FY 2023 Full-Year Results Briefing

Good morning, ladies and gentlemen, friends from the media, analysts, bankers, investors, and fellow CDL colleagues. My name is Belinda, and I'm the head of investor relations and corporate communications at CDL. On behalf of CDL management and my fellow colleagues, a very warm welcome to CDL's briefing on its unaudited financial results for the full year, end of 31st December, 2023. Now this is a hybrid briefing format with both in-person here at the M Hotel Singapore and also those joining us locally and internationally virtually on the live webcast. Now thank you everyone for being here this morning. For today's briefing in line with CDL's commitment to environmental sustainability, we will not be providing any printed materials. Now instead, we encourage you to scan the QR code on the screen to download the documents has been uploaded on our CDL website and also on SGXNet this morning. They will include

a copy of the detailed financial statement, a copy of the press release summarizing some of the key highlights, a presentation deck that the management team will be partially going through this morning, and for our guests that are joining us virtually, you will also similarly be able to download the documents which are available on the CDL website. I I would like to introduce you to the CDL management team that are on my far left. Now in the center, we have Mr. Kwak-Ling Bing, our executive chairman, Mr. Sherman Kwak, our group CEO, Mr. Kwak Ekshin, our group COO, Mr. Chiang Yang Hong, our group GM, and Ms. Yong Yin Ming, our group CFO. The format of today's briefing will be in two parts. We will kick off with a presentation of some of the key highlights of a performance and followed by a Q&A opportunity. Now without further ado, I would like to invite Mr. Sherman Quag, our Group CEO, to kickstart the presentation. Sherman, please.

I think today we'll keep it brief and we want to leave more time for Q&A. And as per the last briefing, I think we decided that in order to keep the presentation short, it would just be myself presenting the overview and strategic initiatives, as well as after me will be yimming, presenting the financial highlights. The ops review is just for your pleasure reading. And we're not presenting it now. This is actually from our House on Handy project. It's the conservation house at the top of the hill. Very, very pretty. We can organize for you to see it if you would like to. Key milestones for last year. I think we had achieved the highest revenue since inception in 1963. This was primarily driven by our EC project, PMON grant in Pongo. As all of you know, under prevailing accounting rules, when the EC project completes, you recognize the revenue and profit in entirety. Also, we divested this land site in Japan in Shirokane, a very prime location. We had five projects that completed last year,

over 2,400 units, put a lot of strain on us. Not sure you all realize how much effort goes into doing handover, a top buyers. And so really our property development team had a very, very hectic and busy year handing over these five projects, all of which are fully sold out except for a boulevard 88, which is about 91% sold. On the living sector side, we continue to expand. We acquired 31 PRS assets and developments. So in the UK, we did two PRS developments in Manchester and in London. And then in Japan, we did 29 new acquisitions, 25 in Tokyo. We finally filled in our missing link in Tokyo and then four more in Osaka. So brings our total portfolio up to 38. So with 35 in operation and three still under development but completing this, physically completing this year. Then, of course, we still have our PBSA

that we had acquired the year before. We acquired six then. So that gives us our current portfolio of about 4,800 units across UK, Japan, US, one project in the US, Sunnyvale, and Australia, as well as six student comp assets with 2,400 beds in the UK. And lastly, on the hospitality side, we also continue to expand our footprint, acquired three hotels, one in South Korea, in prime Myeongdong location, one in the heart of Brisbane, on top of Central Station, and the other is a hotel in Osaka, also in a very prime location next to the luxury fashion district as well as the walking district. And of course we had three new hotels that opened up. One is M-Social Suzo, one is M-Social Phuket, and one is Singapore Edition Hotel on Cascadon Road. Key financial highlights while we had record revenue, but obviously if you look at the

far right of our profit after tax and minority interest, we didn't quite measure up to the year before. The year before was 1.3 billion, but I think all of you already know why. We had very substantial divestments in the year, so therefore, you know, it kind of skewed the numbers quite a bit. But if you look at – if you exclude divestment gains and impairment losses, you will see that actually our operations across all segments have actually shown strong improvement and resiliency.

Our RNAB has grown quite a bit and that's mainly because we were very acquisitive last year. For this year, we are doing a full year, dividend of 12 cents per share. So we hope shareholders will be happy. We have committed since 2018 that we will try to maintain at least a one third payout ratio every year. So I think we have exceeded that with 36 percent. And of course share price performance leaves quite a bit to be desired. But I will detail how we intend to close up the gap with our R&A B. Won't dive too much into this slide. Property development side, you know, we sold 730 units last year with a sales value of 1.5 B, quite a bit less than the years before. But we're still glad, I think, for this tally. We had two launch projects last year, Tambusu Grand in Katong, as well as the Mist in Upper Bukit Timah. Both has sold well to date.

And the overall Singapore resi market obviously has gotten a lot tougher. Costs are still very inflated compared to pre-pandemic levels. According to the URA official stats, we have also seen the overall new home transactions have come down. 2023, it was around 6400. Down from, I guess, recent year's peak was 2021. It hit 13,000 units transacted, this excluding ECs. Then I think 2022 was about 7100. So last year in 23, you know, the volume did drop lower. But prices still held up well. In fact, not an increase, calling the URA a residential price index. I mean, last year private home prices rose about 6.8 percent. So, you know, I think this sector is still quite stable. Obviously, you know, it has suffered, again, from what I mentioned, cost increases. And last year's imposition of the 60 percent ABSD against foreigners was also quite tough luck

to swallow because it really meant that, you know, most, you know, foreign buyers have more or less evaporated from the market. China, we don't have much talk for now because our existing residential inventory is almost fully sold, same with Brisbane. We have two projects there in Brisbane, same in Australia, sorry, we have two projects in Brisbane that are also over 80 percent sold. On the hotel operations side, I think this has been a theme that we had expected. There was very strong recovery last year, and we hope that it will continue forward into 2024 and beyond, notwithstanding all the global macroeconomic uncertainties and geopolitical conflicts. But average room rate was up over 10 percent. Occupancy was up more than eight, close to nine percentage points. So that gave a 25% increase in REFPA revenue per available room, so a really great year

for hotels. Investment properties-wise, you know, we still continue to be very resilient, you know, on Singapore especially, you know, our occupancy are very high for office and retail portfolio. For the UK, actually, our office and retail portfolio is still strong. The only problem is that you would have seen we took some impairments for our office portfolio in the UK and that's really because of cap rate expansion. I mean, properties, you know, around us were all trading at much higher cap rates than normal. So then, therefore, we had to put in some impairments as well based on valuations. But actually, the underlying office, our office properties are actually still doing well. On the living sector side, you know, we achieved a full completion of the junction, which is in Leeds, the fourth largest city in the UK. We did it over two phases so the phase one is almost completely filled up and phase two finally we achieved the completion for that so now we're ramping up the leasing but it's been very well received 665 units so it's a very

big project and a good amount of commercial space as well and of course you can see for our student at comp portfolio I mean you know 97% occupancy and still doing extremely well. On the fund management side I'll have more details to share later. This typical slide we always put up, you know, assets, asset, you know, size sits at 24 B. Of course, we fair value all of our IPs and we value our hotels. It will go up to over 30 billion. And this shows how the geographically it's split up not too much change. Singapore is still about 52% while the rest of our other assets split across other geographies like the UK, China, US, and Japan and others.

GT strategy, all of you are very familiar with growth. Again, just means building our development pipeline and recurring income streams to really strengthen our financials enhancement, enhancing what we currently own and driving operational efficiency in the processes that our teams undertake and transformation, transforming through new platforms. So starting off with growth first with G. This was, you know, what I alluded to in the first slide last year. We were very acquisitive. We invested $2.4 billion, and this is just our share in all these acquisitions because some of them were joint ventures. But, you know, I think we are very proud of the acquisitions we made. We capitalized on some of the price dislocations that arose. So we took a fairly contrarian approach last year when pricing was under pressure, there was some distressed sales, sellers really wanted to clear some assets, and so we acquired obviously one of the big ones was St. Catherine's Docks, that office and retail complex in the

UK, next to Tower Bridge and Tower Hill. We have four funding projects for 1NQ, which is in Manchester and Mordenworff, which is in Greenwich, London. As mentioned earlier, we acquired a hotel in Korea, in China. We went back into Suu To, which we are very familiar with, and acquired a land site there. So that will have six towers, six residential towers, and then one sky-high tower with an office and a small hotel at the top. And then, of course, in Singapore, we acquired Champions Way in Woodlands, very well-located site, as well as, of course, prime site in Topayo, Laurent Wan, along with our JV partners, Freeses and Sekusui House. And in Japan, the Hotel Osaka, I mentioned, the PRS projects across Osaka and Tokyo, and then in Australia, finally the hotel. Won't dive into this much. Again, just shows you our global living sector portfolio.

We've really grown it, and I would say the GDP now is about $2.6 billion, 4,800 PRS, which is multifamily units, and 2,400 PBSA units, and overall occupancy for the entire portfolio is above 90 percent for those in operation. You know, there are few in the pipeline that are being built. Launch pipeline for Singapore for next year, about 1,800 units, and we have this formerly called Central Mall and Central Square. You may remember we acquired Central Square, which was next door to our Central Mall development from FIE's hospitality trust and we amalgamated it together and of course went for a strategic development incentive scheme, received a 67% GFA uplift and I named it after one of my favorite spots in New York where I used to work and live for many years, Union Square. So we will be launching the residential probably in the second half of this year. Champion's Way in Woodlands, that will be second half of this year as well.

Topayo probably right at the beginning of next year. And of course Newport Residences, which is our former Fuji Xerox Towers, which is a component of the former Fuji Xerox Towers, that we are still monitoring the market conditions to see when it would be appropriate time to launch that. And we have no ABSD pressure there. So these are the projects I mentioned earlier that we completed last year and really, you know, kudos to our team for diligently handing over more than 2,400 units. Onto E, enhancement. So we have been doing asset enhancements in our portfolio. I think we have to continue to maintain our competitive position for our priced assets. So one is Changsilon, this very sizable mall in Phuket. As I mentioned in earlier briefings, the mall actually has done really well for us.

Pre-COVID every year was an increase in net property income and revenue. And so it's really done well. So we decided it's time to invest in it. It's a very worn down. So we did a very big AEI. And finally, now we have completed And we have already achieved committed occupancy of 90 percent. And Thailand, as you know, has also, especially Phuket, relies heavily on tourism, has suffered quite a bit during the pandemic. You know, and they were quite late to open up as well. But having said that, we were very encouraged by this, you know, lunar New Year. We had just experienced where shopper traffic was nearly triple that of the same period last year. So that was nice. And then, of course, our flagship mall. We don't have many malls in Singapore, but our flagship mall is City Square Mall. And it also has done well for us, and we've decided that we're going to,

you know, that we're gonna do a big AEI. We've already commenced on phase one, and that's actually completing within the next couple of months. Phase one is more for the basement levels, including the food courts and all that. And then phase two, which will be the rest of the mall, will be completing our first half of next year. And you will see that actually, you know, doing the AEI, we also took the chance to see how we could decanter MNE facilities so that we can increase the NLA, which we did. We increased the NLA by 26,000 square feet. So that will translate into a strong value for the mall as well. And already, you know, for the space under phase one, over 95% has been leased. So these are the redevelopments I mentioned earlier. Union Square, formerly, technically, it's three properties, Central Square, Central Mall, Office Tower, and the Central Mall Conservation Block. So all this will be redeveloped into residential and office

and a few other exciting concepts. So we'll share more when we're ready to share the details. But so far, looking really good. And on the office side, we have an interested tenant that's looking to lease the bulk of the office. So I think if we can get that in, that will really give us a great return on this project. Same for Fuji Xerox Towers. We are redeveloping it as Newport Plaza, and that will have the various components as listed there, the residential, the service departments, and the commercial. And that is we obtained a 25% GFA uplift under the CBD incentive scheme. New hotels opening last year, M Social Suzou, which was the final component open under Suzou HCC, Hongyong City Center. Reason being the construction of the hotel was delayed and the fitting was delayed during COVID.

So maybe it was a good thing it didn't open before then. So now it's opened and slowly we're ramping up the operational performance. The M Social Book Kit is a revamp of the hotel that abuts our Jungsulong Mall, I presented earlier. So we have two wings that abutted. And so these two wings, 400 odd rooms, are now being rebranded, refreshed and rebranded as M Social Book Kit. And of course, the Singapore edition, which I had mentioned earlier, first edition in Southeast Asia. And also we took the chance to revamp our Grand Cogthorn Waterfront Hotel in Singapore. You know, not only the guest rooms but also the conference center which it's been very famous for. M Social, a brand expansion. This has been the brainchild of our chairman who came up with this brand, you know, and really positioned as more of a lifestyle brand, you know, catered for people who want to see and be seen. So right now we have six operational hotels

and three more in the pipeline. The one in London is a conversion of an existing millennium. Then the one in New York is also a conversion of an existing millennium. The one in Sunnyvale, California is a new build. So all these are the exciting ones that be coming online. Sustainability, as always, you know, that CDL has embodied a sustainability as part of our ethos for close to 30 years. It's important we do our part for the planet to ensure that our future generations have a decent place to live in. And I'm glad that we continue to notch up all the many accolades in many of the rankings around the world. And of course, we have made our net zero carbon commitment split into two phases, 2030 and 2050. So we continue to work towards it. And of course, on the governance and transparency side, we have also been ranked fit. Now onto transformation, the part that I think is very, very key that has always been the lever that will push CDL to the next level. Yes, as we had

mentioned, I think 2023 last year was absent of very significant divestment gains, but it's not like we didn't do any capital recycling. We still sold quite a lot of stuff. Total sales proceeds over 600 million and also the good profits. I mean, our total gain was over $250 million for this bunch of properties. But the truth is, it can't compare to the year before, in 2022. 2022, the one hotel itself, the Millennium Hilton Soul, the sales proceed was already over $1 billion. So then when you add on the gain on the deconolidation of CDL Hospitality Trust, you add on the proceeds from the two collective sales that occurred, Dungling Shopping Center, as well as Golden Mile Complex. So that year was a huge year, right? That's why we had a 1.3 billion padmee. So obviously, we understand that we need to continue to accelerate our capital recycling in order to bring our gearing down.

As we buy new, we have to make way for it by selling old, right? And many of our existing assets sit on our books at a low carrying cost. So I think we have a lot of ways to unlock value and monetize. My team is going to cringe when I say this statement. But I think the target I've set for myself and the team, and I hope we get there, is I hope to achieve at least $1 billion of divestments this year in 2024. So big target I've thrown out. Exchanging the main structure, I think let's all work towards it. So portfolio harmonization and optimization, we continue, I think, to look at how we can optimize our hospitality portfolio, which we had privatized in November 2019. So you will see that we have done some divestments over the years, Millennium Hilton Soul in 2022,

and then last year, Millennium Harvest House in Boulder in the US, Colorado. And of course, we de-consolidated our REIT, which brought a lot of benefits to us and to our shareholders. We also recently did off-market buyback of preference shares, which I think is good for shareholders and for us, too. And of course, we continue to drive operational efficiency. We take innovation very seriously in CDL. We have a dedicated innovation committee. And we continue to see how we can improve our operational efficiency, as well as deliver better and more innovative products and services to our customers. My last slide before I hand it to Yiming, fund management, very important to us as well. Yes, our AUM hasn't quite grown at the pace that we would like, we are currently at 3 billion US and just for clarity, we only consider AUM if it's, you know, there are third party investments in it and we don't take into account assets

that are fully held on our balance sheet, right? So we're very strict on how we count AUM. We had intended last year to reach 5 billion US, and we would have reached that if we had listed, as you all remember, we were trying to list our two UK properties back then together with another partner who was going to list their properties. So we're going to list that REIT in Singapore with three UK commercial properties that would have added at least 2 billion US, if not much more than that. That didn't materialize. So our AOM kind of lagged a little bit. And as all of you know, capital markets have not been particularly receptive or favorable over the last two years. But nonetheless, I think we are going to push forward now. We certainly want to do more strategic partnerships. And I have one in mind that I'm sure I'm going to get questions on today that we recently did for a development that we had initially developed in Singapore on an island.

And then, of course, we also want to grow existing platforms. We have our CDL hospitality trusts. We have IRE, which we are the 50% manager, along with TKO from France. And of course, we have H3C, which is an office fund that we are also part of. So we want to keep growing existing platforms. And I think most importantly, we've been very acquisitive. last year, as I mentioned, we made $2.4 billion of acquisition. So we now have a lot of assets on our balance sheet that we can suitably package into public or private formats. So whether REITs or private equity funds, we have a lot of room now to play with, because we have already warehoused many of these assets. So whether it's a new multifamily private equity fund in Japan, or it's a sustainability fund, office fund, or something, We have a lot of levers we can pull, so I intend to kick that into high gear as well, starting from this year. So I think this is how we intend to really accelerate our capital recycling, bring down

our gearing and ensure that CDL is well poised with stronger recurring income streams moving into the future. Thank you everyone and now I'll pass it over to Yiming. Thank you Chairman, morning ladies and gentlemen. Allow me to go to the financial highlights quickly. So this slide looks at PBT of each of the segment. So on property development, I think Sherman has mentioned our staff performer as usual. Two projects that contributed greatly was our EC project PMongwen and of course our Shirokani land site. So these two projects contributed 1.5 billion to revenue and 276 million to profits. So notably, we also made allowance for foreseeable losses for our development projects. This is largely for our project in Shenzhen. So this is our Shenzhen project. I think what's really left for sale is largely office, which we developed for sale. I think office market is fairly weak in China at the moment, particularly in Shenzhen. So on grounds of prudence, we have made a provision for that.

Hotel operations saw top line increase of 9%. Global ref par increase is 25%. However, the much lower profits for this segment, I think Sherman has mentioned, is the outsized divestment gains in 2022, which I won't repeat. So notably, I think for this year, in this segment, we also have Divested One Hotel, which is the Millennium Harvest boulder, for a gain of $80 million. Notably, the sale price for this hotel was $94 million. So this again demonstrates that many of our hotels are carried at low book cost and can generate good profits on divestment. Additionally, with the rebound in the hospitality industry, we also wrote back impairment losses of $54 million, largely for the U.S. properties. So these reversals are supported all by external valuations for the hotels. In terms of investment property, top line increased 32% with basically acquisitions from secondary stock, PBSA portfolio and PRS portfolio. However, this segment recognized a loss in 23 vis-a-vis a profit in 2022.

So again, 2022 has outsized divestment gains, whereas in 2023, I think the divest is also impacted with two things. I think number one was the impairment losses that Sherman had mentioned. This is largely for our properties in UK as well as against Shenzhen. And of course, number two, the higher financing costs which hit this segment fairly heavily, particularly for our UK properties. So excluding the investment gains and impairment losses, EBITDA has actually improved 27% in line with revenue. Other segment relates to market losses on our financial investments. if you notice the higher loss in FY 2022 is really sort of full right off of our exposure to sincere previously. Okay, this looks at REFPA by region. So I think the batch speaks for itself. So it's clear that all regions improve versus 2022. The strongest outperformer being rest of Asia, as China, Hong Kong,

as well as Taipei hotels all did very well and fully opened up. The same for New Zealand hotels as well, although they have not reached pre-2019 pre-COVID levels. So overall, REFPA, I mentioned, is 25% against 22% on a constant currency basis. So we elaborate further on hotel segment, star performer as well. So it did well both in occupancy and ADR. So particularly, room rates have exceeded 2019 levels significantly by 22%. Sure, we all feel the pinch when we go for both our hotels today, right? So with this increase in ADR, GOP margins has also improved. has also improved with the flow through. So the GOP margin increase is largely led by the Asia markets. So the union buyouts in New York also improved the GOP margins as well. Okay, next let us move on to revenue by segment. Repeatedly, we have achieved record revenue of 4.9B.

Last highest was 4.2B in 2018. All three core segments saw increases in revenue. Property development is the biggest contributors at 57%. And of course, all three segments has also improved in revenue. Next, we'll move on to EBITDA by target. The group always target a 1 billion EBITDA for healthy cash generation. So these bar charts at the bottom has removed divestment gains and impairment losses to better reflect the operating performance of each segment. So you can again see that all three core segments actually saw an increase in EBITDA. So this is one metric that the group looks very closely at. Now we go on to PBT by segment. PBT is impacted by financing cost and depreciation. financing cost has gone up by about, you know, on average about 200 million for the group. So it sounds like broken record as well. We depreciate our SSV service, the fair value model. So if the two big cost component, which is financing cost and depreciation, reported PBT dropped by 75%. That's of course, coupled by the outsized divestment gains in the previous

year. So actually, if I were to exclude the divestment gains and impairment losses, the PBT actually increased by 90% in FY2023. And if you can see this chart across all the three segments, again, property development is our star performer. Hotel operations increased 71%, but if you are wondering why is the bar so short, it's really because the financing costs that we have taken on the privatisation of MNC, but in 2019 has eroded the profits of this segment. So of course, for IP, it's reported a loss because of financing costs as well as impactment losses. I move on to balance sheet. I mean, the group is cognizant that operating resilience is the most important in today's market. So having a strong balance sheet is vital. So gearing has gone up to 61% versus 51% last year. This is really because of the huge acquisitions that we have made in FY2023. I'm very thankful to the lenders in this room that's always supported CDL. Total cash stands strong at $2.2 billion,

and available facilities is also very healthy at $3.6 billion. Average borrowing costs went up 2.4% in 2022 to 4.3% in 23. This is in life, our projections, and we do look forward to more favorable rate cuts. I think I guess the question is when. So notably, in January 23, we did a $285 million MTN program with two local banks at 3.712%. So you look at the five-year MTN at 3.712%. This is the average cost of 4.3%. I think we are hopeful that, you know, this rate will obviously have hit his peak hopefully. In terms of fixed rate, we are at 45%, including loans denominated in yen and renminbi. Remaining loan portfolio that's really, really floating to us is about 50%. I think this is a level that we are very comfortable with as well. Lastly, in terms of debt maturity, 2024 comprises 33% of the debt maturity profile, of which 9% are short-term loans and bank over drafts on cash pool

So what happens is the groups has hotels that geographically disperse. So we have a cash pool arrangement with financial institutions that extend overdraft facilities to subsidiaries backed by deposits with other subsidiaries within the cash pool arrangement. This is really for efficient cash utilization. For the loans in the first half of 2024, I think refinancing and repayments have been arranged accordingly. For the second half of 2024, we'll be working with the lenders. So my last slide. On foreign exchange, we adopt a natural hedging policy. We do not take speculative positions. So since with the recent overseas acquisitions, we have always taken bank loans to kind of hedge the foreign exchange exposure. So you can see that in the key geographical markets that the group operates in, we have a fairly effective hedge, about 72% natural hedge. So with this, I hand over back to Belinda. Thank you.