Good afternoon, everyone. A very warm welcome to Wharf Real Estate Investment Company Annual Results Briefing. It is good to see you all again without a mask. Our management today include Mr. Stephen Ng, Chairman and Managing Director, and Mr. Horace Lee, Director. I'm Angela Ng, Investor Relations Manager. Before the presentation and Q&A session, may I first invite Mr. Ng for opening remarks. Thank you. Thank you. I just want to say a few words before we start. I'd like to welcome all of you, welcome you back to our briefings. We haven't had one like this for 3 years. It feels a bit strange sometimes. I need to adjust to it myself. I don't know about you. I don't know whether you've attended a physical briefing so far in the last month or so, but this is certainly my first. Behind me, we've got a beautiful picture of Ocean Terminal, but it was taken last year, very tranquil because there was no business. We've got the docks. This is where the cruise liners are supposed to berth. There was none, there was none for 3 years, the first started to return in January this year, since then we've had 3 or 4, hopefully they'll be coming back more and more. That's the cruise side. At the same time, we're getting visitors back from all parts of the world. Actually, the results indicate, the government results indicate there's a good number of arrivals from Southeast Asia. Not as many yet from mainland China, hopefully there'll be more of them. Long-haul visitors are still relatively low in quantity. Again, hopefully they'll return soon. 2022 was not a good year for us, as for most of you, I think. I don't know for sure. Hopefully 2023 will be better for all of us. I'd be happy to talk about it, some more at the end of the presentation that Angela is giving you. Thank you. Thank you, Chairman. The theme for the presentation is Pandemic Woes Couple Financial Cost Escalation. In view of the rising interest rate environment, borrowing costs increased by HKD 500 million, with annual rate high from 1.5% in the H1 to 3.5% in H2. The soft capital value led to a decline of 6% in IP portfolio value. That is close to HKD 15 billion of revaluation deficit. In regard to our Hong Kong IP performance, retail spot rents started to level off, but passing rent would take time to reverse. Our retail rents are at recent low. In view of the volatile global economy and an oversupplied market, office leasing top-line declined. In 2022, Hong Kong's retail and hotel sectors mainly survive on local demand. Overall market retail sales saw a modest decline of 0.8%. With the borders reopened and mask mandate lifted starting this year, the group is observing the post-pandemic trend and will embrace the new normal. Over the years, the group strives to retain the market position through proactive re-tenanting and innovative marketing. Our marketing strategies are constantly adjusted in response to the market dynamics. As pandemic gradually reside, Harbour City and Times Square stage more large-scale mall installations and art exhibition, which were proven effective in boosting footfall. To capture a larger share of the post-pandemic market, we are accelerating efforts on promotions and campaigns targeting the tourists. During the year, the decline in retail revenue of the three malls narrowed to 4%. Although passing rent may take time to recover, turnover rent is expected to rise following the sales recovery this year. Meanwhile, the office side is driven by oversupply and a slow economy. In total, our Hong Kong IP revenue decreased by 2% with an improving operating margin as a result of strategic cost control. Group revenue declined by 22%, mainly due to the phased exit from the low-margin DP business of HCDL, which is our 72% owned subsidiary. The UMP performance was driven by the increase in finance costs. Hong Kong IP and hotel UMP remained flat. IP portfolio value declined by 6% with cap rate remaining stable. Dividend policy is maintained at 65% of UMP from IP and hotels in Hong Kong, which represent a steady full-year DPS of HKD 1.31. The group maintained a prudent financial management. Total assets was HKD 255 billion and net debt further reduced to HKD 45.2 billion. Gearing ratio was 23.2%. Average interest cost increased to 2.5% with all floating debts. Interest cover was healthy at 7.4x. The group maintained a premium Moody's A2 rating with stable outlook. In the following slides, we will walk through the performance of our core assets in Hong Kong. First, Harbour City, which accounts for 74% of our Hong Kong IP revenue. Despite the challenging operating environment, Harbour City's unique critical mass and retail management led to a steady stream of leasing demand, with the soft market providing opportunities for new entrants and expansion. Retail occupancies improved slightly to 94% by year-end. Office leasing momentum remains soft, Harbour City was cushioned by several sizable take-ups of insurance companies to take advantage of potential reopening. Office occupancy increased slightly to 88%. Overall speaking, Harbour City revenue increased by 2%. With Hong Kong fully opens its doors to tourists again, Harbour City continues to reinforce its position as a must-visit destination with retailtainment and sightseeing all in one. As the largest shopping mall in Hong Kong, and with a stunning view, the west-facing Ocean Terminal extension offer the best sunset and night views in Hong Kong. The mall also enjoys a unique critical mass of over 500 diverse tenants, which is fortified by value-accretive zoning. You can see the breakdown of our rental income from the tree map diagram here. A balanced mix of fashion, leather goods, jewelry, beauty, and accessories accounts for 80% of rental income. To build a better tomorrow, the group has strategically added and realigned brands to curate a fittest-to-survive brand portfolio in the past 3 years of COVID. Let's take a walk through the contiguous 530 meters high fashion frontage on Canton Road. Since 2020, flagships of Dior, De Beers, Ferragamo, Miu Miu, Van Cleef, Piaget, and Hermès joined the world-class portfolio along Canton Road. The Dior and Gucci flagships are even the largest in Hong Kong, while Hermès is the largest in Kowloon. The flagship store of LV and other top luxury brands, including Chanel and Prada, have established presence on Canton Road for many years. The most convicted location of the top retailers, Harbour City welcomed more than 100 new shops during the year. We will talk about Times Square. Times Square has been refining its luxury tenant mix and enriching Gen Z target brand mix to broaden customer base. New openings of luxury brands include Fendi and Marni. Despite the high vacancy nearby, mall occupancy slightly increased to 94%. Office occupancy was steady at 90%. Switching to our regional mall, Plaza Hollywood. Occupancy increased to 97% with strong local footfall from a neighboring population of nearly 0.7 million in Kowloon East area. Our portfolio in Hong Kong also include the hotels under Niccolo brand and Marco Polo brand, namely The Murray in Central and Marco Polo Hotels on Canton Road. In 2022, our hotels reported an improvement in gross operating profit. For The Murray, the internationally acclaimed hotel was awarded the highest honor by Forbes Travel Guide. Bookings of events and banquets are on the rise since the relaxation of social distancing measure last year. Occupancies at the Marco Polo Hotels were mainly driven by local long-stay bookings. Entering 2023, a range of compelling promotion have been launched to target potential tourist return, manpower shortage presents a challenge to the hospitality industry. Moving on to the outlook. The retail and hotel sectors are surely the key beneficiaries of the border reopening. While for office sector, the oversupply situation may take more years to digest. We believe the progressive return to a post-pandemic normal promises a better 2023, uncertainties remain given continuing macro conditions. In the last part of the presentation, I will walk through our efforts in sustainability. The group has formulated 2030 long-term target to reduce environmental footprint, covering reduction of greenhouse gas emissions, electricity intensity, and water consumption, as well as waste to landfills. During the year, Wharf REIC is proud to receive the Social Capital and Sustainability Grant Awards. The group remains a constituent of Hang Seng Corporate Sustainability Index, with AA+ rating, and also one of the top ESG leaders in Hong Kong on Hang Seng ESG 50 Index. To mitigate environmental impact, solar panels are installed at Harbour City and Plaza Hollywood, and solar thermal heater system was installed at Gateway Apartments. Asset enhancement were made to optimize operational efficiency across our portfolio. Meanwhile, the Star Ferry has 3 low-emission green ferry in the fleet, and has participate in the full electric ferry pilot program. In regard to community contributions, the Wharf Group was once again presented with the second top donor award at the Community Chest Annual Awards. Youth development support continues through an array of business and community initiatives, including our flagship Project WeCan, and a number of scholarships and volunteer activities. We also strive to promote the standards of corporate governance, talent development, and workplace safety. That concludes my presentation. Now we will come to the Q&A session. May I invite Mr. Ng and Mr. Lee to come to the stage, please? Please feel free to raise your hand if you have any questions, and I see the first one is Ken Yeung from Citi. Hi. Hi, management. It's Ken from Citi. I have got 3 questions. The first is on your tenant sales. Of course, most of the people are interested on the leading indicator that you have seen post-border reopening. Can we get a sense of how Harbour City sales recover, like, in February after reopening versus the pre-COVID level, like first half 2019 or H1 2018? That's the first one. Second is the margin, because you see quite decent margin improvement, some 4 percentage point. Can we understand if the border reopen, are you doing more promotion expense and likely to make the margin not improving? Basically because of the top-line increase, we still can expect margin can continue to improve in 2023? That's the second question. The third question I think will be to Horace, I see your interest expense HKD 1.9 billion have quite a big unrealized loss on due to IRS, HKD 600 something million. Should we expect that disappear if HIBOR is basically already very high in the end 2022 level, given that that also affect your core profit, even though it's unrealized in finance cost last year? Okay. Let me start first. Retail sales in February, we certainly don't have the numbers yet. We are still only tabulating January sales. However, the initial feedback from tenants is that most of them have seen positive improvement year-over-year so far in the first 8 weeks of the year. Given the timing of CNY being something like 10 days later this year than last year, or earlier this year than last year, it's easier to look at 2 months combined rather than just 1 month. The early feedback is that luxury retailers are doing better than the affordable. Maybe the affordable goods are subject to more competition, whereas luxury is not. That seems to be the early feedback. Excuse me. Early feedback. I don't have much more to share with you at this stage. Second question was? On margin. Oh, margin. I'd like to give you this perspective. Margin improvement in 2022 over 2021 was a significant factor was a reduction in marketing costs. Marketing costs, we spent marketing costs differently during the pandemic than before. Before the pandemic, marketing costs were mainly spent on events and overseas activities to promote inbound visitors and consumption. During the pandemic, as many of you would know, we were active in promoting coupons, which effectively was a discount scheme. Mainly because we were targeting the local market. We wanted to get a bigger share of the local consumption pie. Now that the pandemic is essentially over, we will switch back increasingly to the previous mode. The total marketing expenditure in 2021 was in fact much larger than pre-pandemic. 2022 we were beginning to get back to normal, but even then it was probably even higher than pre-pandemic. Whether or not we can immediately switch back to pre-pandemic levels in 2023, probably not, because we still have some coupons issued in previous campaigns which are still outstanding. I would expect over time, marketing expenses to return to a more normal level. Another factor is of course, with the borders just reopening, there is some start-up or restart-up marketing to do. This year will not be a quite normal year yet. Having said that, I think 2021 with the exceptionally high marketing expenses is behind us. I would say that much. Interest? Uh. Yeah, the mic here. Oh, sorry. I think for the IRS adjustment, et cetera, I don't have a good answer to it. What I can say is, you know, we will try to monitor it closely because it's not entirely within our control. For this year, I would like to address, on the other hand, on the interest level. This year our interest expenses has been increased by HKD 500 million mainly because of the interest hike from 1.5 in the H1 to 3.5 average in the H2. Average for the whole year is 2.5. Most of you probably aware that we are actually almost 100% floating. We are not rely on fixed interest rate. For this year, I would say very challenging. The cost for last year is HKD 1.2 billion altogether. This year, again, we don't have the crystal ball for the interest hike trend, but we will try to do our best to monitor the situation. Thank you. If I may tag onto that, to give you a perspective too. You would have noticed that DPS this year was HKD 1.31. Same as the year before. Given that our DPS is formula driven, it implies our EPS from Hong Kong IP and Hong Kong hotels was the same between the two years. That is net of the higher interest cost. HKD 500 million of interest cost works out to about HKD 0.17 per share. If you deduct tax from it's about HKD 0.14. Without the interest factor, our Hong Kong IP and hotel EPS would have been HKD 0.14 higher. Interest is interest. That is one of the expenses that we need to contend with in running the business. Interest rate continues to be high in the first half of this year so far, in the first quarter at least. We don't expect it to be high much longer. Don't ask me to define whether much is 2 months or 2 years, but hopefully not 2 years. With, hopefully recovery in the market, our revenues would find a way to improve. If our other costs can be maintained, I hope we can give you better results this year. The next question from, Raymond. Thank you, management. This is Raymond from HSBC. I got two questions. The first question will be related to turnover rent. As during the presentation, you mentioned that like the turnover rent expect to rise following the sales recovery. Just want to gauge one thing about the sensitivity. Would the sensitivity of the turnover rent be much higher or something similar compared to the pre-COVID level? This is the first question about the turnover rent. The second question is about the rental reversions. We are entering the fourth year of traveling period. Now everything is getting much better. Should we anticipate a rental reversion to turn positive sometimes, maybe sometime this year or 2024? Thank you. There are two markets. There is the office market, and there is the retail market. The office market, as you know, is still oversupplied, and we expect continuing pressure on rental reversion. In the retail, we're beginning to see firmer rents, but we don't have a lot of transactions right now. It's in the totality of things, the weight of the new commitments will be relatively small to the weight of pre-committed rental. Therefore, this time lag will take a little while to filter through, to cascade through. Turnover rent, I would say this. Comparing this year to pre-pandemic, we don't expect retail sales to recover as quickly to pre-pandemic levels, certainly not entirely within this year. However, the base rent levels, current base rent levels, compared to pre-pandemic base rent levels are lower. That would give us potential for more attractive turnover rent, certainly compared to the last three years. I don't know whether it would be as high as it was pre-pandemic, but because the base rent is lower, it does give us a little bit more flexibility. A lot obviously depends on how quickly consumers come back and how much they spend. Thank you. May I have the next question from Karl Choi, Bank of America? Hi. Thanks. A quick question, actually. Going back to sort of, you know, Stephen, your comments about you don't expect retail tenant sales to recover back to pre-COVID, you know, COVID levels this year. In your sort of planning and also in your discussions with your tenants, sort of is there any expectation how long it would take to get back to pre-COVID levels? Is it sort of something that you can expect within the next two, three years, or that will might take a little bit longer than that? Second, just to go back to the interest, the mark-to-market cost, just want to clarify, is my interpretation correct that it has to do with the swap from fixed rate debt to floating rate debt? So that's what the mark-to-market loss is about. If interest rates stay stable for the fixed rate portion, I think some of that is at, for example, below 3% rate. You continue to book that 3% rate in 2023 or not? Thanks. Interest rate, I think Horace can supplement. I'd like to point out, there are two kinds of swaps which we undertake. There is interest rate swap. There is also currency swap. We may borrow in U.S. dollars and then swap them to Hong Kong dollars. In some cases, we borrow in renminbi or yen or euro, any currency. We look at the post-swap result. Because of these various swaps, while commercially we come up with a equivalent to Hong Kong dollar floating level, which is acceptable to us, as currencies and interest rates move, we do get into these kinds of accounting issues. I don't know whether you have anything else to add. Maybe I can supplement some of it. The reason why I say it's not entirely controllable, because it's very much a market activities. Nonetheless, the timing of the execution of the contract is within our control to a certain extent. Of course, we have to decide when to do the swap contracts. Our current practice is almost we done it immediately rather than speculating on the what is the best timing to do it. We are taking a very conservative approach to these kind of, you know, contracts. Okay. As to your first question, how quickly would things recover? If you ask 10 people, you'll get 10 different answers. Our own plan was done before the border reopened, so it's a bit out of date. Just looking at even when we have reliable data for the first month or two, it would be very dangerous to rely on just two months of data to project forward. I don't think I have a good answer for you. Sorry. Thank you. May we have the next question? Maybe, Mark from UBS first. Yeah. Thank you, management. I think I have a question is regarding on the 6% of the Harbour City space are still vacant. Just want to check what kind of tenant mix you are trying to add on this vacant floor. From a spot rent perspective, how does this compare with our passing rent? I think that's the first question. Second question is understand our current payout ratio is about 65%, and under what condition we may consider to increase that, for example, to 90 or maybe 100%? I think that's the second question. The final question from my end is I saw on the investment portfolio, seems we underway the properties significantly and increase in other, the allocation for other categories. Would you provide more details on what is the other category within our long-term investment? Thank you. Okay. I'll answer, try to answer your questions in reverse order. The reduction in weighting, so to speak, in the property sector, was a consequence because property stocks fell harder than non-property stocks, not because there was a substantial change in the portfolio makeup. The second question dealt with dividend payout. When we went public at the end of 2017, we made it quite clear that was our dividend policy, and we have so far not found it appropriate to adjust it. The reason is, we don't believe in the 90% payout under the REIT code, which is precisely the reason why we did not list under the REIT code. We wanted to avoid being compelled to pay 90% or more of our earnings. We like to reserve the remaining 35% either for capital expenditure, making our properties more attractive or reducing our debt. I don't think it is likely we would amend that dividend policy in the near future, in the foreseeable future. It has never been raised by any director at any board meeting. The first question. Okay. Vacancy. I need to talk a little bit about our leasing philosophy. We don't lease with a view to filling up every vacant space with the highest bidder. That is not our strategy or philosophy. Trade mix and tenant mix are very important to us. We take a deliberate approach to select the right tenant from a macro view for specific locations, which is why in one of the slides that Angela showed you, the contiguous 530 m Canton Road frontage, you will see shoulder to shoulder all of the top brands in the world. Other people have offered to pay higher prices for some of those locations. We've taken the deliberate decision that we'd rather have a good trade mix, which would work to the benefit of the entire mall than a near-term maybe additional rent from another tenant. We're not in a hurry to fill the remaining 6%, and most of the remaining 6% are not very visible in any case. If they were very visible, it would affect the shopping experience. Yes, we would find a tenant to fill them quickly, more quickly, but they're not visible, and they would not affect the overall shopping experience. Thank you. Due to time constraint, we will maybe accept 2 more questions. The first one from Praveen, Morgan Stanley. Thank you. Thank you very much for taking my question. A few questions. The first one you mentioned about the use of cash. 65% payout ratio by definition means you have 35%, which either you can use to buy new land to grow or you could reduce the gearing. What we have seen is that we haven't seen either, to be honest, in the last couple of years, meaning we haven't used any new land acquisition. I'm sure you must be trying for that. The gearing is still high, interest expense is rising. Again, not in your control, but as a shareholder, we are not benefiting from that 65%, which was supposed to be growing the company, so to say. Just want to understand, for sitting here looking at 2023, 2024, where should we think about this extra 35% capital allocation? The second question is about Times Square. There's a lot of attention about Harbour City, which is great, but if I look at the retail rental for Times Square, it's 50%, half of what it used to be in pre-COVID. Even though retail sales for market in Hong Kong is probably down 20% now. Will it ever go back to pre-COVID level? What are the challenges, and what are we thinking about it as the recovery happens? That'll be great. My last question is, what percentage of Harbour City retail space will come for in negotiation in this year, 2023? Just the percentage- Okay. of the space. Right. Thank you. 35% of retained earnings. Yes, it can go to buying new properties. It can pay down debt. We also use it to improve the existing properties. We're actually quite active in, we call it premises improvement. We spend quite a lot of money on improving the competitiveness of our existing products. That's where some of the money goes. Debt has been reduced a little bit. We have tried to buy new assets, but we were outbid. We're not too sorry for having lost out to high bids. We keep our senses. Second question? Times Square. Times Square. Times Square absolutely has lost its competitiveness. You're right. We're looking at rebuilding it. It will take some time for the new plan to be finalized and then to be implemented. In the meantime, we're doing little things to try and maintain its current competitiveness, but it needs to be substantially enhanced. All I can say is watch this space. Okay, the third question? Okay. Well, you would have heard typically leases expire every three years, but it's been an exceptional period in the last three years, and we have more short leases than usual. Some of the short leases, or rather the higher concentration of short leases, would imply that a little more than one-third of the existing leases will come due this year, in numbers, not necessarily in value. 40% maybe, in numbers. Thank you. May we have the next question, maybe, Jeff from DBS first, and then followed by Simon. There's 2 questions at once. Okay, sorry. Okay. I have three questions. The first question is related to the investment portfolio. When we think about the breakdown, and HKD 9 billion is in properties. However, if you look at the geographical breakdown, HKD 4 billion in Hong Kong, do you mean that you invest in some overseas property stock, or you make some overseas investment, property-related? The second question is about IRS. Is there any expiry of IRS this year if you are not going to renew those IRS which is going to be expired this year? We expect you are not going to have 100% voting rate for the year. The third question is related to the performance of two malls in Hong Kong. When we look at Harbour City, the rental income is relatively stable. What are the key factor behind the stable performance? Is this because the rental reversion, although it's still negative, is very minimal or is going to be neutral anytime soon, so the rental income is more stable compared to Times Square? When you talk about Times Square, you are going to enhance the mall. Are you suggesting some major asset enhancement program or tenant mix revamp in the coming 1- 2 years? Thank you. Okay, thank you. First question, listed investments. Yes, we do hold some property stocks which are listed overseas. It's a small measure of diversification, if you like. It's not big position. It's good yield, and that's what we're looking at. Second question deals with the IRS. I'm not sure I understand the question. Okay. I think what Jeff has asked is about how many IRS contract that we are going to expire this year, right? also whether or not you are going to review. Okay. I give you a simple answer. I don't have the answer now. The probably will come back. Okay. The third question. Yeah. Times Square asset enhancement. We're working on it right now. What was the- Harbour City's rental reversion. I see, I see. Yes, yes, yes. Underlying the reported rental income, our accounting standard, I don't know which number. The amortization of rent relief. Okay. Which all landlord companies comply with. That, to some extent, evens out the rent relief. Rent relief, for instance, offered to tenants in 2020 were not fully charged to 2020. It's charged over the term of the remaining lease. I think that's one factor for evening out. Which accounting standards? Whatever the accounting standard is. Okay. The very last question from Simon, Goldman Sachs. Thanks, Stephen, for the presentation. I have two questions. Just one on the margin that you mentioned earlier, it may take some time to fully recover. I remember back in 2018, it was what? Around 88%-89%. The trough was about 77%, and now I think last year was about 85%. Can you give us some sense, you know, on the guidance for this and next year inclusive of what you mentioned about the rent relief amortization? That's point 1. The second thing is on the cap rate as well as the property evaluation. I think you marked down your asset by 6%, I think at Harbour City. As mentioned, there's no cap rate adjustments. Was that purely driven by office or is that driven by retail? Do you see any indication, that, you know, the cap rate would be adjusted going forward? Thank you. Okay. Well, no, we didn't. It was not us who marked down the assets. It's the valuer who did. To provide a little bit more specific, the markdown relates to both office and retail. In fact, in reasonably comparable degrees. It's not just the office at all. The margin. As you know, margin, there are two factors in margin. There's revenue and there's expense. I talked about expense. It depends a great deal on revenue. If we get good revenue recovery, in particular from turnover rent, all of it or substantially all of it drops to the bottom line, except for tax. I'm expecting, I'm hoping for margin recovery, some, but I can't be very precise at this point in time. In fact, as I was saying, when we did our budget three months ago, four months ago, actually, we started longer than four months ago, obviously, we were not expecting the border reopening so soon. We had been wrong many times about border reopenings. Having been burnt several times, we were conservative. I think.