, the area, if you visit substation needs, I think these 2 years will be a dramatic change. First of all, you say international school, a very famous one, opened already last year and then a huge, huge soccer stadium to open end of this year. And on top, there's a major intercity railway line that connects from [indiscernible], right, from -- or to the city centers of that to a substation or within one hour [indiscernible]. I think that will be starting to be a very game changer, where 45 minutes, you can go to all the major cities in Greater Bay Area. And finally, because our land cost is very low when we purchase it. There's no risk of impairment.

Well, I think clearly, we didn't expect the good news from the Financial Secretary this morning. So, when we made the estimate, we were assuming that the tough measures would continue. So hopefully, I think the market would rebound a bit after the financial secretary has lifted the measures. For us, I think we have given a range of 40% to 50%, I would say, I think whenever we reduce our absolute dividend will hold on to the 50%. The top end of the 40%, 50% rather than the 40% of the low end, yes. But I think the -- hopefully, with lowering interest rates and with all the restrictive measures of the government being relaxed and normalized, I think, hopefully, I think well, I think we were quite sure that right, our original second half sales forecast can easily be beaten. And then, well, the more properties, completed properties, we can sell, of course, the more earnings we can book. But anyway, to answer your question, I think -- I think we have decided to reduce the interim dividend, well, anticipating that the FS would not lift any of the measures. But anyway, it's good news. So therefore, -- of course, I think before the FS announced the measures, we had a very conservative profit estimate here.

So may I now have the second question. So the gentleman row closest to the aisle, on my right-hand side.

This is Raymond Liu from HSBC. I've got 3 questions. The first question is related to the property sales in Hong Kong. Actually, just a bit of follow-up on the sales expectation. So as the management mentioned, like the company did not expect any changes in terms of cooling measures right now with all the changes happening. So, should we expect the contracted sales for fiscal 2024 to exceed the full year sales target, that you set earlier this year to HKD [ 33 billion] ? If yes, what will be the key project that would drive the outperformance in the coming 4 months' time? This is the first question. And the second question actually is about more on the macro on the Hong Kong retail. We have been seeing the light emerging trend of the reverse traveling by Hong Kong people to Shenzhen. Does the management think is it a [ cycle ] trend or a structural trend? If it is, how would the management handle this situation? And the third question is actually about the China retail. We saw that very strong Rental performance over the past 6 months. So can the management share with us the tenant sales trends recently in the past few months' time? And what would be the pre-leasing situation of the Shanghai ITC more that we should anticipate in the next few months?

Sorry, you are from HSBC, right? Okay. I think on the sales, I think is more -- okay, yes, please, okay.

Yes, yes. On the sales target, in the upcoming 10 months, we should have a number of projects to be launched, namely the Phase 2 of YOHO Hub, Phase 3 of NOVO Land and Phase 2 of YOHO WEST and together with our 2 superior project in Kia Tak, the Cullinan Harbor and Cullinan Sky and also our JV project in [indiscernible] And not forgetting our mega project, [ iStar ], which is to be launched at the end of the year. We are very confident that the above project will be really well received. However, for the first phase of [indiscernible] project as we lead through compete those related infrastructure before we can market the project. The first phase of the project may actually be marketed in the fourth quarter instead of the second quarter, as we have expected earlier. So for the finance -- for the sales target in this financial year, we may slip a little bit to HKD 23 billion, but net sales of HKD 10 billion can be recovered a few months later.

Actually, I think now that the mortgage limits have been raised, right? So the more -- the [indiscernible] If you buy a [indiscernible] unit, you can borrow 60%. Yes, maybe you and your friends can buy several and then our [indiscernible] . We can then raise our profit, extra profit...

Yes. I want to add that in last year, actually, we have sold a few units in Tower 2 of [indiscernible], [indiscernible] unit price compared with the secondary market, which unit were over HKD 100 million. We are going to market Phase 3 optimistical very soon, which just been completed its renovation, it will be another means of our disposal of encore properties.

Yes. And also with the FS normalizing all these restrictions, right?

Yes. For sure, this will activate the sales as well. .

As for the Hong Kong retail market. I think we've always had a more pre-COVID times. We've always had an open border between Hong Kong and Shenzhen. So I think it's not unusual to see increasing traffic flow between Hong Kong and Shenzhen after the border opened because I think it just reflects a lot of pent-up demand post-COVID and also the fact that there are more entrants and exit points particularly the high-speed rail station since COVID. But at the same time, I think we're also -- since the boarders have opened, we've also seen more Mainland shoppers coming back to Hong Kong. So recently, the -- during the Chinese holidays, number of [ managers ] have exceeded the 2018 levels. And we think that with the expansion of the individual visit scheme on the Mainland, we will also see mainly visitors coming back to Hong Kong in 2024. And as for our shopping mall performance in Hong Kong, I think over the past 12 months, we have seen good solid tenant sales growth across our Mall portfolio in Hong Kong. And as a reaction to Shenzhen, I think we've tried to be more proactive in terms of strengthening our tenant and trade mix, for example, on the food and beverage and also in terms of [ entity ] new experiences with more events, more collaborations with our brands and also in terms of refurbishing some of more outdoor spaces to introduce more pet and family-friendly areas. So an example is the Dino park in Sha Tin Plaza mall, it's been proven to be very popular. So it's a good model we want to applicate for other shopping models. And at the same time, we also want to make better use of our [ depot ] loyalty program to expand our customer base and also to build more stickiness. So one of the ways to do that is this year is by introducing an Instant Point Earn function, which helps with the easier point accumulation. And also, on the other hand, you also have an EV charging service, where you can use your points to redeem. So help people earn and burn points more easily. And those 2 functions so far have proven very popular among our members. And going forward, I think we remain optimistic about the performance -- upcoming performance of our Retail, Rental portfolio. And we've also seen positive rent reversions in the first half of this financial year. And finally, I think just to respond to the recent government initiatives, we think kind of the approach of hosting more mega events in Hong Kong is definitely the right approach. And we also hope there's more and more voices also recently across the business sector and also [indiscernible], calling for the relaxation of the tax-free limit, right, currently is $5,000 for Mainland tourists in Hong Kong. I think if we can lift that, to a more reasonable level, maybe not quite the $100,000 at [indiscernible] Island be at least somewhere closer. I think that will also give a major boost to the retail market. So we -- that's an upside that we can -- that we can hope for in 2024. And for Mainland -- for the Mainland Retail market, obviously, it's more buoyant than the one in Hong Kong. For year-to-date, we have achieved very healthy Rental and Sales growth in Mainland China, across our malls, especially for the luxury malls. There has been some traveling of shoppers who used to shop in major cities to overseas. But we've -- so far, we've seen limited impact on Group's luxury malls. And a case in Point, is for our Shanghai IFC Mall that Retail sales actually is almost double compared to pre-COVID levels currently. And for the -- so we are continuously optimistic about the prospects for 2024. And for our ITC project, for the -- it's one of our biggest -- once completed, it will be one of our biggest projects ever created, not just in Shanghai, but also for SHKP. So we have confidence that it will become a Landmark, when it's done. And so far, for our office tower, the preleasing rate at the Tower A is about close to 70% and for the shopping mall, the ITC [ Mason ], we have so far received strong interest from luxury brands. And we hope we can bring something new to the market when it opens in the latter half of 2025 and beyond.

For Hong Kong Retail, I think Hong Kong people go to the Shenzhen shop, right? But we can go every day, but not the other way, Shenzhen people can only come to Hong Kong once a week or something, right? And furthermore, I think when the Shanghai people understand if they come individually, they can only come to Hong Kong once every -- twice every year is very limited. So if Mainland -- if Beijing government can allow unlimited number of people subject to, of course, they have the money to come and say -- but in China, we have 1.4 billion people, if we just at 0.1%, people come into Hong Kong, I think we'll be doing very well. It's just, I think all these restrictive measures during COVID and also in the past, Beijing should relax. For example, like even when the Mainland is go to Singapore and Malaysia and Thailand, they can just go and stay there for a month or something, right. And I just had a call -- I just had a call with a friend in Singapore. He said, "Wow, so many [indiscernible] in Singapore, right? And even for average hotel, he's paying HKD 600 per room or whatever, right? So what I mean is, right? If we -- Hong Kong, if we just ask for most favored treatment, same Singapore, Malaysia, Thailand, [indiscernible], we'll be doing very well. It's just that, I think, 2 more cities adding to the individual travel list, right, and enable travel to Hong Kong. Subject to that you have some money. So we'll be doing very well because I'm sure for a lot of Mainlanders, they will after -- 3 years of lock-up, they would love to come and visit Hong Kong, too. So I'm optimistic because I think the latest measure of including 2 more cities, adding to the 49 cities, if they allow us unlimited or even once a week coming, right, our hotels will do very well. I think judging from Singapore because Singapore room rents are quite a bit higher than the Hong Kong room rents, yes. Anyway, and also as what Christopher said, right, if we ask for more tax fee allowance like [indiscernible] and even on [indiscernible] . So we just asked for most paper. Anyway, don't argue just ask for the most paper treatment -- we're doing well yes. Yes.

Okay. Thank you. So any further questions? So the gentleman in the middle in the second row, am I right?

It's Ken Yeung from Citi. I have 3 questions. The first is on Kia Tak. I see that you have an upcoming pipeline include 2 luxury projects in Kia Tak. While, indeed, there's still a lot of inventory and competition scheme. So what would be the pricing strategies and margin on these 2 projects? And is there any risk for impairment of that 2 project in Kai Tak? And secondly is on office because I see other people didn't highlight, how is the office outlook? Are we seeing any chance or when the office market is going to bottom out? And how is the reversion outlook for this year? And also, what is the preleasing status for the high-speed railway office project? And lastly, I want to follow up on the dividend. Because you mentioned very clear on the dividend side, which is because that is set before the budget speech. But that was, let's say, cut around 25%. Can we see this as a guidance for full year in terms of DPS because that you already -- definitely, you know how much profit that you're going to book in the second half. And also, is there any risk for -- given that you said that you intentionally said at the high side of 40% to 50% range, are we seeing that there may be potential defurther cut after this year on dividend?

Yes, on the Kai Tak projects, we all know that some projects of our peers in the area are facing challenges in marketing. But for our 2 projects there, we do not see any risk of asset impairment. On the contrary, we are very confident that these 2 projects will deliver good margin for us in the next 2 years, for our one-way project, Cullinan Harbor, it is situating at the permanent location in one way with Panoramic Harbor View. Whereas for the station project, Cullinan Sky, it is uniquely connected to the NPL station and shopping mall and also have a superior high over the labeling projects in Vicinity. I'm sure that this project will be very appealing to both local and Mainland luxury buyers later. And for Cullinan Harbor are going to launch the market really soon. In the next month, we are going to put a lump of units for tender. And you will see very soon, we can clean a lot of transactions at record prices of the area. On the second question regarding the Office market, actually, since the border we opened in last year, we have seen an increased leasing inquiries and inspection, particularly in the CBD area as the trend of flight to quality prevail and we also see that decentralization trend to the colocation continues, as more occupiers seizing the opportunity to relocate to core areas due to more attractive rental compared with 2 years ago. Demand mainly from financial services user also include a number of Mainland companies, for 1 and 2 IFC, like all buildings we are almost fully let. The project continues to be the most sort after location for leading financial institution. Whereas for ICC in West Cullinan, the project is also benefited by the high-speed railing and the West Cullinan cultural area, it is over 90% occupied. Following core location like [ Cullinan ], we all know that the vast majority of tenants are on the trade-related business. And unavoidably, their business are being affected by the macroeconomic uncertainty. So some of the landlords allow adopting a more flexible stand on rental negotiation. But our buildings in [indiscernible] City, are a lot of factor as most of our tenants are belonging to large and we have tenants or users in different sectors. They are very stable and have high demand on quality and single landlord and also management. So same as our other buildings in Venture and [indiscernible], they are also well positioned with pay occupancy. Overall, I think for the office market, I think Central and [indiscernible] will continue to be stable and outperform other submarkets as most of the tenants are in financial services. As for long collocation, I think leasing activities will be more competitive due to the upcoming supply in Thailand East, Hong Kong East or even the Guangzhou [ Hang ] area. For our new project in West Callinan, we all know that it is connected to the express rail line and also connected to free MPL station and also the airport express line, with great connectivity to major cities in Mainland also other parts of the world. We all know that UPS will take up [ 0.25 ] million square feet later. And actually, we have -- we also have a number of big names in financial services under negotiation. I think that we will strengthen this position as the center of wealth management later, apart from this being a tourist entertainment and cultural destination. Overall, I think compared with older buildings, new development like our WEST Cullinan project, they are much preferred by major tenant or M&C due to now-a-days, a high demand on ESG, IT facility and also quality management.

I'd like to add that, I think with your employers, like what you're looking for, right, they should take care of your health, wellness, you should upgrade -- ask them to upgrade yourself to those new buildings, all those ventilation, right, if your building is over 30 years old, you should demand your employer that if you want to work 5 days a week, they have to make sure that they look after you. And of course, you should have some hotel more, a lot of restaurants hereby otherwise, you say, "I want to work from home. Anyway, for the Kai Tak, I think we believe that our 2 projects are the best in the Kai Tak area. And also thanks to the [ FS ] lifting all the restrictive measures now unoccupied, I can just pay 40% down payment, right, 60% mortgage right, 60 -- luxury [indiscernible].

It helps a lot, yes. .

Yes, yes. And also, we expect a lot of our amendments, all these talented people, right over time, come to Hong Kong, yes. And on the office, I think for -- we noticed that more and more people from the Mainland traveled by high-speed railway to Hong Kong. They prefer the high-speed railway to come in by the air because I think it is much more in terms of punctuality, I think much more punctual, right? Much more reliable too. So we believe the XRL project it is the -- actually, it is in the town center, right, next to West Cullinan and also -- I can see only high-speed railway project that is in the center of cities, right? Yes. Yes. So we are confident that over time, given that it's a new project, right, and also with the best bet, maybe you can do your sales pitch a bit, how well we take care of the tenants.