Robust Harbour City Underpins Growth Momentum & Dividend ... - … · 2019. 3. 5. · Wharf Real Estate Investment Company Limited 2018 Final Results Overview 3 Solid HKIP Income

Wharf Real Estate Investment Company Limited 2018 Final Results 1

Wharf Real Estate Investment Company Limited

2018 Final Results

5 Mar 2019

Robust Harbour City Underpins

Growth Momentum & Dividend Sustainability

Wharf Real Estate Investment Company Limited 2018 Final Results

Overview

2

2018 Highlights

Revenue

$16.0B

(+9.5%)

Underlying Net Profit

$9.9B

(+10.6%)

HKIP & Hotels - 6 Core Assets

Retail Sales

$49.4B

(+20.2%)

Market Share

10.2%

(Harbour City 7.7% )

Malls – 73% of HKIP Revenue

72%

of Group Revenue

76%

of Group Operating Profit

Harbour City *– 76% of Underlying Net Profit

HC

18.1%

(2017: 19.6%)

TS

20.2%

(2017: 22.9%)

Occupancy Cost^ – Continuous Improvement

^Occupancy Cost = Retail Rent/Retail Sales *Includes the 3 Marco Polo (MP) Hotels at HC


Overview

3

Solid HKIP Income Stream

Retail

72.8%

Office

25.6%

Serviced Apts

1.6%

HKIP Revenue Split #

HKIP Revenue

$14.3B

• 5 Core HKIP, $258B Valuation*

• Retail 73% of Total HKIP Revenue

• HC Retail Alone 53% of Total HKIP Revenue

# Excl. Hotel

* Excl. $16B of Hotels, which are Carried at Cost


Overview

4

Record Retail Sales at HC

325

406

445

494 493 475

437 446

485

2010 2011 2012 2013 2014 2015 2016 2017 2018

HK Retail Sales (HKD billion)

2018 $485.2B (+8.8%)

2018 Tourist Arrivals

Total +11.4%

Mainlander +14.8%

20

27

31

34 35

31

28

30

37

2010 2011 2012 2013 2014 2015 2016 2017 2018

HC Retail Sales (HKD billion)

2018 $37.3B (+23.6%)

+6.7%

vs 2014 -1.6%

vs 2014


Overview

5

Resilient HC Retail Revenue in Good Times & in Bad

20.6%

22.0%

17.7%

14.8%

22.0%

18.3%

16.2% 15.6%

4.8% 4.3%

6.8%

13.6% 12.8%

10.3%

0.6%

18.3%

24.9%

9.8%

11.0%

-0.2%

-3.7%

-8.1%

2.2%

8.8%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

HC Total Retail Revenue Growth vs HK Retail Sales Growth

HC Retail Revenue HK Retail Sales Growth

2008-2018 CAGR

13.3% 5.9%

Market Downturn Market Downturn


Overview

6

Financial Highlights

• HKIP Total UNP +12% to $9.7B

• HC UNP +15% to $7.2B (Excl. Hotels);

+16% to $7.6B (Incl. Hotels)

• HC Valuation* ~$184B (~$61/shr)

• HC Net Cash Inflow $7.5B^ (~$2.5/shr)

• DPS $2.10 (65% of Realised UNP from

HKIP & Hotel for 2018)

**Excl. IP Revaluation Surplus and Exceptional Items

*As of End-Dec18. Incl. Valuation of 3 Marco Polo Hotels; but All Hotels are

Booked at Cost in Wharf REIC’s Balance Sheet

^ Includes 3 MP Hotels

HKD Million 2018 2017 % Chg

Group Revenue 16,481 20,904 -21%

Operating Profit 12,724 15,442 -18%

Underlying Net Profit (UNP)** 10,053 9,500 +6%

Profit Before IP Revaluation Surplus 10,053 9,236 +9%

Net IP Revaluation Surplus 7,974 7,982 -

Profit After IP Revaluation Surplus 18,027 17,218 +5%

Earnings Per Share (HK$)

- Attributable to Shareholders

- Underlying**

5.94

3.31

5.67

3.13

+5%

+6%


Agenda

7

Financial Management

Times Square (TS)

Central Portfolio

Plaza Hollywood (PH)

Harbour City (HC)


Agenda

8


Times Square (TS)

Central Portfolio


Harbour City (HC)


Harbour City

9

>$100M Retail Sales (each day)

$37.3B

(+23.6%)

$7,529M

(+13.6%)

(73% of HC Revenue)

Retail Sales Retail Revenue

~$2,700

(+17.3%)

(~US$4,200 psf/yr)

7.7%

(New Record)

Retail Sales psf/mth Market Share*

*HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B

Effective Marketing Initiatives


Harbour City

10

Consistent Outperformance in Retail Sales Growth (YoY)

• Among Most Productive Malls in the World

• 2018 Growth 24%, Exceeded HK by 15 ppts

• Momentum Continued into Jan 2019

• Constant Re-tenanting & AEIs Add

Excitement

-18.9%

-9.6%

-6.4%

-3.8%

1.4%

4.4%

12.5%

16.8%

37.7%

34.4%

16.2%

11.0%

-12.5%

-8.2%

-7.5%

-3.7% -1.3% 0.2%

4.1% 5.8%

14.4%

12.4%

6.5%

2.3%

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Harbour City Hong Kong


Harbour City

11

Steady Income Supported by Demand

5.7 5.9 6.2 6.6

7.6

2.1 2.3

2.4

2.5

2.6 1.5

1.3 1.3

1.3

1.5

0.3 0.3

0.3

0.3

0.2

2014 2015 2016 2017 2018

HC Revenue Breakdown (HKD billion)

2018 $11.9B* (+10.1%)

Retail Office Hotels & Club S.A.

• Strong Underlying Tenant Demand

• Sales Supports Retail Rental Growth

• High Occ (>98%) Supports Office Rental

• HC Operating Profit : +12%*

*Includes the 3 MP Hotels at HC


Harbour City

12

Value Add Initiatives

Hampton Court Conversion (to Office)

• GFA: 360,000 s.f

• Scheduled for Completion: Jul 2019

OTE

• New Landmark to Captivate Patronage

• 9 Dining Outlets Opened (All HK Debuts)

to Excite Diners


Harbour City

13

OTE – Hotspot


Harbour City

14

HC Hotels Recover to 2014 High

$1,292M

(+12.1%)

Total Revenue

$526M

(+21.3%)

93%

(Average for the Year)

Total GOP Occupancy

• Robust Tourist Arrivals Underpin Strong

Performance

• Unfolding Improvement Programmes Value

• MP Hongkong Hotel – Top 10 Hotels in HK

(by DestinAsian Readers’ Choice Awards 2019)

3 Marco Polo Hotels at HC


Agenda

15


Times Square (TS)

Central Portfolio


Harbour City (HC)


Times Square

16

Vertical Landmark

$9.1B

(+11.8%)

$2,100M

(-0.6%)


~$1,500

(+11.2%)

1.9%

Retail Sales psf/mth Market Share*

*HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B

• Re-tenanting Creates New Customer

Experience

• New Experience Appeals to Shoppers

• Retail Sales Growth 3 ppts Above Market

• Occupancy Cost Recovers to 20.2%


Times Square

17

Vertical Landmark

1.9 2.0

2.1 2.1 2.1

0.7

0.7

0.7 0.7 0.7

2014 2015 2016 2017 2018

TS Revenue Breakdown (HKD billion)

2018 $2.8B (+0.6%)

Retail Office

Creative Marketing Programmes


Agenda

18


Times Square (TS)

Central Portfolio


Harbour City (HC)


Central Portfolio

19

Prime Commercial Addresses

Wheelock House (WH)

• Ground Zero Commercial Property

• 2018 Rental Reversion: 31%

Crawford House (CH)

• Diversified Tenant Mix

• 2018 Rental Reversion: 16%

$103 psf/mth

(+14.8%)

Office Spot Rent

98%

Office Occupancy

$71 psf/mth

(+15%)

Office Spot Rent

100%

Office Occupancy


Central Portfolio

20

The Murray – Award-winning

• Long-term Strategic Investment

• Full Operation in Aug 2018

• Average Occupancy Reached 71% in 4Q18

• Startup Loss in 2018

Condé Nast Traveller’s ‘The Hot List 2018’,

Best New Hotels around the world

Condé Nast Traveler’s “Readers’ Choice Awards 2018”

Top Hotels in China

Ranked #1 in Hong Kong

Garnered Prestigious Awards in 2018


Central Portfolio

21

The Murray – Award-winning


Agenda

22


Times Square (TS)

Central Portfolio


Harbour City (HC)


Plaza Hollywood

23

Embracing CBD2’s Potentials

$2.6B

(+5.1%)

$569M

(-0.9%)


• Constant Tenant Mix Optimization

• Above Diamond Hill MTR Station


Agenda

24


Times Square (TS)

Central Portfolio


Harbour City (HC)



25

Prudent Financial Management

3.1

8.9

5.6

13.6

3.7

7.2

2019 2020 2021 2022 2023 2024 & After

Debt Maturity (HKD billion)

(As at 31 Dec 2018) • Net Debt Reduced to $39.4B

• Gearing: 17.6%

• Average Interest Cost: 2.0%

• Interest Cover: 16x

• Moody’s A2 Issuer Rating; Outlook Stable


• Sino-US Conflicts

• European Political Instability/Brexit

• Global Currency & Interest Rate Movements

• Global Economic Slowdown

Prudent Outlook


CSR

27

SUSTAINABILITY


CSR

28

• Published the 1st standalone Sustainability

Report in accordance with GRI Standards

• Hang Seng Corporate Sustainability Index

Series Member 2018-2019

• Accredited Hong Kong Quality Assurance

Agency’s CSR Index Plus mark

• Caring Company Logo

2018 Key Achievements


CSR

29

Business-in-Community

• A Business-in-Community initiative launched by Wharf in

2011, providing secondary school students who are

disadvantaged in learning with opportunities and care

• Using an “Adopt a School” model, there are now 68

project partners:

48 Companies 5 Universities

10 Organisations 5 Consulates

• In 2018, the no. of partner schools reached 76, over

66,000 students benefitted

• Business Units of WREIC are partnering with 7 WeCan

schools to provide support


CSR

30

Youth Development

The Wharf Hong Kong Secondary School Art

Competition and The Wharf Art Scholarship

• Since its introduction in 2011, the competition

receives over 10,000 entries from more than 250

secondary schools across 18 districts

• Top 18 entrants are eligible to apply for The Wharf Art

Scholarship to pursue further studies in art-related

undergraduate programmes at a tertiary institution of

their choice.

• Today, 13 students have been awarded a scholarship.


CSR

31

Youth Development

• Established in 2011

• Provide opportunities for graduates of the Master of

Architecture Programme to intern in renowned

architectural firms overseas.

• Today, 23 students have been awarded and interned in

countries including Denmark, France, Germany, India,

Italy, Japan, the Netherlands, Portugal, Spain,

Switzerland, the UK and the US.


CSR

32

Community Care

• First and Only Public Transport Operator in Hong

Kong offering free rides to Eligible Elderly and

concessionary fares to those in need, without

government subsidies.

• In 2018, Benefitted

- Over 1Million Elderly Over 65

- Over 1Million Children and Disabled People


Appendix


Appendix

34

Harbour City Times Square Plaza Hollywood

2018

(HKD million)

Revenue % Chg Revenue % Chg Revenue % Chg

Retail 7,529 +14% 2,100 -1% 569 -1%

Office 2,634 +6% 741 +4% - -

Hotels & Club 1,476 +11% - - - -

Serviced Apt. 232 -29% - - - -

Total 11,871 +10% 2,841 +1% 569 -1%

Valuation* as of

31 Dec 2018

$184B $59B $10B

Retail Sales

Jan-Dec 2018

$37.3B (+23.6%) $9.1B (+11.8%) $2.6B (+5.1%)

2018 Avg. Retail

Passing Rent

(HK$ psf per

Month)

$483 $297 $104

* Incl. Hotels at Valuation as of 31 Dec 2018

HC/TS/PH Performance


Appendix

35

Premium Quality Portfolio

The Above Refers to the 6 Key Properties in Hong Kong

*Incl. Valuation of 3 Marco Polo Hotels & The Murray, Hong Kong; but All Hotels are Booked at Cost in Wharf REIC’s Balance Sheet

Central Portfolio: Incl. Crawford House, Wheelock House & The Murray

Revenue

2018 Revenue

$16.0B

Harbour City

74.1%

Plaza Hollywood

3.5% Central Portfolio

4.7%

GFA

HKIP & Hotels

GFA

11.4M s.f

Harbour City

71.3%

Plaza Hollywood


6.5%

Valuation*

Valuation

$274B

Harbour City

67.2%

Plaza Hollywood


7.7%

Times Square

17.7%

Times Square

21.5%

Times Square

17.3%


Thank You

Robust Harbour City Underpins

Growth Momentum & Dividend Sustainability


End of Presentation

Wharf Real Estate Investment Company Limited [HKEx Stock Code: 1997.HK]

Disclaimer

All information and data are provided for information purposes only. All opinions included herein constitute our

judgment as of the date hereof and are subject to change without notice. The Group, its subsidiaries and

affiliates hereby disclaim (i) all express, implied, and statutory warranties of any kind to user and/or any third

party including warranties as to accuracy, timeliness, completeness, or fitness for any particular purpose; and

(ii) any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the

information and data contained herein.

Documents

Robust Harbour City Underpins Growth Momentum & Dividend ... - … · 2019. 3. 5. · Wharf Real Estate Investment Company Limited 2018 Final Results Overview 3 Solid HKIP Income