Thank you, Winnie. Good afternoon, ladies and gentlemen. Thank you very much for joining us today. I am so grateful to see so many old friends and new faces here. I understand that you are very busy, especially today. I hope this briefing is useful to you, and please enjoy the refreshment after the briefing. Thank you. As usual, I shall walk you through our interim results and business updates, followed by the Q&A section with our senior management. Without further ado, let me kick-start my presentation now. Here are the key message. First of all, we have achieved impressive contract sales since July 2018, and up to mid-February this year, the accumulated sales have already met our full-year sale target of HKD 47 billion.
Secondly, our sizable recurrent rental income stream continued to grow heavily, and the new investment properties in the pipeline will drive up rental income in foreseeable future. In terms of land banking, we continue to seek opportunities to replenish our land bank at reasonable cost through various means. For a period under review, we successfully convert the land use of two pieces of agricultural lands in Hong Kong. Again, our strong balance sheets and prudent financial management policy make us well-positioned to seek new opportunities and sustain our business development. Last but not least, we are committed to creating shareholders value over the long run, and we intend to increase dividend when underlying earnings are higher. Let me talk about the financial highlights of the results. Please note that all figures are in Hong Kong dollars, unless stated otherwise.
For the six months ended December 30, 2018, the group achieved underlying net profits of around HKD 13.7 billion, representing a year-on-year decline of 31%. The sharp decrease was mainly due to the adoption of new accounting standard, HKFRS 15, which is effective for the current accounting period. Under the new accounting rule, the group recognized revenue from property sales when the properties are legally or physically transferred to the customers. This has resulted in revenue for property sales in Hong Kong being recognized later than it would have been under the previous accounting policy. Based on the previous accounting standard, the group would report an underlying profit of HKD 20.5 billion, up around 2.5% year-on-year. For the same reason, underlying earnings per share dropped by 31% to HKD 4.74, while reported earnings per shares was down by 38% to HKD 7.07.
On dividend, the board has declared an interim dividend of HKD 1.25 per share, representing a year-on-year increase of 4%. This table shows the profits breakdown by segment. Our rental business continued to deliver healthy performance with overall net rental income up by 6.9% year-on-year to HKD 9.5 billion. In Hong Kong, net rental income a three-year-on-year growth of 7.2%, while our Mainland China portfolio delivered 7.4% year-on-year growth in Hong Kong dollar term or 11.4% in RMB term.
As discussed, due to the adoption of Hong Kong Financial Reporting Standard 15, the overall property development profit dropped significantly by 52% to HKD 6.7 billion, with profit from Hong Kong down by 57%, while profit from Mainland China was down slightly to HKD 1.2 billion. I shall discuss the sales performance in more detail later. Together with profit from hotel and other business, the total operating profits was down by 25% to HKD 19.3 billion.
Financial position of the group is very strong, with net gearing ratio staying at low level of 11.8%, with net debt of HKD 64.4 billion. Interest coverage was around 13 x lower than that in last period, but please look at the lower interest coverage was due to lower operating profit caused by the change in accounting policy as discussed. Based on the previous accounting policy, the interest coverage would be around 20 x. For the shareholders' funds and net book value per share, they are around HKD 546 billion and HKD 188 per share respectively. Let's move on to the performance of our property business in Hong Kong, and let me start with our Hong Kong land bank.
As at the end of December 2018, the group total land bank in Hong Kong was over 57 million sq ft of attributable GFA, including around 33 million sq ft of completed properties and over 24 million sq ft of properties under development. Majority of the completed properties are shopping centers and office accounting for 67% of total. For a property under development, around 57% or 14 million sq ft of GFA are residential properties to be completed in the next five years, while 25% or 6 million sq ft of residential GFA, including the Shap Sze Heung project, are scheduled to complete beyond end of 2023. On top of that, the group also holds around 31 million sq ft of agricultural lands in terms of sites area.
During the period, the group added four projects or around 1.3 million sq ft of attributable GFA through different means, including converting the land use of two pieces of agricultural land and data center sites acquired by SUNeVision via public tender for its business expansion. Since the beginning of this year, we've further acquired two residential sites through public tenders. In January, we acquired a very unique harborfront residential site with total GFA of 649,000 sq ft along the Kai Tak runway. The project commands unrivaled panoramic view of both sides of the harbor with convenient access to the West Kowloon Cultural District through the central Kowloon route under construction. We shall develop it into a luxury residential landmark and create synergy with the group's and other iconic projects in Kai Tak City Center.
This month, we acquired a sizable residential site with a total GFA of 917,000 sq ft at Pak Shek Kok in Tai Po. The site will be developed into a premium residential project with parts of the units featuring extensive views overlooking Tolo Harbour. Now, let's turn to the performance of our Hong Kong rental portfolio. We continue to see healthy rental income growth across all segments in our rental portfolio. Overall gross rental income grew by almost 7% year-on-year to HKD 9.6 billion, of which 54% or over HKD 5.2 billion was from the retail portfolio with a healthy year-on-year growth of 8%, and 33% or nearly HKD 3.2 billion was from the office portfolio with a year-on-year growth of 6%. Overall occupancy of the rental portfolio in Hong Kong stayed at a high level of 95%.
The group's 12 million sq ft retail portfolio with a relatively healthy mix of local and tourist shoppers continued to enjoy positive rental reversion and high occupancy during the period. Our proactive approach in managing shopping malls has helped us to achieve better growth in tenants' retail sales as compared to the markets. Besides, our occupancy cost remained at a reasonable level. Apart from the ongoing tenant and trade mix requirements, we are also using digital applications to enhance shoppers' experience. Next month, we are going to launch a cross-mall loyalty program covering 14 major shopping malls of the group, and that will further improve our customer loyalty. Through AEIs, we continue to create values for our rental portfolio. We have been carrying out major AEIs works in New Town Plaza in Sha Tin and Park Central in Tseung Kwan O.
We expect the entire renovation works of these two malls will be completed this year. Let's move on to our office portfolio performance. During the period, the group's 10 million sq ft office portfolio continued to deliver solid performance with healthy rental reversion and high occupancy. The completion of major infrastructure, including the Central Wan Chai Bypass and a high-speed road further enhanced the connectivity of both International Finance Centre and International Commerce Centre. On new additions, we expect to open V Walk in mid of this year. This shopping mall atop MTR Lam Tin Station is already 90% let. In North Point, the Harbour North, which is the retail part of the landmark Victoria Harbour development, will open in phases and create synergy with the adjacent Harbour North@VIC, which is the shopping arcade underneath the Hotel VIC.
Looking further ahead, the 1.2 million sq ft commercial project at 98 How Ming Street in Kwun Tong will further enhance our group's presence in Kwun Tong. Turning to the property development business in Hong Kong. For a period under review, the group recognized HKD 12.1 billion property sales and generated HKD 5.5 billion development profit in Hong Kong. The decline was mainly due to the adoption of Hong Kong Financial Reporting Standard 15, which led to later recognition of revenue.
Based on the previous accounting standard, the revenue and operating profit would be HKD 28.9 billion and HKD 13.6 billion respectively. You may notice that our development margin is higher than that in the last period, and we will still have over HKD 56 billion contract sales yet to be recognized. On contract sales, for the period under review, we achieved HKD 39.7 billion and major contributors are shown in this table.
Up to mid-February this year, we have achieved over HKD 43 billion contract sales already, exceeding our full-year sales target of HKD 42.5 billion in Hong Kong. This map shows you the upcoming launches over the next 10 months. The purple boxes represent new projects to be put on the market, including Cullinan West III and Central Peak phase one. On top of these new projects, new units at Victoria Harbour in North Point and St. Martin in Pak Shek Kok are scheduled for sale. This concludes my presentation on the property business in Hong Kong. Now let's move on to our property business in mainland China.
As at end of December 2018, the group had a total land bank of around 63 million sq ft of attributable GFA in Mainland China, of which over 14 million sq ft was completed properties, and around 49 million sq ft was properties under development. Majority of completed properties was shopping centers and offices, accounting for 82% of the total. For property under development, 58% is residential project for sale. We go through the performance of our rental portfolio on the Mainland. During the period, the gross rental income in Mainland China rose 7.6% year-on-year to HKD 2.3 billion, accounting for 19% of the group's total gross rental income. The healthy growth was driven by positive rental reversion and contribution from new investment properties, but offset by RMB depreciation during this period. In RMB terms, the gross rental income was over CNY 2 billion, up 11.5% year-on-year.
Shanghai IFC in Pudong and Shanghai ICC in Puxi, the group's iconic integrated commercial developments in Shanghai, continue to deliver solid performance with high occupancy and positive rental reversions. Construction work for the group's Shanghai ITC is in full swing. The first two phases have completed, and around 90% of their office space has been leased to multinationals and local enterprise. The 340,000 sq ft grand luxury shopping mall at phase one is almost fully let, and is scheduled to open in second half of this year. The entire development of Shanghai ITC is expected to be fully completed by the end of 2023, and shall drive up the group's rental income from the Mainland significantly. Apart from Shanghai ITC, Nanjing IFC is the group another integrated commercial project on the Mainland.
The construction work of the Nanjing One IFC, the 500,000 sq ft of office tower, will be completed soon, while the 290 meter superstructure of Nanjing Two IFC has been topped out recently. The 1.1 million sq ft shopping mall will feature top-notch international brands, and its interior fit-out work is in progress. Besides, the major reconfiguration work at the Beijing New Town Plaza has completed, and this fully leased shopping mall is expected to become a popular shopping destination for young families when it opens in second half this year. Let's turn to the property development business on the Mainland. During the period, the group recognized HKD 2.6 billion property sales on the Mainland, down around 9% year-on-year, while development profits was down by 3% to HKD 1.2 billion. Major contributors include residential and commercial projects in Dongguan, Guangzhou and Foshan.
As at the end of December 2018, we have around HKD 5 billion contract sales yet to be recognized. In terms of contract sales, the group record about CNY 2.9 billion during the period, mainly from TODTOWN phase one in Shanghai, Parc Royale in Guangzhou, and Oriental Bund in Foshan. This table shows the major new launches on the Mainland in the next 10 months, including new phases of Shanghai Arch. That's all for the update on the group's business in Mainland China. Next, I will go through the hotel business performance. The group's hotel portfolio continued to deliver steady performance during the period, and the Hotel VIC in North Point was grand open in December last year. While revenue from the group's hotel portfolio was up by 7.9%, the operating profits was up around 2% only.
It is mainly due to the pre-opening expenses and depreciation charges for the newly opened Hotel VIC. In second half this year, we open a new hotel called ALVA Hotel by Royal in Sha Tin. It is a sister hotel of Royal Park Hotel and will provide over 600 guest rooms. Besides, the development plan of a high quality hotel site on West Kowloon waterfront will be finalized soon. That cover our business update. For the market prospect in Hong Kong, we expect the primary residential markets to be relatively active with improved market sentiment of late. We believe rising income, still low mortgage rate, and ample liquidity will support end user demand.
On office, we think that the key roles paid by Hong Kong in the Greater Bay Area will drive additional demand over the medium term, and tight supply in the core areas in Hong Kong will underpin office rents. On retail side, solid local consumption expanded customers base backed by increasing cross-border connectivity and visitor arrivals to benefit the retail leasing market. We expect rents in major malls will outperform the market. In key city on the Mainland Positive fiscal and monetary policy initiatives to support the leasing markets. We believe quality office space and well-managed shopping malls at prime location should do better. On primary residential markets, we think both the volume and the price in first-tier cities will continue to be constrained by the regulation measure. Nevertheless, fine-tuning in city-specific property measures in some cities will support the transaction volume there.
As for our group's business prospect, we expect our existing rental portfolio will continue to achieve positive rental reversion and high occupancy. We shall try hard to create value to our portfolio through AEIs, proactive management of tenant and trade mix, and make use of digital application as discussed. In addition, we continue to expand our portfolio in both Hong Kong and Mainland China, and the new additions will drive our rental income growth in the future. As for the business prospect of the group's public development, we have abundant sellable resources to meet buyers' demand and shall continue to launch residential units for sale when ready. Besides, we have over HKD 61 billion sales yet to be recognized.
In the next five years, we plan to complete around 14 million sq ft of residential GFA in Hong Kong, and we will continue to replenish land bank through various channels, including land use conversion and stick to our prudent financial discipline. To round my presentation, I would like to share with you a message extract from the chairman statements as follows. "With strong brand, solid foundation, prudent financial discipline, and seasoned management team, the group is confident of tiding over future challenges and accomplishing sustainable business growth in the years ahead." That's all. Thank you very much for your attention.
Before we continue, I would like to introduce the panel to you. From your left, Brian Sum, whom you have already met. Christopher Kwok, Executive Director. Allen Fung, Executive Director. Victor Lui, Deputy Managing Director. The center is Raymond Kwok, Chairman and Managing Director. Mike Wong, Deputy Managing Director. Adam Kwok, Executive Director. Eric Tung Chi-ho, Executive Director, and 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? Gentleman in the second row, please.
Hi. This is Ken Yeung from Citi. I have three questions regarding the Hong Kong property development path. First is basically on the sales, especially the sales strategy of your already launched project. Given home price already come down around 10% from the peak, will that affect your sales strategy of some of those projects already launched previously but still have quite a lot of unsold? For example, St. Martin, which you previously sell HKD 17,000, HKD 18,000, but signal launch a project recently at HKD 13,000. How do you deal with that when you relaunch your unsold inventory? This is one. Secondly, I want to ask, second question is regarding the completed but unsold units. Can you update us how many as of now? Will the vacancy tax affect your development and completion schedule over your planning? The first question is regarding your residential outlook.
Given some of the signs of improvement, do you think this kind of recovery is sustainable?
Yes. On launching our new projects, we are always sticking to the prevailing market condition. Over the past years, even facing different market condition, our strong sales record have proven that we can always strike a balance between volume and margin. For mass market, we are always aiming for a quicker asset turnover. For those luxury project, the location is hard to replace. We shall normally market the units at our pace. Recently, we have seen some price adjustment in some area like Pak Shek Kok. In fact, the area itself is a very good place to live and close to the sea and being adjacent to the science park and the Chinese university. I think you still remember that around three years ago, that most of the site here are being tendered within a short period of time.
And that is why the progress of construction and marketing are very close to one another. So it just needs some time to absorb the existing inventory. We noticed that some of our peers are reducing their price and maybe lower than us, but we know our edge of our project compared with our peers, and we shall continue to market the remaining units at reasonable market price.
And talking about the completed units. Our completed units within a year is only a small number. I think it is a very small number compared with our annual sales of 4,000 units. And I think you still remember that in last year, we have sold a large number of units in Park Yoho Milano, and currently, we are selling the other phase, Park Yoho Napoli. At the same time, we are putting a portion of units for lease. The same situation occurred in Victoria Harbour. We also put a block of small units to be leased as a service apartment, and the response has been very good. We are doing almost HKD 100 per sq ft. And overall, these units should be leased temporarily, and we shall launch again later at appropriate time.
We do not know when and how the vacancy tax is implemented, but I do not think that they have any impact on our portfolio.
On your question about the recovery of the market, right? I think that even the stock market has picked up more than 10%. Interest rates are trending downwards, and there seems to be QE everywhere, even in the U.S. In the U.S., they have slowed down the QE, but I think they said there is a limit going to be They reduce the balance. There is going to be a limit. Therefore, the market confidence has definitely come back quite a bit, yeah.
Thank you, Mr. Kwok. Next question, please. Gentleman in the middle, please.
Hi, this is Raymond Liu from HSBC. I got three questions. The first one is about medium-term perspective, which is about Greater Bay Area. The company has good exposures in Guangzhou and Shanghai or some other tier two cities. We have a formal announcement of GBA policy. Will you consider to allocate more resources to expand further in this GBA area? This is the first questions. The second question is about the dividends. For this interim results, a 4% hike in DPS. Should we expect any pleasant surprise when the company announce the full-year results a few months later? Say for example, higher payout ratio. The last question is about Hong Kong office. Please correct me if I am wrong. For the ICC project, there could be three anchor tenant that will be subject for renewal very soon.
Can you provide us a guidance on the positive rental reversion if you plan to increase the rent, or are you going to provide them a flat rent? Thank you.
I think on the Greater Bay Area, we are going to focus on Shenzhen, Guangzhou, and Nansha, and we are going to stick to where our strength is, which is property development. Of course, on the sites we want it has to be good ones. When there is a good opportunity coming along, we are going to bid for those sites. On your question about ICC, maybe I can comment on the general, not just ICC specifically, because I do not want to disclose too much about Morgan Stanley, Credit Suisse, and Deutsche Bank. In any case, our office rental next year. Our office rental in 2018, our rental reversion would be 14%-15%. There is another third question, right? Oh, dividend. I think we are going to continue with our dividend payout policy of 40%-50%.
We are raising our interim dividend because we hope that our profits would go up, our earnings per share would go up for the whole year. Because as you know, for the first half, 2018/2019, we have units that have been completed but have not delivered. The CC has not been issued. So for accounting purpose, there are a lot of units that the Certificate of Compliance will be issued in the next four months, and then we can book our profits for the full-year. But our dividend payout ratio will continue to be 40%-50%, because we foresee there are lots of opportunities coming along that we can bid for sites. Thank you.
Yes, I want to add that for ICC aspect, by the VOPAS take up, we are doing a premium rent for the whole area. And ICC is still a very sought-after address by most of the multinational and Mainland corporations. And for sure, it is going to also capitalize the increasing vibrancy due to the high-speed rail and also the West Kowloon Cultural District.
Thank you, Mr. Lui.
Actually, on ICC, I'd like to add that for that building, we would like the three investment banks to stay at least partially, because it is called the International Commerce Centre. So we want at least 50% to be international tenants of good caliber. Thank you.
Thank you, Mr. Kwok. Other questions?
Thanks. Justin Kwok with Goldman. Three questions from my end. The first one, Mr. Geoffrey Kwok is now appointed as the non-executive director. I think from the shareholders' point of view, how should they view, number one, the potential, say, synergies with the private portfolio on his end? Perhaps the other thing is how should the shareholders be viewing the job allocations or the duties allocation among the third generation of the Kwok family in the company. The second question is about SUNeVision. I think this subsidiary has successfully secured the last major data center site in Hong Kong. How should the management look at this vehicle in terms of the potential synergies and also perhaps the opportunities on that? I guess the third one is also follow up on the residential outlook.
In view of the current market, how would management comment on their sales target on the short term and also on the medium term? Thank you.
On the SUNeVision, again, Adam can respond.
Maybe I will respond to the SUNeVision first. As shareholders, we like SUNeVision, I think, for two reasons. One is, this is a growing business on data and we have actually built the business over the basically last 15 - 20 years. It is now in a good scale. Market cap roughly about $3 billion, so it is a sizable, so it is a good business. I think equally important is that it is a window for the group to really get more understanding of technology and new economy developments. We are very fortunate that really every major new economy player is a partner or a customer of ours in SUNeVision. We have a lot of opportunities to interact with them, understand what is going on. That is actually a very precious window for us.
I think about the piece of land we have acquired, I wish what you said is true, that it is the last major piece of land. In fact, actually, there are a lot of pieces of land, industrial land, in the process of being transformed into data centers. I think it is actually over-optimistic to say there is no more land for data center. I think there is actually quite a lot of supply going forward. But we are quite confident. We are quite confident because I think we serve our customers well. We already have a very good set of existing customers. This business is highly competitive still because there are actually a lot of All the major international data center players are in Hong Kong. But what we will do is that we will invest, have patience, and then grow the portfolio.
Yes. For the local sales, I think you have noticed that we have achieved very good sales we sell in last year. For the first two months of this year, we have already sold our Downtown 38, a joint venture project with URA, and also disposed quite a large number of units in Ultima. Currently, we are selling phase one of St. Martin and also the completed units of Victoria Harbour. In next quarter, we shall market phase two of Mount Regency in Tuen Mun and also phase three of Cullinan West. In the second half of this year, we shall market the luxury project in Stubbs Road and also the Tuen Mun South residential project and also the industrial project in Tsuen Wan and lastly, maybe the wetland park project at the end of the year.
You can see that we We are very active to launch new projects in the coming 10 months. In medium term, we are very confident that we can achieve an annual sales in Hong Kong of HKD 40 billion.
On the current market, I think, we believe the market would stabilize now because I think the stock market has gone up 12% for Hang Seng, 11%, whatever, year-to-date. Our experience has been whenever the stock market rebalance, confidence always comes back. It is good to note that the stock market has been strong since end of last year. A question about Geoffrey. I think we welcome him to be on the board. At the moment now he is a non-executive director. I think he will grow into the company and then assume an executive position in due course. There will not be any acquisition of the private company because I think just like our family also has a lot of residential investment properties, and we always try to separate the private company with the listed company.
There are really too much to do for the listed company already. There will be no attempt to try to merge with the Walters private company. Thank you.
Hi. It is Karl Choi from Merrill Lynch. I have a couple of questions. First, I think the government is about to introduce or to launch the land sharing pilot scheme. Just wondering what you think the impact will be for Sun Hung Kai. Do you expect more of your farmland can be converted, or do you actually expect the process to take longer because it probably needs to involve an independent panel? Second is, have you heard any update on the timing of the high-speed train station site, when it will be launched in terms of the land tender? Given the expected large price tag would Sun Hung Kai consider JV or 100% basis?
Would you actually, given all the different land acquisition opportunities out there, would you actually consider doing a raising equity through, let us say, rights issue to help fund some of these land acquisitions? Thanks.
On the first one, as you may have known, the proposal led by Mr. Wong Yun-Lai, Stanley Wong, the report has been fully adopted by government. On the report, there is an item for land sharing to unleash the agricultural land owned by land owners. I wouldn't say developers. Land owners in NT. The detail has yet to be reviewed. The principle has been set. It's going to be a transparent, fair system and going to be 70% of the upgraded plot ratio to be public subsidized housing. I think these principles, they're setting the framework, but we have to wait until all the details to implement all these schemes. As you may already know, we do have some proposals on hand, but we have to wait until government review all the details before we can respond.
After all, we have to make this scheme both economically viable before we can respond positively. Yeah.
In the meantime, I think we still try to process our agricultural land to residential land without waiting for the government.
Yeah.
Because I think
As you may appreciate, we have been doing pretty well for the past few years, converting two major pieces of land last year. For the first half, we still managed to convert two pieces of relatively small agricultural land into residential development. As our chairman said, we are still very diligent and busy to go through the planning and land conversion, land premium negotiation stage. We are expecting a few actually coming on to a very close to final stage of negotiation.
We will do our best to increase the private sector supplies.
Yeah.
On the question about high-speed train tender, there definitely will not be any rights issue as far as the foreseeable future. In any case, our leverage is only 12% debt to shareholder funds. When we are near 20%, we may consider, but definitely not now. As for this specific high-speed MTR bid.
Actually, it is a very sizable project.
Yeah.
Total GFA is around 3.2 million sq ft with 300,000 sq ft retail podium. We are actually studying the scheme. We haven't heard from the government the exact date of the tendering, but definitely we're interested.
Hi, it's Ken from Citi again. I'd like to ask about some updates on Shanghai ITC, because I think two, three years ago, you have been saying that Management has been updating us that the total contribution will be around HKD 3 billion in terms of the full contribution. Any update on the number of the full contribution? Also, because now phase one, phase two already completed, can you give us any guidance of these two phases altogether? The annual contribution in operation is how much? Also about the retail portion, what kind of the achieved rent in phase one? On the ITC. Also, just a little bit sidetracked on the government stance of changing their government public-private housing ratio from 60/40 to 70/30. Will that affect your construction and residential launches?
Okay. For ITC project, I think we haven't revised the rental projection. I think it still remain HKD 3 billion. Our phase one and phase two has been completed. The office have been 90% let, and the retail portion, we have almost fully let all the retail portion of the phase one, and it will open by the end of this year. For phase three and phase four, we actually have completed the sub-basement structures. We are actually coming up with the tower. The first tower will be completed by 2021, and the second tower will be completed by 2023, which will be the tallest tower in Puxi.
Yeah. Also we have some very good tenants there. Like Adidas, right?
Yeah. I think we have Adidas. They have moved the Asia headquarter from Hong Kong to Shanghai, and they occupy 23 floors in ITC, too. Yeah.
Obviously, you appreciate government recent policy to change the ratio between the public and private from 60/40 to 70/30. Obviously, the pie of the market for private development will be less. The effect will coming through in the imminent years. The pie will be smaller, the competition will be even thinner. We have to work harder.
Yeah. Also, I think, hopefully, we can increase our market share in the residential market, given that it would be shrink from 60/40 to 30/70 or something. Anyway, fortunately, we also are not just a residential developer. We are also a developer for office, commercial, retail, industrial.
Data center.
There are plenty to do. I think at this juncture, we appreciate that we have a good investment portfolio. Investment public portfolio, so that we can still try to improve on the traffic to our malls and increase the rental income cost. Thank you.
Thank you, Mr. Kwok. Last question, please. Gentleman in the middle.
Okay. It's David Ng from Macquarie. I'll just ask maybe if you can give a little bit more color into the retail environment in Hong Kong. First half of 2018, doing very well for everyone, and then it slowed down. We have a lot of macro uncertainties. Could you comment a little bit on the latest situation, maybe in terms of the retail sales growth as well as best as possible, what's your outlook for 2019 in terms of how your shopping mall, the existing one, will be doing? If possible, can you also give a little bit color between the more high-end malls that you're running and versus the more neighborhood malls? How are they really different in the current environment? Then finally, for the two big one in Shanghai, has their sales kind of slowed down in growth?
Last few years they've been growing significantly from a low base, but has it reached a peak? Is it showing any signs of slowdown or is it still repeating last few years of strong growth for both the IFC and the iapm shopping mall in Shanghai? Maybe just one final thing, just to clarify from what Victor comment about the upcoming year launches. I think you mentioned HKD 40 billion sales for Hong Kong. Are you talking about the calendar year 2019, or are you talking about fiscal year 2020 when you're talking about the HKD 40 billion from Hong Kong? Thank you.
Yes. On HKD 40 billion, it is our target. What I am saying is that in medium term, we are very confident to achieve the annual sales in Hong Kong of HKD 40 billion. In fact, with sufficient land bank and also our very efficient construction and marketing team, we are very confident to achieve this. We want to stay with this target for the time being, you know we are always a bit prudent, and we hope we can exceed this target in the coming years.
Yeah, of course. I think the HKD 40 billion is a per annum forecast, but of course, we want to be conservative, yeah. I am sure Victor and his team will always beat the budget.
Yeah. I think on the retail market in Hong Kong, I think in the past year, in 2018, I think for our shopping malls in Hong Kong, we have recorded for both the rent reversions and sales, we have strong double-digit growth. Yes, I think there is a slight slowdown in the second half of the year. I think we continue to be optimistic. Primarily because we are quite positive about the recent opening of the Hong Kong-Zhuhai-Macau Bridge, as well as the high-speed rail connection to West Kowloon, because we believe it will bring more traffic to our malls. We have also been investing in strengthening our loyalty program.
In March, we are going to launch an integrated loyalty program that is an extension of our shopping malls app, and hopefully that will stimulate more repeat customers and more higher spending per shopper at our shopping malls, and increases the stickiness as well. Going forward, I think in terms of 2019, I think we remain cautiously optimistic. Again, the infrastructure effect has yet to be fully felt. Second of all, I think the GBA, I think the promotion of greater integration between the nine plus two cities in the area means probably more traffic flow and more spending from Southern China to Hong Kong. I think for our mall portfolios, yes, we have a wide range of malls, but I think the common theme that runs across them is that most of them are situated in transport hubs.
I mean, whether it is IFC or New Town Plaza, they are very well-connected. They all have very good catchment of both the local and Mainland China market. I think we should be able to ride on the wave of more shoppers from Mainland China. For our malls in China, in Shanghai, I think we continue to have a good occupancy and rent reversion in the past year. For our iapm and IFC malls, they are both very well-situated, and we position them as mid to high-end. We try to recruit flagship stores from across the world. They tend to be frequented by wealthy local shoppers and also from other cities. We are relatively, I think, unscathed, despite the macro environment and impact of online sales.
I think going forward, for China, obviously, as Chairman said, there has been a lot of QE going on, and there has also been a very big drive on the part of government to redirect sales from overseas purchases to domestic consumption. I think those are signs that make us positive about the outlook in the short to medium term. Yeah.
Thank you, Mr. Kwok. The briefing is coming to a close. Ladies and gentlemen, thank you all for coming. I hope you enjoyed the presentation and find it useful. There are some refreshments outside. Please stay and enjoy.