Hong Kong Shanghai Alliance Holdings Limited - Stock code: 1001.HK Corporate Presentation
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Hong Kong Shanghai Alliance Holdings Limited
Stock code: 1001.HK
Corporate Presentation
September 2021
2020/21 Achievements
Turnaround from a net loss attributable to
owners of the Company of approximately
Achieved an admirable turnaround to profits HK$90.3 million, to a net profit
attributable to owners of the Company of
approximately HK$1.7 million
Property Investment and Project Central Park•Pudong and Central
Management Business saw rebound Park•Jing’an enjoyed higher occupancy
momentum, with successful rate and leasing price since the last
quarter of the Year
acquisition of Central Park•Huangpu
Record-high order book and growing
Strong order book and efficiency efficiency for its automated rebar processing
and assembly plant in Tsing Yi
enhancement for Construction
Materials Business Expanding margins for construction
products and surface critical coil distribution
in HK and China
Building & Design Solutions
Business recorded satisfactory Increasing number of hotel and shopping
growth despite under the impact of mall development and upgrade projects
COVID-19 lead to improving business performance
2
Scope of Business
Portion of FY20/21 Revenue | FY19/20 Revenue
(For the year ended 31 March 2021 | 2020)
*
80.1% | 80.2% 15.1% | 11.9% 4.6% | 4.0%
Property Investment and
Construction Materials Building & Design Solutions
Project Management
A leading processor and A distributor of world- A niche player and specialist
distributor of infrastructure renowned sanitary & in property value
products serving Hong Kong kitchenware brands in enhancement with successful
and Macau’s burgeoning Hong Kong, Mainland China track record
construction market and Macau
Innovative renovation
Leading market share in
Hong Kong (approx. 20%-25%) Accurate market positioning
Hong Kong’s first government Tenant upgrade
approved automated rebar Participated property projects
prefabrication yard include The Point Jing’an
(disposed in March 2014),
Leading distributor of surface Central Park • Putuo
critical steel serving China’s (disposed in March 2017),
automotive sector Architectural & Design Park Lane (disposed in
Centre serving the needs of September 2017), Central
developers in the high-end Park • Pudong, Central Park •
consumer market, where Jing’an and Central Park •
purchases are influenced by Huangpu
architects and designers
*During the Year, the management has grouped the financial result of Engineering Plastics Business segment into unallocated due to the scaling down of its operation.
3
Property Investment and Project Management Business
Shanghai Focused High-end Commercial Property Market
A niche player and specialist in property value enhancement with successful track record
The Buy-Build-Sell Business Model
Project selection Asset upgrade Exit strategies
•Hold for investment
Rental income significantly
Shanghai focused Leasing offices
increased by [-]%
High demand in high-end Precise market positioning Tenant mix management
• Hold for investment or sell out
commercial and residential Innovative design and renovation Rental income
properties Maximization of leasable space
Proactive leasing strategy
Strong potential in occupancy rate Upgrade of tenant mix Sell
and rental upside after
Asset revaluation
enhancement works
Participated Projects
The Point Jing’an
(Successful disposal in March 2014)
Central Park• Putuo
(Successful disposal in March 2017)
Park Lane
(successful disposal in September 2017)
Central Park • Pudong (formerly known as
Chuang Yi Tower)
Central Park • Jing’an (formerly known as
Longyu International Plaza)
Central Park • Huangpu (formerly known as
Great Wall Financial Building) 5
Central Park • Pudong (100% owned)
Competitive Edge
Located in the Pudong New District (hub of financial services)
Benefited from the market trend of decentralization from central
business district
LEED gold for sustainable development
Synergies with the HK Land project
Business Strategies
Position as a prime office with a grand reception lobby and spacious
green surrounding
Enhance facilities and surrounding environment
Increase leasable areas through renovation of G/F space
Professional property management service
6
Central Park • Jing’an (Jointly owned with GIC through JV)
Competitive Edge
Located in Jing’an District (central commercial area)
Directly accessible to 3 metro lines
Business Strategies
Position as a prime office with modern reception lobby and façade
Renovate the public area, lift lobbies and office area to give a
completely new look
Manage the tenant mix and uplift its tenant quality
Professional property management service
7
Central Park • Huangpu (Jointly owned with Apollo through JV)
Competitive Edges
Located in the heart of the CBD of Huangpu
Near the intersection of Dapu Road and Xujiahui Road, a 5-minute
walk from the metro station
Host to Pullman Shanghai Skyway hotel (5-star hotel managed by
Accor Hotel Group)
Host to many office buildings, conference halls, catering and leisure
facilities
Business Strategies
Position as a landmark complex building with grade A office and
5-star hotel
Zero distance to conference and catering facilities
Increase leasable office and rental area through thoughtful renovation
Introduction of high-quality tenant
Improvement of property management services
8
Shanghai Property Market
Supply
2021 Shanghai Office Market Overview
• Although COVID-19 pandemic has delayed project completion and
delivery, a total of 7 new office projects were launched in Shanghai in
Grade A Office Market 2021Q1
2021 2020 • In 2021Q1, Shanghai’s office market continued to show healthy signs of
Change rebound, with continued excellent net absorption performance and a
(Estimate) (Estimate)
rapid recovery in market confidence
New Supply (sqm) 2.23m 1.80m +23.9% • 2.23 million sqm of new office supply is estimated to be launched into
the market
2021 Q1 Rents Rents
QoQ% decrease • Average rent had declined slightly for Shanghai office market
• Grade-A office market followed similar trends, with average rent
Grade-A Office Market 0.36% QoQ decreased slightly by 0.36% QoQ in 2021Q1
Core CBDs 0.14% QoQ • The average rent of Core CBDs edged down by a modest 0.14%,
to RMB10.81 per sqm per day
• However, the rents for some Emerging Business Districts have increased
significantly
2021 Shanghai Residential Market Overview
Head Start for Residential Market, Commercial Potentially Follow Suit
2021Q1 2020Q1 Change
• With residential market taking a more significant hit from the initial stage
of the pandemic, it enjoyed a sooner-than-market rebound, with
New Supply (sqm) 0.97m 0.49m +98.0%
supply, transaction volume, as well as average selling price all showing
a recovery
Transaction 3.2m 0.96m +233.3% • The “Opinions on accelerating the construction of Shanghai as an
Volume (sqm) international financial center and the integrated development of the
Average Selling 55,800 55,770 +0.05% Yangtze River Delta” was announced
Price (RMB / sqm) • It is expected that Shanghai would welcome more financial
corporations and firms from emerging segments, establishing their
Sources: Savills, Knight Frank, Colliers, Jones Lang LaSalle foothold as the major financial hub 9
Growth Strategy
Strategy for long-term growth
Identify property projects with room for asset Provide one-stop solutions for revitalizing
upgrade so as to improve occupancy rate / under-performing commercial buildings to
rental rate / tenant mix valuable assets
Look for local and international quality
partners for setting up joint venture and/or Provide asset management services to
fund partnership for business expansion, generate more benefits and income from
cultivating relationships and fully realising transaction
value
Co-investment venture with Reco Wisteria Private Limited* Joint Venture with Apollo Skyline Holding Limited
Date of Establishment June 2018 Date of Establishment November 2019
Effective Equity Interest 9.3% Effective Equity Interest 5.0%
Investment US$32,550,000 Investment US$10,000,000
Investment Target Central Park • Jing’an
Investment Target Central Park • Huangpu
10
*An investment arm of the Minister for Finance of the Government of SingaporeConstruction Materials Business
Value-Added Processing and Tailor-made Solutions
Established Hong Kong’s First Automated Rebar Processing and Assembly Plant
Tsing Yi, Hong Kong VSC Steel Company Limited is a leading construction steel distributor in Hong Kong
Location :
with pier access
VSC Construction Steel Solutions Limited is the first government-approved automation
Total site prefabrication yard
: 30,000 square meters
area Regional player serving Hong Kong and Macau
Highly Automated Cut & Bend Equipment Rebar Processing
Competitive Edges
Safety Processing Efficiency On-time Completion Traceability
12Strong Order Book Driven by Major Construction Projects
Shek Wu Hui Effluent Polishing Tin Win Stop Residential
Tseung Kwan O - Lam Tin Tunnel
Plant Development
Cut and Bend Water Supplies Department &
Correctional Services Department
Headquarters Building in Chai Wan Hotel Development
at Cheung Sha Wan
Redevelopment of
Mariners’ Club at
Tsim Sha Tsui
Hong Kong Airport 3rd Runway Hong Kong Airport Terminal 2 Extension Skycity – 11 Skies Mega Complex
Steel Distribution
13Promising Prospect of the Hong Kong Construction Market
Market Conditions
Stable Demand from Local Market
The Government is expected to maintain the annual capital works investment at around HK$100 billion in
the next few years, encompassing public housing, hospital redevelopment, government office buildings and
expansion of new towns
Ongoing promotion in adopting technologies and innovative methods in the construction industry
Recognition of off-site prefabrication
The Group is eligible and in the process of applying the HK$1 billion “Construction Innovation and
Technology Fund” (2018/19 – 2022/23)
Encourage contractors to use rebar products made by the large-scale, highly-automated approved
rebar prefabrication yards
Currently there are four major off-site prefabrication yards in Hong Kong with a total production capacity of
about 0.25 million tons per year, which can potentially meet about 15% of Hong Kong’s demand
Our Competitive Advantages
Approved Steel Rebar
First Mover Advantage Prefabrication Yard for Years of Experience Visionary Management
Public Work
14Opportunities with Hong Kong Infrastructure Projects
Hong Kong Government continues to invest in infrastructure projects
In the next few years, the annual capital works expenditure is expected to reach HK$100 billion on
average, and the annual total construction output will increase to around HK$300 billion
Harbourfront Enhancement
The Government has earmarked HK$6.5 billion for implementing a number of harbourfront development initiatives
Making Good Use of Government Land
The Government has taken forward multiple projects under the "single site, multiple use" initiative
Railway Development
Tuen Ma Line is completed and in operation
The Government will progressively implement the new railway projects
Our Offer:
Strong
High-quality High processing On-time
High traceability emphasis on
steel efficiency completion
safety
Huge potentials in collaborating with multinational corporations to extend the services to other countries
Ride on the increasing demand of high-quality construction steel, expanding current businesses while consolidating its market position
15BSC – Coil Processing
Steel Mills BSC Automotive End Users
Early Vendor Involvement Value Analysis/
(EVI) Value Engineering (VA/VE)
Product Design Processing
Product Testing Logistics
Inventory Planning Inventory Management
Cost & Efficiency
Services Development Plan
1 Margin expansion – walk away from customers that
have low profit margin or high collection risk in order to
further boost profitability
Coil Slitting 2 Geographical expansion – expanding presence in
Shanghai, Liaoning, Shandong, Jiangsu, Guangdong,
Hubei and Henan
3 Management by local – promoting employee stock
ownership plan to senior management in order to
promote efficient management with local expertise
Cut-to-length Stamping
16Building & Design Solutions Business
Building & Design Solutions
Extensive client network of the Group’s construction materials and
property businesses brings synergies and accelerates the
development of the Building & Design Solutions Business
Rising market perception of better quality of life, along with
growing emphasis on daily hygiene as a result of COVID-19
Experienced team delivering technical and design services as well
as installation
Software solutions that simplify design and layout efforts for
customers
Brands Represented Building & Design Solutions for Sanitary & Kitchenware End-users
Distributor with Value-added Services Distribution Channels
Property developers
1
Architectural & Design Centre Architects and
Wholesale to sub-dealers
catering to architects & designers designers
Product testing
Hotels
Mock displays 2
Directly supply to projects
Space for architects & Interior design
including our
designers companies
property renovation
Software solutions
Establish & manage showrooms Healthcare and
3
with sub-dealers Architectural & Design Centre elderly care
Credit payment terms for retail business and
renovation
18New Product Line with Expanding Geographical Coverage
Re-entering Macau Market with TOTO
Entered Macau market with one-stop solutions along with efficient on-site technical support & instant spare parts replacement
Key projects reference and project pipelines include:
Projects in Hong Kong Projects in Macau
Hong Kong International Airport T1, T2 Hong Kong Sanatorium &
extension and Runway 3 Hospital New Building Macau City of Dream
Seac Pai Van Residential
Renovation
Hong Kong Convention & Exhibition
AIRSIDE, Kai Tak
Centre Renovation
Central Plaza Renovation 239 Century Hotel Project City of Dream Phase 2 Galaxy Phase 3 HOH
Hopewell Center II Island Shangri-la Hotel Renovation
Galaxy Phase 3C Parisian Hotel 2.3 Bay
Harbour City Renovation Four Season Hotel Renovation
2 Murray Road Office Development Intercontinental Hotel Renovation
W Hotel Macau Nuwa Hotel
The Quayside Two Taikoo Place Project
Iconic Hotel Macau
Kimpton Hotel The Rosewood Hotel Project
New Product Line Catering General Residential Market
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 product portfolio
Expected contribution of around 3 to 5% of total turnover
19Financial Overview
Group Financial Summary
For the year ended 31 March
Financial highlights (HK$m) FY20/21 FY19/20 Change
Revenue 2,073.6 2,325.0 -10.8%
Gross profit 253.0 241.6 +4.7%
The turnaround is mainly
Operating profit / (loss) 96.0 4.8 +1,895.0%
attributable to the
improvement in
Profit / (loss) attributable to performance of the
1.7 (90.3) Negative to Positive
owners of the Company Construction Materials
Business, with its profit
Basic earnings / (loss) per before income tax grew
0.26 (14.08) Negative to Positive by approximately
ordinary share (HK cent(s))
396.6% year-on-year
Profitability ratios
Gross profit margin 12.2% 10.4% +1.8 p.p.
Operating profit margin 4.6% 0.2% +4.4 p.p.
Net profit / (loss) margin 0.2% (3.8%) +4.0 p.p.
21Revenue Analysis
Total revenue Total revenue by business segment
HK$m FY20/21 (FY19/20)
4.6% 0.2%
(4.0%) (3.9%)
2,325.0 15.1%
2,073.6 (11.9%)
90.8
93.5 4.9
275.9 94.1
313.9
Total:
HK$2,073.6 million
(HK$2,325.0 million)
1,864.8
1,660.8
80.1%
(80.2%)
FY19/20 FY20/21
Construction Materials Building & Design Solutions Construction Materials Building & Design Solutions
Property Investment and Unallocated Property Investment and Unallocated
Project Management Project Management
22Gross Profit Analysis
Gross profit and gross profit margin
HK$m
375
12.2%
10.4%
325
275
253.0
241.6
225
175
125
FY19/20 FY20/21
Even though revenue recorded a slight decrease, gross profit for the year rose by 4.7%, mainly attributable to the tightened control on
operating costs, as well as the improvement in operational efficiency and inventories procurement strategy. As a result, gross profit
margin increased from approximately 10.4% to approximately 12.2%.
23Net Profit and Key Analysis
Net profit/(loss) and dividends Key expenses as % to revenue
HK$m FY20/21 FY19/20 Change
HK$m FY20/21 FY19/20 Change
Profit / (loss)
attributable to Negative
1.7 (90.3)
owners of the to Positive Selling and
Company 15.7 11.8
distribution +0.3 p.p.
(0.8%) (0.5%)
expenses
Basic earnings /
Negative
(loss) per ordinary 0.26 (14.08)
to Positive
share (HK cent(s))
General and
140.7 217.8
administrative -2.6 p.p.
Proposed special (6.8%) (9.4%)
expenses
dividend per
1.00 n/a n/a
ordinary share
(HK cent(s))
62.9 78.4
Dividend payout Net finance costs -0.4 p.p.
383.3% n/a n/a (3.0%) (3.4%)
ratio
24Working Capital Management
HK$m As at 31 March 2021 As at 31 March 2020 Change
Total interest-bearing borrowings 1,454.6 1,415.6 +2.8%
– Long-term borrowings 779.7 855.1 -8.8%
– Short-term borrowings 674.9 560.5 +20.4%
Cash and cash equivalents 119.1 120.0 -0.8%
Pledged bank deposits 54.0 9.1 +491.1%
Net debt 1,281.5 1,286.5 -0.4%
Net gearing ratio Note 1 59.1% 61.5% -2.4 p.p.
Note 1: Net gearing ratio = net debts / (capital and reserves attributable to owners of the Company + net debts )
FY20/21 FY19/20 Change
Net cash inflow / (outflow) from operating activities (HK$m) 78.6 78.8 -0.3%
Inventory turnover days 89 62 +27 days
A/R turnover days 56 48 +8 days
A/P turnover days 35 21 +14 days
Cash conversion cycle days 110 89 +21 days
25Capital Allocation Philosophy
Priority
1 Ensure Sufficient Working Capital for Normal Business Operations
Acquisition Opportunities
2 Identify potential projects that have strong potential on occupancy and rental upside improvement after
enhancement works
Identify Building & Design Solutions competitors that allow us to expand our geographic coverage and
diversify our brand and product offer
Identify competitors with funds and brands with international appeal but under financial distress
3 Capital Expenditure
Automated rebar processing and assembly plant in Tsing Yi and increase its capability to meet the
strong growth in market demand (internal or bank funding)
Existing property upgrade to enhance the properties’ values, occupancy rates and average rent (internal
or bank funding)
4 Dividend
Thoughtful consideration of dividend policy as means to return capital to shareholders
5 Share Buyback
26Appendix
Corporate Milestones
￭ Opened the largest
TOTO Flagship
Architectural & Design
Centre in HK
￭ Acquired the remaining
￭ Launched Building & 33.3% stake of Shanghai
Design Solutions Bao Shun Chang from ￭ Completed the
Business and ￭ Obtained Baosteel Group (HKSHA ramp-up of Central
became the distribution 100% ownership) Park • Jing’an, with
￭ Founded as an distributor of TOTO rights to TOTO ￭ Acquired 2nd investment ￭ Successful disposal the project beginning
importer of Japan sanitary ware products in property “Central Park • of Central Park • to generate profit for
construction steel products in HK Hubei Province Putuo” in Shanghai Putuo and Park Lane the Group
1961 1997 2011 2013 2017 2019
1994 2008 2014 2016 2018 2020
￭ Listed on the ￭ Jointly acquired ￭ Disposal of the joint ￭ Launched Hong Kong's ￭ Completed the ￭ Completed the
￭ Completed the
Main Board of the investment investment property “The first automated rebar formation of a co- acquisition of
formation of a co-
Point Jing An” in Shanghai processing and investment venture
Hong Kong Stock property “The investment venture Central Park •
Exchange, Point Jing An” ￭ Acquired the deluxe assembly plant with an investment
with Apollo Huangpu through
stock code: in Shanghai serviced complex ￭ Completed acquisition arm of the Minister for
(“Apollo JV”) Apollo JV
1001.HK apartment “Park Lane” in of Central Park • Finance of the
Shanghai through Pudong in Shanghai Government of
investment in a fund Singapore (“GIC JV”)
￭ Partnership with NatSteel to ￭ Completed the
establish an automated acquisition of Central
rebar processing and Park • Jing’an through
assembly plant in Tsing Yi GIC JV
28Shareholding Structure
Mr. Andrew Yao (Chairman)
Public Shareholders
& Associates
55.8%
44.2%
No. of issued shares (as of 31 August 2021): 641,232,315 shares
29Consolidated Income Statement
For the Year ended 31 March
HK$’000 2021 2020
Revenue 2,073,632 2,325,031
Cost of sales (1,820,613) (2,083,428)
Gross profit 253,019 241,603
Selling and distribution expenses (15,728) (11,803)
(Impairment loss) on / reversal of financial
(293) 3,020
assets - net
General and administrative expenses (140,703) (217,810)
Other gains / (losses) – net 8,067 (10,110)
Net fair value loss on investment properties (8,362) (88)
Operating profit 96,000 4,812
Finance income 1,110 1,216
Finance costs (64,024) (79,616)
Share of results of investments
(19,724) (12,947)
accounted for using the equity method
Profit / (loss) before income tax 13,362 (86,535)
Income tax expense (9,539) (1,616)
Profit / (loss) for the year 3,823 (88,151)
Profit / (loss) attributable to:
- Owners of the Company 1,673 (90,309)
- Non-controlling interests 2,150 2,158
Basic earnings / (loss) per ordinary share (HK cent(s)) 0.26 (14.08)
Proposed special dividend per ordinary share (HK cent(s)) 1.00 -- 30Consolidated Statement of Financial Position
HK$’000 As at 31 March 2021 As at 31 March 2020
Property, plant and equipment 41,682 48,979
Investment properties 1,422,582 1,324,824
Right-of-use assets 13,253 32,090
Intangible assets 710 1,493
Investments accounted for using the equity
337,430 313,823
method
Prepayments, deposits and other receivables 12,540 18,038
Deferred income tax assets 49,326 53,104
Financial asset at fair value through
4,203 62
other comprehensive income
Total non-current assets 1,881,726 1,792,413
Prepayments, deposits and other receivables 99,052 81,843
Inventories 443,072 354,859
Trade and bill receivables 363,814 358,932
Financial asset at fair value through profit or loss - 15,820
Pledged bank deposits 54,008 9,137
Cash and cash equivalents 119,098 120,045
Total current assets 1,079,044 940,636
Total assets 2,960,770 2,733,049
31Consolidated Statement of Financial Position (cont.)
HK$’000 As at 31 March 2021 As at 31 March 2020
Trade and bill payables 245,354 166,929
Receipts in advance and deferred revenue 53,537 57,258
Accrued liabilities and other payables 39,220 37,183
Provisions 35,298 4,025
Derivative financial instruments 1,084 -
Current income tax liabilities 11,380 7,371
Borrowings 674,893 560,555
Lease liabilities 4,528 23,693
Total current liabilities 1,065,294 857,014
Accrued liabilities and other payables 11,147 11,144
Deferred income tax liabilities 94,081 89,541
Borrowings 779,749 855,083
Lease liabilities 1,991 3,499
Total non-current liabilities 886,968 959,267
Net assets 1,008,508 916,768
Equity
Equity attributable to owners of the Company
Share capital 64,123 64,123
Reserves 823,598 741,722
887,721 805,845
Non-controlling interests 120,787 110,923
Total equity 1,008,508 916,768
32Thank You 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.
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