HWA HONG CORPORATION LIMITEDhwahongcorp.com/wp/wp-content/uploads/2017/04/AGM... · 2017. 4. 26. · 1. Based on 31 Dec 2016 valuations except for KilmuirHouse which was based on

HWA HONG CORPORATION LIMITED

64th Annual General Meeting27 April 2017, 10amM Hotel Singapore

1Private and Confidential

OUR FY2016 OPERATING PERFORMANCE

SGDm FY2015 FY2016 Change

Revenues 13.1 11.2 (14.3)%

Gross profit 8.5 7.0 (18.1)%

Net profit after tax 6.8 6.5 (3.4)%

Earnings per share (cts) 1.04 1.00 (3.8)%

Book value per share 31.57 29.77 (5.7%)

2

Private and Confidential

OUR FINANCIAL HIGHLIGHTS (FY2016) 3


Gearing

Total debt/Eq. 41%

Total debt 69m

Net assets 194m

Payout

Payout ratio 100%

NPAT 6.5m

Dividend 6.5m

Dividend yield 3.3%

Market valuation1

P/BV (cost2) 1.01

P/BV (FMV3) 0.63

Market cap. 196m

PER 30.0x

Notes:1. Based on market price of S$0.302. Based on cost model accounting for Investment Properties3. Based on fair market value of c.S$238m for Investment Properties, excluding any tax effects and realignment of

associates and JVs to the fair value model

OUR SHARE PRICE PERFORMANCE


4

85.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

FTSE STI real estate FTSE Small cap HWAH:SP

Relative price performance for period 1 Jan 2016 to 31 March 2017vs FTSE STI Real Estate Index and FTSE Small Cap

OUR DIVIDEND HISTORY 5


Following our special dividends between 2007 and 2011, the Group has maintained a steady stream of dividend payments per annum

1.00 1.00 1.00

1.15

1.00

0.90

0.95

1.00

1.05

1.10

1.15

1.20

2012 2013 2014 2015 2016

93%

76%

53%

111%

100%

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016

Dividend per share Payout ratio

SECTOR COMPARISON


6

1.85

0.63

0.23

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

OHL

ROXY

KSHH BS

FIGT GL

PFR

AG LHN CIT

STHL

CAPL

3CN

YLLG

CENT

KHHL FCL

FSG

WP

UO

LU

ICHW

AHTA

CL LCH

GUO

LBV

EST

HRY

CHIP

HKL

SIN

GGO

OD

LBG

HOBE

EHT

ON

HIAP

WIN

GT

YIN

GLI

HFC

TSH

IPC

PAN

HCY

BP

Hwa Hong Corp P/BV of c.0.63x Average P/BV of c.0.75x

Note: Based on P/BV of Hwa Hong Corp calculated using fair market value of properties of c.S$238m, (excluding any tax effects)

Price to book ratio for SGX-ST & Catalist listed property companies

OUR BUSINESS AS AT 31 DEC 2016 MAJOR ASSETS ALLOCATION


7

Real estate portfolio (by property type)

28%

25%

36%

11%

Industrial Residential

Office & retail Others

Real estate portfolio (by geography)

55%45%

1%

Singapore UK OthersNote: 1. Based on 31 Dec 2016 valuations except for Kilmuir House which was based on investment cost (excluding any tax effects)2. Orchard Medical was based on selling price of c.S$3,200psf (excluding any tax effects)3. Includes our share of the net asset values of associates and JVs, based on fair market value (excluding any tax effects)

RECENT ACQUISITIONS (2016)Property name Kilmuir House

Location Eaton Terrace, Belgravia

Type 8 storey residential with retail on ground floor

Launched/Status Currently being refurbished for lease

Tenure 37 years (target extension to 125 years)

Land area 19,166 sq ft

Floor area (NIA) 35,231 sq ft

No. of units 49 units

Unit types 2 bedroom apartments

Acquisition price £45m (£1,277psf)

Group’s interest 25% effective interest (with veto rights on key decisions)

Remarks• Possible amalgamation of neighbours to enlarge site • Potential redevelopment of site under consideration• Rare 8 storey block in prime Belgravia


8

RECENT ACQUISITIONS (2016)Property name Herbal Hill

Location 3 Herbal Hill, Clerkenwell

Type Commercial

Launched/Status Fully tenanted till June 2019

Tenure Freehold

Land area N.A.

Floor area (NIA) 33,773 sq ft

No. of floors Four floors with basement

Rent / yield £35psf (c.36% below market) / c.4.1% with reversionary yield of c.6.0%

Acquisition price £26.5m (valuation £28.5m)

Group’s interest 50%

Remarks

• Property under-rented at 36% below market rent• Current cap rate for area is sub-5%• Located within 5 min walk to Farringdon Crossrail• Area is popular with TMT companies• The group has invested in this area since early 2000s


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90

100

110

120

130

140

150

160

170

Core Outside core

URA Property Price Index of Non-Landed Residential Properties

MARKET COMMENTARY 2016SINGAPORE RESIDENTIAL PROPERTY MARKET


10

• Price declines have slowed - signs of stabilisation• Government measures still in place but changes have been made• Supply (planned and under-construction) has decline significantly

(source: URA)

25,000

35,000

45,000

55,000

65,000

75,000

85,000

95,000

1991

Q1

1992

Q2

1993

Q3

1994

Q4

1996

Q1

1997

Q2

1998

Q3

1999

Q4

2001

Q1

2002

Q2

2003

Q3

2004

Q4

2006

Q1

2007

Q2

2008

Q3

2009

Q4

2011

Q1

2012

Q2

2013

Q3

2014

Q4

2016

Q1

Supply of non-landed residential properties in pipeline

MARKET COMMENTARY 2016SINGAPORE INDUSTRIAL PROPERTY MARKET


11

• Industrial market continues to be weak• Government measures and weak economy have affected strata sales market• Weak local economy affecting prices and rents

(source: URA)

85

90

95

100

105

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

Q4

2015

Q1

2015

Q2

2015

Q3

2015

Q4

2016

Q1

2016

Q2

2016

Q3

2016

Q4

Property Price Index of Industrial Property

90

92

94

96

98

100

102

104

106

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

Q4

2015

Q1

2015

Q2

2015

Q3

2015

Q4

2016

Q1

2016

Q2

2016

Q3

2016

Q4

Rental Index of Private Sector Industrial Property

MARKET COMMENTARY 2016LONDON RESIDENTIAL PROPERTY MARKET


12

(source: UK Land Registry and Knight Frank Research)

UK House Price Index (Greater London & selected prime areas)

90

95

100

105

110

115

120

Westminister K&C London

BREXIT referendumAdditional stamp duties

• Signs of price stability and recovery post-BREXIT• Prices seem to be recovering since 3Q 2016• Weakening in GBP since BREXIT attracting foreign capital to prime areas

MARKET COMMENTARY 2016LONDON RESIDENTIAL PROPERTY MARKET


13

(source: UK Land Registry and Knight Frank Research)

UK House Sales Volume Index (Greater London & selected prime areas)

20

40

60

80

100

120

140

160

180

200

220

240

260

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

Westminister K&C London

BREXITreferendum

Additional stamp duties

• Signs of recovery in transaction volumes since 2Q 2016• Additional stamp duties effective in April 2016 were decline in transaction volumes• Transaction volumes have been rising since 3Q 2016, especially in prime districts

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 4Q 2016

City Midtown Southbank Central London

MARKET COMMENTARY 2016LONDON COMMERCIAL PROPERTY MARKET


14

(source: CBRE UK & JLL UK)

• Vacancy rates gradually rising, primarily due to recent completions• Still below 10 year average

• Strong demand post-BREXIT from Asia and Europe for UK commercial office assets• Decline in interest from the Americas and Middle East

Central London vacancy rates

OUR BUSINESSOUR REAL ESTATE STRATEGY


15

Value oriented and focused

Conservative capital structure

Balanced portfolio (development vs rental) Recycling of capital

Long term value creation

OUR BUSINESS (2017)OUR REAL ESTATE STRATEGY

OUR STRATEGICOBJECTIVES

PRIORITIES FOR 2017 RISK FACTORS TO OURSTRATEGY

Acquire properties with long term value given their location and type of use

• UK: Distress opportunities• Singapore: Value-add opportunities• Niche strategy• Focus on location attributes• Employ value-add where possible

• UK market averts a downturn• Competition for assets• Interest rates spike• Foreign exchange volatility

Unlock value from portfolio over time

• Manchester conversion• Sheffield student site• Hornton Street AEI

• Planning risks• Sustained downturn in UK

Optimise income from assets

• 20 Midtown• Kilmuir House• Allen House• Herbal Hill• Scotts Spazio

• Sustained downturn in the UK causing rentals to crash and decline in real estate values

• Interest rate increases• Foreign exchange volatility


16

OUR BUSINESS (2017)OUR REAL ESTATE STRATEGY

OUR STRATEGICOBJECTIVES

PRIORITIES FOR 2017 RISK FACTORS TO OURSTRATEGY

Recycle capital • Review status of mature assets for disposal

• Redeploy capital into new investments

• Market for exit/disposal of assets not attractive

• Competition for assets eroding potential returns / overpaying for assets

Maintain strong, & efficient balance sheet

• Hedge currency and interest rate risk

• Ensure sustainable LTVs and interest cover

• Spike in interest rates and and/or credit spreads

• Decline in collateral values

Develop additionaloverseas markets

• Develop additional overseas markets

• SE Asia, Australia

• New market risk• Emerging market risks

depending on chosen market


17

SHAREHOLDER COMMUNICATION

• SIAS initiative to improve the quality of annual general meetings o Raise relevant questions o To help focus discussions at shareholder meetings o Help companies to provide better accountability to shareholderso Initiative supported by SGX

• Q&A available on SGX website

• Copies sent to SIAS (www.sias.org.sg)


18

Copies sent to SIAS (www.sias.org.sg)

HWA HONG CORPORATION LIMITED

Thank you

19Private and Confidential

Documents

HWA HONG CORPORATION LIMITEDhwahongcorp.com/wp/wp-content/uploads/2017/04/AGM... · 2017. 4. 26. · 1. Based on 31 Dec 2016 valuations except for KilmuirHouse which was based on