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Hong Kong Shanghai Alliance Holdings Limited
Stock code: 1001.HK
Corporate Presentation
October 2017
Shifting from product-driven to service-oriented solutions provider to create values
Strategic planning and value-driven disposal to deliver sustainable returns
Highlights in 2017
2
Successful Disposal of Central Park Putuo
Performing tenant upgrades and achieve significant increase in occupancy rates in
Central Park Pudong
New sanitary and kitchenware product line catering general residential market
New revenue stream complementing TOTO and KEUCO
Increase market share by gaining new automated rebar contracts
Transforming to a one-stop solutions provider in construction materials
Scope of Business
Portion of FY16/17 Revenue | FY15/16 Revenue (For the year ended 31 March 2017 | 2016)
Building & Design Solutions
A distributor of world-
renowned sanitary &
kitchenware brands in Hong
Kong & Mainland China
Architectural & Design
Centre serving the needs
of developers in the high-
end consumer market
where purchases are
influenced by architects
and designers
16.2% | 14.5%
Engineering Plastics
Distribution of general and
engineering plastic resins in
Hong Kong and Mainland
China
Provide processing,
inventory management,
logistics and financing
service
Serving segments such as
home appliances,
consumer electronics,
household products, power
equipment and lighting
9.8% | 10.8%
Property
A niche player and specialist
in property value
enhancement with
successful track record
Tenant upgrade
Asset management
Participated property
projects include Point Jing
An (disposed in March
2014), Central Park Putuo
(disposed in March 2017),
Central Park Pudong and
Park Lane
2.4% | 1.8%
Construction Material
70.5% | 72.5%
Scrap
Recycling
4.6% | 5.0%
Coil
Processing
35.5% | 33.1%
A leading processor
and distributor of
infrastructure products
serving Hong Kong’s
burgeoning construction
market
Leading market share in
Hong Kong (approx.
30%)
Hong Kong’s first
automated rebar
processing and
assembly plant
HK
Construction
Products
59.9% | 61.9%
One of the largest
processors of recycled
steel in the region
Leading supplier of surface
critical steel serving
China’s automotive sector
3
Construction Material Business
Business Transformation to Strengthen Position in the Value Chain
A “one-stop shop” supply chain platform for automated steel processing, recycling and infrastructure products to serve the needs of contractors
1
2
1 Income from selling processed scrap 2 Income from providing value-added services
5
Value-Added Processing and Tailor-made Solutions
Partnered with Singapore’s NatSteel Holdings Pte. Ltd.
Profitable and sustainable business model that can be replicated to Mainland China
and Southeast Asia
Regional player serving Hong Kong, Macau and Southeast Asia
Established Hong Kong’s First Automated Rebar Processing and Assembly Plant
Location : Tsing Yi, Hong Kong
with pier access
Total site
area : 30,000 square meters
Highly Automated Cut & Bend Equipment Rebar Processing
Traceability Safety On-time Completion Processing Efficiency
Competitive Edges
6
BSC – Coil Processing
Early Vendor Involvement
(EVI)
• Product Design
• Product Testing
• Inventory Planning
Value Analysis/
Value Engineering (VA/VE)
• Processing
• Logistics
• Inventory Management
• Cost & Efficiency
Steel Mills BSC Automotive End Users
Services
Coil Slitting
Cut-to-length Stamping
Development Plan
1
2
3
Geographical expansion – expanding presence in
Shanghai, Liaoning, Shandong, Jiangsu, Guangdong,
Hubei, and Henan
Margin expansion – walk away from customers that
have low profit margin or high collection risk in order to
further boost profitability
Management by local – promoting employee stock
ownership plan to senior management in order to
promote efficient management with local expertise
9
Property
Shanghai Focused High-end Commercial Property
A niche player and specialist in property value enhancement with successful track record
Business Model
Project selection Exit strategies Project upgrade
• Shanghai focused
High demand in high-end
commercial and residential
property
• Strong potential of occupancy and
rental fee improvement after
enhancement work
• Appoint professional property
management team or partner
with well-known designers
• Redesign, reconstruct and
renovate the property
• Upgrade the tenant mix
• Upgrade period:1 – 2 years
• Rental income significantly
increased by [-]%
• Hold for investment or sell out
Participated Projects
Hold for investment
• Rental income
Sell
• Asset revaluation
Central Park Putuo Successful disposal in March 2017
Central Park Pudong Park Lane Point Jing An Successful disposal in March 2014
11
Central Park Pudong
Competitive
Edges
• Located in the Pudong New District (financial services centre)
• Benefited from the market trend of decentralisation from central
business district
• LEED gold for sustainable development
• Synergies with the HK Land project
Business
Strategies
• Position as prime office with quality facilities and services
• Enhance facilities and surrounding environment
• Increase leasable area through renovation of G/F space
• Appoint professional property management service
• Increase average rental charge to RMB6.37 (face rent) per sqm.
per day in 2017
Target Tenant Mix
2017
2018
2019
3 Years Plan
• Increase occupancy rate to 88.3%
• Increase occupancy rate to 98.0%
• Fine tune the tenant mix and increase
the average rental charge when some of
the contracts of early tenants have
expired
15% 10% 8% 32% 20% 10% 5%
0% 20% 40% 60% 80% 100%
% in 2017-2018
Financial service Non-financial professional service
Real estate & construction Manufacturing & trading
High-tech & IT E-commerce
Logistics & shipping
Prospective tenants:
Shenwan Hongyuan Securities, ICBC, Aijian Trust, TAL Architects
中港汇浦东 Central Park
Pudong
12
Park Lane
Competitive
Edges
• Packaged as high-end residential apartment for strata-title sales
• Located at the fringe of Jing’an and France Concession Area
• Easy access to various public transportation
• Excellent school network
• Proximity to the commercial hub of Jing’an Temple
Business
Strategies
• Repositioned as a high-end boutique residential project
• Re-named as Park Lane to differentiate from nearby buildings
• Set up show flats with sales office and an elegant residential lobby
before sales launch
• Target to dispose the remaining assets including retail podium by
the end of 2017
2016
2017
3 Years Plan
• Sold 191 out of 196 units of apartments with
a total sales proceeds of around RMB1.5
billion
• Handed over 186 units to individual buyers
• Sold 21 car parking spaces in Q1/Q2
尚泰里
Park Lane
• Released residential units for sales according
to sale progress
• Active marketing through various promotional
events and activities
• Finalized the design of duplex units for two
show flats
• Completed all renovation work for both exterior and interior and
handed over to buyers by the end of 2016 / early 2017
• Sales of the remaining units and carpark
spaces
• Realise the asset should opportunity arise
13
Growth Strategy
Growth Strategy:
Identify property projects with high
potentials in occupancy rate / rental
rate / tenant mix enhancement
Expand property team/reduce
shanghai corporate overhead
Set up joint ventures and/or fund
partnership basis and act as
general partner for the partnership
or investment funds to earn
service fee income
Stringent tax planning to realise
maximum benefits when exit
• Growth slowed down
nationally
• Residential property sales
amount 21.5%
• First-tier cities such as
Shanghai, experience a fall in
property price
1H2017:
Sources: Shanghai Daily News, National Bureau of Statistics of China
1H 2017: Sales of residential properties , totaled 5.47 million m2
with a YOY reduction of 41.0%
1H2017: Sales of commercial properties totaled 7.13 million m2
with a YOY reduction of 40.6%
2017 Shanghai Property Market
2Q2017: en-bloc real estate investment deals covering all
property types, totaled￥19.4billion with YOY increase of 47.2%
14
BDS and Engineering Plastics
Building & Design Solutions
Extensive client network of the Group’s infrastructure and Property
Business brings synergy and accelerates with the development of
the Building & Design Solutions Business
Increased spending power in Mainland China results in the pursuit
of better quality of life
Experienced team delivering technical and design services as well
as installation
Software solutions that simplify design and layout efforts for
customers
Brands Represented End-users
Distributor with Value-added Services Distribution Channels
Building & Design Solutions for Sanitary & Kitchenware
Wholesale to sub-dealers
Directly supply to projects
including the Group’s
property renovation
New Architectural & Design
Centre for retail business and
renovation where architects
and designers are influential
1
2
3
Architectural & Design Centre
catering to architects & designers
Product testing
Mock displays
Space for architects &
designers
Software solutions
Establish & manage showrooms
with sub-dealers
Credit payment terms
Interior design
companies
Property developers
Hotels
Healthcare and
Elderly care
Architects and
designers
16
New Product Line with Expanding Geographical Coverage
New Product Line Catering General Residential Market
Re-entering Macau Market with TOTO
• Durban is a Germany brand with various OEM possibilities
on sanitary-wares, fittings & accessories
• Durban is developed for design-oriented customers who look
for tailor-made or unique solutions
• Aim to offer a complementary one-off product portfolio
• Expected contribution of around 3 to 5% of total turnover
• Enter Macau market with one-off solutions along with efficient technical support on site &
instant spare parts replacement
• Potential project pipelines include:
Project Name Contract Sum (HK$) Expected Delivery
City of Dream, Hotel D 0.9m Oct 2017
Parisian Hotel Renovation Phase 1 5m Oct 2017
Parisian Hotel Renovation Phase 2 5m Jun 2018
17
Steel Market Overview
The Belt and Road Initiative Opportunities
The Belt and Road
Covers about 64 countries, 4.4 billion people and 63% of world population
In 2016, the amount of foreign contracted projects from China stands at
USD$159.4 billion, a yoy growth of 3.5%
Accelerating contract flows outside China, with a strong emphasis on the
Belt and Road countries
A Materializing Plan with Strong Financial Support
Asian Infrastructure Investment Bank (AIIB)
• Initial subscription: US$100 billion
Silk Road Fund
• Initial China contribution: US$40 billion
The Belt and Road, AIIB and Silk Road Fund are expected to boost infrastructure development in Asia
Project name Country Project nature Total project cost (USD mil.)
National Slum Upgrading Project Indonesia Urban infrastructure
and services in slums 1,743.0
Distribution System Upgrade and Expansion Project Bangladesh Expand electricity
coverage 262.3
Dushanbe-Uzbekistan Border Road Improvement Project Tajikistan Road reconstruction 105.9
National Motorway M-4 (Shorkot-Khanewal Section) Project Pakistan Motorway construction 273.0
Yamal LNG Project Russia Liquefied natural gas 10,000.0
Intercity Railway Project Egypt Railway EPC 1,500.0
Sources: Ministry of Commerce, HKTDC Belt and Road, AIIB, Silk Road Fund 19
The Belt and Road Initiative Opportunities (Cont’)
0
100
200
300
400
500
600
700
800
900
1000
China India Russia Ukraine Iran Poland Egypt Vietnam SaudiArabia
CzechRepublic
Steel Output Along the New Silk Road
China Steel Industry benefited from the Belt and
Road Initiative:
To meet all of the Belt and Road demands for
railways, pipelines, power stations and other
projects:
• Could generate demand of 272 million tonnes of
steel through 2020
• Adds as much as 5% a year to existing China
steel demand
• China is seeing a surplus of low-end steel
products, but with a shortage of high-end steel
offerings for advanced construction projects
Source: Bloomberg Intelligence
Million tonnes / year
Road Railway Port Telecommunication Energy
Second Phase of
the Central Asia
Road Links
Karakoram
Highway
Railway projects in
Thailand and
Myanmar, Pakistan,
Iran, and Giuseppe
Beijing - Moscow
Eurasian high-speed
rail
Enhance ports
constructions in
Shanghai, Tianjin,
Ningbo and
Guangzhou
Gwadar port project
Bilateral cross-border
communication lines
between Burma,
Tajikistan, Pakistan
Submarine cable
project in Southeast
Asia
Transmission
channels from
China's Xinjiang to
the five Central
Asian countries
20
Guangdong-Hong Kong-Macao Bay Area serves as a strategic hub for Belt and Road and stimulates the Southeastern economy
Sources: Fung Business Intelligence, SCMP
Greater Bay Area Initiate Opportunities
HKSHA can ride on the increasing demand of high-quality construction steel, expanding current businesses while
consolidating its market leader position.
HKSHA to Offer:
Huge potentials in collaborating with multinational corporations to extend the services to other countries
High-quality
steel
High processing
efficiency High traceability
On-time
completion
Strong
emphasis on
safety
Covers about 11 cities: Hong Kong, Macao, Guangzhou,
Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou,
Jiangmen and Zhaoqing
Combined population: 66.71 million
Combined GDP in 2016: RMB 9,332 billion
(approximately 12.5% of the national GDP)
21
Financial Overview
Group Financial Summary
For the year ended March 31
Financial highlights (HK$m) FY15/16 FY16/17 Change
Revenue 3,380.2 3,022.9 -10.6%
Gross profit 415.6 335.1 -19.5%
Operating profit 212.5 400.7 +88.3%
Profit attributable to owners of
the Company 70.1 101.8 +45.7%
Basic EPS (HK cents) 10.95 15.86 +44.8%
Dividend per share
(HK cents)
– Interim 1.80 2.26 +0.46 cents
– Final dividend 1.00 2.49 +1.49 cents
Dividend payout ratio 25.6% 29.9% +4.3 p.p.
Profitability ratios
Gross profit margin 12.3% 11.1% -1.2 p.p.
Operating profit margin 6.3% 13.3% +7.0 p.p.
Net profit margin 2.1% 3.4% +1.3 p.p.
Annualized return on asset 27.1% 42.2% +15.1 p.p.
Due to the fall in
revenue of
Construction Materials
Business as the
Group was more
selective on orders
taken and some of the
large projects were
delayed in Hong Kong
Driven by a significant
pre-tax gain on
disposal of approx.
HK$229.0 million from
Central Park Putuo
23
Revenue Analysis
Total revenue
HK$ m
2,450.3 2,132.6
488.9
490.7
365.2
296.8
60.3
72.9
FY15/16 FY16/17
Construction Materials Building & Design Solutions
Engineering Plastics Property
70.5% (72.5%)
16.2% (14.5%)
9.8% (10.8%)
2.4% (1.8%)
Construction Materials Building & Design Solutions
Engineering Plastics Property
FY16/17 (FY15/16)
Total:
HK$3,022.9 million
(HK$3,380.2 million)
Total revenue by business segment
24
Gross Profit Analysis
Gross profit and gross profit margin
HK$ m
Gross profit margin by business segment
415.6
335.1 12.3%
11.1%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
0
50
100
150
200
250
300
350
400
450
FY15/16 FY16/17
The decrease was driven by the fall in revenue of
Construction Materials Business as the Group was more
selective on orders taken and some large projects were
delayed in Hong Kong
FY15/16 FY16/17 Change
Construction
Materials 10.1% 4.4% -5.7 p.p.
Building & Design
Solutions 16.0% 24.5% +8.5 p.p.
Engineering
Plastics 4.0% 5.9% +1.9 p.p.
Property 100% 100% -
25
Net Profit Analysis
Net profit and net profit margin
HK$ m
Key expenses as % to revenue
70.1
101.8
2.1%
3.4%
-0.2%
0.3%
0.8%
1.3%
1.8%
2.3%
2.8%
3.3%
3.8%
-10
10
30
50
70
90
110
130
150
FY15/16 FY16/17
HK$ m FY15/16 FY16/17 Change
Selling and
distribution expenses
78.6
(2.3%)
129.3
(4.3%) +2.0 p.p.
General and
administrative
expenses
302.9
(9.0%)
295.1
(9.8%) +0.8 p.p.
Finance costs 63.3
(1.9%)
117.1
(3.9%) +2.0 p.p.
Income tax expenses
(% to profit before
income tax)
75.0
(51.3%)
148.0
(59.9%) +8.6 p.p.
Driven by a significant pretax gain on disposal of
approximately HK$229.0 million from Central Park Putuo
26
Working Capital Management
HK$m As at 31 Mar 2016 As at 31 Mar 2017 Change
Total interest-bearing borrowings 1,992.4 1722.3 -13.6%
– Long-term borrowings 1,140.4 509.2 -55.4%
– Short-term borrowings 852.0 1,213.1 +42.4%
Cash and cash equivalents 546.3 628.4 +15.0%
Pledged bank deposits 59.2 68.7 +16.0%
Net debts 1,386.9 1,025.3 -26.1%
Net gearing ratio Note 1 56.6% 47.6% -9.0 p.p.
FY15/16 FY16/17 Change
Net cash generated from/(used in)
operating activities (HK$m) 175.6 376.7 +114.5%
Inventory turnover days 46 56 -10 days
A/R turnover days 22 54 +32 days
A/P turnover days 4 19 +15 days
Cash conversion cycle days 64 78 +14 days
Note 1: Net gearing ratio = net debts / (total equity + net debts )
Repayment of bridging
loan for the acquisition of
Central Park Pudong
Bank loans related Central
Park Putuo were repaid
upon its disposal, mainly
due to the increase in short
term trust receipt loan
27
Capital Allocation Philosophy
2
Priority
Acquisition Opportunities Identify potential targets that allow us to enhance our procurement leverage, help to diversify product/process offer and/or
help us to consolidate the very fragmented regional markets
Building & Design Solutions competitors that allow us to expand our geographic coverage and diversify our brand and
product offer
Brands with international appeal but under financial distress
3 Capital Expenditure Automated cut & bend plant in Hong Kong with capability for cage assembly (option for internal or bank funding)
Software platform to bring together all business lines of the Group (internal funding)
Property upgrade (internal funding)
4 Dividend Consistent payout of dividends as preferred way of returning capital to shareholders
5 Share Buyback
1 Ensure Sufficient Working Capital for Normal Business Operations
28
Appendix
Corporate Milestones
￭ Formed JV
Company with
Baosteel Group -
Shanghai Bao
Shun Chang, with
focus in the steel
processing &
distribution
business
(HKSHA holds
66.7% ownership)
￭ Launched
Building &
Design
Solutions
business and
became the
distributor of
TOTO Japan
sanitary ware
products in HK
1961 1964 2008 2013 2014 1993 2011 1994 1997
￭Obtained
distribution
rights to
TOTO
products in
Hubei
Province
￭ Jointly acquired
investment property
“The Point Jingan”
in Shanghai
￭ Listed on the Main
Board of the Hong
Kong Stock
Exchange,
stock code:
1001.HK
￭Commenced
distribution
business in high
quality
engineering
plastics resins
￭ Founded as
an importer
of
construction
steel
￭Disposal of the joint investment property “The
Point Jingan” in Shanghai
￭ Acquired He Tai, one of Hong Kong’s largest steel
recycling plants
￭ Acquired the deluxe serviced complex apartment
“Park Lane” (formerly known as “Metropark”) in
Shanghai through investment in a fund
￭ Partnership with NatSteel to operate an
automated rebar processing and assembly plant
in Tsing Yi
2015
￭ Launched Hong
Kong's first
automated rebar
processing and
assembly plant
￭ Completed
acquisition of
“Central Park
Pudong”
(Formerly known as
“Chuang Yi Tower”)
in Shanghai
￭ Opened the largest TOTO
Flagship Architectural &
Design Centre in HK
￭ Acquired the remaining
33.3% stake of Bao Shun
Chang from Baosteel
Group (HKSHA 100%
ownership)
￭ Acquired 2nd investment
property “Central Park
Putuo” (Formerly known
as “China CTS Tower”) in
Shanghai
2016 2017
￭ Became
the sole
distributor
of KEUCO
sanitary
products in
Hong Kong
￭ Successful
disposal of
Central
Park Putuo
30
Shareholding Structure
Mr. Andrew Yao (Chairman)
& Associates
44.2%
Public Shareholders
55.8%
No. of issued shares (as of 30 Sep 2017): 641,882,674 shares
31
Consolidated Income Statement
For the year ended 31 March
HK$’000 2016 2017
Revenue 3,380,161 3,022,923
Cost of sales (2,964,591) (2,687,782)
Gross profit 415,570 335,141
Selling and distribution expenses (78,624) (129,277)
General and administrative expenses (302,866) (295,061)
Other gains/(losses) – net (21,059) 217,961
Fair value gain on an investment property 199,514 271,985
Operating profit 212,535 400,749
Finance income 2,065 1,964
Finance costs (65,404) (119,085)
Share of results of associates – net (7,364) -
Share of results of joint ventures – net 4,437 (36,511)
Profit before income tax 146,269 247,117
Income tax expense (75,005) (147,981)
Profit for the year 71,264 99,136
Attributable to:
Owners of the Company 70,105 101,776
Non-controlling interests 1,159 (2,640)
Basic earnings per share (HK cents) 10.95 15.86
Final Dividends per share (HK cents) 1.00 2.49
32
Consolidated Statement of Financial Position
HK$’000 As at 31 Mar 2016 As at 31 Mar 2017
Property, plant and equipment 220,536 163,489
Investment property 1,311,600 1,222,682
Land use rights 44,536 9,518
Intangible assets 80,178 --
Investments in joint ventures 148,108 110,631
Prepayments, deposits and other receivables 286,316 52,860
Deferred income tax assets 18,456 21,370
Available-for-sale financial asset 487 506
Total non-current assets 2,110,217 1,581,056
Prepayments, deposits and other receivables 147,541 165,281
Inventories 175,634 395,628
Amounts due from joint ventures 15,593 34,360
Trade and bill receivables 461,717 495,033
Financial assets at fair value through profit or loss 15,630 15,500
Pledged bank deposits 59,166 68,659
Cash and cash equivalents 546,261 628,382
Total current assets 1,421,542 1,802,843
Total assets 3,531,759 3,383,899
33
Consolidated Statement of Financial Position (cont.)
32
HK$’000 As at 31 Mar 2016 As at 31 Mar 2017
Trade and bill payables 132,581 143,604
Receipts in advance 36,688 28,696
Accrued liabilities and other payables 83,233 163,688
Amount due to a joint venture -- 49,900
Current income tax liabilities 14,177 67,916
Borrowings 851,961 1,213,146
Total current liabilities 1,118,640 1,666,950
Accrued liabilities and other payables 10,755 7,223
Deferred income tax liabilities 200,438 69,638
Borrowings 1,140,423 509,190
Total non-current liability 1,351,616 586,051
Net assets 1,061,503 1,130,898
Equity
Equity attributable to owners of the Company
Share capital 64,064 64,188
Reserves 995,360 1,045,323
1,059,424 1,109,511
Non-controlling interests 2,079 21,387
Total equity 1,061,503 1,130,898
Thank You
33
DISCLAIMER
This document is confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person, or published, in
whole or in part, for any purpose without prior written approval from Hong Kong Shanghai Alliance Holdings Limited (“HKSHA”).
HKSHA and its subsidiaries (collectively the “Group”) make no representation or warranty (express or implied) as to the accuracy, reliability or
completeness of this document. The Group and its respective directors, employees, advisors, agents and consultants shall have no liability
(including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information or matters
(expressed or implied) arising out of, or contained in or derived from, or for any omissions from this document, except liability under statute that
cannot be excluded.
This document may contain forward looking statements concerning the Group. Forward looking statements are not statements of historical fact
and actual events and results may differ materially from those described in the forward looking statements as a result of a variety of risk,
uncertainties, and other factors. Forward looking statements are based on management’s beliefs, opinions and estimates as of the dates the
forward looking statements are made and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates
should change or to reflect other future developments.
No representation or warranty (expressed or implied) is made by the Group or any of its respective directors, employees, advisors, agents or
consultants that any forecast, projections, intentions, expectations or plans set out in this document will be achieved, either totally or partially, or
that any particular rate of return will be achieved.
This document is not:
(I) an offer of securities for sale in Hong Kong or elsewhere; or
(II) an invitation to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities; or related to the issue of any securities.
