Good evening, everyone. A very warm welcome to The Wharf (Holdings)' final results briefing. I am Angela Ng from the IR team. You can download the PowerPoint presentation using the QR code on the LED wall. The backdrop photo here features our 1 Plantation Road project on The Peak, surrounded by lush greenery and offering stunning views of the ocean and sky. With the market sentiment in the Hong Kong luxury residential improving, we have begun preparations to invite buyers for some of the 20 newly completed houses at One Plantation Road. Now let's kick off our results briefing. Today, our management includes Mr. Stephen Ng, Chairman and Managing Director, and Mr. Kevin Hui, Director and Company Secretary. We will first go through the PowerPoint presentation and then open the floor to the analysts for Q&A session with the management. Here shows our results highlights.
Looking back to 2024, under the sluggish economy, our group revenue declined by 36% and OP by 18%, mainly led by fewer recognitions from Mainland Development Properties. UNP declined by 22% as we took further steps to de-risk our DP stock by making additional impairment provisions, mainly for the non-residential stock. The softer capital values result in non-cash IP revaluation deficit and led to a group loss. In view of the economic uncertainties, the group maintained prudent financial management, with gearing further improved to 5%. Full year DPS was steady at HKD 0.40. Here is our balance sheet. The group has maintained a strong balance sheet and proactively managed that exposure. We timely converted all gross debt into RMB, with 35% of it at fixed rate. As a result, average interest rate went down by one percentage point to 3.7%. Net debt reduced to HKD 7.1 billion.
Cash flow remained healthy, our listed investment portfolio continues to provide liquidity. Market value of listed equities was HKD 33.9 billion and HKD 1.9 billion dividend income was booked to P&L. This slide shows the group's total assets breakdown. The Wharf (Holdings) is a property-focused company with over 60% of total assets in Hong Kong and Mainland properties. Since 2019, we have not replenished our land bank in Mainland China and have strategically reallocated our capital to Hong Kong properties. Currently, the majority of our Hong Kong properties are under development and all are progressing on track. In the coming few slides, we will walk through our business segments in the order of Hong Kong properties, Mainland DP, Mainland IP, hotels, and logistic and infrastructures. Our Hong Kong properties are showcased by the ultra-luxury Peak Portfolio.
During the year, one apartment at Mount Nicholson was sold for HKD 600 million, equivalent to over HKD 130,000 per square foot. The last house at 77/79 Peak Road was sold for HKD 501 million, equivalent to HKD 80,000 per square foot. As at the year-end, our Hong Kong residential land bank amounts to 2.8 million sq ft, including the 1 Plantation Road project on The Peak. Moving on to development properties in Mainland China. While residential inventory diminishing due to the lack of land replenishment, attributable contractor sales have declined, and attributable provision of HKD 2 billion was made for the slow-moving stock, particularly in the non-residential sector. As at the year-end, our net order book amount to RMB 600 million, with remaining stock totaling 1.2 million sq m. In regard to Mainland investment properties, Mainland domestic consumption slowed down last year.
However, with proven track record and geographical advantage. Our flagship malls, Chengdu IFS and Changsha IFS, remain popular among global and domestic brands, achieving satisfactory occupancy. Office leasing was weak amid the gross supply and demand imbalance. As a result, mainland IP revenue decreased by 4% and OP by 6%. Moving on to hotels. Wharf Hotels currently operates 16 hotels in Asia, represented by three self-owned brands, namely Niccolo, Marco Polo, and Maqo. Additionally, Park Hyatt Changsha, which is owned by the group and managed under an outsourced contract, opened its door in Changsha IFS in June last year. Hotel segment was challenging with the intense market competition and cautious spending sentiment, which result in a decline in room rate across the industry. Turning to our logistic infrastructure.
Due to escalating trade tensions and regional competition, the market throughput for Hong Kong's port business has declined by 6% year-on-year. On a positive note, given the growing demand in local distribution and cross-border e-commerce, Modern Terminals is building a new modern logistics center in the Kwai Chung Terminal. Here shows our project pipeline. In Hong Kong, our completed or to-be-launched projects include One Plantation Road, Kai Tak JV Project, and Kowloon Tong Project. While those under development include Mansfield Road Project, Kowloon Bay Redevelopment Project, and a new logistics center by Modern Terminals. In mainland China, the high-rise apartments at Changsha IFS Tower 2 is under development. Looking ahead, a major looming trade war, geopolitical tensions, and the U.S. Fed rate trajectory are introducing volatility to the economy.
As we navigate this complex landscape, the group will maintain prudent financial management while focusing on our core competency to drive progress. In the last part of the presentation, I will walk through our efforts in ESG. Wharf Holdings maintains strong ESG ratings and green certifications, including A rating in MSCI ESG assessment and LEED Platinum. We have formulated the 2030 targets, which are on track. Additionally, we are developing new carbon reduction targets in accordance with SBTi criteria. As at the year-end, the group raised and accumulate sum of HKD 20.3 billion in green or sustainability-linked loans. We are also dedicated to various business in community initiatives, including our flagship project, Project WeCan, which supports youth development. We are also an active supporter of The Community Chest and continuous efforts were made to promote our employee wellbeing.
Same efforts are placed to uphold the standard of our business ethics and corporate governance. That conclude my presentation. We will now proceed to the Q&A section. A quick housekeeping note for the analysts before we begin. If you have any questions, please raise your hand. Our hotel staff will provide a microphone to you, and please identify yourself and state the organization you represent if I did not do so. You may feel free to ask no more than two questions each time. Now, may I invite Mr. Ng and Mr. Hui to come to the stage, please. Okay. We already have the first question from Karl Choi, Bank of America.
Hi. Two questions. First, regarding the 1 Plantation Road project. Sounds like management is quite optimistic about the outcome, noting the strength in demand from high-net-worth individuals, and I think you talked about how it was obviously a very high-quality product. Just curious about whether that means you can actually expect relatively quick asset turn, even though the lump sum for this type of project, it tends to be very big, obviously, for each unit. Second is, moving on to mainland retail sales. I think some of your peers mentioned that they saw stabilization in the fourth quarter of last year in terms of sales performance. That seems to have carried over into the new year. Just wondering what you're seeing. Is that something you're also seeing for Chengdu and Changsha? Thanks.
Okay. Thank you. The ultra-luxury residential market in Hong Kong is a very niche market. Small supply and small demand, certainly not a turnover business, the kind that you would see for instance, MTR projects. For instance, Mount Nicholson. You're familiar with it? It's taken us more than 10 years to complete the project. I think if I remember correctly, the site was bought in 2010, and even today we still have a couple of units remaining. That is the nature of that segment of the market, and we expect similar behavior for number One Plantation Road. We're in no hurry. In the case of number 77/79 Peak Road, it also took us a few years to sell a total of nine units. The initial indication of demand is encouraging.
If everything goes according to plan, we would probably put a few of the first units on the market to invite interested buyers to bid for them. To your second question, out of our remaining stock of mainland DP properties, there's only a relatively small proportion of residential properties. We're not directly as close to the market as many of our peers are. What we have left, the majority of that is non-residential. It's commercial, primarily offices. Offices are certainly not selling well in the mainland. What I can say to you, however, is that as you may know, we are the second largest investor in a company called Greentown China. I sit on the Greentown China board. Now, they haven't announced yet, so I can't disclose anything which is price sensitive about Greentown China's performance.
Generally, the information I'm getting about the market from their point of view is that, yes, the market has stabilized. First, after September last year, there was a burst of activities. That was not sustained too well. It drifted downwards a little bit. The industry's response to the outcome of the Two Sessions is positive. They see signal coming out from central government being positive to the industry, to the sector. Quite unlike what it was a year earlier. The tone has changed, and they feel much better about the coming months. Having said that, of course, at the end of the day it's execution of that general policy. The precise market outcome will take probably a few more months before we can see it.
What was the second last thing on retail sales?
Oh. I mistook the question. Sorry. I didn't answer your question. Retail sales in mainland China has been weak. It's been weak throughout last year. January that just passed is probably not representative given the timing of Chinese New Year. We need to look at January and February together. January by itself there was some good news. However, as I said, it may be a distorted view. There's still generally weakness in the marketplace and we haven't seen any positive sign of recovery yet.
Thank you. May we take the next question from Cindy, Citibank.
Thank you. This is Cindy from Citi. Two questions. First is wanting to hear your view on Hong Kong versus mainland China, IP and DP. Which subsegment do you see could potentially recover first? Given you have a very solid balance sheet, right, so if you would consider any new investment, then which would you be looking at? If currently is not the right timing, then what are the signals you will be waiting for? This is the first part. The second part is wanting to ask about the impairment in mainland China. Obviously most of that is our offices, but consider your remaining not so big exposure. Do you see any further impairment pressure into 2025? After those impairments made, do you think the current holding cost is good to facilitate sales through, say, accelerate in 2025 and 2026? Thank you.
Sure. Okay. Thank you. Out of the various businesses we're in, we see Hong Kong properties, the area where we play in, the playing field where we play in particular the luxury residential, being the most interesting certainly in the next couple of quarters. Mainland IP, primarily commercial properties, the office market is well oversupplied, and occupancies are not anywhere near satisfactory. I'm jumping a little bit to the second question, and that is the bulk of our impairment provisions last year relate to the DP offices in mainland China. In fact, we don't have a lot of residential DP left in mainland China. That's why the bulk of it related to the offices.
I can't predict with certainty whether the written down prices, written down value is defensible. We are generally prudent about our accounting, so I hope we don't need to write them down further. We may be proven wrong depending on the market situation. Coming back to your first question, we have not invested directly in the mainland China residential properties market for six years or so. Our indirect investment through Greentown seems to be paying off quite well. It is one of very few non-SOEs in the sector that are thriving, and that obviously pleases us. We'll be looking possibly at working with Greentown to co-invest given the right opportunities. It's still early stage. A lot needs to be decided.
Thank you. May we take the next question from Mark, UBS.
Thank you, management. This is Mark from UBS. Maybe I have a follow-up with Cindy, and also my earlier question on this Monday is we've got both malls in Hong Kong and mainland China. Definitely not sure the 2025 outlook. Would you think that maybe your sister company, Harbour City, will outperform more or our IFS in mainland China will outperform more? Love to hear your view. I think that's the first questions. The second question is I was quite surprised that we switched almost all our gross renminbi debt into renminbi. Just want to check what is the rationale, and for your sister company, 1997, will we consider to do the same thing given the borrowing cost is much lower? Thank you.
The second question is easy to answer. These two companies that you refer to have completely different asset and liability profiles. The reason this company today, the company we're talking about today, has done a lot of RMB debt is because of our RMB assets. We have a large, still a very large RMB asset base, and we've taken advantage of favorable rates to effectively convert the HKD or U.S. dollar debt into RMB, partly as a natural hedge against our RMB assets. We had always been thinking about a natural hedge, but it would've been very costly when RMB was expensive. Now that RMB interest rate is considerably lower than the dollar rate, it just makes simple sense for us to do hedging and save interest at the same time.
There's also a third dimension to the extent that if the RMB debt is onshore, we'd be able to claim tax deduction as well, unlike Hong Kong dollar offshore. These are characteristics which Wharf REIC do not share. They don't have RMB assets. It's an entirely different scenario. Coming back to your first question, whether our malls in the mainland or how they are expected to perform. I expect the competition, A, among malls and B, among retailers to continue. We haven't seen signs, as I said earlier, of a turnaround in retail sales in the mainland. A few days ago, I said we haven't seen signs in Hong Kong either. More or less we are in the same boat, and I don't see a clear outperformer between the two. They're going to be in the same boat.
Thank you. If you have any question, please feel free to raise your hand. Raymond from CGS.
Thank you. About your Greentown investment, I think you guys own some 24% stake, right?
I'm sorry?
A 24% stake in Greentown China, right?
20
24%?
22%
Oh, 22%. Okay.
Less than 23%.
Oh, okay. Thanks. I remember, maybe can you share with us roughly how much cost you guys have? I think from what I remember, maybe HKD 6 something, right? Now share price HKD 11 something. I think this is congratulations, which is a very good return given most of the Chinese peer, basically they have the problem. On this, just want to know whether your company will consider maybe just dispose this investment, given the return seems to be quite okay. I just want to ask your management thought about this. Thank you.
Okay, sure. Thank you. We invested in 2012. We first invested in 2012. That's 13 years ago. Our entry cost at that time was HKD 5.20. At the same time, we also bought a convertible securities, which was subsequently redeemed. It was a high yield instrument, and we made good money out of that as well. Let's just leave that aside. I could roll that into this investment to reduce the equity cost, but I'm not. Our entry price was HKD 5.20. Subsequently, we bought some in the market. Your HKD 6 estimate cannot be too far away. That was the only question, right?
Yes.
Right.
Also-
Sorry. Oh.
Would you consider disposing this stake?
We haven't received any offer.
Thank you. In the interest of time, we will receive the last question if there is any. Okay, the last question from Mark.
Thank you, management. I think a few questions just for housekeeping. Understand the tenant sales in mainland China has been challenging in past few months, or maybe 12 months. Just want to check what's the latest rent to sales ratio for our IFS mall? I think that's the first question. Then the second question is regarding to, I see that we have a Changsha IFS high-rise apartment for sale. Just want to check, is it we did some conversion from office to service apartment? Last but not least is regarding on our long-term investment. I continue to see that we have some acquisitions. My rough estimation is about HKD 1 billion. Just want to check we are still having a sizable exposure in properties and new economy.
Just want to check, do we have any plan to reshuffle the industry sector mix or geographical mix, given maybe the Hong Kong side is currently outperforming and maybe U.S. side is underperforming? Thank you.
I'm trying to think. To answer the last question first, we don't have a lot of U.S. exposure in that portfolio. We don't. I don't think so. No.
We have disclosed this location.
Oh, okay.
Only a few percentage.
Yeah. It's primarily Hong Kong. All right? The first question I actually didn't quite understand. What were you asking?
The occupancy cost for the IFS.
Okay. Occupancy cost for the IFS for mainland China IPs is generally lower than Hong Kong. They tend to be in the low teens. In fact, the IFSs don't worry me as much as our older and smaller malls. Nobody's asked this question, but I should volunteer it myself. You would have noticed that a substantial IP revaluation deficit, most of it related to the smaller and older malls, which are becoming less competitive. They are being overtaken by newer and better and bigger competitors. The valuers told us, and we agreed. We, in the true spirit of marking our assets to market, we did not blink in writing them down to market. There's no point in kidding ourselves. They're probably not worth nearly as much as we used to like them. Did I miss a question? Was it all?
Changsha IFS apartments.
Oh. Changsha IFS, the apartments are indeed, you're right, they are conversion from office. I've already highlighted the gross oversupply of office in Mainland China. Changsha is one of those markets, Changsha, among our other markets, Changsha is probably the most oversupplied or under demanded. In fact, one of the reasons why we have three hotels in Changsha is because of conversion. We were originally going to have one hotel. We ended up having three. Because office was not good and because hotel was doing much better. These apartments are also conversion products, but they're not service apartments. They are unserviced apartments for sale.
Thank you.
Thank you.
Now I will conclude today's briefing. Thank you very much for joining, and we wish you a nice evening. Thank you.