Good afternoon, ladies and gentlemen. Welcome to Shui On Land's interim result announcement. I'm Michelle Sze, the Head of IR of Shui On Land. On the stage, we have Mr. Douglas Sung, our CFO, Managing Director, and CIO. In the middle, we have Stephanie, our Managing Director, and also Jessica, also our Managing Director. Let me pass the stage to Douglas.
Okay. Thank you. Good afternoon, everybody. Let me kick off with maybe a report on our financial for first half 2019. Okay. On this page, you see some of the key figures for first half financial. Maybe I'll just highlight a few of the more important ones. I think, first of all, you will see that we are continuing to grow our recurring income. You see that rental and rental-related income increased by about 17% year-on-year compared to first half 2018. We will have further breakdown for you later on in the presentation. You will see that contract sales, compared to 2018 period, has a noticeable decline. This is mainly because in first half 2018, we recognized the revenue and profit from the transaction with COFCO, where we sold 50% interest of two residential sites in Rainbow City in Shanghai. We recognized that.
We completed that transaction in first half 2018, and we booked the revenue and the profit. That was a relatively large amount. If you take that out, we actually see property sales revenue increased by 76% year-on-year to CNY 5.1 billion. That was the four figure here in the table. Gross profit, CNY 3.5 billion. Again, the decline compared to the first half 2018 is primarily because of that transaction with COFCO in first half 2018. Profit for the period and attributable profit to shareholders were both up 8% year-on-year. Profit attributable to shareholders is CNY 1.326 billion. We have an increase in profit margin, and I'll go through that later on in the presentation. Our financial and balance sheet continues to be very strong, and you can see that net gearing as of first half is 44%, so it's only a slight increase compared to 2018.
On some of the key strategic achievements, I would maybe highlight this as a reflection of the company's ongoing strategy to focus more on commercial real estate going forward. You will see that some of our key transactions in the first half are basically all related to the commercial real estate area. For example, we completed the acquisition of Brookfield's share in China Xintiandi in March this year. Right now, China Xintiandi is 100% owned subsidiary of Shui On Land. We also completed the purchase of Corporate Avenue 5 in Xintiandi during this year through our investment platform with Manulife and China Life, the Shui On Core Office Investment platform. We will have, again, more detail for you later on. We have also opened two shopping malls, retail malls in the first half of this year.
We completed the renovation and the AEI for Xintiandi Plaza in Shanghai, in Taipingqiao Xintiandi . That was formally opened in May. We also completed the development and opened the Wuhan Horizon North Shopping Mall in May also. Again, we were very busy in expanding our commercial property footprint. We didn't have a lot of new property sales in the first half. I think we mentioned in March, when we have the annual result announcement, that we expect this year a lot of our new launches will be in the second half of the year, particularly closer to fourth quarter. That's why you are not seeing a lot of property sales revenue in the first half, but we expect that will pick up in the second half, and I think Jessica will later on give you more highlights.
On the financial, some of these I already mentioned, so I won't go through this line by line. Overall, you'll see an increase, a pretty big increase in rental income. Again, revenue declined year-on-year, mainly because of the transaction in first half 2018 with COFCO. That's caused quite a bit of distortion in the year-on-year comparison. Overall profit margin increased in the first half of 2019 to 45% gross profit margin. Again, I mentioned that for profit attributable to shareholders is up 8% year-on-year to CNY 1.32 billion. Okay. The income statement, I've already mentioned quite a bit of the figures. On the revenue, basically, you can see the breakdown in three areas. Property sales is about CNY 6.3 billion. Rental income is about CNY 1.1 billion, and about CNY 420 million of other income.
Overall, if you net out the cost of sales, gross profit is about CNY 3.5 billion. Profit margin, I mentioned, is 45%. Operating profit is about CNY 3.2 billion. Then a couple of, I think, highlights on the figures below. On the investment properties, revaluation basically is stable in the first half. I'll have the breakdown for you later on. The revaluation gain is only about CNY 93 million out of a CNY 43 billion commercial property portfolio. Other gains and loss is just some miscellaneous costs and expenses. There is a reversal of impairment loss of CNY 180 million. This is related to a provision we made in first half 2018, for the final payment on the Foshan residential site we sold to Country Garden in 2016. Last year, the final payment was related to a final site clearance, relocation clearance.
Last year, we noticed that there was some delay in the relocation, so that's why we made a provision on that final payment, CNY 180 million. We completed the relocation. We received the payment from Country Garden, so that's why there's this reversal of the provision of CNY 180 million in the first half. Finance cost, down by about 8%, so it's about CNY 860 million finance cost in the first half. That includes the fluctuation of the FX, so you see a net exchange loss of about CNY 17 million. We continue to hedge roughly about half of all our FX exposure. We are trying to manage a lot of the FX volatility through hedging. You haven't seen a bigger impact to our P&L in the first half. Profit before tax, about CNY 2.5 billion.
I mentioned profit for the period and also the attributable profit to shareholders are both up 8% year-on-year. The board recommend the interim dividend to maintain at HKD 0.036 . On the next page, you will see that last couple of years, we have been gradually increasing our dividend to shareholders. Although in the interim period, we are maintaining or recommending a stable dividend of HKD 0.036 . Based on yesterday's closing price, Shui On Land is actually paying a dividend yield of about 7.2%. We do believe that this is an attractive dividend level for shareholders. We will obviously reassess and revisit the final dividend after our final period to see whether there's room to increase full year dividend in the second half of the year. Recognized property sales.
These are basically property sales that we've sold and handed over to our buyers. Mainly coming from two projects in Taipingqiao, Lot 116, which the unit sold in 2018, and we handed over in the first half this year, and also from Foshan. This will be the two main contribution in the first half. I mentioned earlier on the valuation of our investment property. The overall carrying value in the first half is CNY 43 billion. These are all the completed commercial properties. You can see that it's basically overall, the value is stable. It's up only 0.2% compared to end of last year, about CNY 96 million. Some increase mainly coming from two projects. The Xintiandi Plaza in Shanghai, where we completed the AEI, and I mentioned we have the formal opening in May.
This is a markup mainly to reflect the completion of the AEI. From the Shanghai KIC project as a reflection of the rental income increase during the period. These are the locked-in sales, basically sales that we have signed but not yet handed over. It's about CNY 7.2 billion as of first half. Mainly coming from Wuhan and Chongqing and a little bit from some of the Foshan and some of the other projects. Financial position. We have cash on hand, about 15, almost CNY 16 billion in the first half of the year. If you net out the total debt, our net debt is about CNY 21 billion. It's a slight increase from December of last year. The overall gearing, again, is up marginally to 44% compared to 40%. But overall, we are still very comfortable with our balance sheet.
We think the gearing is still very reasonable. We believe that this is obviously very beneficial for the company, given the quite uncertain financial markets right now. This is basically just graphically show you the gearing. We have been deleveraging in the last few years. At the current level, about 40%, 50% gearing, we think this is a sustainable level, and we hope to be able to maintain at this level in the foreseeable future. The debt maturity breakdown, you can see that we've broken down into second half this year, first half next year, and beyond. In the near- term, as of June, the maturity for second half is about CNY 6.5 billion, CNY 6.6 billion. For first half next year is about CNY 3 billion. But all of that CNY 6.6 billion, we continue to pay down the maturity.
So as of last week, the outstanding for the rest of this year is about CNY 5 billion. We have further paid down the maturity by about CNY 1.5 billion in the last two months. Overall, you can see that in the coming, let's say, 9-10 months, we only have debt maturity of about CNY 8 billion, and we have cash on hand of about CNY 16 billion. We are very comfortable with our current financial position. We don't really have a lot of financing needs or financial pressure in the near- term. We think that this obviously, again, is beneficial for the company, given the very volatile capital market right now. This is just for your reference, our outstanding U.S. dollar bond and senior notes. The next one due is in October this year. A relatively small U.S. dollar bond, $250 million .
Given the fairly large cash on hand we have right now, certainly we have quite a lot of capacity to repay this bond. On our asset breakdown, total asset is about CNY 107 billion right now. The breakdown on the right-hand side, you can see that it is above 55% investment property or commercial property, of which about 41% are completed investment property and about 14%, 15% are commercial under construction or commercial land bank. We can see that, for Shui On Land, the majority of our asset currently is commercial. This is, again, why we mentioned that we will continue to focus more on commercial going forward, given that this is the biggest asset base we have, and also we believe this is where our strength lies. In particular, I want to highlight our commercial property portfolio in Shanghai.
I mentioned that we completed two big transaction first half this year. We bought back Brookfield's share in China Xintiandi, and also completed the acquisition of Corporate Avenue 5. We have actually increased our effective exposure to Shanghai commercial real estate portfolio quite a bit. You can see that our share of the Shanghai commercial property portfolio asset value has increased by about 24% compared to the end of last year. So, right now, the Shanghai commercial portfolio's total value is about CNY 73 billion, of which the completed income-producing portfolio is about CNY 42 billion, the first half of the table. The bottom half are basically the ones under construction, under development. It is about CNY 32 billion. So altogether, CNY 73 billion. Our share of this portfolio is 57%, so it is roughly about CNY 42 billion.
This is an increase of about 24% compared to the end of last year, mainly because of the completion of the Brookfield transaction, where we are now 100% owner of China Xintiandi. We think we would call this the cornerstone of the company's portfolio and asset base. This obviously is also our clear focus in the next few years to continue to increase our footprint in Shanghai and hopefully, to continue to maintain a leadership position in the Shanghai commercial property market. Strategically, I mentioned that, and, Chairman and senior management has mentioned to analysts and investors that we are transitioning to become more commercially focused. I mentioned that first half, we did some big transaction to increase our commercial portfolio.
This will continue to be a key strategic focus for the company, particularly to try to continue to maintain a leadership position in our Shanghai portfolio. So right out the Shanghai portfolio, both the completed properties and the ones under construction. Together, the total GFA is about 1.65 million square meter , or roughly about, let's say, 18 million square feet , in Shanghai. Basically all of which are in downtown city center location. This makes us one of the largest commercial property company in Shanghai already. We want to continue to maintain this leadership position and with the right opportunity, continue to expand our footprint in Shanghai. This is a key strategic focus for the company in the next few years. To achieve that, we will continue to adopt an asset-light approach.
Basically what that means is we would like to continue to partner with long-term investors, such as the ones that we already have, like China Life, Manulife, for example, China Pacific Insurance Company, and to continue to partner with these long-term investors to expand our portfolio. We hope to be able to, going forward, form more platforms like the one we formed with Manulife and China Life at the end of last year. To use these type of platforms to increase our capital sources and to increase our investment capability. The market outlook, just very quickly, how we see the market. Obviously, macro environment is not very certain right now. Obviously, there's trade war going on, slowdown in global economies. All these, I think, have proven that our more cautious approach in the last couple of years are the right approach.
We will continue to be more cautious in the next 6- 12 months in terms of capital deployment, in terms of managing our balance sheet. On the office market, we do notice that there is some, I think, slowdown in the pickup, some slowdown in inquiries. But we believe that for the first-tier cities like Shanghai, Shenzhen, Beijing, demand is still very, very strong, particularly for city center projects. We're not too concerned about the overall outlook, although we do think that there's probably going to be some slowdown in terms of rental growth, in terms of demand in the next maybe 6- 12 months, as a reflection of the macro environment right now. Very similar for the retail sector. Consumption, obviously, we've seen some data suggesting that it's slowing down a bit.
But given the fact that we think the Chinese government is trying to push domestic consumption to support the economy, we think that the medium-term outlook continues to be okay. Again, it's more, I think, a question of a slowdown in growth rather than a decline. For residential, particularly for the first-tier cities, we think that a lot of the policy restriction will be in place. We don't really see maybe a relaxation or a big relaxation anytime soon. For the markets that we operate in, for example, like Shanghai and Wuhan, for example, we continue to believe that market will be stable. There's not a lot of supply in the market anyway, so we think the pricing will be stable. Overall, the environment will be relatively stable. In the past, basically, most of our residential launches are sold in one day, two days.
We are not really concerned about demand. We think that overall, the market will continue to operate at a relatively stable level. I conclude my part, and then hand it over to Stephanie.
Thanks, Douglas. Let me share with everyone a little bit more about how we have been doing in our rental portfolio. As Douglas mentioned just now, our rental income increased by 17% to CNY 1.1 billion in the first half of this year. You will see here that we also have two properties under JV and associates, which is Rainbow City as well as CA5, which is held in our new investment platform. In the next chart, you will see a more detailed breakdown of how our properties are doing. A couple that I would like to highlight for you. The first one, as you see, is Shanghai Xintiandi, and you will see a drop in our rental income of 8% this year. The reason is that we are doing an AEI, a renovation, of the South Block.
The first part of the South Block to go under renovation is actually where IT is. That accounts for about 10,000 sq m of leasable GFA that has gone under renovation this year, and that's the reason for the drop in rental income. It accounts for about 17% of Shanghai Xintiandi's total leasable area. If you look at the total Taipingqiao portfolio, which are the first three lines, accounts for Xintiandi Style, Shui On Plaza, Xintiandi Plaza , as well as Shanghai Xintiandi. This drop in rental income is more than offset by the opening of Xintiandi Plaza, which is the new retail mall on Huaihai Road. That was opened this year in mid-May. Within the Taipingqiao portfolio, it has grown approximately 15% in rental income. Another project we are very pleased about is the hub in Hongqiao, in Shanghai.
We are seeing a 20% increase in rental income there, and it is largely driven by increase in shopper traffic and sales at the mall. For the first half of this year, sales increased by 43%. To us, that's actually a very positive sign, especially in the market conditions that Douglas just mentioned. Two other projects that I would like to highlight. Firstly is Shanghai KIC and INNO KIC. Previously, you have heard us introduce INNO as a new office product, and it's actually an extension to the greater KIC neighborhood. That came onto the market later, basically in the last six to nine months. The lease rate here that you are seeing is a TA signing rate, so that's of 22%. But actually, as of August this year, we have an MOU signing rate of over 85%. We are in okay shape for that project.
Shanghai KIC, largely an office park in Yangpu, in Shanghai, saw a 9% increase in rental income. It' s because there were a couple tenants whose leases were up, and we brought in new tenants there. The drop in occupancy, you will notice, is a time lag, and essentially we are fully let. Foshan also saw a 26% increase in its rental income, largely driven by NOVA, one of the 70,000, thereabout, square meter shopping mall in Lingnan Tiandi, the greater Lingnan Tiandi. It is 100% fully let, and the sales and traffic have steadily increased there. Here you will see some new additions to our list, which is Nanjing INNO Zhujiang Lu. Last time we mentioned we have this new INNO office product, which is a younger office crowd. It has different types of office spaces. Everything from co-working to fitted-out office spaces, to built to suit.
This is actually an asset-light project that we are working with the Nanjing government on. It is a management contract. We don't own the property. We started pre-leasing for this property earlier this year, and we are 56% pre-leased. That has been good progress on that project so far. The last two projects you will see are the two JV projects, which is Rainbow City . Rainbow City , we saw a decrease in occupancy because in the Palette Mall, which is the small shopping mall under the residential towers, it is largely a neighborhood mall. They had an E-Mart in the basement right next to the subway, and that is approximately 10,000 sq m. That lease came up, and we are now renovating that entire space after many years. That is the reason for the drop in occupancy there.
The rental income as an entire portfolio has still risen by 9%, despite that loss in leasable area. Shanghai Corporate Avenue 5 is largely fully let. It is at 97% occupancy. The two new openings I would like to share with you that happened in the first half of this year are in Shanghai and Wuhan. As I mentioned just now, Xintiandi Plaza had its grand opening on May 16th, and we opened with a pretty high occupancy rate of 97%. It is right on Huaihai Road above, I think it is the third most trafficked subway stations in Shanghai, on top of Line 1 and Line 2 . The positioning of that mall is a new female shopping destination, and it is part of the overall Xintiandi footprint now.
For Xintiandi, we are actually expanding the Xintiandi footprint to go beyond just the North and South Block, and the Xintiandi Plaza is the first new addition to the site. If you include Xintiandi Plaza, North and South, which is what you historically know of as Xintiandi, as well as Xintiandi Style, it is firstly connected directly by the basement to three subway lines, and the size of it in terms of GFA, it is over 100,000 sq m, which is approximately the size of a typical shopping mall in China. From that point of view, what we are doing is we are enlarging the footprint so that we can have a more diversified retail and F&B base and not be solely driven by F&B and entertainment. Secondly, we can expand our clientele, to bring in a wider catchment.
Wuhan Tiandi Horizon North is also a 72,000 sq m shopping mall that opened on 31st of May . It is actually a soft opening. The positioning of this mall is for young families. It is within the overall Wuhan Tiandi master plan, and to differentiate in positioning from Horizon South, that is a little bit more upscale, and this one is more catered to family and a little bit more kid-friendly, if you will. The whole design concept is around indoor-outdoor garden design, and it actually has really beautiful balconies all throughout the entire mall. We have a beautiful rooftop on the top you will see in the second photo with a large kids' playground. It has an urban farm on the rooftop as well that actually attracts lots of residents to come back.
That's a new product that we opened earlier this year, and it opened with an occupancy rate of 92%. Here is a chart that you can look at because Shanghai is still the largest portion of our asset base. We are 74% in Shanghai, if you look at the rental income contribution. The Shanghai portfolio had a rental income of 15%, and non-Shanghai cities such as Wuhan, Foshan, saw a rental increase of 21% on average. But within our total portfolio for retail sales, we saw a traffic increase of 20% increase year-on-year, and an 18% increase in retail sales year-on-year as well. This last page is just to share with you a little bit more, because as I mentioned just now, we are really going through a major rebrand of the Xintiandi brand to expand its scope and expand its tenant offering.
The positioning of Xintiandi is to be a culture and social destination. The way we see retail going forward, it has to be largely content and experience driven. Your ability to create proprietary content and drive traffic and sales that way is going to be critical to its success and sustainability in the long run. As a culture and social destination, actually, in the first half of this year alone, we had over 100 events across our portfolio, large and small. We attracted over 23 million in traffic and 140,000 new members to our online iTiandi loyalty program. iTiandi really is at its conception. We have launched it a year ago, so this sort of intake to us is actually quite helpful, but we hope that this can become our omni-channel retail channel in the future.
It is a better way for us to engage with the customer in a new way and a more sustainable way. Some of the events to note here would be Shanghai Fashion Week, Design Shanghai, which is citywide. It is not only at Xintiandi, but a citywide festival, but we are their property partner for the long- term. We also had a social festival, which is essentially a performing arts festival that takes place all across Xintiandi each summer. We worked with the Edinburgh Film Festival previously and actually still do to engage them to do a lot of public performances in all of our public spaces outdoors. We have a lot of greenery. It engages with a lot of the existing buildings in Xintiandi. We can actually show you some videos later.
We actually also have some large IP events such as Marvel Avengers S.T.A.T.I.O.N. , as well as PAW Patrol at some of our Wuhan and Foshan projects that actually also attract a lot of traffic. I will stop here and I will let Jessica introduce more about our residential and development properties.
Okay. Thank you, Stephanie. Firstly, let us have a look at the contract sales for the first half of 2019. As mentioned by Douglas, actually, the residential property contract sales in the first half is CNY 3,277 million, which contributed by two major projects, Wuhan Optics Valley Innovation Tiandi and the Chongqing Tiandi. The commercial property contract sales was CNY 145 million in the first half. But the major launches are scheduled in the second half of this year. From this chart, you can see the detailed breakdown for the projects can be available for pre-sale or sale in the second half of this year. The total saleable area is around 296,000 sq m and the estimated saleable resources is CNY 17 billion. That is why we are very confident to achieve our sales target for the whole year. Here, next. Here is some detailed introduction for the saleable projects.
This is Rui Hong Xin Cheng Lot 1 . It is a high-rise residential lot with 667 units. We opened the sales center in June and got a very good response from the customers. Up until now, there is over 1,700 groups of customers that have visited our sales center and shows they are interested to buy units. Next is Wuhan Tiandi Site B10. As we all know, this is one of the most luxury residential projects in Wuhan, and it got a very good sales record in last year. The left three super high-rise residential buildings will go to the market step by step in the coming future. The Wuhan Optics Valley Innovation Tiandi , t he R1 residential lot is the first residential lot of the whole development. Over 400 units have been already sold out, and the left 200 units will launch in the coming future. Okay.
This is the chart we can see based on the current landmark. The total sales area for residential is around 1.4 million, and the estimated saleable resources is at CNY 73 billion. The attributable to SOL, the saleable resources there is CNY 46 billion, which means the residential sales will continue to provide cash flow for the future development of the group. Next. As mentioned by Douglas, we still have a strong pipeline of commercial property in Shanghai. The total GFA, for the land bank under development in Shanghai is 759,000 sq m. In other cities, we still have 2 million projects to develop. That means it will provide rental growth and capital recycling potential for the group. Okay. Here, I also would like to share some good news with all. The company won the top accolades in the period.
The Knowledge and Innovation Community in Shanghai and the Foshan Lingnan Tiandi have won the 2019 ULI Asia Pacific Awards for Excellence, which recognized the superior development efforts across the region. Two major commercial centers opened in the first half, Xintiandi Plaza and the Wuhan Tiandi Horizon North Shopping Mall also won two very important awards by ICSC and CRED, respectively. As our Chairman requested, our developments are benchmarked against the top, the highest international standard. Among the master-planned development projects, six projects were awarded by LEED-ND Gold level . Until now, Shui has ranked the first for the development in Mainland China in terms of building area awarded a LEED-ND Stage 2 Gold level certification with a certified area of 9 million square metre. As of 30 June , there are 1.6 million square meter green certified green commercial buildings held by the group.
Among them, 1.1 million square meter is complete, and 500,000 sq m is under construction. Shui On Land is committed to build high-quality, green, healthy, and sustainable development communities while creating higher value for our shareholders.