WHARF REIC(HK:01997) Jin Rong Jie·2025-08-07 06:46Core Viewpoint - Kowloon Warehouse Properties is facing unprecedented operational pressure, with a significant decline in profits and revenue due to the ongoing downturn in the Hong Kong commercial real estate market [1][3]. Group 1: Financial Performance - The company's total revenue for 2024 was HKD 12.912 billion, a year-on-year decrease of 3% [1]. - Shareholder profit dropped to HKD 0.891 billion, down 81% from HKD 4.766 billion in 2023 [1]. - Earnings per share fell from HKD 2.67 in 2023 to HKD 1.35 in 2024, indicating a decline in operational efficiency and profitability [4]. Group 2: Retail Sector Challenges - The core assets, Harbour City and Times Square, showed performance divergence, with Harbour City’s revenue increasing by 2% but operating profit remaining stable [3]. - Despite a high occupancy rate of 94%, tenant sales decreased, impacting overall revenue due to structural issues in the Hong Kong retail market [3]. - Times Square experienced a 6% decline in both revenue and operating profit, despite efforts to attract new tenants and adjust the tenant mix [3]. Group 3: Office Market Conditions - The office market is facing oversupply, leading to increased competition and soft demand [4]. - The overall occupancy rate improved to 90%, but rental rates are under downward pressure due to new supply entering the market [4]. - The financial data indicates a decrease in net asset return from 2.50% to 0.47%, reflecting weakened profitability [4]. Group 4: Debt Management and Financial Stability - The company successfully reduced its net debt to HKD 34.2 billion, the lowest since its listing, improving its financial structure [5]. - The debt-to-asset ratio decreased from 20.27% in 2023 to 19.36% in 2024, indicating a more robust financial position [5]. - However, the company faces interest rate risks, with the actual borrowing rate rising, and cash flow from financing activities showing a negative trend [5]. Group 5: Future Outlook - The external environment remains complex, with trade conflicts and global economic uncertainties posing challenges to Hong Kong's growth [6]. - The completion of the Hong Kong International Airport's three-runway system and government initiatives may support market recovery [6]. - A potential shift in cyclical factors could boost the retail and hotel sectors if comprehensive measures are effective [6].