Good afternoon, everyone. Welcome to the CTF Services Limited Financial Year 2025 Annual Results Analyst Briefing. I'm Silvia, the Head of Group Investor Relations and Corporate Communications. Thank you for joining us today, both online and in person. Due to the impact of the very strong typhoon, we have to delay the analyst briefing to today, and we truly appreciate your flexibility and also continuous support. Our senior management will walk you through the overview of the results highlight and also the outlook of each of our five business segments and our strategy moving forward. A Q&A session will follow. For those joining us online, please click on the question mark icon on the left-hand side of your screen, and you will be able to submit a question, and our management will address it later.
With all that in view, may I now invite our Executive Director and Group Co-CEO, Mr. Gilbert Ho, and Executive Director and Group Chief Operating and Financial Officer, Mr. Jim Lam, to kickstart the meeting. Thank you.
Thank you. Thank you for everyone for joining our presentation today. I understand it messed up everyone's schedule, but unfortunately, we can't do the presentation yesterday. First of all, the financial year 2025 was a stable year for us. We continued our effort to redefine and strengthen the group business portfolio. As you can see, we have done a number of acquisitions as well as disposal. We also renamed our insurance segment to a financial services segment. Obviously, because of a couple of the acquisitions, and we will explain also later on that, that will be one of the group focuses on the fast-growing wealth management business.
The Jim Lam slide.
Sorry. Okay. Also, with the logistics warehouses, we also renamed, or I would say rebranded, gave the logistics asset a brand, CTF Logistics, to leverage the strong brand equity of Chow Tai Fook. We will continue to grow this particular segment and drive synergies across different portfolios so that the tenants' mix can actually move across different assets. In the capital market, we have issued a number of convertible bonds with the initial aim to increase our public float and hopefully to also enhance the liquidity of our stock. We will obviously talk about the bonus share issue as well as the exchangeable bond that we issued yesterday later on. We also maintained the sustainable and progressive dividend policy, and we continue to have a very consistent dividend distribution to our shareholders.
In terms of the portfolio optimizations, as I mentioned, we have done a number of divestments throughout the financial year 2025. We have very timely disposed of the Free Duty businesses. We also disposed of one of the investments that the group invested in 2011, Hever Group. We disposed of it earlier this year. Last but not least, we also disposed of our investment in Italy, which is a solar farm investment, which we invested in 2018 and 2019. In terms of the strategic advancement, as I mentioned, we have renamed the insurance segments into financial services segments to reflect its expanded scope with the two new members that we acquired throughout the year. First of all, the USMARC in that group, as well as the BlackHorn Group, which is focusing on external asset management.
We also established through CTF Life, we also established a Bermuda operations to serve the high net worth clients who want offshore insurance policies. For the logistics segments, as I said, we rebranded the logistics segment, the asset of the logistics segments, to have a consistent brand name of CTF Logistics. We will also, going forward, target the undervalued logistics assets in two main areas. One is the Greater Bay Area. The other is the Yangtze River Delta, which is around the Shanghai area. For the investors who are looking into our stock, I think the key investment thesis when you're looking at CTF is, first of all, the operational excellence across our very diversified business portfolio. All of them actually have very similar characteristics with stable cash flow and resilient earnings.
You can see from the results that even during the trade war, the geopolitical tensions, we still deliver a relatively stable result for 2025. With the expansion of the financial services, we hope that we can actually leverage on a very strong brand name of Chow Tai Fook and also a very strong network of Chow Tai Fook Group to deliver unparalleled services to our different clients within the financial services segments. We continue to do portfolio optimizations. As you can see, since 2018, we have done a series of portfolio optimizations, and it's not the end. In fact, we just done one portfolio optimization yesterday, which we'll talk about later on. Obviously, the aim is to maximize our long-term shareholders' value. Jim will talk about the financial management and the diversified sources of funding, which is actually one of the foundations of our continued expansions of the group.
Dividend policy, which I'm not going to talk about further, I think the actions say it all. We continued our dividend distributions for 22 consecutive years, and it's counting and will continue. Last but not least, about our independent management team, all of us have been with the group for quite some years now. For 2025, our AOP up 7% year on year to $4.4-4.5 billion. That actually includes two businesses, which is Free Duty and YQ. If we exclude that two businesses, our AOP actually has gone up by 9% to $4.5 billion. In terms of each business segment, roads segment, the AOP is $1.4 billion, decreased 8% year on year, which I will actually explain a little bit about that later.
If we exclude, let's put it this way, if we're just looking at the operating roads, which is because we have four roads which the concession period has expired throughout the year. If we exclude that four roads, the AOP actually has gone up by 1%. Financial services, which for this financial year only, which only has CTF insurance, has gone up by 29% to $1.24 billion. Logistics business, the AOP gone up by 3% to $740 million. Construction, $790 million, our AOP. If we exclude YQ, it slightly decreased by 7% because of the project completions of the construction business. Facility management is $89 million. Because Free Duty was disposed of in the middle of the financial year, which was completed by the end of 2024 in December, if we exclude the Free Duty business, the AOP actually was increased by 16%.
Last but not least, our strategic investment has increased by over 1,000% to $237 million. Looking ahead, the different business segments on roads, we do see the changes in the road segments because of, first of all, the economic situations and also the shifting traffic pattern. Second, the rising competition of newly developed roads. I think from a long-term perspective, we will be very unlikely to further expand on the road segments. However, we will try to enhance the earning of our existing road portfolio, including some expansions on our current roads if we can find that the return of such expansion actually makes sense. On the financial services segment, CTF Life, as I mentioned, established its Bermuda operations to provide insurance products for high net worth individuals. We definitely will continue to boost our agency force, which I will talk about later.
Also, upon the completion of USMARC as well as BlackHorn , we will use that to expand on a very holistic wealth management platform, which hopefully, with all the different financial services units, can actually work together to build our entire wealth management platform. Last but not least, is to utilize the strength of CTF Group for cross-sell about the different wealth management products, including insurance, brokerage, as well as the external asset managers' services of BlackHorn. For logistics, we will continue to diversify the tenant base for both the logistics properties in Hong Kong as well as in China to offer more flexible arrangements to attract both short-term and long-term tenants. We will look for acquisitions in this space, especially in the Greater Bay Area, as well as Yangtze River Delta, which is around the Shanghai area, for some undervalued logistics assets.
For our construction business, we will continue to grow and gain market shares on the Hong Kong recovering construction market. As all of you know, a number of large construction contractors have closed down. From our perspective, it is a time for our CTF Construction Group to gain market share in this respect. We will also explain later on that you can see the proportion of government-related projects has increased from 40% to now 61% of our entire construction in progress.
We will continue to focus on the government projects, especially as the latest policy address has strengthened the effort in delivering the Northern Metropolis construction developments. The facilities management, the three parts, the CC GHK , as well as KTSP, I think we will continue to leverage on the government initiatives in supporting mega events in both the Hong Kong Convention and Exhibition Centre as well as KTSP. For GHK Hospital, which we will explain also later on, we now achieved AOP, meaning that the finish is ramp-up phase. It's now going into a phase of fast-growing development. We will continue to expand its healthcare network in Hong Kong to diversify its revenue stream and also capture more patients from different areas in Hong Kong.
I will pass it to Jim to talk about the financials first, and then we will talk about the different business segments updates.
Sure. Thank you, Gilbert. Some highlights on the FY 2025 financial results. As Gilbert mentioned, AOP for this year increased by 7% year on year to $4.5 billion. Adjusted EBITDA, which is a proxy of our cash flow generation for the year, and included dividend received from our joint ventures and associated company, increased by 1% to $7.3 billion. Profit attributable to shareholders increased by 4% year on year to $2.2 billion. The board approved the final ordinary dividend of $0.35 per share, which is the same as last year, including the interim ordinary dividend of $0.30 per share and also the one-off interim special dividend of $0.30 per share. Total dividend for the year amounted to $0.95 per share.
Even if we exclude the special dividend, the ordinary dividend for the year of $0.65 per share generated 8.3% dividend yield for the stock based on the latest closing price, which is quite attractive. Cash on hand amounted to $20.2 billion. We have committed and drawn banking facility of $9.6 billion. Total available liquidity is close to $30 billion. Net debt balance was $14.7 billion, which translates into a net gearing ratio of 37%, which is more or less the same as a year ago. Net debt to adjusted EBITDA ratio is two times, which suggests we remain in a very healthy financial position. As you know, we have strategically shifted a substantial portion of our debt to the lower-cost renminbi borrowing since 2023. This helps us to save the interest expenses, and also it will serve as a lateral hedge against our renminbi-denominated asset.
As of June, 2025, our renminbi debt to total debt ratio actually furthered to 62%. Renminbi liability to renminbi asset increased to almost 80%, and the fixed rate debt now accounts for about 70% of our total debt. Because of the increase in proportion of renminbi borrowing and also the decrease in high borrowing during the year, we have a vigorous decline in average borrowing costs from 4.7% in fiscal year 2024 to 4.1% in fiscal year 2025. We do expect our interest rate average borrowing costs to continue to come down in fiscal year 2025, given the expected third interest rate cut in the U.S. and the moderate decline in interest rate in the mainland. Debt maturity profile, we had about $35 billion of gross debt as of 30th of June 2025, of which about $9.4 billion or 27% will mature in the coming 12 months.
We've been negotiating with our banking partners for refinancing of the debt that will fall due within the next 12 months, and we expect the majority of the refinancing will be done before December 2025. We have quite a diversified source of funding. We have bank loans both onshore and offshore. We have issued U.S. dollars in InnoEX in Hong Kong. We have issued panda bonds in the Lafayette market in Mainland, and we have also issued two convertible bonds this year in order to restore our free float. Hot off the press is the $2.2 billion exchangeable bond transaction announced last night. This chart shows the movement of our net gearing ratio since 2019. Back in 2019, we had a net cash position. Then the net gearing ratio increased to 31% due to the acquisition of CTF Life.
Thanks to the strong cash flow generation and to some extent on core disposal proceeds, our net gearing ratio has been gradually coming down to just 8% in fiscal 2023. Following the general offer by CTF, our gearing ratio increased to 35% due partly to the payment of a special dividend of $6.5 billion and also partly to the redemption of our public PERP with the amount of U.S. dollar $1 billion, which is also associated with the acquisition of CTF Life because the PERP was issued in fiscal 2019. As I mentioned earlier, the net gearing ratio in fiscal 2025 is 37%. Our target net gearing ratio remains unchanged, 40% to 45% in the near to medium term. Despite the headwind to the macroeconomy both in Hong Kong and the Mainland, we've been able to grow our AOP, cash flow, as well as net profit from 2023 to 2025.
We are also improving our return on equity thanks to the more optimal capital structure. We have a very long dividend track record. We've been paying dividends for 22 consecutive years. We have adopted the current progressive and sustainable dividend policy since fiscal 2019, and we gradually increased our ordinary DPS from $0.58 per share in fiscal 2019 to the current $0.65 per share. We paid out special dividends once in fiscal 2024 and the other one in fiscal 2025. For the current year, we have given the shareholders a scrip option for the final ordinary dividend for fiscal 2025. We also announced a one-for-ten bonus share issue. The purpose of both is to increase the liquidity and trading volume of our stock. As you know, we have issued two convertible bonds. The primary purpose is to restore the public float of the company.
We issued the first convertible bond, $718 million, in January 2025. Endpoint is maturity in July. Approximately 27% of the convertible bond were converted, and we managed to increase our public float to about 24.4%. Because it's still below the 25% minimum requirement, as a result, we purchased the remaining outstanding convertible bond and issued a new convertible bond with an amount of $518 million. As of today, part of that $850 million convertible bond has been converted, and our latest public float is about 24.5%. We are confident that the outstanding convertible bond will get converted because the current share price is above the conversion price by quite a wide margin. Upon full conversion of the $850 million convertible bond, our free float will be able to increase to 26.4%, which is above the 25% minimum requirement.
Maybe Jim can talk about the exchangeable bond first.
Yeah, yeah. Okay, sure.
We announced an exchangeable bond transaction last night. The key terms include the size of the bond is $2.2 billion. The coupon is 0.75% per annum. The maturity date is three years with a put in two years by the investor. It's exchangeable into our 10% stake in Sautang Holdings. We issue the EB at a 3% premium. We will get a total proceed of $2.3 billion. If we manage to dispose of all the CB due to the conversion, we will be able to generate a gain of about $1.1, $1.2 billion pre-tax. I think the beauty of this CB transaction is that we are able to take advantage of the very hot CB market in Hong Kong by issuing the CB at so-called negative yield, meaning that we fetch free dollar from the investors, and we will give out 0.75% coupon every year.
At the end of three years, in case the EB does not get converted, we will still be in the net gain of about 0.75%. The reason why we decided to issue the CB is because, first, it will allow us to dispose of our stake in Sautang at a premium. The premium is 5% to the latest closing price. Also, as I said, if we're not able to get converted on the EB, we'll still be able to acquire the funding at a negative yield.
Thank you, Jim. Next, I will talk a little bit about the business operations of each of the segments. Let me just give me a bit of time to go back. Yeah. Okay. So, first of all, the road segment, as I mentioned, the AOP has decreased 8%. If we exclude the four roads, the Guangzhou City North, North Ring, and the three toll roads in Shanxi, the AOP of the operating roads actually has a 1% increase year on year. In terms of the traffic, it increased 2%. However, there is a decrease in the long-distance traffic, which actually leads to a 2% decrease in the toll revenue. For our remaining concession period, it's about 12 years. As I mentioned at the very beginning, I don't think we will heavily invest in the toll roads in the expansions.
We probably will look at enhancing the income of the existing toll roads by expanding the existing toll roads. Obviously, on each particular investment of expanding, we'll calculate the return in deciding whether to expand the current toll roads in order to get the extension of the concession period. It is unlikely that we will acquire any new toll roads in the near future. For the financial services segment, we have rebranded the CTF insurance into CTF into the financial services segments. Throughout the year, we have leveraged on the CTF brand rather than the CTF Life. Yeah, sorry, I forgot already. The CTF Life brand. We can actually leverage very much on the CTF jewelry popularity in China to sell its insurance products. Going forward, as I mentioned, we will develop an integrated wealth solutions platform for the entire services. For the CTF Life, the AOP increased by 29%.
CSM release increased by 28% to $1.1 billion. The CSM balance, net of reinsurance, also increased by 30% year on year to $9.2 billion, which actually positions us for a very consistent and sustainable profit recognition going forward. The investment yield on the fixed income portion also increased by 0.1% to 4.6%. On the details of the operations, the APE decreased by 27% because that I need to explain a little bit. Our financial year actually spanned across the second half of 2023 to the first half of 2024. That has actually an impact on the pent-up demand for COVID-19 for the second half of 2023. It has a relatively high base that actually attributes to the decrease in the APE. If you're looking at the three-year CAGR, the increase was actually quite significant on the 23%. The VOMB also got impacted by the same reasons.
Looking again on the three-year CAGR, it also is around 24%. The VOMB margin increased 3% to 30%. Our solvency ratio actually still maintains a very strong position at 279% even after the dividend distributions to us in the middle of this year. The embedded value, which is essentially the value of the insurance company, increased by 90% to $25 billion Hong Kong dollars. When you're looking at the APE, as I mentioned, there was this effect of the pent-up demand in 2023 and financial year 2024. If you break it down to look at the performance of each channel, our agency channel actually performed very strongly. Next page, sorry. Yeah. If you're looking at the agency, the APE from agency actually increased by 48%. Looking at the quality, the agency productivity increased also by 48%. The persistency of the agency also increased by 23%.
New recruits increased 24% year on year. This actually is a result of the transformation of the agency force over the last few years. You can see the fruits of the transformations actually improve the KPI of the agency channel. In 2025, we expect the agency channel will continue to grow in the coming years. Looking at each parameter, the investment portfolio AUM increased to $91 billion Hong Kong dollars. All the other investment criteria has not changed, with the majority in bonds. The majority of the bonds is in A-minus or above.
The two acquisitions that we have done in March 2025 and August 2025, including the acquisition of USMARC and the acquisition of BlackHorn, is basically the backbone of our expansion in the financial services segments, catering to serve the high net worth clients, essentially to try to form a mini ecosystem within the financial segments so that we can actually blend all the different products together to cross-sell our clients within the different companies. Next is our logistics with the three different portions, the ATL, the seven logistic properties in China, as well as CUILC. In the logistic asset and management segments, ATL in Hong Kong, the occupancy rate is 80%. The average rental increased by 8%. You can see the occupancy rates actually decreased from 96% to 80%. The reason, probably I have explained in the half-year result as well.
The reason is actually very simple because during the year, we have the renewal of one very big client within the premises. The determinations of the next five years' rental is actually by the average rental of the existing clients. That's why we need to keep the existing rental high. By that, we give up some of the lower rental tenants. That actually drives the occupancy rate down. We now have already determined the next five years of this big tenant, so we can actually ramp back up the occupancy rate. Our target is to go back up to above 85% by the end of this year for ATL. For the seven logistic properties, the overall occupancy rate is maintained at 87%. One to note is the Shuzhou property. As you can see here, the occupancy rates of Shuzhou properties decreased to 40%.
The reason for that is we terminated our tenant, what we call [Foreign language], the subtenant. T he reason is that the subtenant, so we mix the Chinese and English together.
Subtenant
The subtenant, because they are in financial difficulties, they are not actually servicing, they are not actually doing their work. We terminated that subtenant. We directly manage our tenant now, and we already terminated that tenant in April. By now, in August, we already increased back the occupancy rate from 40% to above 60%. We do expect it will go back to above 80% by the end of this year. I mentioned before, going forward, we'll continue to look for undervalued logistic opportunities in mainland China, particularly in the Greater Bay Area, as well as the Yangtze River Delta. The target is to look for fully occupied assets at above 8% cap rates. This is the target for our acquisitions in this particular space. It's very simple. We look for undervalued assets with strong cash flow. CUILC, in which we own 40%. The AOP increased by 23%.
Throughput increased by 10%. It is a very strong year for CUILC. We do expect that it will continue because it continues to be supported by the Belt and Road initiatives. The new expansion road of Yongqi Terminal will finish by the end of this year. We do foresee that the result of CUILC will continue to grow. Next is our construction segments. Our construction segments maintain a very steady AOP despite probably all of you think the very stagnant residential market in Hong Kong. We completed the acquisition of Sunshine Esther earlier this year, which already contributed positively to our profitability. The gross value of contracts on hand decreased 8% to $58 billion because throughout the last financial year, we basically finished the entire Kanda Sports Park. That actually decreased the contracts on hand. The backlog increased 24% to $38 billion.
The newly awarded contracts also increased by 9% to $23.9 billion. The type of projects now stood at 61% government-related projects. That actually increased from 48% to 61%. Probably some of you will be curious how many of those projects are New World related. 8% of them are New World related. I need to give you a little bit of light in this. First of all, there is no pressure for us to get or to take any New World related projects. It's all independently negotiated. From our perspective, from CTF Services Limited's perspective, we won't sacrifice our profit or our margin to do projects for related parties. I think the bottom line for us is we will maintain our profit margin if we do any of the related party projects.
This 8% actually were projects that we got from Hip Seng, one of the previous construction contractors for New World projects. Going forward, whether we will do any New World related projects, it's definitely going to be a competitive bidding process. For us, again, it's not necessary for us to do any New World projects. For those who are concerned about the payment of New World projects, I can assure all of you that the two projects that we got from New World, one is Pavilion Farm, the other is State Pavilion. Both of them already got enough cash in the stakeholder accounts to pay our construction costs. Rest assured there's no issues on their payment on our construction expenses.
The CTF Construction Group, now we have a complete suite of different services, including the engineering and building constructions for Hipeng, the foundation of White Bro, the concrete products suppliers of Guangxing, as well as the electric and mechanical engineering services of Esther. For the construction industry, I think as a whole, we're still very positive, as you can see from the recent policy address, that a very strong emphasis has been put in the Northern Metropolis, and we definitely will be benefiting from them. We will continue to focus on government-related projects. One thing that probably is sad for others is there has been a close down of a number of contractors throughout the year, but that will actually benefit Hipeng as there are less competitors in the field going forward.
Last but not least is the facilities management business, which comprises the GHK Hospital, Hong Kong Convention and Exhibition Centre, as well as KTSP. GHK, as I mentioned, we own 40%. For the first time since its opening, it contributed positively to our AOP. Adjusted EBITDA increased by 23%. The patient volume also continued to increase with the regularly utilized beds increased from 313 to 337. The average occupancy rate maintained at 64%. As some of you know, or probably don't know, the GHK actually also comprises a network of clinics. We have now six clinics and different services within the network. We have clinics in both Central, the Western District, and also the Southern Districts. We also have a pharmacy. We also have laboratory services. We're going to open another medical services center in Central, Yin MOT, later this year.
All of these actually serve as a channel to get patients into the hospitals and also to free up some valuable spaces within the hospitals so that they can actually serve the patient offsite from other service centers. Next is the CEC. The AOP declined mainly because of the decrease in F&B revenue due to fewer banquet events and also downscaling of some of the trade exhibitions. Going forward, I think CEC will definitely expand on the emphasis on conventions as well as conferences, which will require physical attendance rather than the traditional trade shows. We will also get the government support on mega events to bring in more non-traditional types of industries, including the recent Bitcoin conferences and all these different new conferences to Hong Kong. KTSP, in which we own 25%. Because of the pre-opening expenses, it recorded an AOP loss during this financial year.
Since the official opening of KTSP on the 1st of March, already more than 30 sports and entertainment events have been held in the park, with over 1 million attendance to the main stadiums, and more than 7 million visitors to the entire park. As you probably know, within the park, there is a shopping mall of around 700,000 square feet. The occupancy rate is around 80% by the end of the financial year. Now it's already over 90% as we speak. We do expect the result of KTSP will continue to grow. I will pass on to Karen to speak a little bit on ESG.
Hello. Thank you. I'm pleased to share an update on our ESG progress for FY 2025. Since we introduced Breakthrough 2050, our ESG strategic framework last year, I'm happy to report that all our key targets remain on track. In particular, I would like to highlight two major achievements. 39% of our bonds and loan facilities are now coming from green financing. We have achieved a 19% reduction in Scope 1 and 2 emissions compared to our FY 2023 baseline. Let me now walk you through what this number means in context and how they reflect our broader ESG journey. Our ESG rating provides a snapshot of how we are performing across key sustainability dimensions. I'm proud to say we have maintained strong standing across all major ratings. This result reinforces our commitment to transparency, accountability, and continuous improvement.
With that foundation, let's take a closer look at some of the operational highlights driving this performance. In our upcoming ESG report, we have expanded our GHG inventory disclosure to provide a clearer picture of our emission hotspots. This allows us to tailor decarbonization strategies to each business unit's operational and strategic context. When you look at the number, you can see that Scope 1 and 2 emissions are largely concentrated in on-site operations at Hipeng and HML, which is the Hong Kong Convention and Exhibition Centre operation, making up 86% of our direct emissions. Meanwhile, Scope 3 emissions, primarily from investment and procurement, account for 97% of our total footprint, underscoring the importance of engaging our value chain. With this deeper understanding of our emission profile, we have been able to allocate resources more effectively and accelerate our impact.
Hipeng and CTF Life have now received SBTI validation for their near-term target. In FY 2025, we achieved a 19% reduction in Scope 1 and 2 emissions compared to FY 2023. This effort aligns with our goal to reduce emissions by 50% by 2035. We kind of list out some of the decarbonization levers that we are going to focus on for each business segment. I hope I'm not too technical at this point. Let's now zoom in on how our business units are driving the transition through some technology. In construction, digital transformation is a key enabler. We are integrating tech across the project lifecycle. A standout example is the Hipeng distant tower crane command system, which combines MIC, AI, IoT, and remote control technology. This innovation not only enhances safety and efficiency, but also helps attract younger talents and promotes lean, data-driven practices.
When you log into our report, you can have some more insight of this new innovation. We also use tech throughout our operations. Communication is critical to supporting our people and communities, and technology is helping us to do that even better. Our digital platform now provides real-time well-being support, safety updates, and engagement tools for employees anytime, anywhere. In particular, for construction workers, Hipeng Connect has become a key tool. Over 77% of registered construction workers in Hong Kong are now using it to access safety records and site entry for all Hipeng construction sites. We have also launched Go Hong Kong CEC, a virtual queuing system that reduces traffic congestion in one tri-area by allowing trucks to enter only when loading bays are available. We are using this kind of digital tool to improve not only communication, but also safety, efficiency, and community impact.
In our rural operations, we have continued to modernize with AI monitoring, electronic tooling, and mobile payments like WeChat Pay and Alipay. This upgrade reduces congestion, enhances user experience, and supports our green mobility goals. By embedding technology into our operations, we are now delivering services more effectively and managing resources more efficiently. Now, let's shift gears and look at how we are capitalizing on opportunities through responsible investment. In FY 2025, we mobilized HKD 18.5 billion in sustainability-linked loans and green debt financing, representing 39% of our total debt financing. We also partnered with Reset Carbon to procure green electricity certificates in China, following a rigorous due diligence process. This not only supports our own emission target, but also contributes to broader renewable energy transition in the region. We recognize that how we allocate our capital plays a critical role in the transition.
That's why we have embedded ESG into our investment criteria, ensuring capital flows to initiatives that build resilience and mitigate climate and social risks. We have implemented an ESG due diligence checklist at the investment planning stage to identify and address potential risk areas. Our exclusion list ensures zero exposure to non-ESG-aligned sectors. At CTF Services Limited, we have adopted Mars Climate, a Bloomberg NEF power model that assesses transition risks and opportunities under various climate scenarios. In FY 2025, we have invested HKD 3 billion in ESG-labeled bonds, which accounted for 5.2% of our total bond investment. Additionally, we allocate HKD 4.5 billion to ESG funds, representing 34% of our mutual fund and ETF investment. Importantly, 100% of our credit and equity research reports incorporated ESG assessment, reinforcing our commitment to responsible and resilient investment.
To quickly wrap up my update, I want to emphasize that we know that ESG is not just a reporting exercise. It's a continuous process that requires cohesive effort across the group. We have been actively creating platforms like our internal ESG conference, project funds, and leadership workshops to engage colleagues at all levels. This year, we have further strengthened our efforts by appointing 45 impact leaders from across all business units. They serve as key drivers in embedding our ESG strategy into day-to-day operations. Together, they form a powerful network of change agents, helping us embed ESG thinking into everyday decisions and drive measurable progress across the group. As we look ahead to FY 2026 and beyond, we invite all stakeholders to engage with us, challenge us, and collaborate in shaping a more sustainable, resilient future. That's it for me. Thank you.
Thank you, Gilbert, Jim, and Karen, for the insightful presentation. We are now moving to the Q&A session, and please state your name and organization before stating your questions. Thank you. Jeffrey Kiang from CLSA.
Thanks for the presentation. My first question would be, can you give us some updates on the roads? Probably from some media we saw, there could be some potential disposals happening during the spec. I just want to hear any updates or what's happening behind the door. Thank you.
Okay. First of all, actually, there's another question about toll roads on the internet, which I will answer together as well. There has been news, I think, on Bloomberg or wherever, about the road disposal. Given that we have very good road assets, there have been approaches from different parties about our toll road assets. From our perspective, we have a very strong cash flow with all our toll roads assets. From our perspective, there is no immediate need of disposing any of those. Obviously, if the price is right, if the price is good, then we might selectively dispose of some of them, but only if we think it makes sense from a price perspective. There's no immediate plan of what the articles mentioned about the entire toll road portfolio. No, there's no such plan. On the internet, there's this question.
There is a question online saying that right now the remaining duration is only 12 years. For the road business segment, if we do not invest further, will it contract? In other words, when the duration or when the maturity is reached, are we going to just extend the concession period by means of expansion or modification? If we are to invest, how much do we need to invest? Two points here. First of all, for every road, before the end of the concession period, we need to calculate whether we want to put in place expansion or modification. Every road is in a different situation. If we use Guangzhou North Ring as an example, back then we discussed with the government to see whether there can be expansion and alteration to extend the concession period. However, the cost of expansion and alteration is too high.
Guangzhou North Ring is in the center of Guangzhou City. If expansion and alteration is to take place, we have to make use of the sites on which other people might be building properties. We have to first acquire those sites before we can start expansion and modification. Even if the place is not within the city center, are there other parallel roads? Will that be an impact on future traffic? Are there any slip roads or branches to be built that may affect road traffic? Regarding the province, if we build a new road or if we do expansion, how much is the cost? In each province, to do this work, the requirements are different. When we do an overall calculation, the thing is very straightforward. We look at future vehicle flow and whether the return makes sense. If it doesn't make sense, we won't do it.
We will not, for the sake of maintaining a big road portfolio, blindly invest to maintain all the 13 roads. There is not a need for us to do that. The answer is correct on one hand. If we do not do expansion or modification, if we don't buy new roads, of course the concession period will continue to fall. That's the fact. There are still 12 years to go. Secondly, for the decision about expansion or modification, it all depends on investment return. If the investment return doesn't meet the standard, we would rather use the money for other investments.
Is there any question? Yeah.
Thanks for the question. My next question would be logistics. You highlighted some factors that may have impacted the occupancy and probably your target by year end for Hong Kong and Suzhou. I just want to maybe hear your thoughts about from 80% in Hong Kong to 85%. We probably are quite confident on that. Based on what you are seeing in the market and how we determine the rent, how difficult would you say it will be from 85% to 90% plus for the occupancy in Hong Kong maybe for the next 12 to 18 months? Just want to maybe hear an assessment around this.
Okay. That's a very good question. I think first of all, it's definitely not going to be easy. The Hong Kong warehouse market, although we are in a very, very good location in Kwai Chung, but at the same time, the tenant has actually changed over the last 20, 30 years. Less than 50% of our tenants are transshipment tenants. Basically, we are serving like retail tenants locally. Our biggest tenant, we're talking about Dairy Farm. We got Coca-Cola. We got Wellcome. It's all about domestic consumptions. When we're talking about the next 12- 18 months, hopefully, the economy, and especially domestic consumptions, needs to get better, right? Before we can actually say that our warehouse will have tenants. Give you another example. One of the tenants is Zaza.
With the tourists coming in and they need to buy things to ensure that the retail market goes well, accordingly, our warehouse will go well. In terms also of the supply, there will be new supplies, but not in the next 12- 18 months. There will be still quite some time before the new warehouse from Yaesau is coming out to the market. We think that the main driver will still be a stabilizing domestic consumption market. I think we are confident to get back to 90%. 85% shouldn't be a problem because we strategically didn't lower our rent for the last 12 months. With our premium locations, facilities, we are very confident to get back to 85%. You can talk about construction now, I think.
Yeah, actually, my third question is really about construction. On Sunshine Esther, that asset we acquired, of course, it's good to see it is contributing positive profit. Strategically, can you help us understand how it has added value to Keeping, maybe from a project bidding point of view, and specifically, how is it different by sitting under CDF Group before acquisition and now sitting under CTFS ? Is there any change in the strategic value on this asset? That would be helpful.
I guess this is something that all of you will very like to hear. Although it is sitting at CTFG Group, all of us, despite all of you probably wouldn't imagine, all of us are actually working very independently without influencing each other. Okay. Putting that company into CTFS Group, we can actually do all the tendering together, especially the design and build contracts. Just to give you a little bit of sense about the design and build contract, design and build contract meaning that when you submit the tender, you actually need to know all the costing of different components. In a design and build tender, you have the construction component. You also have the M&E component.
If you don't have that arm, you need to guess or you need to actually have that other contractor coming in as a joint venture partner to submit together the tender. Okay. That one problem is you probably need to give some of your profit margin to that tenderer, to that M&E tenderer, and you don't have the full collaborations on the tendering process. Now we have all the costing base of the different components. We can actually submit a more competitive tender and actually can calculate the costing more accurately. We do see that there is a very competitive advantage in having a full suite of different services. There are only two big construction groups having that. One is Zaz, one is Gamut.
In order to bid for high-value contracts, because usually design and build contracts are higher margin, in order to bid for these higher margin projects, we think it is beneficial to have this M&E arm in this particular area. When you're looking more deeply into Sunshine Esther, more than 60% of the Hong Kong hospitals are built by their M&E team. We do, we will going forward have a competitive advantage in this project because we have this experience with Sunshine Esther being in the team.
Thank you, Gilbert, and thank you, Jeffrey. We received a question online regarding the toll road business. If we do not further invest in the toll road portfolio, the concession period will continue to go down. How will this impact the sustainable and progressive dividend policy?
Okay. First of all, the next main toll road concession expiry is 2029, which is the Hangzhou Ring Road. There's still a little bit of time. I think from now until then, there will be continued growth in our different business segments. You can actually see the trajectory of the different business segments is already on a growing trend, especially on the financial segments, which is CTF Life. I also mentioned that we will look for very creative acquisitions in the logistics segments. The first most important criteria in this area is a strong cash flow in any of the acquisitions. We are very confident that we can actually replenish both the profit and the cash flow that we will going to lose in probably five years' time from some of the toll roads expiry.
Yeah. Besides, you know, the ordinary dividend only accounts for about 50% of our operating cash flow. There is room for us to reinvest the remaining 50%.
Operating cash flow ratio into new acquisitions.
Thank you. Goodbye, Jim. Ethan from HSBC.
Thank you. I do have a few questions on my mind. First of all, on your presentation page 30 on your construction business, on your lower left chart, it says that 61% of your projects are government-related. Is that based on your existing projects on hand, or was that based on revenue already incurred in your financial year 2025? That would be my first question.
Existing projects on hand.
Oh, got it. Okay. That reflects basically 61% of your order book.
I think so. Yep, correct.
Yeah. Okay. Got it. That would be reflected into revenue in the future. That would be mainly driven by government-related projects. Thank you very much. My second question will be on your dividends. I just want to kind of get a better understanding on your progressive dividend strategy. Meaning, does that mean that your core or regular dividend will be maintained on a dividend per share basis, irrespective of the bonus shares being allocated this year, and whether or not that 10 to 1 bonus share issue will continue to recur in the next financial year? That would be quite key, right? I'm just trying to think, you know, what is the total cash return that shareholders will bring back on an ongoing basis, on a multi-year basis?
Okay. Maybe I can talk a bit more qualitatively and then Jim can talk a bit more quantitatively. First of all, in terms for the current year, in the current year, we are looking at the DPS. We are looking at the DPS continue to be at $0.65 total, like $0.35 for the final dividends. I think there will be no changes on that for the current year. Going forward, whether the DPS for a full-year basis, whether we're going to keep at $0.65 per share or there will be any changes to that because of the 10 to 1 bonus issues, we're still internally thinking about that. I would say, without discussing internally, I would say it wouldn't because we're talking about a 10% increase in our shareholder base. Without changing the DPS, we're talking about a 10% increase in the dividend, right?
We will be more looking at assuming every single shareholder getting the bonus shares, not selling their bonus shares, you will have the absolute amount of return on your shareholder stay the same. Conversely, there will be a decrease in the DPS. We still haven't decided yet. We haven't discussed it in the board going forward on that. The next question is about whether there will be a continuous policy on whether there will be bonus shares every single year. We actually mentioned that in the press conference. The reason of having the bonus shares is to create a more liquid shareholder base. We hope the increase of the number of shares will actually enhance the liquidity of the stock going forward. It's not going to happen in one single year. We do think it will be a continuous policy. It will continue to do this.
Again, whether we're going to maintain the DPS, we still haven't discussed that in the board. Maybe Jim can actually supplement that as well.
Actually, I don't have much to add. The primary purpose of the bonus share issue is to increase the liquidity and trading volume of the stock.
Got it. Because if I understand this correctly, with the dividend on the final year of the $0.65 you gave, with the additional 10% additional shares that shareholders will take back, the yield, at least for the next few months to go, is going to be quite attractive, right? Assuming the equity value is not going to go down, I think that itself, the return for shareholders is actually quite attractive. I'm just trying to think whether or not that return could be sustained. When you think about progressive, you know, are you maybe it's a question that, you know, it's the same question to ask basically, you know, whether or not are you thinking of maintaining your dividend per share continuously by enhancing return for shareholders through bonus shares, or should we say the bonus shares are just going to be a one-off for this year?
I think, first of all, it's unlikely to be one-off. As I said, it's going to be a continuous policy as we see it as of now.
Right.
After that, I think we can only assure you at this point that the total amount of dividend in absolute term will not be lowered. Whether or not the DPS will be lower, we haven't decided yet.
Okay. Makes sense. My final question will be about your financial sector. You've done quite a number of things alongside with CTF Life. I just want to see how optically or, you know, how do I understand the synergy could be created between CTF Life, USMARC, and BlackHorn together in the next couple of years, how much accretion that we could estimate or imagine, at least qualitatively, where that's going to come in from.
I think, first of all, in terms of numbers, it would be very difficult to actually give any exact numbers as of now, given that we still haven't even completed transactions. I think the logic or the division is actually to have our higher network of clients at CTF Life to be able to buy their other wealth management products within our own ecosystem. In a very blunt way, it's to lock their money within our own ecosystem. They have $10 spent already, $5 in CTF Life. They can spend the other $5 at BlackHorn and at USMARC. The idea is actually very simple from our perspective. The main growing sectors in Hong Kong, as you can actually see from all the different banks, HSBC, Standard Chartered, everyone, whether they are actually doing it or not, they are actually saying that they are growing the wealth management segment, right?
We are doing exactly the same. The difference is we already have a very large pool of policyholders with CTF Life, and we are having individually servicing each of these policyholders. You like it or not, we basically contact all these policyholders every single year, right? I don't see HSBC contacting me every single year. By that, I mean, obviously, we have this very good touchpoint that we can actually grab all these different clients and sell them our other wealth management product at BlackHorn , at USMARC. This is something that I think is very likely to do. Vice versa, obviously, it's a very relatively small amount. I think BlackHorn currently has around 3,000-something high net worth clients. Vice versa, obviously, we could do exactly the same.
With the biggest suite of wealth management platform and products to sell, we can obviously use our other clientele, including China Procure and Rosewind and all the others, to keep them services and also sell them our wealth management products. It is a very lucrative way. I can't really quantify that, but at least this is the vision. I know. I have been talking about that for the last five years. Now, with the reality that the platform actually built up with a stronger team of agency force, they are actually very hungry to have more products for them to sell to ensure all these clients stay within our own ecosystem. It is something that I see that it is going to come in the next few years.
Okay. Thank you, management, and thank you, Ethan. This is the end of our analyst briefing. Thank you so much for joining us. Have a nice evening. Thank you.