Good evening, ladies and gentlemen. Welcome to SHKP FY 2016 annual result analyst briefing. From your facial expressions, I have a feeling that is quite different from six months ago when we met at the interim results briefing. You know what? I can feel that most of you are in high spirits this time. My colleagues told me some numbers this morning, I think this can help to explain why. They told me that since the end of February this year, that is after the interim result, the Hang Seng Index has rose by 24%, but more importantly, the Hang Seng Properties Index has already rose by 33%. I am sure that your clients will be very pleased with this return. Congratulations. Let us get back to the result briefing.
As usual, in the next 20- 25 minutes, I will present you the key results highlights, the business reviews, as well as the group's future prospect. After my presentation, there will be a Q&A session with our senior management. Without further ado, let me kick start my presentation with the result highlights, and please note that all figures are in Hong Kong dollars, except stated otherwise.
For the 12 months ended June 30th, 2016, the group's underlying net profits was around HKD 24.2 billion, up around 22% year-on-year. The strong growth in profits was primarily due to much higher development profits recognized in Hong Kong. With lower revaluation gain this year, however, the reported net profits was only up 5% year-on-year to HKD 32.7 billion. The underlying earnings per share increased by over 18% year-on-year to HKD 8.37, while the reported earnings per share rose by 2% year-on-year to HKD 11.31.
On dividend, I am pleased to tell you that the board of director has recommended a final dividend of HKD 2.80 per share. Together with the interim dividend of HKD 1.05, the total dividend per share will be HKD 3.85, which is around 15% higher than last year. Let me go through the profit breakdown by segment. The group continues to grow its rental business with net rental income increased by 7.4% year-on-year to around HKD 16.5 billion during the year under review. In Hong Kong, net rental income grew by 7.6% year-on-year to around HKD 13.2 billion. The net rental income from mainland China rose 8.6% to over HKD 2.7 billion. In RMB term, the growth rate of net rental income from mainland China would be 13.3%. These satisfactory growth are attributable to continuous positive rental reversions and contribution from new investment properties.
The 4% decline in net rental income from the group's 50% owned Orchard Turn in Singapore was mainly due to the depreciation of SGD during the year. Profit from property developments for sale grew significantly by almost 60% year-on-year to around HKD 11.7 billion, with much higher completions in Hong Kong this year. The property development profit from Hong Kong was around HKD 9.7 billion, more than double what we achieved last year. On the other hand, the development profit from mainland China dropped 27% to HKD 2 billion on lower delivery. Operating profit from the group's hotel operations declined around 3% due to lower room revenue for hotels in Hong Kong. Profits from other businesses amounted to HKD 4.3 billion, slightly higher than last year. To sum up, the group's total operating profits were HKD 33.7 billion, up by almost 20% year-on-year.
The group's financial position continued to be improved with lower net gearing of 10.8% and higher interest cover of 12.5 x. Shareholder funds and net book value per share increased to around HKD 468 billion and HKD 161.9 per share, respectively. Net debt stood at HKD 50.7 billion, similar to 12 months ago. Let me now talk about the business reviews, starting with land bank in Hong Kong. As at the end of June this year, the group's total land bank in Hong Kong was close to 50 million sq ft, including 29 million sq ft of completed investment properties and 20.9 million sq ft of properties under development. You can see from the charts on the right that for property under development, 78% is for residential purposes. This is enough for the group's future developments for five years.
If you look at the chart on the left, of the total completed investment properties, around 38% are shopping centers, 34% are office buildings. On top of that, the group also holds over 30 million sq ft of agricultural land in terms of site area in the New Territories. On land acquisition in Hong Kong, four new sites with a combined GFA of 1.8 million sq ft were acquired through public tenders. All these sites are situated along existing or upcoming railway stations. The most significant one is the Yuen Long Station Development, which will provide the group with nearly 1.4 million sq ft of residential GFA and 107,000 sq ft of retail space, which will be part of the YOHO Mall in the future. After June this year, the group acquired a site in Sha Tin with a residential GFA of over 434,000 sq ft.
Following this acquisition, the group's total land bank in Hong Kong has increased to 50.3 million sq ft. Turning to the property development business in Hong Kong. For the year under review, the group recognized around HKD 36 billion property sales, with decent profit margins. The sales mainly came from Century Link in Tung Chung, Ultima in Ho Man Tin, and The Wings IIIA in Tseung Kwan O South.
On property completion, over 3 million sq ft of residential GFA was completed this year. This completion level is much higher than the previous years. With regard to contracted sales this year, the group has achieved about HKD 32 billion sales, much better than the revised target of HKD 27 billion set in late February this year. As shown in table here, major projects sold include mass market residential developments such as Century Link II, Ocean Wings, Twin Regency, and luxury project Ultima.
Since July this year, we have already achieved contracted sales of more than HKD 10 billion. In the coming months, we continue to have ample sellable resources. On top of recently launched Grand YOHO and Lime Gala, which have received encouraging sales progress, in the coming fourth quarter, we expect to launch projects including Babington Hill in Mid-Levels, St. Moritz, a luxury residential development in Sha Tin, and Eight Regency in Tuen Mun . In the first half of next year, we expect to launch projects including Phase 1A of Nam Cheong Station, Phase 1 of Victoria Harbour, which is a luxury project in North Point, and PARK YOHO Phase 2A in Yuen Long. This is the location map of the group's major residential developments for sale. Next, let's turn to our Hong Kong rental portfolio.
The group's well-diversified rental portfolio continued to perform satisfactorily and provide the group with sizable rental income. For this financial year, gross rental income from Hong Kong increased by 7% year-on-year to around HKD 16.8 billion. The growth was attributable to positive rental reversions and additional contribution from new investment properties. Overall, occupancy also sustained at a high level of around 95%.
By segment, gross rental income from office portfolio grew by 8% year-on-year to HKD 5.6 billion, accounting for 34% of total rental income from Hong Kong. Shopping malls gross rental income was up around 8% to around HKD 9 billion, which was 53% of the total. With that, let me talk about the group's shopping mall portfolio in Hong Kong. Performance of the group's well-diversified retail portfolio of close to 11 million sq ft was relatively resilient, achieving high occupancy and positive rental reversion during the year.
There are many favorable attributes for the resilient result, including ongoing refinements of trade and tenant mix, as well as appealing sales and marketing strategies. The group continues to take on asset enhancement initiative so as to bolster the competitiveness of its retail portfolio. For example, the reconfiguration at MOKO in Mong Kok has brought meaningful growth in visitor traffic and rents. Other major AEIs will be taking place in apm in Kwun Tong and Metroplaza in Kwai Fong. Looking forward, the group's rental income growth will be supported by new investment properties in the pipeline. YOHO Mall will definitely be one of the major growth drivers in the near term. The opening of YOHO Mall I and the completion of YOHO Mall II, orange in the map, has successfully helped bringing in more traffic and additional rental income.
The YOHO Mall I extension, blue in the map, will have around 450,000 retail space and will be well connected through MTR and public transport terminal underneath. This portion of YOHO Mall will be opened next year. Together with the Yuen Long Station developments, yellow in map, the YOHO Mall will be the largest shopping mall in the Northwest New Territories with scale comparable to New Town Plaza. Other future new additions include PopWalk in Tseung Kwan O, Harbour North in North Point, and Nam Cheong Station Development. PopWalk will have a total of over 240,000 sq ft of retail space. We leave the group's residential projects near MTR Tseung Kwan O station. The first phase of PopWalk that is the retail space at The Wings II is grand opened in late August.
The retail portions under The Wings IIIA and The Wings IIIB with 95,000 sq ft of retail space are expected to open in next year. Harbour North, which will be developed in phases, will house over 140,000 sq ft of retail space. Phase one is scheduled to open in 2018, while foundation work of phase two is underway. In addition, a premium mall of nearly 300,000 sq ft at MTR Lam Tin station is scheduled to open by end of 2018. Moving on to the group's office portfolio in Hong Kong. The group's 10 million sq ft of well-diversified office portfolio continued to generate promising result. Benefiting from tight supply in Central, International Finance Centre office is virtually fully let and recorded higher spot rents. International Commerce Centre in West Kowloon achieved strong rental reversion, at the same time, better occupancy.
Millennium City cluster in Kowloon East continued to perform well with high occupancy and high rents. From this location map, you can see most of the group's office buildings are located along the railway lines. In early August this year, we are pleased to complete the land use conversion for a site at 98 How Ming Street in Kwun Tong to commercial use. The project will provide total GFA of 1.2 million sq ft, of which the group has effective interest of around 68%. Upon completion of this project, it will create much synergy with the group's well-established Millennium City office cluster in Kowloon East. That covers the group's property business in Hong Kong. Let me walk you through the group's property business on the Mainland.
As at the end of June this year, the group's Mainland land bank amounted to 69.9 million sq ft, of which over 12 million sq ft are completed investment properties and 57.8 million sq ft are properties under development. You can see from the chart on the left, of the completed investment properties, 57% are shopping malls and another 1/3 are offices. Meanwhile, as the other chart shows, of the properties under development, around 62% will be residential, 20% offices, and 50% shopping centers.
Moving on to the Mainland property development. For the year under review, the group recognized around HKD 6.9 billion property sales, which mainly came from projects such as Shanghai Arch Phase 1, Shanghai Kunlun, and Hangzhou MixC service apartments. In terms of completion, the group completed about 1.6 million sq ft of attributable GFA, of which IGC, a shopping mall in Guangzhou, is for rental purpose.
There are over HKD 6 billion property sales yet to be recognized. In terms of considered sales on the Mainland, the group achieved encouraging sales of about RMB 7.5 billion during the year, mainly from Shanghai Arch Phase 1 and 2A, Shanghai Kunlun, Top Plaza East Tower in Guangzhou, and the Grand Waterfront Phase 1 in Dongguan. Since July this year, we have achieved over RMB 1.8 billion considered sales on the Mainland. On top of projects previously launched, the group expects to launch new projects including Grand Waterfront Phase 2 in Dongguan, Guangzhou Commerce Center, and townhouses at Shanghai Arch Phase 2B. Next, let me update you about the group's Mainland investment properties. For the year under review, the rental portfolio as a whole continued to enjoy positive rental reversion with high occupancy.
The gross rental income from Mainland China increased by 7% year-on-year to around HKD 3.6 billion, accounting for 17% of the group's total gross rental income. In RMB term, the growth rate of gross rental income from Mainland China is 12%. You can see from the chart on your right that 55% of the rental income came from shopping malls and around 37% from offices. Let me give you a quick update on the group's two signature integrated projects in Shanghai before moving on to our new investment properties. Shanghai IFC in Pudong continued to perform well. Both office towers at Shanghai IFC are virtually fully occupied and recorded strong rental reversion. The Shanghai IFC mall recorded decent growth in both footfall and tenant sales and achieved high occupancies and encouraging rental reversion during the year.
The One ICC office tower at Shanghai ICC in Puxi was fully leased, while majority of the office space in Two ICC has been leased. Meanwhile, the fully listed 1.3 million sq ft apm mall at Shanghai ICC continued to see higher tenant sales and traffic flow. The strong pipeline of the group's new investment properties on the Mainland will serve as a major growth driver to the group's earnings.
The latest new addition is the 50% owned Parc Central, which is a shopping mall located in the traditional Tianhe Road shopping district in Guangzhou. The mall was soft opened in March this year, and we saw visitor traffic has been steadily increasing. Another new mall to be opened in Guangzhou will be the 33% owned IGC, which is situated at the central business district of Zhujiang New Town. The mall is targeted to open in fourth quarter 2016.
Given the huge size of Xujiahui Centre project, the group's presence in Shanghai will be further boosted upon its full completion. The constructions of phase one on Huashan Road, which includes 180,000 sq ft office space and 330,000 sq ft mall, is progressing very well. Both office and mall has received keen interest from potential tenants. Besides, the superstructure work for phase two, which consists of 320,000 sq ft offices and 45,000 sq ft retail space, are in progress.
Other major investment properties under developments including Nanjing IFC, which is situated atop an interchange station of two metro lines in the Hexi business core of Nanjing. The integrated project consists of 2 million sq ft of quality office space and 1 million sq ft mall and high-end hotel. The construction of the project is progressing smoothly. Next, let me go through the performance of our hotel operations.
As you all know that the Hong Kong hotel industry suffer from falling visitor arrival. The group's hotel business inevitably recorded mild decline in both revenue and operating profit during the year. Through proactive marketing and sales strategies, however, we managed to achieve relatively high occupancy despite lower room rates in Hong Kong. The Ritz-Carlton Shanghai, Pudong, continues to do well with solid revenue growth. Now I'm going to share with you our views on the markets. We expect the residential markets in Hong Kong will continue to do well, supported by the increased home buyer confidence, relatively low interest rate, etc. Performance of Hong Kong Grade A office leasing market is expected to be solid, while regional malls performance is likely to be resilient. Residential markets in first-tier city on the mainland will remain active on back of robust demand.
At the same time, prime located, well-managed shopping mall and Grade A office will continue to outperform. Let me reiterate the group long-term strategy, which include striving for continual delivery of high-quality products and excellent services, aiming at relative balanced source of income mix over long run, strictly observing the discipline of prudent financial management, sticking to a selective and focused approach to mainland property investment. Let's turn to business prospect for property development. Riding on better property market sentiment and the group's abundant stable resources, we shall continue to aim at high asset turnover. Over the next three financial years, the group plans to complete average annual residential GFA of 3.6 million sq ft in Hong Kong. On rental portfolio size, we expect to generate robust rental income stream, which is supported by both existing rental portfolio and strong pipeline of new investment properties.
Last but not the least, as mentioned before, the board has recommended final dividend of HKD 2.8 per share. Together with the interim dividend, full-year dividend for FY 2016 would be HKD 3.85, representing a 15% increase from last year. Going forward, we intend to maintain sustainable dividend per share, which is well supported by the group's recurring income, and grow it over time. That is the end of my presentation. Thank you very much for your attention. Next, let's move on to the Q&A session. Please join me to welcome our senior management to come up on stage. Thank you.
Before we continue, I would like to introduce the panel to you. From your left, Mr. Brian Sum, whom you have already met. Mr. Christopher Kwok, Executive Director. Mr. Allen Fung, Executive Director. Mr. Victor Lui, Deputy Managing Director. The center is Mr. Raymond Kwok, Chairman and Managing Director. Mr. Mike Wong, Deputy Managing Director. Mr. Adam Kwok, Executive Director. Mr. Eric Tung, Executive Director, and Mr. Frederick Li, Group Chief Accountant. The question-and-answer session will now begin. Please signal for the microphone if you want to ask a question. Also, please identify yourself and the name of your company before starting your question. Video of today's briefing will be uploaded on our corporate website. May I now invite the first question, please?
Hello. It's Kenyon from Citi. I have three questions. The first is, on the residential market, recently the residential market has improved quite substantially. I want to ask management view on how sustainable on that kind of rebound in transaction volume of price that management expect. Are you wary of some policies that can be introduced by the government if that kind of rally continue? This is the first question. The second will be on sales. Can you share with us your FY 2017, the Hong Kong and China contracted sales target, respectively? I understand that in the first half, due to the very bad market, you introduce some very innovative mortgage plan like King's Key 120. Are you consider to remove that on the upcoming launches? I have a third question, but I want maybe go through the first two first.
Actually, there is a number of questions here. First of all, on the market first, due to some external volatilities earlier this year, I think you still remember, at that time, we made a reasonable adjustment to slightly adjusting our sales target. Of course, in the second and third quarter, we are all seeing that market sentiment quickly revive and a number of our projects are being sold with very good response there in the different ranges. Like luxury project, like Ultima, we have sold over 200 units, each having an average price of HKD 40 million, and that is a record for luxury project in decades. For mid-range project like Ocean Wings, we have sold over 90% of units already. Two months ago, we have launched PARK YOHO, and we have sold around 900 units already, and we are expecting a sell-out later this year.
Overall, we have a very stable economy, and with the very prevailing low interest rate, we have seen more people or even renters willing to buy. Actually, buyers' confidence is now very strong, and we have very strong sales on various projects. I think we should see the essential market will continue to be sustainable, to be healthy and stable in the coming 12 months. On the sales, actually, we have reached the sales figures as last year. That is HKD 32 billion in Hong Kong and around HKD 8 billion in the Mainland. This year, we should achieve a similar contract sales in the Mainland. For overall, we are expecting that the total sales can be sustainable as last year, i.e., HKD 40 billion.
Regarding the 120% mortgage plan, I need to point out that it is actually binding on two properties, the old one and the new one. The plan is designed to help those owners who are having their existing mortgages at low levels, and they have stable income, but a bit lack of cash to pay their deposit. We are just creating a sort of buffer period so that they can move into the new apartment and then having enough time to sell their old flats. I think this is a good way to facilitate these capable owners to upgrade. Overall, we are always flexible and innovative on our payment plans so as to cater for the market condition and the need of our customer. For the 120% mortgage, we are also serving to give more confidence to the buyers when making the decision.
Finally, they may not need to use our plan. The actual utilization of the plan is only around 5%. At the same time, we are also providing first and second mortgages. Again, the utilization is low, and it is only around HKD 1 billion on our book. The mortgage financing on the balance sheet is not significant at all.
Okay. I've just have last questions on land banking strategies. One of your peers is saying that some of the Chinese peers are coming for land, which they don't know how to calculate their profits from the land cost recently. Will that affect your land banking strategy, which, for example, either you need to chase the land costs or you scale back your land acquisitions, if the Chinese players continue to come?
I think the natural government response should be to supply much more land in the market . There always are competitors, maybe Singaporean, Chinese. Hong Kong is a free market. We're hoping government can supply much more land . In greater quantity and in more lots . That should be the best response for Hong Kong .
What if they don't and then other people are beating up the land, so do you-
I think you have to ask the government. I think the natural response should be to supply more land .
Perveen Wong from HSBC. Thank you for the presentation. I have a couple of follow-up questions on the commercial side of the business. Firstly, on your Hong Kong retail leasing portfolio, could you please share with us the retail sales as well as occupancy cost trends that you've seen within the Hong Kong retail leasing portfolio, and particularly, the retail sales in the recent months like July and August? Among some of the landlords, they have different outlook for the retail reversions in 2017.
It would be great to hear from you what your expectations are for the rental reversions or for the retail in 2017. The second part is on Hong Kong office. Kowloon East spot rent has softened a bit. Could you please share with us the rental that you've seen within your Millennium City portfolio? This portfolio, as a percentage of total, how much does it contribute to the total Hong Kong office rental? Thanks.
Yeah, maybe answer the question on the office in Kowloon East. For our Millennium City portfolio, it comprise around 12% of our total office rental income. We have seen a lot of consolidations and relocation in the area. Actually, recently, we have also seen a number of sizable relocation in Kowloon East. Most of these long and sizable users, they are very choosy on landlords and especially on project quality and management. Actually, our buildings in Millennium City are being benefited. They are enjoying very high occupancy. We are happy to see that government offer more commercial site for sale, but actual completion would be four to five years later. In meantime, office supply in Hong Kong and Kowloon continue to be stable in the range of 2.5 million sq ft. Overall, we should see the office leasing activities can be sustainable in Kowloon East.
On the retail portfolio, year-to-date, I think the occupancy cost is around 14% something . Our retail mall is doing better than the market because we are catering more to the local people. O F course, I think to respond to the weaker sales due to less mainlanders coming, I think we have to change our tenant mix a bit and also we have to keep on upgrading our malls, but we are doing better than the market .
Thank you, management. Eugene from UBS. A couple of questions. First, on the sales target. In fact, in one month, you have already done one third of your sales target. Looking in your target, you're saying maintaining flat for the entire year. What's the thinking behind? Is the management very confident on the outlook of the Hong Kong market, and they don't consider that there's no rush to actually push out all the launches as soon as possible? This is my first question.
My second question is on China. Could management give us an update on the pre-leasing progress for the Xuhui project and the expected yield on cost? Finally, on the dividend policy, could management share with us how should we think about the 2017 dividends? I think the market has been quite happy about the dividend this round, 15% increase. How would management guide us on next year's dividend? Thank you.
First question, Victor. Second question, Eric can answer. T hird question, I answer.
Yes, I answer you regarding the local launches. Apart from the two projects which we are selling now, namely Grand YOHO and Lime Gala in Kowloon East, projects to be launched in the coming months include Babington Hill in Mid-Levels, St. Moritz at the peak of Kowloon, and also Eight Regency in Tuen Mun . At the end of the year, that would be phase one of Nam Cheong Station. In first half of next year, that would be phase one of Victoria Harbour, the waterfront project in North Point. In the middle of the year, that would be phase two of PARK YOHO. Again, we shall continue to be very active on launching our new projects in the coming nine months.
Okay.
For the Xuhui project, there are four phases. For phase one, it's a small office with a retail portion, 180,000 sq ft of offices and also 330,000 sq ft of retail. It's almost completed. We are going to apply for the occupation permit by the end of this year. We're going to deliver the building by middle of next year. The leasing progress is doing well. I think all the floor spaces for office is under negotiation.
For the retail portion, because normally in China they love to see you complete the building first, so the retail will be open in the early part of 2018. For the phase two, which we're doing well, so it's already off the ground. We've completed the structure of the basements already. For the big phase three and phase four, we are actually secured all the approval. At the moment, we're doing the planning work.
I think, two points. I think it's our policy always to pay out to be about 40%-50%. As our earnings per share go up, we'll pay more dividend. Secondly, I think at the moment now, I think we are still in a net debt situation, and we also still trying to buy more land in Hong Kong and China. Therefore, as for the moment, I think our dividend payout ratio will continue to be between 40%-50%. On the question about the sales target, I think as Victor said, I think we'll still keep on pushing the projects as when they're available. I think I would add that our target is a bit conservative.
Next question, please. Gentleman on the front.
Thank you. Justin Kwok from Goldman Sachs. Perhaps I would ask question on the opportunities for asset monetization. I think in the last few months, two things happened. One is that one of your peers decide to do a strategic review on non-property asset, including telecom. On the other side, in the market, there are a lot of Chinese buyers coming in to buy en bloc properties, especially on the office side. I think in view of these two developments, what's your view on your portfolio? Would you be considering monetizing part of this? Or what kind of criteria are you looking at if you were to do such a decision? Thank you.
F or the non-property asset and then for en bloc office?
Yeah.
Yeah.
On the non-property asset side, I think, as we have said before, we actually like the assets currently in our portfolio, especially SmarTone and SUNeVision. We think they are actually very promising, actually can give quite a lot of growth in areas which will broaden the exposure of the group to different kinds of assets. We have no intention and plans actually to sell off these assets.
In the past two years, it is true that we have seen some en bloc office buildings are changing hands with premium price. For us, our office portfolio is now reaching around 10 million sq ft already, and it continue to contribute handsome office rental for us over the years. Apart from our flagship development, like IFC and ICC, actually, most of our office buildings for rental are situated along MTR or railway lines, providing premium quality and intelligent facilities.
We shall continue to hold them and manage them with efficient asset management, with regular renovation. Even for a sizable redevelopment in good location, like the future How Ming Street site in Kwun Tong, we shall keep for long-term investment upon completion. Whereas for smaller scale projects like the Shek Mun site in Sha Tin, which acquired in last year, we shall dispose as a strata title later this year.
This is Praveen Choudhary from Morgan Stanley. Most of the smart questions have been asked already, so I am going to dig deeper on those same questions if possible. T hree questions. The first one is on dividend, which grew 15%, which is fantastic. B efore this growth this year, there has been last four years of flat dividend growth. Considering the completion is going to be more both in Hong Kong and China next year and next year, considering you said the target is conservative, should we definitely assume the dividend will grow next year? That is the first question. I just wanted to comment on that.
Second question is on the margin in Hong Kong. It is clear that the land prices are going up and property prices fell from September till now by at least 10%-12%, slowly picking up. Should we assume that the margin future for the existing land bank will be lower than the historical margin for the company? If that's the case, at what point would you be willing to buy non-property businesses? As you just mentioned, you like SmarTone and SUNeVision. Would you go beyond that, like one of your competitors is saying that there are better opportunities outside of property and money is just money? That's it. Those are two questions from me.
I think at this moment, I think it would be difficult for me to project our earnings per share. I can only say if our earnings per share go up, the dividend will go up. On the point about the margin, true, land prices are going up, but that means the 17 million sq ft of land bank that we hold, the profit margin will go up. Of course, if we buy more land now, the profit margin would definitely go down. That is the problem we have to worry about beyond the next three or four years.
Fortunately, I think our rental income also is going up at the same time. It's true, if our land prices keep on going up, the profit margin in four years' time will be lower. For buying the non-property business outside Hong Kong, well, I think we're busy already with what we have. In Hong Kong, if there's growth, we're definitely interested to acquire businesses in Hong Kong if we see a growth business.
Next question, please. Gentleman on the third row, please.
Thank you. Raymond Liu from Macquarie. Just one question. This is more about related to the growth. Over the past few years, the company's rental income has been growing much faster than the Hong Kong property development income. This year is slight solid changes. Should we expect, in terms of the earnings contribution in the coming few years time, would they have more balanced mix, or will the trend of the Hong Kong rental income growth be much faster than the Hong Kong property development income growth? Thanks.
I think the balance between rental and development, we are gradually shifting to 60/40 now, i.e., more rental compared with our development income. We are moving the medium-term target now to 60/40. Thank you.
For the interest of time, may I now invite the last question, please?
Yes. I have a question for Victor Lui. It's on Grand YOHO. Grand YOHO, I see is virtually the phase two already completed, but I'm surprised that this is not in your next till mid-2017 pipeline. Is there any specific strategy on this because you think that Grand YOHO can have a much higher price, so even if it's already in the completion stage, but don't launch for sale over the next 12 months?
Oh, actually, we are still selling the first phase, and we still need to look deeply in the next few weeks about the actual sales progress.
Is it phase two can launch any time? Because I see it's already completed.
We have applied the sales consent already. Hopefully, it will be granted around end of the year.
At the moment now, we are still upgrading the phase two, upgrading the quality of phase two. In any case, in Yuen Long, the future supplies are limited . W e will upgrade the phase two depending on what customers are telling us for phase one .
Yes. Actually, I also would like to point out that for our two projects in Yuen Long, PARK YOHO and Grand YOHO, they are totally two different projects in terms of market positioning and buyers profile. We have carefully phased them, in terms of sales concern, OP date, and handover date. As you can see, both of the phase one of the two projects are sold with overwhelming response. We are very confident for the future phases of both projects.
Ladies and gentlemen, thank you for coming. Hope you enjoyed the presentation and find it useful. There are some refreshment outside. Please stay and enjoy. Thank you very much. See you next time.