Thank you for coming to Hysan Development 2023 interim results announcement session. Let me introduce our panel for this afternoon. Our Executive Director and Chief Operating Officer, Mr. Ricky Lui, and our Chief Financial Officer and Company Secretary, Mr. Roger Hao. We will start today's session with a presentation from Ricky and Roger. We will follow that with time to take questions from the floor. As we have a live webcast today, we will also be taking questions online. Before that, let's invite Ricky to start. Ricky, please. Good afternoon. Let's start with the overall market situation. The global economic uncertainties. There's ongoing geopolitical tensions, declining world trade, and tighter monetary and fiscal policy, rising concern about the stability of the international banking system, persistently high core inflations, and growing geoeconomic fragmentation. The IMF revised the global economic growth to 2.8% to reflect their lack of confidence in a strong economic rebound. About Hong Kong, there's a sign of improvement. Year-on-year GDP growth resumed, labor market continued to improve, and unemployment rate dropped to 2.9%. Hong Kong retail sales in the first half increased by 20.7% year-on-year. The increasing inbound tourism number and the further resumption of economic activities will help to revive Hong Kong relevance and competitive status. About our business. For the first half of 2023, our total revenue is HKD 1.611 billion, and our retail occupancy is 98%, office is 89%, residential, 61%. Here, we have approximately 11% of our retails area were taken off for major enhancement, which affect retail revenue. For office and residential sectors, they're still under pressure. Our dual engine business model continued to serve its balancing function. Retail. We see the recovery of retail sales as Hysan surpassed that of Hong Kong, and we also see our turnover rent increased by 67% year-on-year. Our rental reversion rate on renewal and rent reviews and new lettings was predominantly positive. Further recovery of tourist arrival numbers and their spending should add momentum to the revival of the retail sectors. About our Lee Gardens rejuvenation, We try to curate content for the Lee Gardens community to cater the needs of different customer, making Lee Gardens a very unique place that cover a full range of customer, from the trendsetter, about Hysan Place and Lee Theatre areas, and also the town center, being the home of luxuries and flagship for the high spender. Upcoming young family and affluent class looking for a lifestyle, we will cover by our future Lee Garden Eight, which will form a lifestyle park together with our Lee Garden Three. The progress of the rejuvenations. Lee Garden One, we have started our renovation at February of this year, and we are seeing this to finish and reopen by the second quarter to the end of the next year. The temporary new concept store of the luxurious anchor tenants continue to attract strong support from members. At the same time, for Hysan Place, the transformation make good progress in first half. We unveiled the urban park, which is the first large-scale indoor skateboard park, in the city in the center of the city, which draw a lot of attention and which also provide venue for us to hold a lot of very chill and, and, and cool event, just for the first few months. Then we also we opened the fourth floor and the fifth floor, while the sixth floor is undergoing renovations. This theme will also be spill over to the seventh floor and the third floor. As a background of the urban culture zone, which has been drawing a lot of good attention from the tenants and the customers. We are also doing the ground floor and the basement floor renovations, which will be a metropolitan train station, thematic dining, and shopping experience, which will start coming to the market by end of this year to the early next year. About marketing initiative and the loyalty programs. Our loyalty club members continue to provide strong support to our retail sales. Other than the thematic campaigns, which cover different interests and needs of the customers, to welcome all the coming back of the tourists, we have a lot of tourism promotion campaign to stimulate their sales as well. Office. Our occupancy, as stated before, is 89%. We are, we are, we are offering the full range offering of, of office to our tenants, from size to even the quality of the building. This help to capture different need of different customers. At the same time, because of we have a very vibrant and integrated community, which is our community business model, we attract and capture the demand of semi-retails and service trade. Like, we see the good growth of the banking, wealth management, and finance sectors, as well medical and health sectors. Because of our, the nature and the character of the space of the Lee Gardens communities, it help us to be able to convert the use of space between retail and office, seamlessly. This also become a quite a good buffer to help to maintain certain occupancy for the office. Residential, we obtained the CC for the Villa Lucca in the 1st quarter, and you can see recently we have completion. We have transactions of a house and also some simplex apartment, which give a amount of very good price from unit rate to the total lump sum. For To Kwa Wan, the development plan was approved in the 1st quarter by the government, and the project will develop into three, three blocks of 24-storey buildings, residential building, on top of a 120,000 sq ft of high street retails. Hysan is responsible to oversee the design and operation of the retail portion. Sustainability commitment. We have established our board-level sustainability committee in 2020. We try to have our own sustainability model, which we call the community business model, which help with emphasize to have outcome, good outcome on inclusivities, positive economic impacts, social wellbeing, climate change preparedness, as well as livabilities. We emphasize on doing innovation and partnership, being that to enable the whole program of sustainabilities. Of course, this is under the good governance of the company, including the board. We adopt the United Nations Sustainable Development Goals. We have four key area to emphasize. First is the good health and wellbeing, and second, the decent work and economic growth. Thirdly, the sustainable city and community, and the fourth one is a partnership for the goals. We set different targets and make certain achievement from governance, environment, community, and people. All the, all these goals has been achieved, and we keep revising all this goal and trying to achieve better in response to the community need. We also obtain certain award and from different associations, as well as having good rating from also ESG associations. I think this is what I want to update today. May I pass it to Roger? Thank you, Ricky, and hello, everyone. Let me give you a very brief update, and then we can jump right into the Q&A, so that we can, you know, discuss the matters that you are obviously interested in. On the financial and capital management side, as you can see from this slide, just a few key figures, which you can also find from the announcement this afternoon. Shareholders fund at HKD 68.7 billion, and NAV per share, HKD 67. Both of which represent approximately 2% drop from six months ago. First, interim dividend, as you all know by now, HKD 0.27, which is same as the last interim period. On the next page, again, this is, this may be a topic of particular interest recently. On the left, you can see our overall debt maturity profile, and I think a few key observation that I want to highlight to you all is, in particular, from a liquidity point of view. First of all, as we mentioned in the first point, of this, total debt portfolio, only less than 5% come due in the next 18 months. Secondly, as you can see from the, balance sheet at the end of, 30th of June, we had about HKD 4.3 billion-HKD 4.4 billion cash on hand. This level of cash is actually sufficient to cover all the maturing debt coming due in the next three years, meaning from 2023 all the way to end of 2025. You can see that we do not have any pressure on the short term to medium term basis, that we have some liquidity, you know, pressure. Of course, as part of the conservative financial management, we also line up some committed banking facilities. As you can see here, at the end of the interim period, Hysan Development had roughly HKD 10 billion committed banking facilities. That obviously add as a good buffer for any unanticipated urgent liquidity needs. Next, I'll just wrap up with certain key financial metrics. As you can see from the, the, the, the list here, effective interest rate for the debt portfolio, 3.9%. Average debt maturity, close to five years. Our net gearing, that is, netting the total debt, with our cash on hand, is about 26%. One last ratio I particularly want to mention, is the fixed float ratio. That, you can see that our fixed rate debt portfolio account for around approximately 3/4 of our total debt. In a rising interest rate environment, actually, that, you know, sort of like help us to mitigate some of the exposure due to the interest rate increase. That is also a defensive point from our overall portfolio, I mean, debt portfolio perspective. Credit rating-wise, again, remain the same as, six months ago. Moody's, Baa1, while Fitch maintained the A-minus credit rating. That, basically is the key, update, from me. Back to you, Sandy. Yeah. Thank you, Ricky and Roger. Now it's time for Q&A. Question from the floor, please use the microphone when asking the question, as we are going out live online. For those who join in our webcast, you will find the question mark icons on our webcast platform. You can type in your questions on the platform. Now, let's see. Yeah. Hi, I'm Frank Chou from Bank of America. Thank you for the presentation, and very nice venue indeed. I have a couple of question. Maybe, if you don't mind, I'll ask one by one. First of all is on the overall tenant sales. If you can comment a little bit on maybe doing some adjustment for those area under AEI. How is the recovery compared to pre-COVID level, and how is the momentum you are seeing, for example, in July? Thank you. Okay. Ricky, maybe I share some information about the overall tenant sales in terms of like-for-like, all that kind of thing, and Ricky can definitely share with you some of the most recent, you know, angle from a business perspective. For tenant sales, as you can see, we have a year-on-year increase, obviously. In terms of pre-COVID, let's say if you look at the first half of 2019, overall, we still see a good progress. On that, I, I need to refer to a more detailed breakdown, 'cause different segment has slightly different performance. On the luxury part, let's say our, like, our top eight, 10 luxury tenants. Altogether, their tenant sales as compared to between first half this year versus first half of 2019, actually, we see a close to 30% increase. That is even better than the pre-COVID level, defined as first half of 2019. You know, that is also before the social unrest. F&B, for example, another major contributor from our tenant. Again, the sales from all our F&B account is already back to the 2019 first half level. These two are the bright spots, especially when you look at it from a pre-COVID-19 perspective. These two together account for roughly 55%-60% of our total tenant sales. The remaining 40%, I think you will see that a lot of these are also related to the 11% area that we've been working on for the AEI. Primarily, it will be the luxury area downstairs, I mean, the Lee Garden area, as well as Hysan Place. It is quite an interesting thing to note that with even the AEI, the luxury top eight, 10 tenants with the AEI impact, they're still performing quite well as compared to the pre-COVID level. At the same time, we do see some of our tenant, they are still working very hard to get to that. All in all, I think the other part, non-top 10, luxury, non-F&B, roughly, I, I, we see that they are back to, like, 80% of the pre-COVID level. Mm. So I, I think that ties in also to our strategy of, you know, refreshing our- Mm ... a good portion of our retail area. Yeah. Maybe Ricky can also share with. I think try, try to echo what Roger had just said. We don't do the renovation for, just for renovations. When we do the renovation, we summarizing the experience from the last few years, seeing the structural change. What we see is there's two there's polarized about the consumptions, about retail sales. First, the top lux, which become so resilient and even growth during the COVID time and also the 2019 situations. It also, we can, through that process, we identify the strength of Hysan, a customer base, being the old rich and new rich in Hong Kong, are very concentrated. This also drive the decisions of those high brands to do the expansion in Lee Gardens, which this, which is why we, we, we, we, we start our renovation, starting some last year and this year. From the rental level, that the same area, the new rental and the old rental, and the old rental, have about, have over 10% increase between the old and new for those renovated area, mostly. At the same time, when you talk about try Hysan Place, that's another polar. We all know that we, we talk about the general commodity, the mass market-based commodities, is having some pressure. For tourists come to Hong Kong, will come to, come for the Hong Kong culture, come to see extra some new experience there, as well as the local people. They come other than to do the online shopping, but they also come to the offline store for experience. That's why for Hysan Place, we're trying to do a real transecting positionings to cover the two identified area of consumptions. Of course, we also know that the families, young families are also a big consumptions sectors, which we will cover by the future Lee Garden Eight, with the big piece of green. Basically, what I want to explain is that, we do our renovation with our target customer in, in mind, to capture this, really the sales, which will in, in return, support the rental. Hello? Sorry. My second question is, Roger and Ricky, could you comment about the latest occupancy costs? Since your comment, you mentioned those top luxury, their outperformance is so meaningful compared to other trades. Do you feel that their bargaining power versus landlord, like you, is getting higher and higher? In the medium term, do you expect the occupancy costs could be go back to, for example, low 20s% in 2016, 2017, that kind of level? Thank you. Okay, thanks, Fine. Let me take the easy one first. The occupancy costs. Overall, our retail portfolio for the first half, I mean, blending all trade together for Hysan as a whole, is 15%, 15. Historical, you know that- Mm-hmm ... we tend to have a slightly higher. Again, it has to be, you know, looked into the individual tenant by tenant. The overall remarks you made about, you know, the good performance of the luxury tenant versus, you know, the ongoing discussion term, actually, we had quite a interesting experience, actually, during the COVID period and the most recent discussions. Maybe, can I ask, Ricky- Sure ... to share part of it with you? Yeah, I, I think we, we all know that about the seems to be the retail economic situation over the last few years not good. It will be strange to say why, why this high brand do expansion? But at the same time, we also see consolidation for those lux brands, right? I think it's a choice of location, where to consolidate. Okay, I just, in my first when answering the first questions, it's about the strong customer base of Hysan, particularly the Club Avenue, being like, the one of the oldest loyalty club for the high spender. We also have a strong base of Lee Gardens Club, which have more than 300,000 members. All this contribute a very important% of sales of, of, of, of, of Lee Gardens. All these are the major factors why this, the, the, the, brands choose Hysan to offer expansion. Because they, they, they are doing expansion, they become a kind of positive effect to other high brands to come to Lee Gardens and, and make us the home of lux. Interestingly, once the news about our renovation out with the high brands expansion, in, announced, other high brands, then they don't have the expansion brand at the day 1. Now, they all looking for space. In a way, I think the, the, the things that we have done, seems to be meeting their need. Your question is about whether they're squeezing us, I think it's more about a, like a choice of each others. We choose each other to, to work together as partner here. What you said, the 15% OC is very sexy in, in a way. If they continue their sales growth with us after we open up the flagship store, then there will be. I think the rental will get a good support. That, I mean, that explain about the relation, our partnership relationship with those brands, in, also to attract, as a magnet to attract new content into the area. Next question, please. Thanks for taking my question. This is Kevin Lam from Jefferies. I got two questions, one for retail, another for payout. On retail, as a follow-up, because some of our peers are placing more emphasis on local spending with the tourist arrival trend appears losing steam. How do we see the overall competitive landscape, for example, in Causeway Bay or the overall Hong Kong retail market? This is the first one. The second one is on payout. AEI and some headwinds in the office market somehow plays a short-term toll to our top line. Wondering if there is any impact on our payout policy. Thank you. The first one, maybe, Ricky- Oh, yeah. ...you want to take it? I think we, it's come to the point that I understand that it seems to be a natural response over when tourists are not here, we emphasize on local. Hysan, our tradition is local is always strong, as I reflect about our, our strong, you know, old rich, new rich customer base. Also, we have spent time on our loyalty program, few, starting a few years ago, even in the non-luxe or not the extreme high spender. At the same time, if you, if you look at tourists and the local customer, they the behavior start having a lot of similarity, particularly for those tourists come to Hong Kong not for shopping only. They come to Hong Kong for experiencing Hong Kong culture, experiencing from food to workshop, to about knowing the culture, art, and everything. We understand this is a need. That's why you, you see, when we don't just emphasize on deluxe. We put money and put effort into Hysan Place, the skateboard park, which is chill, chill, and cool. Tourists really go there and visit it. Then how to, how we curate those low-rise, the Pak Sha Road, the Bakehouse, all this area, how we create, curate the characters of it. It's bring the uniqueness of our community versus just another mall. I think this is. That's why in my presentation, I emphasize a few time, we have a community business model, where this is something that we want to offer. People come here, they can experience different things. The kind of offering to local and the tourists are quite unique compared with the other, other places. So far, we find this format work, and we will carry on to push harder on making our whole community have a lot of choices and a lot of surprise, together with the with the hardcore spending tenants. Right. Thank you, Ricky. On the second part of the question is about payout. I think, let me reiterate. First of all, in terms of our dividend policy per se, it is still our policy to provide on a long-term basis, a stable dividend path. Of course, each year, like I probably explained to some of you before in previous sessions, when we present the dividend proposal to the board for considerations, there are three main factors that we'll consider. First, that is the operating performance for that particular period or, you know, year. Secondly, the CapEx requirement, especially in the short to medium term. Thirdly, is about the economic outlook. In the sense, it will, it help us to, you know, manage on a more stable financial positioning. I would expect we continue to look at these, all, all of these three factors. Like, for example, this year, so far, the question is about retail and payout. Obviously, our office, we, as we mentioned in our announcement, continue to have pressure on our portfolio. You see that from our announcement, office is having a negative rental reversions. It's like early teens negative. In terms of the office lease, lease that will expire next year, 2024, the expiring rent, that is the rent related to those leases that is going to expire next year, is actually at a level similar to what we are seeing this year in 2023. If the spot rents maintain, we probably will still continue to see a negative reversion situation. On the overall portfolio, we, we, we, we used to tell you or share with you guys, that we are a dual engine business, in the sense that, you know, office and retail, sometimes they help each other out. In the past few years, especially when retail is under particular pressure from COVID, for example, office, does provide some mitigation. This time around, while we see exciting improvement in terms of retail sales and all that, we, we, we continue to see pressure, downside pressure from office. In a sense, next year, we don't have a particular high concentration of lease expiring, and we, we had about one quarter of our lease, 25% of our total office space coming to expiry with similar expiring rents. You know, if you look forward to that, I mean, you're looking on a... If you look at it from a forward basis, next 6-12 months, office, we still have a lot of work to do. Obviously, at this difficult operating environment, one of our key objective is trying to defend the occupancy so that, you know, while, you know, observe for the further recovery on the retail side. All in all, that is the landscape that we are seeing. Of course, of course, we still have another half year or six months to go to see how our, how our operation, you know, fare. If it is, I mean, this is the kind of like thought process that we, we employ and we continue to employ when we look at our overall position. Is there any other question from the floor? Maybe let's take one question from online. It's about our Caroline Hill Road Project. How much CapEx will be incurred in next few years? Would it require further refinancing? Right. Thank you. For Caroline Hill Road Project, it is a 60/40 joint venture with Chinachem, the project is going well. As you all know, obviously we had an upfront premium payment for the land premium, which actually we pay once we get the land. That account for a big chunk of the cost. Then the construction. Now I think we are now getting into the final, you know, main contract tender stage. Like a lot of the other development project, the construction cost will be incurred, use like a hockey stick type of thing. In a sense, the construction cost will be incurred like, I would say, back-end loaded. The initial phase is primarily the cost for digging further down for the car park. Overall, first of all, we had a project financing with five banks, and that also follow the Hong Kong MA requirements, about 40% on land, 80% on construction, with the overall LTV cap at 50%. Right now, I think you can see from our financials that a lot of these investment are related to the land. As and when construction costs are in, are incurred towards, you know, the latter half of the project, which I think on a calendar year basis, I think, a lot of them will start to get into our book towards the end of 2024, 2025, and, you know, early part of 2026. As and when we incur that, we will, you know, finance 80% of it by project loan. The two sharehold- joint venture partner will contribute the other 20%. I don't see a major issue in terms of funding the project because there's a project financing arranged. As to the other debt of Hysan, as, you know, I explained before, we don't see any major refinancing issue in the short to medium term. Thank you, Roger. As we are running out of time, let's see if there's any further question from the floor. Yeah. Thank you. It's Alvin from CLSA. Maybe, two questions. One is, could you give a bit more color on the rental version of re- retail in 1st half, and your outlook for 2nd half? Maybe on the office, particularly on the co-working space, and we noticed actually recently, a Korean company come and they have quite difficult situations. Mm. How is their operating in Hong Kong or in your portfolio, and how do you try to defend the occupancy on our co-working space? Thank you. Why don't I share some information about reversion first. Mm. and invite Ricky to share with you some of our views on the co-working space. On rental reversion, overall, it's negative, but in fact, we do see an encouraging sign, 'cause if as you know, there are certain area that's under AEI, the 11% on average, 'cause we started the renovation work in February. For the first six months, we had about five months with those areas under renovation. The total gross floor area affect is about 13%, you know, at the end of the interim period. We expect by end of this year, we should finish 10% of it. We should, you know, going into 2024, we should have a much normalized space in terms of the retail space generating revenue. On the reversion, part of it is related to this overall restructuring. Some of the tenant, while their space are under renovation, they still have a, you know, reduced scale of operations. But the thing I want to share with you guys is in terms of the number of tenants that we dealt with in the renewal and reversion case, over 75% of them, in terms of number of tenant, we see a positive rental reversion. In terms of area, it's roughly, you know, 75%. That's why if you exclude certain major trade mix, you know, renovation or change, the ratio is even as high as 90%. We see the underlying health of the operation of our retail tenant. , is part of the reason you see that our turnover rent increased quite a lot comparing to last year, first half, or even from a historical, you know, point of view, it's quite high. That is primarily because we see the general health of the tenant in terms of rental reversions. On the co-working space, Ricky? Okay. Maybe I can give some colors of the overall business performance of the co-working business. I think for compared with last year, we do see a obvious increase in occupancy in general for all the centers, both Hong Kong and GBA. While we don't have seen much increase in the unit rate, I think that's the general situation. When you talk about the demand, I think the demand for co-working space flex is still valid and strong. What we see, at the same time, because of the some occupancy, vacancy issue of some of the landlord or building, sometime they do offer good rental terms for co-working operators 'Cause right now, we all know that landlords start changing their mindset to look at co-working space as part of their offering, of the building offering. We strongly believe that the co-working will stay in the office ecosystem, and this is also the move why we have done a 50/50 joint venture with IWG for the GBA area. Thank you, Ricky and Roger. Of course, thank you everyone for joining us today. We hope to see you again when we have our next result announcement session. See you then. Thank you. Thank you. Thank you.