“Rail + Property” Development
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MTR Corporation Company Overview December 2019 to January 2020 Forward-looking statements Certain statements contained in this presentation may be viewed as forward-looking statements. Such forward- looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Page 2 MTR Today MTR was listed in the Stock Exchange of Hong Kong (2000) Establishment of MTR 1975 1980 1985 1990 1995 2000 2005 2010 2015 1st Railway line opened (1979) Merger with KCRC (2007) 1H19 Underlying Profit2 1H19 Recurrent Profit1 HK$3.4 billion HK$2.7 billion 26.0% 40.6% 34% Transport Operations 8% 40% 10% Station Commercial Property Rental 14% Outside Hong Kong 3% 3% 41% 48% Property Development# Note: 1. Recurrent Profit: $2,665M - Net Profit attributable to Shareholders of the Company arising from Recurrent Businesses (comprising Hong Kong Transport Operations, Hong Kong Station Commercial Businesses, Hong Kong Property Rental & Management Businesses, Mainland of China and International Railway, Property Rental and Management Businesses, Other Businesses and project studies and business development expenses). Excluding provisions for Shatin to Central Link project and South Western Railway, recurrent profit would have increased by 13.8% 2. Underlying Profit: $3,440M - Net Profit attributable to Shareholders of the Company arising from Underlying Businesses (comprising Recurrent Businesses and Property Development Businesses). Excluding provisions for Shatin to Central Link project and South Western Railway, underlying profit would have increased by 26.4% 3. Reported Profit (not shown here): $5,506M - Net Profit attributable to Shareholders of the Company arising from Underlying Businesses and Investment Property Revaluation # Property development profit mainly derived from the sales of inventory at Lake Silver and Wings at Sea II and share of surplus proceeds released from completed property development projects Vision: a leading multinational company that connects and grows communities with caring services Page 3 Rail + Property Business Model Railway Share of Profit Land Land Development Development Right Opportunity Land Premium Funding Contribution Government Developer MTR leads and coordinates the development processes including: • Agrees with Government amount of property development rights for new rail extension • Land premium is negotiated with Government on “greenfield basis”*, prior to tender being offered to developers • Tender property packages to developer partners • MTR contributes property rights, oversees the design & construction • Developers usually pay for land premium and development costs; MTR may contribute on a case by case basis • Profit sharing with MTR by percentage of profits or assets in kind or lump-sum payment *Greenfield basis = market value ignoring the presence of the railway Page 4 Examples of MTR “Rail + Property” Development Tung Chung Station Development Kowloon Station Development • Total GFA: 1,030,634 sq m (Retail: 55,793 sq m; Office: 14,913 sq m) • ~12,400 residential units Tseung Kwan O LOHAS Park Development • Total GFA: 1,650,000 sq m (Retail: 46,000 sq m) • ~25,500 residential units • Total GFA: 1,096,169 sq m (Retail: 82,750 sq m; Office: 231,778 sq m) • ~5,800 residential units Page 5 HONG KONG TRANSPORT OPERATIONS Page 6 MTR Network No. of Stations: 94(1) 羅湖 Route Length: 257km(2) Lo Wu 落馬洲(福田口岸) Lok Ma Chau (Futian Port) ◼ 3 Rail Segments: Domestic Service, Airport Express and Cross-boundary Service 1. 93 heavy rail stations, 1 XRL station (ex. 68 light rail stops) 2. 195km of heavy rail, 36km of light rail, 26 km of XRL Page 7 Market Share Hong Kong Franchised Public Transport Green Trams & Green Trams & minibuses ferries minibuses ferries 13.4% 2.3% 13.0% 2.2% MTR MTR 48.9% 48.8% Buses Buses 35.4% 36.0% Jan – May 2018(2) Jan – May 2019 Cross-harbour Cross-boundary & HSR Airport Express 69.2% 68.2% 51.8% 51.5% 21.7% 21.8% (1) (1) Jan-May 2018 Jan-May 2019 Jan-May 2018 Jan-May 2019 Jan-May 2018 Jan-May 2019 Sources: The Transport Department / Immigration Department / Airport Authority Hong Kong 1. Calculation based on the proportion of air passenger using Airport Express over the total air passenger figures reported by the Airport Authority Hong Kong 2. Market share for January-May 2018 was rebased to reflect the impact on the opening of Hong Kong – Zhuhai – Macao Bridge. Page 8 Patronage Domestic Service(1) (m) Airport Express (m) YoY change YoY 17.7 8.6% 16.1 16.6 change 14.9 15.7 14.7 % 1,670.0 5.2 1,547.8 1,577.5 1,586.5 1,637.9 1,445.1 2014 2015 2016 2017 2018 Nov-19 Cross-boundary Service (m) YoY change % 2014 2015 2016 2017 2018 Nov-19 113.3 112.5 117.4 10.5 113.0 114.2 95.9 2014 2015 2016 2017 2018 Nov-19 1. Domestic Service comprises the Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland Resort, East Rail (excluding Cross-boundary service), West Rail and Ma On Shan lines Page 9 2018 2019 2018 2019 2018 2019 2018 2019 148 1.5 126 1.3 9.3% 7.8% 4.0% 0.5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 2018 2019 10.4 8.4 5.8% (8.4%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hong Kong Transport Operations (HK$b) 30 43.1% 43.2% 45.0% 42.6% 41.9% 41.1% 40.7% 40.0% 25 Revenue Domestic Service 35.0% Cross-boundary Service High Speed Rail 20 19.5 30.0% Airport Express 17.7 18.2 Light Rail, Bus, Intercity and others 16.9 HKTO revenue 16.2 25.0% EBITDA 15 EBITDA margin (%) 20.0% 10.7 10 15.0% 8.2 7.6 10.0% 7.0 7.2 7.5 5 4.3 5.0% 0 - 2014 2015 2016 2017 2018 1H19 Page 10 Fare Adjustment Mechanism (FAM) ➢ FAM – a direct drive mechanism providing a measure of certainty for fare setting ➢ Next scheduled review in 2022/23 Fare Adjustment = 0.5 * CCPI + 0.5 * WAGE INDEX - t - Wage index: the yearly percentage change in the Nominal Wage Index (Transportation Sector) - t: productivity factor ◼ Productivity Factor ➢ t = greater of zero and 0.5 x CAGR in Productivity over a reference period (t = 0 from 2017 to 2022) ➢ Productivity: HK Transport Operations Revenue HK Transport Operations Expenses ◼ Fare Promotions – 3% rebate for Every Octopus Trip for at least 6 months (linked to profitability and service performance arrangements), and others ◼ Special applications from 2017 to 2022 ➢ Fare rise under FAM shall be reduced by 0.6 percentage point from 2017 to 2022 ➢ In 2017, it will be followed by a further 10% discount ◼ Past Fare Adjustments 2009: +2.05%, effective in June 2010 2010: +2.20%, effective in June 2011 2011: +5.40%, effective in June 2012 2012: +2.70%, effective in June 2013 2013: +3.60%, effective in June 2014 2014: +4.30%, effective in June 2015 2015: +2.65%, effective in June 2016 2016: +1.49% (rolled over to 2018/19) 2017: +3.14%, effective in June 2018 2018: +3.30%*, effective in June 2019 * The fare adjustment rate for the year 2019/20 should be +3.6%, by applying the FAM formula. After counting the “Affordability-Linked Arrangement”, the result of the overall fare adjustment rate for 2019/20 will be 3.3%, with the remaining +0.3% fare adjustment to be recouped in 2021/22 Page 11 HONG KONG STATION COMMERCIAL BUSINESSES Page 12 Hong Kong Station Commercial Businesses Station Kiosks Advertising Telecommunications Page 13 Hong Kong Station Commercial (HK$m) 10,000 91.6% 89.6% 89.8% 90.4% 91.2% 90.8% 90.0% Revenue 9,000 Advertising 80.0% Kiosk rental 8,000 Telecommunication income 70.0% Others1 7,000 6,458 HKSC revenue 5,975 60.0% EBITDA 6,000 5,544 5,380 5,891 EBITDA margin (%) 4,963 5,474 50.0% 5,000 5,012 4,830 40.0% 4,000 4,448 3,555 30.0% 3,000 3,227 20.0% 2,000 1,000 10.0% 0 - 2014 2015 2016 2017 2018 1H19 1. Include revenues from other station commercial business such as station car park and publications Page 14 HONG KONG PROPERTY BUSINESSES Page 15 MTR Investment Property Portfolio Elements (Retail) Maritime Square (Retail) Telford Plaza (Retail) Plaza Ascot Citylink Plaza (Retail) (Retail) Ocean Walk Hanford Plaza Sun Tuen Mun Shopping Centre (Retail) The Lane (Retail) Luk Yeung Galleria (Retail) PopCorn 1 & 2 (Retail) Two IFC (Offices) Paradise Mall (Retail) ◼ 13 malls – 217,469 sqm, Office – 39,410 sqm, Others – 17,764 sqm ◼ Total Area: 274,643 sqm LFA * Lettable floor area attributable to MTR, as at 30 Jun 2019 Page 16 Hong Kong Property Rental and 90.0% 7,000 85.0% 83.6% 83.9% 82.2% 82.9% Management 80.9% 80.0% (HK$m) 6,000 Revenue 70.0% 5,055 5,000 4,900 Management fee 4,741 8,000 90.0% 4,533 60.0% 83.6% 83.9% 85.0% 82.2% 82.9% Revenue 80.9% 4,190 Rental income 80.0% Rental income 7,000 4,000 4,242 Management fee 4,098 50.0% Rental income 3,930 EBITDA 70.0% 6,000 EBITDA 3,668 4.9% EBITDA margin (%) 3,443 40.0% EBITDA margin (%) 5,055 60.0% 3,000 4,900 5,000 4,741 2,635 4,533 50.0% 4,190 30.0% 4,000 4,242 4,098 2,240 3,930 2,000 40.0% 3,668 3,443 20.0% 3,000 2,635 30.0% 2,000 2,240 20.0% 1,000 10.0% 0 - 2014 2015 2016 2017 2018 1H19 Page 17 New Investment Property Initiatives 49% increase in attributable GFA of existing retail portfolio THE LOHAS ◼ MTR contribution: HK$4.98 billion ◼ Profit sharing in the residential development ◼ MTR will take ownership of and invest further in fitting out the shopping mall ◼ Shopping mall GFA: 44,500 sqm ◼ Target opening: 2H 2020 ◼ With a large international standard indoor ice-skating rink and