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Edited Transcript of 4.HK earnings conference call or presentation 10-Mar-20 10:59am GMT

Full Year 2019 Wharf Holdings Ltd Earnings Presentation

Hong Kong Jun 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Wharf Holdings Ltd earnings conference call or presentation Tuesday, March 10, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Angela Ng

Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited

* Tin Hoi Ng

Wharf (Holdings) Limited - Chairman & MD

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Conference Call Participants

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* Andy So

Haitong International Research Limited - VP & HTI Sector Coordinator

* Hoi Chuen Yeung

Citigroup Inc, Research Division - Director

* K. Y. Cheung

Goldman Sachs Group Inc., Research Division - MD

* Karl Choi

BofA Merrill Lynch, Research Division - Director

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Presentation

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [1]

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Good afternoon, everyone. A very warm welcome to the webinar of Wharf final results briefing. I am Angela Ng, Investor Relations Manager. Our management team in the webinar include Mr. Stephen Ng, Chairman and Managing Director; and Mr. Kevin Hui, Director and Group Financial Controller.

Before the presentation and Q&A session, let me now pass the time to the Chairman, Mr. Ng, for an opening remarks.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [2]

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Thank you. I'll be very brief. In essence, the title of the announcement, which we published about 5 hours ago, says it all. Everything basically was on plan in 2019 up to the end of the year, and then we turn the corner into 2020. And 3 weeks later, of course, the virus started to hit. And then everything changed. Not just for us but for the markets that we operate in and our peers. And of course, we'll be talking a little bit more about that in the course of today's session.

Let me, with that, hand back to Angela to take you through the presentation.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [3]

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Thank you, Chairman. Now I believe that you will see our PowerPoint presentation on your computer screen or mobile device. The theme of the presentation is On Plan in 2019 but Virus in 2020. 2019 is an exceptionally difficult year for Hong Kong and Mainland China due to both external and internal factors.

First, let's take a look at our performance highlights in 2019. Profit from DP decreased by 85%, despite meeting operating plans. Strict government controls on selling price prompted appropriate financial provision, which affected the profitability. Profit from IP increased by 44% and met budget. Logistics decreased by 17%. As a result, the group's underlying net profit decreased by 58% for the full year.

The virus outbreak in 2020 has triggered a new crisis. Most businesses, particularly those in the Mainland, suffered very badly. DP sales and construction halted substantially. IP performance was hurt from the government-instructed closures up most as well as rental reliefs. Hotel occupancy rate falls to low single digit with 98% of last year's revenue loss. The production base in South China is still far from full strength for cargo flow.

Now we will look into the group's operation. Total assets, excluding cash and investment, amounts to $184 billion, with properties account for over 90%. Mainland china assets account for over 70% of the total assets.

Under the challenging market conditions, the group's expanded recurrent income base from the Mainland IP portfolio contribute to a larger share of profits. Despite the virus outbreak causing disruption, the prime IP assets are set to capture the opportunities from Mainland China's consumption-driven economy in the long term.

Moving on to financial highlights. The group maintained a sound balance sheet. Net asset value was $142.9 billion. Net debt decreased by $6.6 billion to $19 billion. Group revenue amounts to $16.9 billion, and underlying net profit was $2.7 billion. A full year dividend of $0.225 (sic) [$0.325] per share was declared.

In the following slides, I will walk through the performance of different business segments. Firstly, recurrent income, including Mainland IP, hotels and logistics. Secondly, asset turns, including DP in Hong Kong and Mainland.

Now let's focus on recurrent income. It was the driving force from Chengdu IFS and newly opened Changsha IFS. Mainland IP revenue increased by 14% to $4 billion. The malls' growth are well supported by our solid sales productivity. Occupancy of office sector is improving steadily despite oversupply.

At Chengdu IFS, our flagship in Western China, retail sales grew by 14% to RMB 6.8 billion, which is among top 10 shopping centers in Mainland China for 6 years. Double-digit rental reversion has been achieved since its commencement. Commitment rate of office climbed to 85% with rent rates among highest in the city.

Changsha IFS is gaining pace and reaching out to different clienteles in Hunan and other provinces. In its full year of business, retail sales achieved RMB 4.7 billion among the top leaders in Central China.

As for hotel management, the group currently manages 17 hotels in Mainland China, Hong Kong and the Philippines under Niccolo brand and Marco Polo brand. From the table, you can see that Niccolo Hotels at our 3 IFS in Chengdu, Chongqing and Changsha outperformed competitive set proven by their high RGI, Revenue Generating Index.

Taking Niccolo Chengdu as an example, RGI of 179 means outperforming the competitive set average by 79%. In addition, revenue per available room at Niccolo Chengdu and Niccolo Chongqing also achieved satisfactory growth.

The Niccolo Hotels continue its award-winning legacy with a number of awards we served during the year.

As for logistics, under macro challenges and regional competition, total throughput of Modern Terminals declined by 4% and Hong Kong Air Cargo Terminals declined by 6%.

Moving on to assets turn. The luxury-focused Hong Kong DP currently holds the landbank of around 3 million square feet, while Mainland DP focusing in Hangzhou, Beijing, Shanghai and Suzhou, has a landbank of 3.5 million square meters. The group continues to be very selective on land purchase.

In Hong Kong, a Harbour front land site on the runway at the former Kai Tak airport with a total GFA of 1.2 million square feet has been awarded to a consortium in which the group participated during the year. While in Mainland, the group acquired a project in Hangzhou with a total GFA of over 0.3 million square meters.

Quality DP projects include Mount Nicholson under the valuable Peak Portfolio in Hong Kong, which generate total contracted sales of $4.2 billion and attributable profit book of $0.6 billion. 4 houses and apartments will be recognized in 2020.

In Mainland China, total contracted sales amount to RMB 19.9 billion, exceeding our target. Underlying demand remains solid. However, profitability has been limited by strict price restrictions, and the timing of sales launch was also affected. For 2020, sales target is RMB 15 billion and sellable resources totaled 1.3 million square meters.

Warped by the price restriction policy, attributable Mainland DP revenue decreased to $14.8 billion, and operating profit was $4.9 billion. The net order book was RMB 27.4 billion. Target completion for 2020 is 1.2 square meter -- 1.2 million square meters.

Moving on to the financial management. Net debt decreased to $19 billion. Gearing ratio lowered to 13%. Average interest cost was 3.6%. Interest cover was 5.1x.

Looking ahead to 2020, most business, particularly those in the Mainland, suffered very badly in the past 2 months and may take months to recover even after the virus outbreak comes under control. Retail properties are facing material rent relief and marketing aid. Hotel revenue only achieved less than 5% of the same time last year. Construction and sales of DP ground to a halt. Cargo movements saw a significant reduction. For those business sectors, the first quarter of 2020 is already consigned to a washout.

In spite of macro headwinds, the group's operating plans continue. There are a couple of highlights across our business, including the prime sites in Kowloon Tong and Kai Tak for Hong Kong property, the upcoming Niccolo Suzhou for hotel management, and for logistics, the efficiency gain from Hong Kong Seaport Alliance are expected to be revealed.

In the last part of the presentation, I will walk through our efforts and achievements in sustainability. The group continued to be a member of Hang Seng Corporate Sustainability Index. We have raised our first Green Loan Facility of $2 billion to refinance Chengdu IFS.

The group also incorporate green features in property design. Several of our properties have achieved LEED Gold or Platinum certification, a testament to our efforts in reducing environmental impact.

For the youth development program, Project WeCan, our business units are partnering with 5 WeCan schools to provide support.

So that concludes my presentation. Now we will come to the Q&A section.

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Questions and Answers

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [1]

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Just a little housekeeping before we get started. We welcome both verbal and written questions. We will first receive the verbal questions. If you have any questions, you can use the icon on your control panel to raise your hands, we will unmute your line.

The first question from Ken Yeung from Citi.

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Hoi Chuen Yeung, Citigroup Inc, Research Division - Director [2]

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Can you hear me?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [3]

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Yes.

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Hoi Chuen Yeung, Citigroup Inc, Research Division - Director [4]

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Okay. I have 3 questions. The first is on the Hong Kong DP. I understand Wharf has been using Wheelock properties as its agency for sales and development. So if Wheelock property become a private company, would that affect your Hong Kong DP sales and development? And this is a follow-up question. Are you interested in the Hong Kong asset if they want to sell to you? And the second question is on your equity portfolio. I've noticed that you have sold some stocks during 2019. Can you update us on what type of it? Is it -- you're selling CME2 or the Hong Kong property company? So also update on this, the latest $31 billion equity portfolio, what is the percentage being CME2 and being Hong Kong property stocks? And lastly, on dividend. So I understand your core earnings are down 58% and DP is cut by 50%, but the provisions for China property project, $3.8 billion is not cash. So can we understand why this noncash item affect your cash dividend, so i.e., what is our latest dividend policy?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [5]

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Okay. Thank you very much. To the first question, Hong Kong DP, by ourselves, we don't believe we have enough scale to run the business in as effective manner as if we were to do it together with the Wheelock portfolio. Wheelock, over the years, has built up a substantial presence in the marketplace. And that is why they are -- we and them together are working together. There is no plan to change the ownership of any of the projects that are currently in the respective listed companies. And we're quite happy with what we've got -- quite busy with what we've got in the coming 2 or 3 years. So I think generally, we can expect the present position to continue.

On the second point, equities, we -- it's a portfolio which has helped for the longer term until we need the funds to invest in something else. We have not identified sufficient application of funds to liquidate the position in any material way. However, we did minor switches during the year to take advantage of opportunities. At the moment, I think the portfolio is still slightly in favor of CME2, but there is still a very high component of Hong Kong properties in there.

And to your third point, the provision, of course, as you pointed out, is a noncash item. And what we did was we took the reported underlying net profit as the base to determine the 2019 distribution. As and when those projects are recognized in the future, of course, the cost base having been written down, we would expect -- if we get into a profit, we expect the profit to be realized in the coming years, in which case that would assist us to -- that will give us a lift on the bottom line. And that would, in turn, be reflected in the future dividend. So it is more of a timing matter than anything else. In the past, we have -- in the recent past, we have been adopting a dividend policy, representing roughly 30% of our underlying net profit. This year, we have raised it slightly to about 37%, primarily because of the fairly significant decline in underlying net profit. Generally, we would still be adhering to the 30% benchmark in the coming years, unless there are special situations that warrant fine-tuning.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [6]

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So may we have the next question from Karl Choi of Bank of America?

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Karl Choi, BofA Merrill Lynch, Research Division - Director [7]

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Can you hear me?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [8]

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Yes. Please go ahead.

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Karl Choi, BofA Merrill Lynch, Research Division - Director [9]

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Yes. I also have 3 questions. One, can you give a little bit more color on the rental concessions you've given for your investment property portfolio in China? And second, also, can you give us a little bit more details on the provision you took in China DP, sort of locations of the projects and also how many new projects were involved? And third is, going forward, should we expect Wharf to take on more Hong Kong DP projects when the opportunities come up since Wheelock would be -- will have a much smaller balance sheets going forward?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [10]

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Okay. First question, rental relief in Mainland China, there are 2 kinds. Well, there are 3 components. Let me divide them into 3 baskets. The first basket is -- relates to, rather, turnover rent. Turnover rent is directly pegged to a tenant's sales. And in the past 5 weeks or so, 6 weeks even, because the markets generally were inactive, most of our tenants reported a sharp decline in sales. And as a result of that, turnover rental income to our group would have been significantly affected. The second component is base rent. And what happened was there were -- some of our malls were -- and in fact, it's more than malls, it's also the offices. Some of our IP assets were directed by the local government to close in order to avoid crowds from gathering and congregating. And with the properties closed, we legally do not have the right to charge rental. And in those cases, we gave our tenants' contractual rental waiver. If the property was closed for a week, then we waive rent for a week. If it was closed for 5 days, then we do it for 5 days. And the third component is the base retail rent. In view of the sharp downturn in retail sales during that period, even when the malls were open, we had limited footfall and therefore, our tenants experienced sharp decline in sales. And so on a tenant-by-tenant basis, we offer them a material rental waiver for the days on which they were affected -- for the weeks in which they were affected. I can't quantify precisely how much it is because it differs from tenant to tenant. Some tenants are affected more than others. Some tenants were closed altogether because of the particular trade they're in; cinemas, for instance; so IFS. Others continue to trade. And others had a chance to continue to trade but chose to close. So different people were given different arrangements. And those are deals between ourselves and the tenants on a private basis and were subject to confidentiality undertakings. So I can't disclose details to you. What I can say, however, is that because the markets were bad, retail sales were down throughout China. So the impact to our February numbers, which we don't have yet, obviously, will be material.

To your second point, provisions about DP. They relate to a number of projects, particularly the projects, which we acquired in 2018 -- 2017, 2018. In a way, what happened was government, local government and central government shifted the goalposts. At the time when the sites were tendered or auctioned in '18 or '17, there was no price control. And price control was introduced subsequent to the sites having been bought by various people, including us. And with the price control, we are no longer able to realize what the market is prepared to pay. Price control typically would allow us to sell at below market. And because we can't sell at the market rates that we have been projecting and that the market is prepared to pay, it means our profit margin going out the window. In some cases, it becomes a negative profit margin. So for the purpose of accounting to our stakeholders properly, we took advice and mark down the value of those projects, not in any specific city, but primarily those during the period that we acquired in '17 and '18.

Third point, whether we would do more Hong Kong DP in Hong Kong. Possibly, but it's too early to tell because we actually have fairly sizable projects in our hands right now. You may remember, we bought the Lung Cheung Road site a year ago, 2 years ago. That still is to be digested. And then we -- last year, at the end of last year, we bought a site in Kai Tak. And then we have 2 other projects from our previous investments. One of them being Kowloon Godown redevelopment, if we proceed with it. And another one is the Yau Tong Bay joint venture. Now the Kowloon Godown redevelopment and Yau Tong Bay joint venture, they've been in our books for a long time. The question is timing. When do we get the proper development plans approved by government? And when do we get modification premium, reasonable modification premium quoted by government? Where do we get the financing? When do we get the financing? And is there a good enough market, so on and so forth? So timing is imprecise at the moment, but at least, we've got a fairly full plate at the moment.

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Karl Choi, BofA Merrill Lynch, Research Division - Director [11]

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If I may follow up for the DP projects. I think some of them are JC projects or associated projects. Did your partners -- are they also taking a provision or we are taking a more conservative approach here?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [12]

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I can't speak for our partners. Many of them is not having reported yet. It becomes high sensitive. You have to answer.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [13]

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Thank you, Karl. So on the next question from Andy So, Haitong.

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Andy So, Haitong International Research Limited - VP & HTI Sector Coordinator [14]

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Can you hear me?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [15]

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Yes, we can.

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Andy So, Haitong International Research Limited - VP & HTI Sector Coordinator [16]

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On the China DP, what we are seeing is that we are seeing some decrease in revenue for China DP back in [Q1]. And can you give us some guidance on a year-on-year change on the completion volume in China DP in this year? And secondly, in terms of the price to book, right now, both financially (inaudible) if I remember correctly, should be around 0.4, 0.3 price to book, which is relatively low. May we know if we are going to choose to do some share buyback going forward?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [17]

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Okay. First of all, DP, let me give you a bit of a market update first. Of course, we have included a statement in the announcement, too. Since the beginning of this year, there's been little progress in sales as well as in construction. Some construction sites are back to work, but many of them don't quite have full strength from labor. Workers are not able to get back to where they work, migrant workers and so on and so forth. So we would expect the market to continue to be slow, not only for us but for everybody in the sector. Sales, some developers have chosen to do it online. Yes, they can sell some units online. But the -- relative to the usual volume, that would be probably negligible. That's one problem. Another problem is even if sales offices are open, many potential buyers stay away for health concerns or other reasons. So sales have been slow.

Secondly, construction has been stalled. On both count, when the virus problem becomes under better control, activity may return to the market, generally. However, how quickly the situation would stabilize or recover, I'm afraid I don't have a crystal ball. What may also happen when the window reopens is that some of the smaller developers with tighter cash flow. Maybe pricing the projects more aggressively because they need the cash to keep them going. The bigger developers or healthier developers, financially healthier developers may not be -- find themselves in a similar position, but the weaker ones may be pricing more aggressively. So the market will probably be unsettled for a little while. And since we're not in a hurry to sell, we would probably be watching the market, too. It is quite possible that this year's market will be quite different from last years or previous years.

Price to book, yes, we are currently trading at a sizable discount to book. But we're not alone. Many of our peers are trading at similar discounts to book. We do not have a history of repurchasing shares, and the Board has so far not discussed the option of repurchasing shares. We don't know part of the recent weakness in our share price, maybe because of the -- the proposal to privatize Wheelock and Company Limited. It may or may not be. I don't know. But if it is related to that, that may become less of a factor as the market adjusts to it. I don't know.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [18]

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Thank you, Andy. So on the next question from Simon Cheung, Goldman Sachs.

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K. Y. Cheung, Goldman Sachs Group Inc., Research Division - MD [19]

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Can you hear me?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [20]

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Yes. Please go ahead.

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K. Y. Cheung, Goldman Sachs Group Inc., Research Division - MD [21]

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I got 2 questions. Again, related to the provision for the China DP. I think if I look through the number, $3.7 billion on $30 billion or so, landbank is about 11%, 12% kind of land cost. Can I -- I understand, after the provisions -- or maybe what is the basis of the provision? So we'd be expecting some sort of maybe 20%, 30% expected margin on the current selling price as the basis for adjusting the landbank provisions. So I wanted to get a sense. And on the related note for your, what, $27 billion order book, what is the margins on the order book? That's my first question. And I have another follow-up later.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [22]

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Okay. That's -- is that one question or 2?

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K. Y. Cheung, Goldman Sachs Group Inc., Research Division - MD [23]

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One. One. Basically, one question. It's basically margin for existing order book and the margin for the upcoming projects after adjusting for the write-down.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [24]

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Okay. What's happened is this. In effect, the relevant sites have been marked to a level at which if we were to sell the sites as sites, that's how much the market would pay, all right? So the market, you would generally expect to pay a price at which the buyer can make a profit. Now sometimes, markets behave differently. Sometimes, markets pay above market price, so to speak, when the market is hot. Other times, when the market is cold, then when there are fewer buyers, maybe the margin would expand. But I think the markdown is priced to reflect normal market resale value of the sites. I hope that will provide a reasonable hedge. What we have in the net order book is -- would probably come in at a margin, which we have been able to report in the past several years because most of it relate to lands that we acquired before the '17, '18 period.

Having said that, however, I hasten to add that the construction delay, which many developers will probably experience, may increase the development costs, holding cost, for one thing, and possibly some variation orders, extension of time and so on and so forth. It depends very much on how the contracts are written and whether or not there will, in fact, be material delays. In the worst case, if the delays extend for a very long time, arguably, this becomes a legal question. The developer could be in breach of whatever the sales contracts are, but it -- we would need to look at the contracts one by one. At this point in time, however, I don't think we're near this breach red line yet. But having said that, of course, as I said, there may be higher holding costs.

Second question?

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K. Y. Cheung, Goldman Sachs Group Inc., Research Division - MD [25]

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Yes. How much contracted sales -- I understand, in February, you said that basically, there were minimal contracted sales, and you have a full year target of RMB 15 billion. How much you have shipped so far, if you can share with us?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [26]

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We have done less than 5% of our target this year. It's been -- I mean the market has been, in effect, what is the right term, dormant. I didn't want to use the term dead, but it was dormant. It was in hibernation.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [27]

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Thank you, Simon. If no more verbal questions, now we will open to written Q&A.

The first from Mark Lam (sic) [John Lam], UBS. First question, which project you've done impairment loss for the China DP, which I think the Chairman has already explained. So on the second question, update on rental concession -- situation in China and business recovery update so far. And the third question, China DP margin guidance going forward after the impairment loss.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [28]

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Okay. I'll talk a little bit about the so-called recovery. As I said, there was a time when some of our properties were ordered to close. That's over. All of our properties are now trading again, operating again. And we are beginning to see, for instance, retail sales, returning to the malls, not -- we're not back to 100% yet year-on-year, same, for instance, the past weekend or the past week compared to the same week a year ago. We're still below what it was a year ago, probably by as much as half. So there's still quite a ways to get back to what it was previously. But the good news is at least we're beginning life to come back.

And as an aside, I should mention, nobody has asked about it, but I should mention that our hotels in the Mainland, they did very poorly in the month of February. The hotels in cities like Chengdu, Chongqing and Changsha, our hotels were trading at occupancy rates of 3%, 5%. And with that, you would expect -- as you would expect, the revenue for the month of February would probably come in at a tiny fraction of what it was a year ago. Now we don't have the numbers yet because a lot of our hotel staff are not back at work yet. So -- and they're busy dealing with operational issues, controlling -- helping to control the virus, public health issues and so on and so forth. But I don't think it would surprise us if, at the end of the day, February numbers will come in very unfavorably.

The sole exception is that we also operate a hotel in Wuhan. And that's the sole exception. It will not obviously change the overall numbers because it's a small part of our overall business. The Wuhan hotel has been helping to accommodate emergency medical workers from Beijing hospitals. So they've been running a high occupancy rate. But on the other hand, when we have high occupancy in the Wuhan hotel, we had a challenge in finding enough staff to provide service because the city is in a lockdown. The good news is what we're hearing today is that the Wuhan situation appears to be under control. I just read that President Xi was in Wuhan today. But in any case, it appears the airport may be reopening in Wuhan, may be reopening at the end of this week. There may be only limited services initially. But at least if it does reopen, it would be a good sign for the rest of the city to gradually return to a more normal state. So that's about recovery.

DP margin, I guess, I have already dealt with it.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [29]

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So the second written question from Jeff Yau, DBS. Which company, Wharf (Holdings) or Wheelock, will be responsible for the group's Hong Kong property development business in the future?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [30]

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I have already addressed that question to an extent. We are busy with our Hong Kong DP -- current Hong Kong DP assets. And we're not hungry. If anything, we may not have the appetite right now. If we have the appetite, then we would certainly want to participate some more.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [31]

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And the third written from Wai Cheng from CIMB. The first one, on Hong Kong DP, can you share with us the project stake and completion schedule in Kai Tak project? Second, on China DP, we see a lower landbanking space since 2019, while Wharf is trying to maintain contracted sales of at least RMB 15 billion in the coming year. Should we expect a depletion of China DP landbank and greater focus on China IP? And the last question, can we expect partial disposal of your equity investment portfolio and increase the DPs in the near future?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [32]

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Okay. First project, Kai Tak, it's a joint venture. We only bought a land not too long ago. So it would take several years before it would be completed. You have to be patient. It's not going to contribute to our P&L for some time.

China DP, yes, your logic is entirely correct. If we continue to sell and we don't replenish the landbank, the landbank will decline. Whether or not we would invest in new landbank depends on whether the market will provide us with good opportunities to replenish landbank. There may be opportunities, particularly if the -- if some of the other developers are tight on cash flow, the competition for land may soften a little bit.

Partial disposal of our equity investment portfolio, we don't see the need to do so yet. Our gearing is relatively low. So if we have new investment opportunities, we have the option of borrowing as well.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [33]

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And for the stake in Kai Tak project, we have 30% stake as shown in the presentation.

And then the next written question from Justin Kwok from Goldman Sachs. What's your preference on landbanking between China versus Hong Kong? Is that more level-gearing driven or level of contracted sales or margins-driven?

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [34]

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The answer is, of course, returns. Our capital goes to where the return is the most attractive, particularly when it's weighed against the risk. At this moment in time, we would think the Hong Kong market probably is more attractive than the Mainland market. I say that because of the tight price control, a very tight price controls in the Mainland. The market is prepared to pay more. But the government would not allow us to sell at what the market is prepared to pay. And that is keeping us thinking twice about taking on new projects until the returns returned to a higher level.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [35]

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Thank you. Just a reminder, you may type your questions into the QA box in the control panel. If there is no more question, I think this is the end of the Q&A section.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [36]

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I have nothing to add. Again, if you have questions going forward, please contact my colleagues, and we'll try the best we can to provide you with reasonable answers.

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Angela Ng, Wharf Real Estate Investment Company Limited - IR Manager of Wharf Limited [37]

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Thank you. So the PowerPoint presentation of the annual results will be uploaded to our corporate website shortly. Thank you for joining us today, and we hope to see you next time. Thank you.

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Tin Hoi Ng, Wharf (Holdings) Limited - Chairman & MD [38]

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Thank you. Bye-bye.