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

Good afternoon, ladies and gentlemen. First of all, welcome to the Sun Hung Kai FY 2024 Annual Results Analyst Briefing. And I would like to thank all of you for coming under the typhoon. As usual, I'll present an overview of the results and the performance of our businesses, followed by a Q&A section with our senior management. Let's start with the group's financial review. Please note that all figures are in Hong Kong dollars, unless stated otherwise. For the year ended 30th June 2024, the group's underlying profit amounted to $21.7 billion, which decreased by 9% year-on-year. The decrease was primarily attributable to lower property development profit from Hong Kong and the Mainland, partly offset by increased profit contribution from property rental and hotel businesses. Including the net effect of revaluation loss of around $2.4 billion on investment properties, the reported profit was $19 billion, a decrease of 20% year-on-year. The underlying earnings per share was down 9% to $7.50 while reported earnings per share was down 20% to $6.57. As for dividend, the Board of Directors has recommended a final dividend of $2.80 per share, a decrease of 24% year-on-year. Together with the interim dividend of $0.95, total dividend for the full year will be $3.75 per share. Now we come to the profit breakdown by segment. The group's property development profit decreased by 31% to around $8 billion, mainly due to lower profit margin in Hong Kong and lower sales volume of residential units on the Mainland. On rental front, the group's net rental income increased by 3% to around $19 billion, mainly driven by a 1% growth in net rental income in Hong Kong, and there was also an 8% increase in net rental income from the Mainland portfolio. There was a recovery in inbound tourism, which offset -- which offer supports to the group's hotel business. And operating profit of $615 million was recorded from the group's hotel business, significantly increased from $161 million in last financial year. Profit from other businesses also increased by 2% to around $4.9 billion. Altogether, the group's total operating profit for FY 2024 was down 7% to around $32.4 billion. On financial position, as at 30th June 2024, the group's net debt was $111 billion. The net gearing ratio was 18.3%, down from 21.2% as at the end of December last year. Interest coverage for the past 12 months was around 4.6x compared to 6.8x a year ago, mainly due to higher interest expenses. The group will continue with prudent financial management. Ongoing measures of cash flow management, including strict control on construction CapEx and strengthening of our recurring income from property investment portfolio and non-property businesses. We will also strive to achieve fast asset turnover for property development business. We expect to see the net gearing ratio to drop further by end of next financial year with over $28 billion to be received by June next year. To diversify funding sources and achieve a better alignment of the group's RMB-denominated assets and liabilities, the group has been ramping up the use of RMB-denominated borrowings. As of the end of June 2024, about 46% of the group's total borrowing were either fixed rate debt or RMB floating rate debt. The group's debt maturity profile were also well staggered. The group is one of the best-rated developers in Hong Kong, holding an A+ rating with a stable outlook from S&P and A1 rating with negative outlook from Moody's. The group maintains a sizable recurring income base from its rental portfolio and non-property businesses. For this financial year, this recurring income base was just 1.6% below the peak level in FY 2019. Now we come to the performance of different business segments. As at June -- end of June 2024, the group's total land bank in Hong Kong was about 58 million square feet of attributable GFA, comprising 38 million square feet of completed properties and around 19.6 million square feet of properties under development. Among the completed properties, retail portfolio accounted for 33% while offices accounted for 29% of the total. For property under development, about 13 million square feet were residential property under development for sales. These developments are expected to be completed in phases over the next 6 to 7 years. During the financial year, the group added 3 residential sites with a total GFA of about 1.5 million square feet through lease modification. We also added 2 sites totaling 465,000 square feet of GFA after the end of financial years. The group will continue to adhere to its prudent financial discipline, including a selective approach in land banking replenishment. Regarding land resumption, the group's land blocks in of Kwu Tung North/Fanling North NDA were resumed by the Hong Kong government, with cash compensations of about $1.9 billion already recognized in this financial year. Another batch of landlords in Hung Shui Kiu/Ha Tsuen NDA will be received, and the compensation of around $2.7 billion will be recognized in the next financial year. Let's move on to the property development business in Hong Kong. For the financial year, the group recognized that property sale in Hong Kong increased 3.7% year-on-year to $24.8 billion, mainly derived from NOVO LAND, University Hill, Silicon Hill, and Grand YOHO. Development profit decreased at 23% to over $6.5 billion, mainly due to lower development margin. During this financial year, about 2.5 million square feet of residential growth -- floor area was completed. Contracted sales not yet recognized amounted to around $25 billion, of which around $19.6 billion is expected to be recognized in the next financial year. Hong Kong residential market became active following the withdrawal of cooling measures in February this year but has softened in recent months as interest rate remains high. During the financial year, we achieved around $25.6 billion of contracted sales in Hong Kong, of which 35% or $8.9 billion were from the sale of completed stock including dynasty courts. This map shows our new project to be launched in the next 9 months, which include a diverse mix of residential project across Hong Kong to appeal to different home buyers. There are mass market projects such as Sai Sha near Ma On Shan, YOHO West and the YOHO Hub in Yuen Long. As for luxury projects, in addition to the recently tendered Victoria Harbour II in North Point, we also launched Cullinan Sky in Kai Tak. Furthermore, we will continue to put up for sale the unsold completed residential units and some noncore properties. We will be looking at our Hong Kong rental portfolio. During the financial year, the group's rental portfolio in Hong Kong to achieve -- continue to achieve modest increase in gross rental income of 1.2% year-on-year to about $18 billion. Overall average occupancy remained stable at around 92%. Higher gross rental income from retail and service apartment portfolios offset the decrease in office rental income. The group's retail rental income accounted for about 52% of total gross rental income in Hong Kong. We have adopted a proactive approach to strengthen the competitive edge of our malls. This includes ongoing asset and service enhancement and refining trade and tenant mix to enhance shoppers' experience. These efforts helped the group to achieve stable occupancy of around 94%. Our major malls enjoy strong connectivity. They are located along the railway lines and are linked to the surroundings by couple of foot bridges. Not only do we partner with business units and tenants in launching promotions, we also collaborated with market players from different sectors. A number of our malls have introduced pet and family facilities by refurbishing their outdoor areas. For example, part of the open space in the New Town Plaza will be [indiscernible] into a children park. The Point, our integrated loyalty program, helps our malls drive footfall and enhanced shopper experience. The program has also leveraged the group's extensive retail network and hotel footprint to strengthen membership recruitment. The Point will launch a new function, allowing special member to prebook the EV charging service. The new instant point earned function has been extended to about 60% of tenants in the group's major mall. The Point also collaborates with the Go Royal, the hotel's loyalty program to drive synergy. Moving on to the office rental performance. Despite the challenging market, the group's quality office portfolio achieved an average occupancy of about 91%. Our portfolio benefited from the flight to quality trend. We differentiate our portfolio by premium building quality and professional management services. In particular, we adhere to high green building standards that meets the ESG goal of our tenants. We will continue to upgrade our major existing buildings. In the near term, some properties have already opened recently and strengthened our recurring income base. YOHO Mix and YOHO Plus in Yuen Long opened in June this year. These new malls introduced popular brands and restaurants new to Hong Kong and pet and family-friendly spaces. They are linked to our flagship YOHO Mall by foot bridges, creating the largest retail cluster in the Loft West new territories. In the near to medium term, the group's recurring income base will be further expanded as major new investment property come on stream. They will include Mall beneath The Millennity in Kwuntong, high-speed rail terminus development and Artist Square project in West Kowloon and a commercial project in Mong Kok. A highlight in the pipeline will be the High Speed Rail West Kowloon terminus development whose office portion has been named the International Gateway Center, IGC. IGC comprises 2 sets of twin block gray office towers and has attained the highest sustainability ratings. An entire block has been taken up by UBS as its regional headquarters. The group also exchanged the green lease with UBS to demonstrate our commitment in sustainability. The project will be ready for handover from early 2026 and is expected to create synergy with our other properties in West Kowloon, including the Asia Square Tower project under construction and ICC cluster. Now let's move on to our property business on the Mainland. As at the end of June 2024, the group's total land bank on the Mainland was about 67 million square feet of GFA on an attributable basis, comprising about 21 million square feet of completed properties and 46 million square feet of properties under development. Among the completed properties, 43% of them were shopping centers and 38% of them were premium office. Now let's focus on our property development business on the Mainland. During the financial year, the group's recognized that property sale on the Mainland decreased by 49% year-on-year to about $2.7 billion, mainly due to lower sales volume. Development profit was also lower at about $1.3 billion with satisfactory development margins. As at the end of June 2024, the unrecognized but contracted sales amounted to RMB 12.6 billion. About RMB 8 billion will be recognized in the next financial year. In FY 2024, the group achieved contracted sales of over RMB 11 billion on the Mainland, mainly from the sale of residential units at Shanghai Arch and Hangzhou IFC. In the next 9 months, 4 projects with a total attributable GFA of about 930,000 square feet will be launched. You may refer to the table here for details. Now let's take a look at our Mainland rental portfolio. During the financial year, the group's gross rental income from Mainland rental portfolio increased by almost 8% year-on-year to about 6.3 billion or up 11.6% in RMB terms. The major driver was the retail portfolio whose rental income increased over 16% in RMB terms. Also, incremental contribution from Nanjing IFC Mall and Shanghai 3 IGC Tower A also contributed to the increase in gross rental income. The group's major mall on the Mainland continue to maintain high occupancy with positive rental reversion. The portfolio rises above the competition with synergy within our large-scale integrated project and proactive management approach. Shanghai IFC Mall is a must-visit luxury destination and maintain high occupancy. As for the office market, although the environment remains challenging, the group's Grade A offices at Shanghai IFC, Shanghai ICC, and the first 2 phases of ITC achieved a satisfactory occupancy. Three ITC Tower A is ramping up with 70% committed occupancy. We have extended our success from Shanghai to Nanjing recently. The 1 million square feet Nanjing IFC Mall host its grand opening in July this year and achieved high occupancy already. It houses duplex luxury flagships and new concept stores together with popular restaurants. Three ITC in Shanghai is a highlight in the pipeline, which will further expand the group's rental portfolio on the Mainland upon full completions. Tower A office was completed in FY '23 while several other parts are under construction and are scheduled for completion from 2025 onwards. They include the Tower B, the 370-meter toll office skyscraper, the flagship mall, ITC Maison, the hotel Andaz Shanghai ITC. Both Tower A and Tower B meet world-class green specifications under the LEED and Well certification program. Moving on to our hotel business. The group's hotels in Hong Kong achieved a notable recovery, although the return of inbound tourists has been slower than expected. Room rate and occupancy continue to improve. On the Mainland, Ritz-Carlton Shanghai, Pudong achieved a record high in both average room rates and RevPAR. As for new hotels, Four Seasons Hotel Suzhou opened in December last year. As a result, operating profit of the hotel segment reached $650 million, up significantly from $161 million in the same period last year. Let's turn to our ESG initiatives. The group will, starting from this financial year, disclose its Scope 3 emissions for better transparency. We are committed to obtain LEED gold or platinum rating for our new major commercial properties. As mentioned in the previous slide, we have exchanged a green lease with an anchor tenant of the IGC. The group is committed to using renewable energy. We installed a superfast EV charger in our malls and purchased electric construction equipment to reduce emissions. In collaboration with a bank, our construction arm, Sanfield launched Hong Kong's first ESG-linked supplier payment scheme this year, which allows suppliers and subcontractors meeting sustainability targets to enjoy early payments focused on services. The group uses its resources to make Hong Kong a better place to live and work in. All of the initiative will lend us [indiscernible] to the government for the construction of one of the city's first light public housing estate. It will start taking in residents around first quarter 2025. During the 2024 Paris Olympic Games, we utilized our extensive shopping mall network to promote the Olympic spirit in Hong Kong. We also continue to promote reading and support a wide range of spot for charity initiatives. For more information about our latest ESG performance, please refer to the appendix of this PowerPoint or our website. Now I will discuss the market and business prospects. In Hong Kong, the economy is expected to register modest growth in the near term despite a challenging external environment. Potential interest rate cuts should further benefit the housing market, while rising home rents supported by solid housing demand. Relentless efforts by the government to foster a mega event economy and the recovery of passenger flight capacity will support the revival of inbound tourism. On the Mainland, policies in cultivating new quality productive forces, advancing high standard opening up and unlashing domestic demand will render further support to the structural transformation and steady economic growth. Supportive measures should help steer the property sector towards a more sustainable path over the medium term. As for our business prospect, the group's attached importance to cash flow management and will continue to adhere to prudent financial discipline, where we strictly control capital expenditure. The overall construction CapEx is expected to decrease meaningfully in the next few financial years. We will continue to strengthening recurring income from property investment portfolio and non-property businesses and working on enhancing the competitiveness of our portfolio. We aim to achieve high asset turnover for our property development business, including the disposal of noncore properties. With new major projects in Hong Kong and on the Mainland coming on stream, we aim to achieve long-term growth in our recurring income. For the property investment portfolio, one of our key strategies is to strengthen its competitiveness to enhance service quality in addition to leveraging the strength of its sizable quality portfolio in prime location. Over the next few years, several of the group's new developments are coming on stream, creating new sources of recurring revenue. The shopping mall underneath The Millennity and the High Speed Rail West Kowloon terminus development in Hong Kong as well as Three ITC in Shanghai will help contribute to the group's recurring income upon their gradual completion. For property development business, the group will continue to capitalize on it's strong reputation for delivering high-quality properties to achieve high asset turnover. We will continue to launch new residential project for sale when ready and put up for sale unsold completed residential units and some noncore properties. Finally, I would like to conclude my presentation with the following message extracted from the Chairman's statement. Over the past half century, the group has been shaping Hong Kong's cityscape with iconic landmark developments, which have built its history and long-running reputation for quality. The group's customer-centric culture has earned trust and long-term relationship with tenants and customers. Adhere to prudent financial discipline, the group has achieved sound performance and resilience in weathering various economic downturns. Moving forward, the group will uphold its unwavering commitment to quality, flexibility in moving with the times, and prudent financial discipline. Supported by a solid foundation, including time-tested business strategies and strong execution teams, the group strongly believe it will rise above challenges and achieve long-term growth by continuing to build quality properties to meet public aspiration for healthy and environmentally-friendly community. This is the end of my presentation. Thank you.

Thank you, Miriam. Let me first introduce the panel members. Starting from your left, Mr. Allen Fung, Executive Director; Mr. Christopher Kwok, Executive Director; Mr. Victor Lui, Deputy Managing Director; Chairman and Managing Director, Mr. Raymond Kwok; Mr. Mike Wong, Deputy Managing Director; Mr. Adam Kwok, Executive Director; Mr. Eric Tung, Executive Director; and Mr. Frederick Li, Group Chief Accountant. May I now invite Chairman and Managing Director, Mr. Raymond Kwok, to share with us the highlights of today's results announcement? Mr. Kwok, please.

Yes. Thank you for attending today's session. We'll try to end this session before the typhoon #8, [indiscernible] hoisted, okay? Thank you for attending in spite of the weather. During the year under review, the group continued to deliver resilient performance despite the challenging external economic and operating environment. Such performance was supported by the group's prudent financial discipline, extensive experience gained over the years and strong execution ability of its management team, the group's premium properties and services as well as a reputable brand also serves as a backbone of our performance. The group continued to launch new projects for sale when ready. During the year, the group's contracted sales in Hong Kong and Mainland amounted to about $37.5 billion. New launches in Hong Kong included YOHO West Phase 1, the YOHO Hub 2 in Yuen Long and Cullinan Harbor Phase 1 in Kai Tak as well as [indiscernible] in Midlevels and other completed projects. All of these projects received positive market responses. On the Mainland, projects offered for sale include Phase 3 of Shanghai Arch and the third batch of residences at the River East part of Hangzhou IFC. The sales response for both projects was very encouraging. For a quick update, after the financial year, the group launched Victoria Harbour II in North Point for sale by tender just last week. Several projects in Hong Kong will be put on the market over the next 10 months. They include, for example, the first phase of Cullinan Sky in Kai Tak. A new block at the YOHO Hub 2 in Yuen Long, a joint venture project on Prince Edward Road West in Ho Man Tin. The second phase of YOHO West, and the first phase of the Sai Sha Project near Ma On Shan. On the Mainland, the group plans to launch new batches of strong venture developments. This includes a new phase of the [indiscernible] project, Lake Geneve in Suzhou and new batches at Hangzhou IFC and Oriental Bund in Foshan. For the group's property investment portfolio, its overall occupancy was satisfactory, thanks to continuous efforts to make the portfolio more competitive. In addition to having premium building quality and professional property management services, the group's office buildings are designed with high green building standards that align with tenant's ESG goals. They continue to attract multinationals and domestic corporations. The group's mega project atop the high-speed rail West Kowloon terminus is set to become one of the most sustainable and eco-friendly buildings in the world. Its office portion called the International Gateway Center, the IGC, has secured global financial institution UBS as a tenant for an entire block to house its regional headquarters. This landmark project plus other new developments coming on stream will bring additional rental income and steady cash flow to the group starting from the next 1 to 2 years. To cope with the challenging operating environment, the group continues to enhance the competitive edge of its malls. Apart from upgrading its properties and services, we regularly refine the tenant mix of our malls and have added more pet- and family-friendly facilities in outdoor areas. The loyalty program of our malls, i.e. The Point, continues to expand its customer base and launch new initiatives to bring greater convenience to customers. Over the next few months, the group plans to double the number of EV superchargers at its malls, and a prebooking service will be launched soon for our select Point members who want to use our EV superchargers. On the Mainland, the group has replicated the success of Shanghai IFC Mall in Nanjing with the recent opening of Nanjing IFC Mall. As the third iteration of our signature IFC brand, Nanjing IFC Mall houses an array of prestigious, high-end brands. Some are Asia and global flagship stores. It is quickly becoming a popular destination and a new landmark in Nanjing. Separately, the remaining portions at Three ITC in Shanghai, including Tower B office tower, a mega mall ITC Maisons and Andaz Shanghai IFC Hotel are scheduled for completion from 2025 onwards. These additions are expected to contribute to the group's sizable recurring income base when they are completed. The group has exercised prudent financial discipline in land bank replenishment. During the year, the group added 3 residential sites to our land bank in Hong Kong through lease modifications with a total GFA of about 1.5 million square feet. Moreover, the group is expected to receive cash compensation of about $1.9 billion for the government's resumption of our landlords in Pudong North and funding new development area. Another batch of landlords in n Hung Shui Kiu/Ha Tsuen new development area has also been resumed with compensation of about $2.7 billion. In addition, the group is applying for a land exchange for other lots in the Hung Shui Kiu area. In keeping with our belief in building homes with heart, the group is dedicated to developing a harmonious and sustainable community for all. The large-scale project in Sai Sha will not only provide premium residents but also a sports and commercial complex, covering a site area of 1.3 million square feet called Gold Park Sai Sha Infrastructure in the surrounding area has been upgraded to benefit all residents who live nearby by blending green lifestyle with nature. The project is set to become a most enjoyable and dynamic community. The resolution adopted at the third preliminary session of the 20th CPC Central Committee affirmed that Hong Kong should leverage the strength of 1 country, 2 systems to enhance its status as an international financial, shipping, and trade center. It also supported Hong Kong's drive to build itself into international hub for high-caliber talent. Such efforts along with the government's initiatives to attract businesses, investment in talent are expected to strengthen Hong Kong's competitive edge. Furthermore, a potential interest rate cut should benefit the housing market. The group will uphold its prudent financial discipline and maintain substantial recurring income from its rental portfolio and non-property businesses. It will leverage a strong brand. It will focus on high asset turnover in its property development business while staying responsive to market conditions. Without compromising on quality, the group will continue to strictly control the overall construction CapEx. Riding on these time-tested strategies and the strong execution team, the group has built a strong foundation over the years. Going forward, the group will continue to develop quality properties that help to build a healthy eco-friendly community for the public. The group will also strive to achieve sustainable growth. Thank you. Thank you very much. Thank you.

Thank you, Mr. Kwok. So we now open the floor for questions. So before posing your questions, could you tell us your name and the company you represent? So may I have the first question, please? So the gentleman in the first row, please.

This is Mark Leung from UBS. So I got about 4 questions. I think the first question is regarding on the market outlook. So if the rate cut is around the corner, so what's our residential market outlook in terms of both prices and volume? And what is our sales target for Hong Kong and China for next fiscal year? I think that's the first question. And the second question is regarding on the margin side. So the booking margin for this fiscal year is about 26%. But I think in the results announcement, we continue to highlight asset turnover, cash flow management. So going forward, how should we prioritize the margin and volume for the new project launches? I think that's the second question. And the third question is, we also mentioned we are going to be CapEx disciplined, control or construction CapEx. But at the same time, we do see -- we do acquire [indiscernible] land site, free farmland conversion and 2 residential land site acquisition. So what's our thoughts on that one? And lastly is on the Singapore investment properties. Just want to check with management why don't we exercise the option to buy the Singapore ION Orchard Mall?

Yes. On the first 2 questions, on the residential market, the relaxation cooling measure on stamp duties have stimulated our primary market earlier this year. Although momentum is a bit slowing down in recent months, I think this is quite normal after a strong rebound on volume. We all know that both the employment and immigration policies of the government are very well received, backed by the influx of talents and students. The residential leasing market has been very active over the months. And actually, we can see from the government rental index that the rents are rising quite rapidly. And upward trend continues. I think for some of -- most of the talents, they will consider buying a property and becoming homeowners after 2 to 3 years of adaptation to our society. And even in the local market, as the rents are rising and we are expecting that interest rate, there may be an interest rate reduction later this year, that will also induce a lot of renters considered to become homebuyers too. So for the next 12 months, I think the market will be very active with an increase in transaction volume. But since we are still in the course of the economic recovery, I think the prices may just rise modestly in the range of 5% to 10%. And for the next 9 to 10 months, we should have a number of projects to be launched, namely Victoria Harbour Phase II, which we are doing now, and also followed by the second block of YOHO HUB II together with our JV venture in Prince Edward Road and also our Cullinan Sky project connected with the Kai Tak MTR station. At the end of the year, that would be Phase 2 of YOHO West. And not forgetting our mega project, Sai Sha, the phase 1a will be marketed in early next year. We have achieved a total sales of over $25 billion, which is exceeding our target in last year. And we are very confident that we can conclude a similar or better sales in this financial year. And on margin positioning, over the years, I think you agree that we can always strike a balance between volume and margin. And for the mass project, we are usually aiming for a quicker asset turnover like the YOHO West project, which we have sold over 1,050 units within 20 days in the beginning of this year. And recently, even the units of NOVO LAND are doing well. And you know our cost of these 2 projects, and I think we can have a good and reasonable margin in future. Even for a luxury project like Victoria Harbour Phase II, which we are selling through a number of tenders, actually, we are doing a few transactions with average price range of $30,000 to $40,000 per square foot, which can also deliver good profit for us. And in the last quarter, I think you are aware that we have sold a number of units in [indiscernible] And this is alone core investment properties. We have a really low historical cost and this units are going to deliver handsome profit for us. Thank you.

I think on the question about the -- sorry, the CapEx discipline, right? I think we are buying land that we're confident of selling the end units, right? And also, we are buying land that we predict the profit margin will be very reasonable, yes. And for in the primary market, the property prices have fallen to 2017 level. I think if government is prepared to offer a more reasonable premium, I think this could be a good time to accept, provided that we are confident of the selling the end units there. And regarding your question about CapEx, right, I think we would be developing properties. For example, we were developing investment properties that we feel confident of, yes. If we are not confident of the ratability, we're going to slow down on the investment CapEx. Anyway, I think buying land, we feel at the right time, when we are confident about the end sales, I think it's a good time, yes. And government has realized that they should be more flexible now, yes. On the Singapore ION Orchard, I think we have a very good working relationship with CapitaLand. And I think CapitaLand is transferring the 50% to their -- a listed fellow subsidiary. And I think we work well with them. And I think we need a strong local partner to operate in Singapore, given that our company is not based in Singapore. And we have -- CapitaLand and us have both agreed that we should continue to invest and make sure that our mall would be the best mall, best luxury mall in Singapore, yes. So we work well together with CapitaLand and we are confident of the future of the mall, yes. Thank you.

Thank you, Mr. Kwok. So can I have the second question? So the gentleman in the front row, please.

Griffin Chan from Citi. So I have 5 questions. The first 1 will be on dividend and capital allocation. So will there be any change in your dividend policy in 2025? Have you considered for more active capital recycling from the noncore asset disposal? And what is the capital allocation strategies between deleveraging, share buybacks as well as on land banking? So this is the first one. The second 1 will be on gearing. So are you comfortable with the current gearing level and debt level? So what is the optimum level on the RMB-denominated debt as a percentage of the total debt? And will you consider to be adding more onshore financing in China? So this is a second 1. The third 1 will be on the land banking strategies in Hong Kong, banking strategies in Hong Kong. So what is the group land banking strategies in Hong Kong? Given the land cost, home price is falling as well as the sales is weak. And what is the expected margin and the minimum return for the new land banking in Hong Kong? And the next one, the fourth one, we were on the China land banking. So what is the land banking plan for China? Will you consider to bottom fish some of the commercial properties in Hong Kong or in China or even will you consider to buy out any pod stake from your partner from the project in China? And the last 1 will be on industrial building convert. We will be considered developing or converting more of the industrial building into data center? For example, sale for submssion, especially for those in the [indiscernible].

On the last question, Allen, can you respond to that?

Yes, yes. I'll take the last question first. I mean SUNeVision, we have a very robust pipeline in [indiscernible]. It's a multiphase project. Our Phase 1 just opened, and we still have a lot of -- and we like that location very, very much because it is very high electricity, very dense in fiber. So we're going to invest quite heavily in that. Obviously, we will continue to evaluate other opportunities. I think there's a misconception in the market that there's not enough space for data centers. Actually, there is actually a lot of buildings, a lot of space, which can be turned to data centers. Just that they might not be great data centers. So we're continuing evaluating that. But I think the -- we will particularly focus on our [indiscernible] asset because this is a very, very good site and has very dense electricity and has all the infrastructure that can support the development of AI data centers in the future.

And also for [indiscernible] I think we've incurred the land cost, right, there are still a lot of -- we still have Phase 2 to build, right?

Phase 2.

So we have enough land bank for the foreseeable future. By the way, on the total supply of land for data centers, their plan -- they really plan in [indiscernible] building.

Totally, totally. There's actually quite a oversupply.

Anyway, I think for SUNeVision, we also need to control our leverage a bit, right? So I think we've incurred a lot of the CapEx for the land in construction, right? So we would want to make sure that the capital is -- the productivity of the capital, yes. Adam, can you answer on the China land banking?

Yes, thank you. On the China land bank, I think 3 things. Number 1 is as our Chairman was saying, we have to be very agile, and we have to only build if the market has demand. And so even though we have, for example, 45 million square feet under development, well, of course, only build it if there's demand. And if not, we'll phase it out. That's part of our strategy to control CapEx and also being agile to adapt to market demands. And number 2 is that even with the core portfolio we're building and with the completion schedule we give you, our IP is going to grow from 19 million right now to 30 million in the next 3 years. That includes Shanghai ITC Phase III, Hangzhou IFC, Suzhou, Guangzhou, et cetera. So I think the point is we're very focused on execution because our IP alone is going to grow 50%, and it's not an easy market to lease it out and sell out. And I think finally, the third strategy and third point is on sales, on property development sales. We are very focused on monetizing an asset turnover sales. You will see we've achieved $11 billion from fiscal year in China -- from this past fiscal year, mostly from Shanghai Arch and also some from Hangzhou IFC. And you'll see that we also have ample sales resource from existing stock and also coming new launches in the coming year that we are focused on asset turning over and selling it. So I think the summary of all that is we'll build it out by phases according to market demand. We will also raise our focus on just executing on our investment portfolio growth and also our residential sales. And on partners and buying the stake of course, we're open to it if the price is right and the partner is willing, right, and especially if we run it too. So you should talk to our partners and convince them. Yes.