SHK PPT(SUHJY) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The group's underlying profits for the year ended June 30, 2021, amounted to HKD 29.9 billion, representing an increase of around 2% year on year, driven by higher contributions from property developments and rental income from the Mainland [3][4] - Reported profit increased by 13% year on year to approximately HKD 26.7 billion, with underlying earnings per share up 2% to HKD 10.31 and reported earnings per share rising to HKD 9.21 [4] - The net gearing ratio as of June 30 was at a healthy level of 16%, with interest coverage around 13.8 times [10] Business Segment Data and Key Metrics Changes - Gross property department profits grew by 14% year on year to around HKD 21 billion, with property development profit from the Mainland surging over 115% [6][7] - Net rental income increased by 3% to around HKD 19 billion, attributed mainly to robust rental growth in the Mainland portfolio, while net rental income from Hong Kong's rental portfolio dropped by 6% [8] - The hotel business in Hong Kong recorded an operating loss of HKD 511 million due to the pandemic's impact on tourism [9] Market Data and Key Metrics Changes - The group's total land bank in Hong Kong stood at around 57.9 million square feet, with completed properties accounting for approximately 34 million square feet [11] - In the Mainland, the group had a total land bank of around 75.3 million square feet, with completed properties amounting to 16.3 million square feet [27] - The gross rental income from the Mainland rental portfolio increased by 25% year-on-year to RMB 5.2 billion, driven by strong performance in shopping malls [32] Company Strategy and Development Direction - The company plans to continue increasing its land bank through various channels, including farmland conversion, and aims to expedite the construction of quality residential projects to alleviate housing shortages in Hong Kong [58][60] - The group is focused on developing large-scale integrated projects in Hong Kong and major cities on the Mainland, with expected new additions to the property investment portfolio exceeding 16 million square feet over the next five years [48] - The company is committed to enhancing its ESG initiatives, including reducing electricity consumption and greenhouse gas emissions, and aims to achieve LEED certification for new investment properties [40][107] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future of Hong Kong, citing a stable social and business environment supported by the National 14th Five-Year Plan [56][57] - The economic recovery in Hong Kong is expected to continue, with solid end-user demand and low interest rates underpinning the primary residential markets [43][44] - The company anticipates that the performance of its rental portfolio and hotel business will be constrained by cross-border travel restrictions in the short term [47] Other Important Information - The Board of Directors recommended a final dividend of HKD 3.70 per share, maintaining the total dividend for the full year at HKD 4.95 per share [5] - The group has received recognition for its ESG efforts, including a Triple A rating from the Hang Seng Corporate Sustainability Index Series [41] Q&A Session Summary Question: Property sales targets for FY 2022 and FY 2023 - Management acknowledged delays in pre-sale content but expressed confidence in catching up, with several projects planned for launch in the coming months, expecting a revenue of HKD 45 billion in the financial year [67][69] Question: Hong Kong office rental reversion and outlook - Management reported successful tenant retention, with over 70% of leases confirmed for renewal, and noted that premium office developments are expected to outperform other sub-markets [72][73] Question: Hong Kong residential market risks and sales strategy - Management indicated that the market is currently end-user driven, with a focus on launching projects at reasonable prices while balancing volume and margin [81][82] Question: Retail sales outlook in Hong Kong and Mainland China - Management noted that retail sales have bottomed out and are improving, with positive impacts from government initiatives, while the Mainland's domestic consumption remains strong [84][99] Question: Farmland conversion progress - Management confirmed ongoing submissions for farmland conversion, with significant projects expected to alleviate housing shortages [94][96] Question: ESG targets - Management highlighted targets to reduce greenhouse gas emissions by 25% and electricity consumption by 13% over the next ten years, along with commitments to achieve high green labels for future projects [106][107]