|Shun Tak is a progressive business. Over the past years we have been actively consolidating our strengths in order to deliver for our clients and shareholders over the long term. The Board believes that our clear and focused strategy, together with our highly motivated and talented management team, have put us right on track.
Mr. Stanley Ho
Group Executive Chairman
27 March 2017
Over the past twelve months, the Group has experienced formidable hurdles in our operating environment. It started on a bleak note for our hospitality business, attributable to heightening recessionary pressure in the Chinese economy, a strong local currency which discounted our destination appeal, and the effect of the “one trip per week” Individual Visit Endorsements. A notable fall-off in inbound tourism in the first eight months which underpinned a broad based decline in export of travel services and retail performance have resulted. The market has remained largely challenging over the first eight months, with tourist arrivals trailing year-on-year. Despite signs of recovery towards year end, our portfolio properties were met with yet another set of challenges. Keen competition and aggressive pricing, especially in Macau where new resorts have brought on a surge in room supplies, have significantly impacted our bottom line. During the year, our hospitality division has registered a loss for the first time since 2010.
In terms of real estates, although risks were skewed towards the downside given an anticipated interest hike and potential capital outflow, properties continued to outperform most other sectors, buttressed by strong end user demand and a resilient labour market. The Group has actively leveraged the opportunity to market a number of our properties with on target prices, including the Chung Hum Kok Collection, remaining inventory at Nova Park, and the pre-sale of Nova Grand. The latter was launched in December with solid response from the local community, bearing testimony to the consistent quality and value of our developments. Nonetheless, a time lag in profit booking, coupled with a substantial revaluation loss for One Central, have prevented our property division from contributing better results to our financial performance within this fiscal year.
Our transportation division has continued to perform on strong footing, benefiting from lower fuel price, effective yield management and expansion of its market catchment. It is evident that our foresights and investments made to build the capacity for a well-connected maritime system across the Pearl River Delta, as well as a state-of-the-art fleet and value-creating services, have paid off in recent years. In 2016, TurboJET commenced management of the Hong Kong Tuen Mun Ferry Terminal, with routes to Macau, Shenzhen, and Zhuhai progressively launched. We are fully aware of the significance of 2017, as TurboJET is set to embrace opportunities and challenges brought about by two pivotal developments. These include the arrival of the Hong Kong-Zhuhai-Macau Bridge, and the completion of the new Pac On Taipa Ferry Terminal. We are confident that sea transport will continue to be an integral part of multi-modal transport connection, and we are well prepared to usher in a new era of an expanded one-hour living circle, with its ever-growing population, market size and purchasing power.
While it is encouraging to see improvements in Macau’s gaming market since August 2016, our investment division has registered a significant decline in profit, underscored by receded dividend income from Sociedade de Turismo e Diversões de Macau, S.A. which was indicative of its performance at the trough of the market corrections in 2015.
Although we are not pleased with the set of financial results delivered, 2016 has been a solid year from the perspective of advancing our strategic initiatives. Since five years ago, the Group has started to gear for expansion beyond Hong Kong and Macau. Starting with our investments in Beijing, Hengqin, Shanghai, and leading up to our latest foray into Singapore, the Group has carefully built an exciting pipeline of projects that are progressing smoothly as planned, bringing catalysts for dynamic growth from 2018 and beyond. Tying in with this initiative is a parallel expansion of our hotel management subsidiary Artyzen Hospitality Group (“AHG”), which has enlarged its footprint into important gateway cities such as Taipei, Kuala Lumpur, Shanghai and Nanjing. Through leveraging our market knowledge and network resources, the diversification strategy was aimed at optimizing our position to capture new opportunities in some of the most promising economies, to create additional synergies that promote balanced growth across the Group’s portfolio, as well as to generate recurring cash flow with secure and stable returns for the future.
Notwithstanding a number of external uncertainties weighing on the market’s confidence, the Group has entered 2017 with relative optimism. Firstly, the economy has regained momentum, picking up successively upon the back of sustained improvements in the external economic environment. Secondly, ground works laid over the past years are progressively coming to fruition. Not only have we locked in profits from a number of property sales to be recognized in 2017, our hotel arm AHG is also set to launch its first hotels in Taipei and Beijing within the year and propel new organic growth for the Group. Finally, and underpinning the above, are the core strengths and solid foundations we have built into our businesses. As new policies and infrastructures accelerate cross-regional integration, we will be at the forefront to capitalize upon the powerful growth.
Shun Tak is a progressive business. Over the past years we have been actively consolidating our strengths in order to deliver for our clients and shareholders over the long term. The Board believes that our clear and focused strategy, together with our highly motivated and talented management team, have put us right on track. Taking this opportunity, I would like to thank our committed employees, business partners and shareholders for your unwavering support throughout the years. I look forward to a strong 2017 with you all.