Wednesday, March 20, 2019
Martin Hennecke
HKEx Stock Code : 00012 
Corporate Profile
The principal activities are property development and investment, construction, infrastructure, hotel operation, finance, department store operation, project management, investment holding and property management.

Business Review - For the year ended December 31, 2012

Business Review - Hong Kong

In 2012, low interest rates, rising inflation as well as the low supply of housing units during the year led to the sustaining of high property prices. In response, the Government has launched a number of suppressive measures to cool down property prices. To illustrate one of the harshest measures imposed: for a non-local's purchase of a residential property at a price exceeding HK$20 million, it would attract a 15% ¡§Buyer's Stamp Duty¡¨ on top of the doubling of the originally applicable 4.25% stamp duty with an additional 4.25% stamp duty. In other words, a total stamp duty of 23.5% on the stated consideration would be immediately payable upon purchase. Such measures have dampened the sentiments among homebuyers, resulting in a moderate downtrend in property price and drastic drop in property transactions. Given the high construction cost and the scanty supply of newly completed residential units, property prices are expected to stay steady. As for commercial properties, which do not appear to be greatly affected despite the increase in stamp duty, they are expected to have a slight increase in price. It transpires that such measures will cool down the overheated residential market and will facilitate its healthy development.

Property Sales

During the year under review, the Group actively promoted the pre-sale of a number of residential developments. ¡§High West¡¨ at Sai Ying Pun was launched in July 2012 and nearly 90% of its total 133 boutique apartments were pre-sold at the year-end date. ¡§Double Cove¡¨ (Phase 1) at Ma On Shan was launched in September 2012 with about 70% of its total 928 residential units pre-sold at the year-end date. Certain blocks of ¡§The Reach¡¨ in Yuen Long were launched in October 2012 and out of the batch of 1,096 residential units offered, over 50% was pre-sold at the year-end date.

Together with ¡§La Verte¡¨ in Fanling, which was launched in early 2012 with all its 16 villas sold out, as well as an array of residential and office developments sold during the year, the Group's attributable sales revenue for the year amounted to HK$11,709 million.

Meanwhile, non-core investment properties were disposed of during the year under review and they included the entire 27,000-square-foot building of ¡§579 Nathan Road¡¨, 17 houses of ¡§Casa Marina¡¨ and 8 houses of ¡§The Beverly Hills¡¨ at Tai Po, as well as the redevelopment site at 25 La Salle Road with an approved gross floor area of about 24,000 square feet. Proceeds arising from these disposals totalled HK$1,715 million. Including the aforesaid amount of sales revenue, the Group sold an attributable total of HK$13,424 million worth of properties for the year.

After the end of this financial year, the Group continued to release properties under development for sale in January 2013 including ¡§High Place¡¨ at Kowloon City and ¡§High Point¡¨ at Cheung Sha Wan, both under ¡§The H Collection¡¨ (urban redevelopment boutique residences) series, with residential areas of about 27,000 square feet and 62,000 square feet, respectively. Both developments sold well and together with the sales of other projects, the total attributable contracted sales for the first two months of 2013 exceeded HK$2,730 million.

Hong Kong Ferry (Holdings) Company Limited, an associate of the Group, also put its ¡§Green Code¡¨ at Fanling on sale in mid-March 2013. This project was well received by the market with 363 units, or approximately one half of its total residential units, sold last week. It shows that small- to medium-sized units of superior quality are highly sought after by the local end-users.

Land Bank

Instead of bidding for land at high prices through public auctions or tenders, the Group has chosen to replenish its land bank by acquiring old tenement buildings for redevelopment and applying for land-use conversion for its portfolio of New Territories land. Although such approach of land banking may involve a relatively longer period of time to accomplish as compared to that of public tenders, it ensures a more reliable source of land supply with a lower acquisition cost, which is beneficial to the Group's development returns in the long term.

The urban redevelopment project of ¡§High West¡¨ at Sai Ying Pun launched for sale during the year under review may serve as a manifest example. In terms of gross floor area approved by Buildings Department, the average selling price for the units sold for this project is about HK$16,500 per square foot, whereas the acquisition cost is about HK$3,500 per square foot (excluding construction cost and other expenses). As for ¡§Double Cove (Phase 1)¡¨ at Ma On Shan, New Territories, which was sourced from land-use conversion, the average selling price for the units sold stands at HK$10,000 per square foot, whereas its acquisition cost (including the cost for acquisition of New Territories land and the land conversion premium) is merely HK$3,600 per square foot (excluding construction cost and other expenses). Hence, it is evident that profit contributions from projects of urban redevelopment as well as New Territories land are highly satisfactory.

Investment Properties

Leasing performance was impressive during the year with the overall occupancy for the Group's core rental properties rising to 98% by the end of 2012. The Group's attributable gross rental incomenote in Hong Kong for the year ended 31 December 2012 increased by 12% to HK$5,466 million, whilst attributable pre-tax net rental incomenote was HK$4,031 million, representing a growth of 12% over the previous year. (Note: this figure includes that derived from the investment properties owned by the Group's subsidiaries (after deducting non-controlling interests), associates and jointly controlled entities) The International Finance Centre project, in which the Group has an attributable interest of 40.51%, performed well. Excluding the contribution from its hotel, it provided a total attributable gross rental income of HK$1,591 million (2011: HK$1,424 million) to the Group during the year under review.

At 31 December 2012, the Group held a total attributable gross floor area of approximately 9.1 million square feet in completed investment properties in Hong Kong, comprising 4.4 million square feet of shopping arcade or retail space, 3.4 million square feet of office space, 0.9 million square feet of industrial/office space and 0.4 million square feet of residential and apartment space. This quality rental portfolio is geographically diverse, with 25% in Hong Kong Island, 34% in Kowloon and the remaining 41% in the New Territories (with most of the latter being large-scale shopping malls in new towns).

Given the improvement in both local consumption and visitor spending, Hong Kong's retail sector fared well and all of the Group's major shopping malls, except those under renovation, recorded nearly full occupancy by the end of the financial year. In addition to conducting certain targeted marketing activities, such as organizing shopping tours for mainlanders and wide adoption of multi-media promotional channels, continual facility upgrades and improved tenant mix are all the keys to such remarkable success. For instance, Metro City Phase II in Tseung Kwan O, which recently brought in international fashion and beauty care brands to upgrade its market image, has drawn continuous interest from many popular restaurants to open their dining outlets in this mall. In order to further differentiate themselves from other competing malls in the neighbourhood, Metro City Phase II and Sunshine City Plaza in Ma On Shan are undergoing a series of renovation works which are set to give visitors a fresh shopping experience after the revamp. Trend Plaza in Tuen Mun attracted more shoppers after the completion of a facelift at its North Wing in 2012, whilst Skyline Plaza in Tsuen Wan also became a popular one-stop shopping hot spot in the region when one single tenant, which occupied the mall exclusively with a total gross floor area of over 150,000 square feet, commenced its department store business in October 2012.

Leasing demand for quality office space in Hong Kong also remained resilient on the back of persistent economic growth in both Hong Kong and mainland China. The Group's premier office developments in the core areas, such as ifc in Central, AIA Tower in North Point, as well as ING Tower and Golden Centre in Sheung Wan, have all performed well with a remarkable increase in rents from lease renewal. Meanwhile, the Group's approximately 2,000,000-square-foot portfolio of prime office and industrial/office premises in Kowloon East recorded nearly full occupancy by the end of 2012 and it is set to benefit further from the Government's commitment to reshape the district as a new business hub under the "Energizing Kowloon East" project. In order to stay ahead of the market and enhance their rental values, the Group regularly enhances the green features and upgrades the quality of its office developments. During the year, Golden Centre in Sheung Wan, following the previous success of ifc and Manulife Financial Centre, achieved the highest ¡§platinum¡¨ rating under the globally recognized Hong Kong ¡V Building Environmental Assessment Method (HK-BEAM), whilst facility upgrades for AIA Tower in North Point are planned to commence in 2013.

Leasing performance for the Group's luxury residences and serviced suites was satisfactory. Both Eva Court and 39 Conduit Road at Mid-Levels leased well, whilst the serviced suite hotel at Four Seasons Place, which offers premium accommodation to guests from all over the world, continued to achieve high occupancy and increased rent. An upcoming addition will be a 66,000-square-foot hotel development at 388 Jaffe Road, Wanchai. Completed in August 2012, this 90-room designer lifestyle hotel is now undergoing interior decoration works and upon its scheduled opening in the summer of 2013, it will be operated by Miramar Hotel and Investment Company Limited under the name of ¡§Mira Moon¡¨.

The Group has a 20% attributable interest in a jointly controlled entity, which holds the project of Citygate in Tung Chung and recently won the bid for a commercial land lot in Tung Chung Town Centre for a consideration of about HK$2,300 million in March 2013. With the planned linkage to its adjacent Citygate, the site will be developed into a large-scale complex with a gross floor area of approximately 540,000 square feet.

Hotel and Retailing Operations

Hong Kong's hospitality industry had another thriving year with visitor arrivals reaching a record high of over 48 million in 2012. In this favourable business environment, Four Seasons Hotel Hong Kong registered a solid growth in average room rate with a consistently high occupancy. Being internationally acclaimed as one of the world's best hotels, Four Seasons Hotel Hong Kong continued to win numerous accolades such as the coveted 3-star designations for its two signature restaurants, namely, Caprice and Lung King Heen in the Michelin Guide to Hong Kong and Macau.

Benefiting from the ever-rising mainland tourist arrivals which accounted for over 60% of their total room revenues during the year under review, the three Newton hotels owned by the Group, namely, Newton Hotel Hong Kong, Newton Inn North Point and Newton Place Hotel, have all achieved an increase in average room rate with a higher occupancy of over 80%. In the previous year, the Group recognized its share of a one-off gain on disposal of a hotel property, namely, Silvermine Beach Hotel held by Hong Kong Ferry (Holdings) Company Limited. After excluding such non-recurrent income, the Group's attributable share of profit contribution note from its hotel operations increased by 7% to HK$288 million during the year under review. (Note: this figure includes that derived from the hotels owned by the Group's subsidiaries, associates and jointly controlled entities)

Established in 1989 as a complementary business to the Group's shopping facilities, Citistore has developed into a retail network with five department store outlets and two ¡§id:c¡¨ specialty stores in Hong Kong. During the year under review, Citistore's turnover and profit contribution increased by 7% to HK$373 million and 3% to HK$67 million, respectively.

Construction and Property Management

During the year under review, both 39 Conduit Road and Henderson Metropolitan won the biennial Quality Building Award, which are jointly organized by nine professional organizations in Hong Kong, in recognition of the Group's experienced construction team and dedication to quality that have produced some of the finest buildings both in Hong Kong and mainland China. Meanwhile, Double Cove and The Gloucester were the only private residential developments in Hong Kong to achieve the top honours of ¡§3-star Green Building Label¡¨ from China Green Building Council. At the MIPIM Asia 2012, which is an annual property event for governments as well as real estate experts around the world to showcase their outstanding development projects, Double Cove was once again heralded as one of the Best Innovative Green Buildings.

Teamwork is central to the Group's success. Stakeholders and experts in different disciplines collaborate from the very beginning so as to ensure that local context, innovative architecture and environmental sustainability features are blended into all of the Group's new developments in both Hong Kong and mainland China. The Group strives for excellence throughout the construction process and advanced features recommended by the Leadership in Energy and Environmental Design (LEED) and BEAM Plus have been persistently integrated. For instance, against the prevailing backdrop of soaring material costs and a shortage of construction workers, pre-fabricated building components are commonly used to save manpower and minimize construction waste and disruption to the neighbourhoods. Foundation piling for the Group's development projects is now also completed on its own to ensure cost efficiency by accelerating development progress along with better quality control. Meanwhile, the Group considers site safety a top priority and apart from proactively promoting site safety within the industry, the Group is also an active supporter of the Construction Charity Fund, which provides immediate assistance to victims of tragic industrial accidents.

The Group's commitment to quality has also been extended to its developments in mainland China. In addition to its tight grip over all key aspects of development such as selection of main contractors and subcontractors, material sourcing and tender awarding, the Construction Department also maintains an ongoing dialogue with contractors and conducts on-site inspections to ensure that all the mainland projects are completed on schedule, within budget and in line with the Group's stringent environmental and quality requirements.

The Group's property management companies, namely, Hang Yick Properties Management Limited, Well Born Real Estate Management Limited and Goodwill Management Limited, collectively manage over 80,000 apartments and industrial/commercial units, 8 million square feet of shopping and office space, as well as 20,000 car parking units in Hong Kong and mainland China.

For the Group's boutique residences under ¡§The H Collection¡¨, these property management subsidiaries will provide unparalleled home services upon their completion in order to offer discerning residents hassle-free urban living. Meanwhile, their commitment to service excellence has also been extended to the Group's property developments in mainland China. As a result, Hengbao Huating and Hengli Wanpan Huayuan were accredited, respectively, as ¡§Excellent Property Management Community Showcase in Guangdong Province¡¨ and ¡§Excellent Community Showcase in Guangzhou¡¨ in recent years.

Aligning with the Group's corporate culture, these property management subsidiaries also offer care to the public at large. In addition to their usual contribution to charity by way of ¡§Hang Oi Charitable Foundation¡¨, their volunteer teams continued to take numerous concrete actions to help the needy after the preceding ¡§Year of Care¡¨. The ¡§Highest Voluntary Service Hour Award¡¨ championship is a testimony to their dedication to community services and corporate social responsibility.

Business Review - Mainland China

In 2012, the austerity policy governing the property sector in the mainland continued to be strictly adopted. Under the stringent implementation of measures such as differentiation in the terms of lending and restrictions on quantity of home purchases, speculative and investment housing demand had been effectively curbed. Coupled with the increased supply of land for low-income housing at the same time, the objective in promoting the long-term steady growth and healthy development of the property market is being achieved.

In early 2012, the property market was plagued by pessimistic sentiment which resulted in a drastic fall in transaction volumes. In response, many local governments lent their support for reasonable end-user demand through a revision of provident fund credit policy and increase in the mortgage loan to value ratio in respect of first-time home purchases. Besides, the overall credit environment improved in the wake of the fine-tuning of the monetary policy to stabilize domestic economic growth, which gave rise to a gradual recovery in the real estate market. Boosted by strong user demand, the property market took a positive turn in May, culminating in a slight peak in July. Riding on the stable resurgence of the macro economy on the mainland in October, the property market has become buoyant again from November onwards. As compared to the previous year, the sales results of developers registered a significant growth, leading to a marked improvement in their cashflow upon achieving their annual sales target. In the fourth quarter, property price rose steadily as there were fewer cases of price reductions by developers to boost sales.

During the year under review, although still affected by severe macro control measures, the Group launched a number of mainland projects for sale, with emphasis on its superiority in brand-name, environmentally friendly features, quality and facilities, which met with an overwhelming response. The Group sold and pre sold in total an attributable HK$6,548 million worth of mainland properties during the year under review, a significant increase of 244% over the previous year. Newly launched units from projects including ¡§Palatial Crest¡¨ in Xian, ¡§Grand Lakeview¡¨ in Yixing, ¡§Treasure Garden¡¨ in Nanjing, ¡§Riverside Park¡¨ in Suzhou, and ¡§Xuzhou Lake Development¡¨ attracted a keen response from prospective purchasers and recorded remarkable sales. The majority of home-buyers were end-users, who had a discerning taste for brand recognition, building quality and associated facilities. Capitalizing on its past experience in design, engineering, construction, building quality as well as scenic landscaping, the Group is set to build ideal homes for end-users and better meet their needs in the subsequent phases of developments. An equal emphasis will also be laid on cost effectiveness.

With a view to fully implementing the standardisation of building plans, development cost control and strengthening the sales and marketing efforts, the delegation of project management and sales responsibilities to local management teams was completed during the year under review in fulfilling the Group's policy of localisation. Notable enhancement had been observed in on-site management, sales and marketing capabilities as well as building quality. As to after-sales property management services, quality has been raised to preserve the sound reputation of each project. This would benefit subsequent sales.

The Group has a prime site in the heart of Haizhu Square, Guangzhou of an approximately 240,000-square-foot land lot, which will be developed into an integrated complex, comprising shopping mall, office and serviced apartments. Preliminary construction is expected to commence in mid-2013 and upon its scheduled completion in late 2017, it will be another flagship property in the Group's rental portfolio.

Henderson Investment Limited (¡§HIL¡¨)

HIL's turnover for the year ended 31 December 2012 amounted to HK$63 million, representing a decrease of HK$236 million or 79% from that of HK$299 million for the corresponding year ended 31 December 2011. The decrease in turnover was due to the fact that, commencing from 20 March 2012, payment of toll fees in respect of Hangzhou Qianjiang Third Bridge to a joint venture company of HIL was provisionally suspended. Consequential upon the failure of the relevant authority to put forward any formal proposal or compensation offer regarding the toll fee collection right, for the sake of prudence, the toll fee income during the period from 20 March 2012 to 31 December 2012 in the amount of HK$254 million (after deduction of PRC business tax) has not been recognized in the consolidated accounts of HIL. Nevertheless, taking into account those toll revenues which were accrued but not recognized, the total toll revenue for the year ended 31 December 2012 generated by Hangzhou Qianjiang Third Bridge amounted to HK$317 million, representing a growth of HK$18 million or 6% when compared with that of HK$299 million for the corresponding year ended 31 December 2011.

Due to the aforementioned non-recognition of the toll fee income from 20 March 2012 onwards, HIL's profit attributable to equity shareholders for the year ended 31 December 2012 decreased by HK$83 million or 77% to HK$25 million as compared with that of HK$108 million for the corresponding year ended 31 December 2011.

The above issue of toll fee collection right is subject to arbitration by China International Economic and Trade Arbitration Commission (¡§CIETAC¡¨). CIETAC on 12 November 2012 confirmed its acceptance to administer the above arbitration case. CIETAC's decision for the composition of arbitral tribunal, as well as its notification of commencement of proceedings, are both pending.

HIL may report a loss from operations in the current financial period, unless the arbitration proceedings result in a determination or the parties come to an agreement in each case satisfactory to HIL, or suitable investment that may be identified by HIL produces satisfactory income.

Associated Companies

The Hong Kong and China Gas Company Limited (¡§Hong Kong and China Gas¡¨)

Profit after taxation attributable to shareholders of Hong Kong and China Gas for the year 2012 amounted to HK$7,727.9 million, an increase of HK$1,578.3 million compared to 2011. Profit growth was mainly due to growth in profit of mainland businesses, a revaluation surplus from the International Finance Centre (¡§IFC¡¨) complex and a one-off net gain. Profit after taxation attributable to shareholders of Hong Kong and China Gas, excluding revaluation surplus from the investment property, amounted to HK$6,333.4 million.

During the year under review, Hong Kong and China Gas invested HK$5,905.5 million in production facilities, pipelines, plants and other fixed and intangible assets for the sustainable development of its various businesses in Hong Kong and mainland China.


Total volume of gas sales in Hong Kong for the year 2012 increased only slightly by 0.8% compared to 2011. Appliance sales for the year 2012 increased by 6.1% compared to 2011. As at the end of 2012, the number of customers was 1,776,360, an increase of 25,807 compared to 2011.

Hong Kong and China Gas will raise its standard gas tariff by HK1 cent per megajoule with effect from 1st April 2013, which represents 4.6% of the standard gas tariff, with a commitment to no further increase for this tariff in the coming two years.

Laying of a 15 km pipeline to bring natural gas from Tai Po to Ma Tau Kok gas production plant, to partially replace naphtha as feedstock for the production of town gas, is near completion with commissioning expected this year. Construction of a 9 km pipeline in the western New Territories to strengthen supply capability and reliability is also in progress. In tandem with the government's development of West Kowloon, South East Kowloon and a cruise terminal, network planning, design and construction in these locations are underway. Construction of a new submarine pipeline from Ma Tau Kok to North Point commenced in 2012. Meanwhile, the gas main extension to Lei Yue Mun is substantially complete.


As at the end of December 2012, this group had an approximately 66.18% interest in Towngas China Company Limited (¡§Towngas China¡¨; stock code: 1083). In January 2013, Towngas China issued and sold 150 million new ordinary shares by placement (the ¡§Placing¡¨) at a price of HK$6.31 per share. Net proceeds from the Placing after deducting related commission and other expenses were HK$930 million. This group's interest in Towngas China was slightly diluted to 62.37% after the Placing.

Towngas China's profit after taxation attributable to its shareholders amounted to HK$841 million in 2012, an increase of approximately 19% over 2011.

In 2012, Towngas China acquired seven new piped-gas projects located in Wafangdian, Dalian city and Xinqiu district, Fuxin city, Liaoning province; in Binhai Science and Technology Industrial Park, Zhaoyuan city and Pingyin county, Jinan city, Shandong province; in Yifeng county, Yichun city, Jiangxi province; in Lingang Industrial Park, Shanhaiguan district, Qinhuangdao city, Hebei province; and in Changting county, Longyan city, this group's first in Fujian province. Towngas China also added a new midstream pipeline project in Wafangdian, Dalian city, Liaoning province to its portfolio in 2012. Towngas China is focused on developing city-gas businesses in cities with a high proportion of industrial gas consumption. Towngas China will continue to strive for rapid expansion through mergers and acquisitions.

With seven new projects successfully established by Towngas China in 2012, this group had 107 city-gas projects in mainland cities spread across 20 provinces, municipalities and autonomous regions at the end of 2012. The total volume of gas sales of these projects for 2012 was approximately 11,900 million cubic metres, an increase of 15% over 2011, and at the end of the year this group's gas customers on the mainland stood at approximately 14.82 million.

This group's midstream natural gas projects are making good progress. These include high-pressure natural gas pipeline joint ventures in Anhui province, in Hebei province, in Hangzhou city, Zhejiang province and in Jilin province; the Guangdong Liquefied Natural Gas Receiving Terminal project; a natural gas valve station project in Suzhou Industrial Park, Suzhou city, Jiangsu province; and a new pipeline project in Henan province.

As at the end of 2012, this group had invested in and was operating four water projects. These include water supply projects in Wujiang city, Jiangsu province and in Wuhu city, Anhui province; and an integrated water supply and wastewater joint venture project, together with an integrated wastewater treatment project for a special industry, in Suzhou Industrial Park, Suzhou city, Jiangsu province. During the first quarter of 2013, this group successfully added a water supply project in Zhengpugang Xin Qu, Maanshan city, Anhui province to its portfolio, making a total of five water projects in hand.

Overall, inclusive of projects of Towngas China, this group had 150 projects on the mainland, as at the end of 2012, twelve more than at the end of 2011, spread across 22 provinces, municipalities and autonomous regions. These projects encompass upstream, midstream and downstream natural gas sectors, water supply and wastewater treatment sectors, natural gas vehicular filling stations, environmentally-friendly energy applications, energy resources, logistics businesses and telecommunications.


This group's development of emerging environmentally-friendly energy projects, through its wholly-owned subsidiary ECO Environmental Investments Limited and the latter's subsidiaries (together known as ¡§ECO¡¨), is progressing well. ECO's two major businesses in Hong Kong ¡V an aviation fuel facility, servicing Hong Kong International Airport, and dedicated liquefied petroleum gas (¡§LPG¡¨) vehicular filling stations ¡V are operating smoothly. Total turnover for the aviation fuel facility for 2012 was 5.56 million tonnes of aviation fuel. The profit margin for ECO's filling station business for 2012 was lower than in 2011 due to the impact of rising petroleum gas prices.

ECO's vehicular clean energy business on the mainland mainly focuses on the use of compressed or liquefied natural gas to replace diesel. A network of filling stations established by ECO is gradually taking shape in Shaanxi, Shanxi, Shandong, Henan and Liaoning provinces mainly servicing heavy-duty trucks. As at the end of 2012, nine filling stations were in operation and another five under construction.

Construction of a logistics port in Jining city, Shandong province, to link an upstream dedicated coal transportation railway with a nearby downstream canal connecting Beijing and Hangzhou, part of ECO's new ¡§Energy Logistics¡¨ business sector, is nearly complete. The pilot run for bulk cargo transportation has commenced. The logistics port is expected to be fully commissioned during the fourth quarter of 2013. ECO is also planning to provide liquefied natural gas filling facilities for incoming and outgoing heavy-duty trucks and river transport vessels at the pier so they may progressively replace their use of diesel.

ECO's coalbed methane liquefaction facility located in Jincheng city, Shanxi province is operating smoothly; production increased by 36% in 2012 compared with the same period for 2011. ECO's methanol production plant in Erdos city, Inner Mongolia, which converts coal into methanol and has an annual production capacity of 200,000 tonnes, is now running smoothly at the pilot stage of production. To further enhance the economic benefits of this project, ECO plans to also convert the methanol into high value-added energy products.

ECO's new-energy research and development centre is also working proactively on technologies to convert resources of low value into high value-added energy. Industrial tests on a medium scale, focused on converting coal tar oil of medium to low temperature into petrol or diesel, were successfully completed in 2012 and planning is now in place to apply this technology to commercial projects in 2013. Furthermore, ECO is also developing its interests in methanol processing and in conversion prospects for coke oven gas, tar oil and biomass energy.

ECO in mid-2012 acquired a 60% effective stake in the development of onshore oilfield blocks in central Thailand; ECO has already smoothly taken over the operational management of the oilfields and organised a professional team to formulate a plan for their comprehensive development. In addition, in Guizhou province, ECO has conducted an innovative test with promising results on surface extraction of coalbed methane for coal mines of low permeability. In Inner Mongolia, ECO's Xiaoyugou coal mine, with an annual production capacity of 1.2 million tonnes, is now at the pilot stage of production and is expected to be fully commissioned during the first quarter of 2013 while its open-pit Kejian coal mine has been operating normally as planned.


For the commercial area of the Grand Waterfront property development project at Ma Tau Kok, as well as IFC complex in which this group has an approximately 15.8% interest, leasing is good.


This group continued issuing medium term notes, for a total amount equivalent to HK$4,400 million, during the year 2012 under its medium term note programme (the ¡§Programme¡¨). Inclusive of this group's first renminbi-denominated notes in Hong Kong issued in late March 2011 for a total amount of RMB1,000 million over a term of five years, this group had issued, as at the end of December 2012, medium term notes of an aggregate amount equivalent to HK$10,200 million under the Programme with tenors ranging from 5 to 40 years.

Hong Kong and China Gas predicts an increase of about 25,000 new customers in Hong Kong during 2013. Its increase in the standard gas tariff with effect from 1 April 2013 will offset some of the pressure on its own rising operating costs. The combined results of this group's emerging environmentally-friendly energy and mainland utility businesses have already overtaken the results of its Hong Kong gas business and are forecast to grow faster than the latter in the coming years.

Hong Kong Ferry (Holdings) Company Limited (¡§Hong Kong Ferry¡¨)

Hong Kong Ferry's turnover for the year ended 31 December 2012 amounted to approximately HK$616 million, representing a slight decrease of 3% when compared to the previous year. This was mainly attributed to the decrease in the sales of The Spectacle. Its consolidated profit after taxation for the year amounted to approximately HK$398 million, a decrease of 30% as compared with the profit after taxation of HK$565 million last year. However, if the gain from the disposal of Silvermine Beach Hotel in 2011 (amounting to HK$245 million) is excluded, Hong Kong Ferry has achieved an increase of 24% in profit in 2012 as compared with that of 2011. During the year under review, its profit was mainly derived from the sale of the residential units of Shining Heights, rental income and the surplus from the revaluation of investment properties.

Hong Kong Ferry sold 14 flats in Shining Heights and 1 flat in The Spectacle which accounted for a total profit of approximately HK$162 million during the year. Rental and other income from its commercial arcades amounted to HK$54 million. The commercial arcades of Metro Harbour View and Shining Heights were fully let whereas the occupancy rate of the commercial portion of The Spectacle at year end was about 60%.

During the year, the superstructure works of its development project, Green Code at 1 Ma Sik Road, Fanling, New Territories (formerly known as Fanling Sheung Shui Town Lot No. 177) have been completed and the pre-sale of the property commenced in mid-March 2013. The response from the buyers was good. Up to 21 March 2013, the accumulated number of residential flats sold amounted to 363, or approximately one half of the total units of the project, with the sale proceeds amounting to approximately HK$1,607 million.

Construction works of the site at the junction of Gillies Avenue South and Bulkeley Street, Hung Hom Inland Lot No. 555, with a site area of approximately 6,300 square feet, is progressing well. Foundation works are expected to be completed in the second quarter of 2013. The residential-cum-commercial tower will provide a total gross floor area of approximately 56,000 square feet and 95 residential units.

Foundation works of the property at 208 Tung Chau Street (formerly known as 204-214 Tung Chau Street) is in progress. It is expected that the aforesaid works would be completed by second quarter of 2013. The project will be re-developed into a residential-cum-commercial building with a total gross floor area of approximately 54,000 square feet.

The Ferry, Shipyard and related operations achieved an increase in operating profit to HK$28.1 million. This sum represents a five-fold as compared with the profit of HK$5.5 million last year. The increase was mainly due to increased leasing of its vehicular ferries as a result of more harbour works in Hong Kong. The turnover of the shipyard operations has also improved.

With increasing competition during the year under review, the Travel Operation achieved a profit of HK$0.6 million, a decrease of 78% compared with that for last year.

Although Hong Kong Ferry recorded an impairment loss of HK$34.4 million due to market fluctuation on available-for-sale securities in the first half of 2012, it derived an appreciation of approximately HK$116 million in the portfolio following market recovery at the year end date, which had been credited into the Securities Revaluation Reserve.

Hong Kong Ferry will continue to sell the residential flats of the ¡§Green Code¡¨, Fanling project in different lots. If its occupation permit can be obtained by the end of 2013, the profits from the sale of the project will be booked in its accounts for the year 2013.

Miramar Hotel and Investment Company, Limited (¡§Miramar¡¨)

Miramar's turnover rose by 19% to approximately HK$2,974 million for the financial year ended 31 December 2012 when compared to HK$2,496 million for the corresponding financial year ended 31 December 2011. Profit attributable to shareholders increased by 4% year-on-year to approximately HK$1,377 million (2011: HK$1,325 million). Excluding the net increase in the fair value of its investment properties, underlying profit attributable to shareholders grew by 9% to approximately HK$448 million (2011: HK$411 million).

Miramar continues to strengthen its five lifestyle businesses of hotel and serviced apartment, property rental, food and beverage, travel and apparel.

The Hotel and Serviced Apartment business benefited from the surge in visitor arrivals to Hong Kong in 2012. Its flagship hotel in Tsim Sha Tsui, The Mira Hong Kong, recorded an average occupancy rate of 84% in 2012, compared with 83% in 2011. The average room rate rose by approximately 9%. EBITDA (earnings before interest, taxes, depreciation and amortization) of The Mira Hong Kong grew by 13% to approximately HK$233.6 million. A new designer lifestyle hotel under its management, Mira Moon, is scheduled to open in Wan Chai during the summer of 2013. This hotel will provide approximately 90 guest rooms.

For the Property Rental business, Miramar owns a prestigious portfolio of commercial properties in Hong Kong and mainland China. As at the end of 2012, occupancy rate of Miramar Shopping Centre was approximately 99% and the average unit rate rose by 7% year-on-year. Mira Mall, the shopping centre at The Mira Hong Kong, unveiled its new face in a grand opening in the fourth quarter of 2012. As at the end of 2012, occupancy rate of Mira Mall was approximately 99%. Miramar Tower's rental income recorded satisfactory growth following its renovation in 2011 and as at the end of 2012, occupancy rate of Miramar Tower was approximately 99%, while the average unit rate increased by 4% year-on-year.

Miramar adopts a multi-brand strategy for its Food & Beverage business. The wide selection includes Chinese restaurants of Tsui Hang Village, Yunyan Sichuan Restaurant and Cuisine Cuisine (a Michelin-Star-rated Chinese restaurant), The French Window (a French brasserie), Assaggio Trattoria Italiana, and Japanese restaurants of Hide-Chan Ramen (a Japanese Ramen restaurant), Saboten (a traditional Japanese pork cutlet restaurant) and its newly-opened Japanese sake bar, Zanzo. Miramar opened two Cuisine Cuisine restaurants in Beijing and Wuhan.

Its Travel business resumed growth momentum with an increase of 6% in turnover to HK$1,119.8 million in 2012. Segment EBITDA rose by 40% to HK$35.5 million in 2012.

Miramar diversified into the Apparel business in 2011 and set up directly-managed DKNY Jeans retail stores in Shanghai and Beijing. It has a network of franchised stores in major cities across mainland China by the end of 2012.

Business Outlook - For the year ended December 31, 2012

The Group plans to launch ten projects for sale and, together with the remaining unsold units from the major developments, a total of about 2.27 million square feet of space will be ready for sale in 2013 and they are expected to bring satisfactory returns to the Group. Meanwhile, both ¡§Double Cove (Phase 1)¡¨ and ¡§The Reach¡¨, which went on sale in the latter part of 2012 with the attributable sales revenue totalling HK$6,663 million by the end of February 2013, are set to be recognized in the accounts in 2013. Together with the continued sale of completed stocks, they are expected to bring significant property sales revenue to the Group for the forthcoming financial year 2013.

Turning to mainland China, it is expected that the macro economy will show a steady growth in 2013, notwithstanding the continuation of the tight control measures targeting speculative and investment demand in the housing market. Following the gradual advancement of urbanization, the scale of development for the residential property market will further expand. In 2013, the Group plans to launch various new projects for sale and the Group's attributable sales revenue is expected to rise further. The Group's mainland rental income has shown a substantial growth over the last two years. ¡§Henderson 688¡¨, an approximately 700,000-square-foot commercial complex in the Jingan District of Shanghai, is scheduled for completion in the last quarter of 2013. In Guangzhou, the prime site of 240,000 square feet at the Haizhu Square is set to commence its preliminary construction in mid-2013.

In Hong Kong, the Group has over the past few years made acquisitions of old tenement buildings of about 4,000 units in total (and one unit may house several families in certain cases). Their redevelopment can greatly enhance the environment and benefit the society, whilst mitigating the problems arising from living in the dangerous and dilapidated buildings. The redevelopment of old buildings in urban areas is a win-win move for the society, the people, as well as the Group itself. The Group will pursue its further developments in earnest.

The Group has three major earnings drivers. (I) Rental: The fast expanding rental portfolio in both Hong Kong and mainland China is an income pillar of the Group. (II) Associates: The three listed associates (in particular, Hong Kong and China Gas) serve as another pillar to support the Group's sustainable earnings growth. (III) Operation: The above-mentioned development projects in categories (1) to (7) will ensure successive completion of over 7.5 million square feet in total attributable gross floor area to be available for sale or leasing. It also has a huge land reserve in the New Territories of over 42.8 million square feet, the largest holding among all property developers in Hong Kong. In particular, for the Group's land holding of 5.4 million square feet in ¡§North East New Territories New Development Areas¡¨, which is suitable for residential development, it is expected that there will be a clearer direction when the Government announces the consultation conclusion in mid-2013. These projects, with its low costs and wide sources for acquisition, are sufficient for the Group's development for the coming five to seven years and become another pillar for the Group's long term superior returns.

The book net asset value attributable to equity shareholders calculated by the Group in accordance with generally accepted accounting principles was HK$84.97 per share. In contrast, the recent share prices of the Company carry a substantial discount to the book net asset value. Besides, such net asset value did not reflect the market value, if revalued, of the development sites, completed stocks, and its shareholding in The Hong Kong and China Gas Company Limited. We would like to draw the attention of shareholders to the huge potential of the Group's assets. In the absence of unforeseen circumstances, the Group will report a satisfactory result in the coming year.

Source: Henderson Land Dev (00012) Annual Results Announcement
Chairman LEE Shau Kee Issued Capital (shares) 2,684M
Par Value HKD 2 Market Capitalisation (HKD) 128,676M
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