CTF Services Limited (659) Earnings Call Transcript

Good afternoon, everyone. Thank you for joining CTF Services Limited Financial Year 2026 Annual Results Analyst Briefing. I'm Sylvia, the Head of Group Investor Relations. In today's meeting, our management presentation will cover the financial and operational performance for the period, provide updates on our 5 major business segments and further elaborate on our strategic initiatives. A Q&A section will follow the presentation. [Operator Instructions] Without further ado, may I now invite our Executive Director, Group Co-CEO, Mr. Gilbert Ho; and our Executive Director, Group CFO, Mr. Jim Lam, to kick start today's meeting.

Thank you, Silvia. Okay. Let me have a quick introduction on our results. So for financial year '26, we continue to have a very stable year, I would say, it's not particularly strong, but it's a very stable year. We have done a number of acquisitions and also a number of disposals. I will talk about the numbers later on, and Jim will elaborate on the operations as well as the numbers. But overall, as I said, we have a very solid financial year '26. In terms of the expansions, the financial services showed a very strong momentum and it became the largest AOP contributor that replaced our road segment as a top AOP contributor. We continue our capital recycling. We disposed some of the assets. We deployed our capital into 2 focus areas, namely our Financial Services as well as our Logistics segments. As you may also know, during the year, we issued the convertible bond and all of them has now been converted. So we restored our public flow. And also that we enable us to go back into the Hang Seng Composite Index as well as renewed our Stock Connect Eligibility. As you can expect, I mean, our DNA or our business is always a very strong cash flow generation, and that continues to be the case. We lower -- actually lower quite a bit on our net gearing ratios and have ample of liquidity for us to be deployed and expand into the 2 core areas that I mentioned before, the logistics sector as well as the financial services sector. Dividends, we uphold our sustainable and progressive dividend policy. I think this is the 24th year. This is the 24 years consecutively, we distribute our dividend. We will talk about the dividend part later on. So -- on AOP, we delivered a strong result with HKD 4.59 billion of AOP, increased year-by-year by 3%. In terms of profit attributable to shareholders, it increased by 11% to HKD 2.393 billion. As you can see in the chart here, 32% of the AOP actually coming from the Financial Services now and 31% coming from our Road segment, followed by Logistics, 14% and then Construction. And then last but not least is our Facility Management. So this basically summarize the entire years of capital recycling that we have done. I will first talk about the monetization and the disposal first. In October 2025, we first issued the exchangeable bond of HKD 2.2 billion to exchange into our shareholding in Shoucheng. That exchangeable bond, the 0.75% is due 2028. So that actually allowed us to monetize the stock without actually selling it. We can capture the upside. And in the meantime, we have a very low funding cost funds for us to do our acquisitions. And then between 2025 and 2026, within this entire year, we have done a number of disposals within our strategic investment segments. That total of around HKD 1.3 billion. That consists of a number of different investments, small and big. So in the old days, we have done very much a number of PE investments as well as VC investments. So here are the proceeds coming from those investments. Then in 2026 July, we completed the disposal of one of our roads, the Changliu Expressway. That came back with HKD 1.6 billion as well as I think very importantly, we consolidated the net debt of around HKD 1.7 billion. So that -- I think that actually is very important to us because that substantially lowered our net gearing ratios. So in addition to the monetization as well as the disposal, we have done a number of acquisitions throughout the year. In November last year, we acquired a 13% in uSmart. This is actually a very important step. Not only that expanded our financial services platform. These acquisitions, although it's only 13%, only account for half a year, already contribute around HKD 30 million, right? -- HKD 35 million of AOP just for this half year. And then between 2025 December and 2026 January, we consecutively acquired 4 logistics properties, 1 in Greater Bay and 4 in the Yangtze River Delta, so around the Shanghai area. And then in April, we invested in a battery energy storage platform in Finland. Then in 2026 July, we completed our acquisitions of 65% in Blackhorn. Again, that is a very important step in building up our ecosystem in the financial services platform. It enhances the entire capability for us to cross-sell to our policyholders and offer more wealth management products to our customers. Last but not least, in 2026 September, we completed another acquisition of logistics property in the Yangtze River Delta. We also invested in AI data center in this September 2026. In fact, we just issued a press release for our investment in a data center project in Johor in Malaysia. So that actually marked our first overseas investments of data center in this month. Very importantly, we -- I have to say that most of the investment, if not all, we don't invest in greenfield investments. So we only invest in brownfield or mature assets. So basically, all the investment that we do, no matter it is warehouses or data center is already making cash flow. It is very important to us that we don't take any construction risk. It is really not the nature of our company. So if we go to the strategic priorities and outlook, I'll very quickly go through this. As I said, financial services will be one of the core segments that we will grow. We will continue to expand this this particular platform, especially definitely is CTF Life. We will focus very much on the expansion of CTF Life. We will expand the reach of their customers, not only Hong Kong and CMV, Chinese Mainland Visitors. We have actually a very good growth, which Jim will talk about later on, that the customers coming from overseas, including Japan, including Taiwan. We will also look into overseas market such as Singapore. We will continue to enhance the wealth management platform. Now we have CTF Life, we have Blackhorn, we have uSmart. We will continue to utilize all these different units to give more choices for our customers. We will also keep an eye open on to see whether there's any acquisitions suitable for this particular ecosystem to expand in this financial services sector. For Toll Roads, I said in the last analyst briefing that we are not going to expand further in toll roads. And in fact, we -- after that, we disposed one of the toll roads. We will continue to see whether there's opportunities to monetize at a good valuations, any of these toll roads. I think one of the key step here is about good valuations. We won't monetize for the sake of just getting the cash flow back because all of the toll roads at the moment, we now have 12 toll roads left in our portfolio. All of them still generating very good cash flow. So unless we get good valuations, I don't see the needs of the immediate disposal. But if we get the right valuations, we have no hesitation to dispose toll roads in this juncture. Logistics, we -- I think the idea, as I said, is to continue to expand in this particular area. Hong Kong, for ATL, we already increased the occupancy rate from 70-odd percent now to around 85% by the end of last financial period, which is 30th of June. We will continue to strengthen the operations of ATL and increase its occupancy rate. We will look for value acquisitions. So we've already done 4 over the last few months. We'll see whether there's any other opportunities. I think it is very important that I mean, over the last 10 years, there's a period where there's many people chasing for assets in the logistics sector. We are not those type of people. We don't chase assets. We only -- we only do the acquisition when we see value. So now although some of the people exiting the sector, it is not because it is really not because the entire sector outlook has been affected. It is because some of the funds reached the end of the fund life, they have different reasons. So we only do acquisitions. Again, when we see value in it, long-term value and good locations. At the end of the day, logistics is about locations, location, locations, locations. So all the focuses of this is in the GBA area as well as in Yangtze River Delta. Construction, we have now 4 platforms, Hsin Chong Aster, which focus on E&M. We have Hip Hing focused on building. We have Vibro focused on foundations. And then we have Quon Hing focused on concrete. So all this actually can capture very different type of things, especially now, as you can see from the government policies, they are very focused on the Northern Metropolis. How we see it is, especially in the very initial phase, it will benefit Vibro doing the foundation work. This is actually very much stated already in the 5-years plan as well as in the policy address last week. So we think we can definitely capture that particular market, Vibro being the top -- not the top tier, the top, top foundation company, I think we can capture all these opportunities in the Northern Metropolis. In fact, over the last year, Hip Hing already is doing some of the projects in the Northern Metropolis. We continue to see the recovery in the residential market as well. Some of the property developer already start bidding land again. So we are very positive about the construction segments. We will continue to do well, especially that we are in the top part of the cake. We are in the -- where we can actually capture the most value out of this particular sector. Last but not least is the Facility Management. That includes the -- where you situated here, the HKCEC, GHK and KTSP, CEC, I mean, operationally, it continues to be good, but the result is a little bit affected because of the depreciation where we have only a few years left in the concessions. So while the operation is good, we will continue to hit by the high depreciation. We will start the negotiations or discussions with the government on the next concession period for HKCEC. For GHK, GHK now mark the -- I think, the 6 years, 7 years of its operations. It started operating in 2017, grand opening in 2018. It turns into positive EBITDA in 2021. Now this year's AOP, in fact, the AOP grew 4x from last year, which Jim will talk about. We will continue to see this will continue to do well. We'll focus on the expansion of the clinics, which drives a lot of the patients from our clinics to our hospitals. We'll expand -- continue to expand on the clinic as well. We opened one of the clinics in Admiralty in last year. We will look for more expansions this year. The aim of opening the clinics really is not about the clinic itself, is to channel the patients into the hospital where they can do high-value operations. KTSP, where we only own 25%. This is the second year in its operations. They've already done, I think, over 100 events, including concert and sports amidst all the KPI. We do see that it will continue to do well, although this is still the ramp-up phase. So it is still in the AOL phase, but we definitely will enjoy what we call " Seng Si Ging Jai" from the government. We will see how we can actually do better and improve the operational efficiency. Okay. Now I'll pass it on to Jim on the financial updates.

First, a very quick recap on the key financial numbers. Attributable operating profit up 3% to HKD 4.6 billion. Profit attributable to shareholders up 11% to HKD 2.4 billion. Adjusted EBITDA, which is a proxy of our operating cash flow before tax and interest increased by 1% year-on-year to HKD 7.4 billion. Total liquidity remains very ample, HKD 31.3 billion as of June 2026, comprising of cash on hand, HKD 20.8 billion and undrawn committed banking facility HKD 10.5 billion. Net gearing ratio decreased by 9 percentage points year-on-year to 28% and net debt balance decreased by 12% year-on-year to HKD 11.7 billion. In terms of the debt mix, we turned more bullish on the renminbi exchange rate about 18 months ago. Since then, we've been gradually reducing our renminbi borrowing exposure, resulting in a lower percentage of the renminbi debt to total debt. The ratio was 46% in June this year versus 62% a year ago. We believe such move will allow us to benefit from a stronger renminbi, resulting in a stronger increase in our equity on the back of the renminbi appreciation. The borrowing cost remained stable at 4.1%, which is unchanged compared with last year. We also done quite a lot of refinancing last year. We did HKD 14.2 billion of refinancing last year, which resulted in our debt maturing within the next 12 months from June this year to HKD 7.9 billion compared with over HKD 9 billion 12 months ago. The majority of this HKD 7.9 billion we expect will be refinanced by December this year. We continue to maintain a very diversified funding channel. We have a banking facility of total HKD 35.5 billion onshore and offshore, of which about HKD 10.5 billion remained undrawn. We have 2 outstanding U.S. dollar bonds. We have issued an exchangeable bond exchangeable into our approximate 10% stake in Shoucheng Holdings, which was issued in September last year. And we have also issued Panda Bonds -- 3 tranches of Panda Bonds since 2022. We repaid the first tranche at its maturity in May this year, which is consistent with our strategy to reduce exposure to the renminbi borrowings. We maintained our A+ credit rating with JCR and the outlook was upgraded from stable to positive. We also maintained our AAA rating with the domestic rating agency, China Lianhe. As mentioned, our net gearing ratio decreased from 37% to 28% in June this year, which was due to, first, the issuance of HKD 2.2 billion exchangeable bond. second, reclassification of the HKD 2 billion net debt associated with Changliu Expressway to held for sale as of 30th of June 2022 because we signed the SPA to dispose this Expressway in May. conversion of approximately HKD 1 billion of convertible bond and finally, disposal proceeds of approximately HKD 1.7 billion. The majority of it come from the disposal of various strategic investments. Okay. Page 14. Despite the challenging macro environment, both in Hong Kong as well as the Mainland, we managed to increase our attributable operating profit, profit attributable to shareholders as well as return on equity over the past 4 years, which reflected our successful portfolio optimization strategy as well as a shareholder-friendly dividend policy. We have committed to our sustainable and progressive dividend policy since fiscal '19. We -- today, we announced a 4% increase in our final to HKD 0.33 on a comparable basis. When I say comparable basis, it means we will adjust the FY '25 final and interim DPS number to reflect the 1 for 10 bonus issue completed in December 2025. So together with the HKD 0.28 interim dividend, total dividend this year would be HKD 0.61, and that represent a 3% increase year-on-year. We announced another 1 for 10 bonus issue. The purpose, just like last year is to further increase the stock liquidity. Our daily stock daily turnover volume has increased substantially by about 1.4x to over USD 2 million, thanks to the increase in research coverage by the major investment banks as well as the 3 percentage point increase in our free float as a result of the CB conversion. Next, I will talk about the performance of each of our 4 major segments. I will start with Financial Services. Sorry, as Gilbert mentioned, Financial Services has become our largest AOP contributor for the first time overtaking the Road segment. The AOP increased by 19% year-on-year to HKD 1.5 billion. And CTF Life represented the vast majority of this HKD 1.5 billion AOP, although uSmart that we acquired in November last year also contributed nicely to the AOP of the segment. The earnings growth was driven mainly by the robust CSM release from CTF Life, which increased by 21% year-on-year to HKD 1.4 billion. We have also seen a strong increase in both our APE as well as NBP, meaning new business premium, 7% for APE and 74% increase for new business premium. Regarding APE and new business premium, we want to go a little bit deeper because there has been a major shift in the product mix. I think it happened not just to us, but also to other life insurance company in Hong Kong as well as a result of the new commission spreading rule introduced by IA effective from the 1st of January 2026. So in the first half of the fiscal 2026, we saw a lot of multi-pay insurance policy, so it can be 2p, 5p, 10p. But moving into the second half of this fiscal year, because of the new commission spreading rule, a lot of the insurance company, including us, are selling the majority of the product in the form of single premium, which when you translate that into APE calculation, you will only -- the APE only account 10% of the single premium as -- the APE only include 10% of the single premium. We substantially reduced the APE number for the second half of this fiscal year. That's why we did not -- while we did not mention new business premium in the past, now we think it's important for investors to also look at new business premium, which is defined as 100% of the single premium together with the annualized first year premium. Having said all this, we think this year, it will be quite misleading and not meaningful to look at the year-on-year growth of APE and new business premium between FY '26 and FY '25. Instead, we will urge you to focus more on the VONB dollar. Because no matter a single premium or multi-paid premium, at the end, you generate the same VONB. So we think VONB growth is the most important metric that you should focus on in fiscal year 2026. Our VONB dollar increased by 30% year-on-year to HKD 1.3 billion, which is driven by -- sorry, the margin also increased from 30% to 37%, which is driven by, as I mentioned earlier, the shift to single-pay premium and also the successful repricing of our flagship product called the -- My Wealth Series. The CSM balance of CTF Life increased by 22% year-on-year to HKD 11.3 billion, which is quite impressive considering the strong CSM release during the year. The Embedded value also increased by 12% year-on-year to HKD 28.4 billion. The solvency ratio for CTF Life stood at 285%, which has already taken into account HKD 0.6 billion of dividend remittance -- we believe 285% is one of the highest, if not the highest, among all the major insurance companies in Hong Kong. Because of the very high solvency ratio, we actually think CTF Life is in a very strong position to argue for a further increase in its dividend payout ratio to the listed company. Over the past 2 years, CTF Life pay out about 50% of its profit as dividend. So we think there's room for further improvement in the dividend payout ratio going forward. In terms of the performance of different channel, the agency channel saw a 10% increase in APE and 85% increase in NBP. The partnership channel increased its APE by 16% and NBP by 138%. As mentioned by Gilbert just now, in addition to focusing on the CMV business, we are also developing the overseas business, meaning we established a relationship with broker to focus on international high net worth customers. During the year, our APE from these overseas customers increased by 40% year-on-year. And now the overseas customer already accounted for slightly less than 10% of our total APE for fiscal year 2026. In terms of the AUM, our total asset under management for the insurance company increased by 17% year-on-year to HKD 106 billion. Like in the past, most of this investment were allocated to investment-grade bonds. And also, we continue to maintain a very diversified geographical exposure, 45% in Asia and Oceania, 40% in North America and 12% in Europe. The strategy of our investment is to generate sustainable risk-adjusted long-term return in order to support the fulfillment of its obligation to the policyholders. The fixed income portfolio continues to see a small increase in its investment -- recurring investment yield to 4.59% in FY '26. With the -- first of all, we believe there are a lot of new business opportunity in the wealth management industry in Hong Kong. And with the recent acquisition of 13% stake in uSmart, which is the digital brokerage and 65% in Blackhorn, which is an external asset management, together with the core CTF Life insurance business, we think our Financial Service segment is now in a position to offer integrated financial solutions covering both wealth accumulation as well as protection and retirement. I would move on to Roads. I'm mindful of time, so I will try to finish within the next 10 minutes. . As of today, following the disposal of Hunan Changliu Expressway in July, our portfolio now comprise of 12 toll road projects with a total length of 815 -- sorry, 815 kilometers. The average remaining concession period for our road portfolio is 11 years. During FY '26, the segment AOP was flat year-on-year at HKD 1.4 billion of AOP. The average daily traffic flow and total revenue was down 1% year-on-year. AOP was broadly flat, however, thanks to the appreciation of the renminbi as well as the lower financing cost of the onshore project loans. we disposed the Hunan Changliu Expressway in July, which resulted in a 4% reduction in the AOP, which is pretty minimal for the segment and a 9 percentage point decrease in the group's gearing ratio, which is very substantial. And going forward, we will continue to optimize our portfolio by divesting selected mature assets with less attractive risk-adjusted returns. Logistics. Our logistics business comprised of a 56% interest in ATL, almost 100% interest in all the warehouses, except Suzhou, which is 90% in 12 logistics properties in Mainland China and a 30% interest in CUIRC. So first, let's talk about ATL Logistics. The Segment AOP was down 13% year-on-year in FY '26 to HKD 645 million, and the decline was driven mainly by the decline in AOP of ATL Logistics Center. The occupancy rate of ATL Logistics was 80.7% in June last year, and then it declined further to 75% but started to recover to about 85% in June this year. However, if you take an average of the occupancy rate for FY '26 and FY '25, the average occupancy rate was still down percent and hence, the decline in AOP of ATL. Hopefully, we have already seen the worst of the occupancy rate for ATL given the recovering retail sales as well as the strong import export numbers of Hong Kong. Rental rate of ATL have been quite resilient over the year despite the challenging macro environment. Going forward, we will continue to boost the occupancy rate for ATL through diversifying our tenant base, improving the service quality, upgrading the tenant experience as well as closer collaboration with the leasing agencies. Regarding our logistics portfolio, regarding our logistics centers in Mainland China, we have provided deferred tax for the 7 -- for the 11 Mainland warehouses for the first time. So if you exclude this impact, the Mainland -- the PRC warehouses AOP actually increased by 11% year-on-year. The occupancy rate has been pretty stable. For the 7 existing property, the average occupancy rate was 86%. So as the entire portfolio, including the 4 newly acquired projects during the year. We remain optimistic on the sector due to growing city distribution demand, increasing e-commerce penetration as well as the relatively resilient manufacturing export activity in Mainland China. Recently, we have acquired -- we have entered into the AI-related infrastructure sector, i.e., the AIDC. As of today, we have made 1 investment in AIDC project in Jiangsu. We have signed SPA to invest in another AIDC project in Hebei province. And this morning, we have also signed an SPA to invest in AIDC project in Johor, Malaysia. CUIRC, its performance has been relatively stable, AOP up 2%. throughput increased by 8% to 7.6 million TEUs. We think it will continue to benefit from rising rail freight demand, favorable policy promoting the multimodal transportation in China and also its nationwide network comprising of 13 railway container terminal across different important cities in China. Construction, as Gilbert mentioned, this comprises of Hip Hing, Vibro, Quon Hing and Hsin Chong Aster. During the year, its AOP -- the segment AOP was down 4% year-on-year to HKD 689 million. Contracts on hand increased by 7% year-on-year to HKD 63 billion. Backlog was HKD 35 billion and new contract secured was HKD 17 billion. We have seen a continued increase in our exposure to the government and institutional sector comprising of 66% of our backlog. Obviously, the environment remains quite challenging given the softness in the private sector market, although we are seeing some private developer in Hong Kong started to bid or tender for residential land in the past 12 months. And we think the order flow should improve going forward. We also want to highlight that despite the challenging operating environment, our account receivable management remains very stringent. So if you look at our financial statement, you will see that the account receivable balance of Hip Hing actually decreased by 12% year-on-year despite a 17% increase in revenue, which means its account receivable days has declined by 8 days to only 35 days. I'll skip Page 31. So Page 32, Facility Management. The segment AOP was down 1% year-on-year to HKD 88 million. The key earnings driver for this segment was Gleneagles. Its AOP increased by 4x year-on-year. EBITDA increased by 15%. Inpatient, outpatient, day cases number grew 3%, 1%, 9%, respectively. We continue to expand our clinic network through Parkway Medical. As Gilbert mentioned, we recently opened a new clinic called MediCenter -- Gleneagles MediCenter in Admiralty in October this year. And this network have contributed approximately 10% of Gleneagles gross profit in fiscal '26. And currently, the network comprises of 7 clinics and 1 laboratory. Hong Kong CEC, the revenue increased by 8%, and the AOP was down mainly because of the increase in depreciation charge as a result of the shortening remaining concession period. But if you exclude the depreciation and also CapEx, the AOP of CEC actually increased by 8% year-on-year. Kai Tak Sports Park still in AOL because of -- it is still in the ramp-up stage. However, operationally, the stadium has posted more than 150 events. The stadium rental utilization rate was very high at 90%. And the mall -- Kai Tak Retail Mall occupancy also improved 7 percentage points to 87%. It has received quite a number of international awards during the year like Venue of the Year, World's Greatest Places by TIME. But most importantly, it ticket sales ranked the first in Asia and third globally in 2025. I pass on to Karen to go through our ESG achievement.

I will make it brief. So thank you, Jim. Before I -- sorry, before I take you through the FY 2023 ESG progress, I would like to start with the thinking behind our ESG philosophy. So our approach is built around 3 interconnected elements, understanding, integration and action. We start by understanding the ESG risks and opportunities that could affect our businesses. We then integrate those insights into risk management, investment decision, business planning and governance. And finally, we act by mobilizing capital, people, innovation to deliver measurable outcomes. So let me show you how that works in practice. Our climate and nature assessment have given us greater visibility of risks such as heat stress, and extreme weather as well as dependency, including water climate regulation and flood production. But the important point is what we do with those insights. They are increasingly being incorporated into enterprise risk management, project planning, decarbonization, investment due diligence. So we are moving from simply understanding ESG risk using those insights to make better business decisions. So what has this translated into during FY 2026? I won't take you through every number, but let me highlight 2. Green and Sustainability-linked financing now represents 45% of our total debt portfolio, bringing us closer to our 50% target and Scope 1 and 2 emissions have reduced by 17% compared with our FY 2023 baseline. So this is a good example of how ESG is becoming increasingly embedded in how we finance and operate our business. Our progress has also been recognized externally. This year, CTFS achieved a AAA rating for the first time in the Hang Seng Corporate Sustainability Index assessment. External recognition is not the objective, but it provides a useful independent benchmark of our progress. Our focus remains on underlying capabilities and resilience that support long-term value creation. Turning to capital. This slide shows you how ESG consideration is influencing both our financing and investment decision. We launched our sustainability-linked finance framework to strengthen the alignment between our sustainability target and financing. Our investment ESG considerations are increasingly integrated throughout the investment life cycle. One example is our strategic investment alongside Unisun in a battery energy storage system in Finland. It's supporting renewable energy integration and grid reliability. With CTF Life, the investment portfolio carbon footprint has been declined by 12% compared with FY 2023 baseline. This example demonstrates how sustainability is increasingly shaping our way with how we finance and deploy capital. So better -- I think what we have mentioning is how we are making better decision. I think in the era of data-driven era, better decision also depends on better data. Approximately 61% of our Scope 3 emissions are now calculated using higher quality supplier-specific or physical activity-based data, covering approximately 96% of our total Scope 3 emission. So this gives us better visibility of emission hotspot and help us focus on decarbonization effort where they can make the greatest difference. So this is not simply about better reporting. It is about enabling better decision and more targeted action. So what's in action now? So we're also translating this insight into operational improvement. At Hip Hing, our carbon estimation tool is being developed to help project teams identify emission hotspot earlier and access reduced -- reduction opportunity during project planning phase. At HML, more than 27 energy efficiency projects were completed during the year, delivering estimated annual energy savings for more than 700,000 kilowatt per hour. So they are practical example of sustainability and operational efficiency reinforcing each other. We also see the same connection between sustainability and resilience elsewhere in our portfolio. Across our 4 newly acquired logistics warehouse, on-site solar generation supply approximately 75% of electricity demand. With road, technology such as slope monitoring, bridge structure health monitoring and intelligent traffic management are helping our business anticipate and respond to climate-related risk. For us, ESG is not only about reducing our environmental impact, it is about strengthening the resilience and long-term performance of our assets. So ultimately, sustainability is implemented by people. So this year, we continue to invest in building ESG capabilities and empowering colleagues across the group to turn ideas into action. Our aim is for ESG to become part of everyday decision making rather than somehow owned by one team. So during FY 2026, we strengthened our understanding of ESG risk and opportunity, integrated those insights into business and investment decision and translate them into tangible action. Looking ahead, our focus remains on strengthening resilience, embracing innovation and allocating capital responsibly to create sustainable long-term value for our investors. So thank you very much.

Thank you, Karen. So we are now moving to the Q&A session. [Operator Instructions].

This is Jeffrey from CLSA. So maybe starting with insurance. So just want to get a sense on how the business momentum is going after period end going into July, August. Anything you can comment, that would be helpful. And second question on -- maybe just going to ATL a little bit. On the pickup of occupancy to 84% or 84.5%, so can you give us a little bit more color whether the additional occupancy is from existing tenants or new tenants? And also any comment on the average rental growth for FY '26?

Okay. For the first one, for the July or the last 3 months, third quarter of this year. I think you're referring to the -- especially after the new policy coming from China. I think we are very similar to all the other insurance company. We do see some vacillations or slowdown, but it's not significant. We're talking about a single-digit slowdown in terms of the people coming from China to buy insurance policy from us. If we compare to the information that we've got with the industry, in fact, we are a little bit better than them. We do think that this effect is short term. I think people are doing -- putting a wait-and-see mode. I mean, as you know, I mean, China has been putting out different policies over the last few years. I think for the first few months, it is very obvious for the people to wait and see until it becomes more clear. And I think fundamentally, because of the rate -- interest rate differentiations and also the protections that we can offer in most of the insurance company in Hong Kong, that actually differentiates us from the policies from the insurance company in China. I think there's still fundamentally, we still have the attractiveness of of insurance in Hong Kong. Jim, you have anything to add?

Yes. Just want to supplement. When Gilbert mentioned there is a single-digit year-on-year decline in VONB dollar in July and August combined. Bear in mind that we are comparing July and August this year with July and August last year. And July last year was actually a very, very strong month because of the -- a lot of policy submission in June last year ahead of the illustrative return cap introduced by IA, a lot of the clients they submitted their policy in June, which then spill over into July. So our VONB dollar for last July was 3x the average normal level. So a single-digit year-on-year decline in VONB for July and August this year is actually, I would say it's actually quite satisfactory.

Yes. I think that also answered one of the online questions that actually asked about the so-called differences in the growth rate on the second half of this year compared to the growth rate of the first half of our financial years. On your second question about ATL, a lot of them are new tenants. Obviously, we have some renewal, but a lot of them are new tenants. That actually drives the occupancy rate back up from 70-odd percent to 85%. In terms of the rental rate, average rental, if we're looking at the full year average rental, it actually increased compared with last year.

Low single digit.

Low single digit.

Timothy from Citi.

This is Timothy from Citigroup. I got 2 questions as well, if I may. The first one is about the bonus issue. So would you mind elaborate a little bit more about the thought process from the management in terms of pushing forward this kind of a bonus issue. Of course, from sell-side banks perspective, we are always welcome for more liquidity and more trade potentially. But I'm just trying to understand what -- is there a target of average daily trading value or volume that we are going for. Last round, of course, we are trying to get back to stock connect. So I'm just wondering this round, is there something that we are looking at? And please allow me to ask a not so intelligent question, which is about the DPS. Does it mean that next year, DPS would likely be 10% lower? So that is the first question. The other question is about the AIDC acquisition. So I'm just curious because, of course, AI and data center is likely going to be a very strong growth engine going forward globally as well. But I'm just -- but in the market to what I understand, usually this kind of AIDC, the valuation might be a little bit ludicrous. So I'm just wondering because of the unfortunately, lack of the disclosures on -- I totally understand that because of ongoing investments probably other potential deals. But just wondering what kind of expectation, valuation range and target about our future logistics kind of business mix between different segments going forward?

I take the most easiest one first, right, the DPS growth. Yes, we always look at comparable basis. I think that answer your question. And answer your first question, stock turnover target, obviously, the higher, the better. But we -- as I mentioned, now our daily stock turnover volume is about USD 2 million a day. We do recognize that in order to attract some of the bigger size fund, we do need to get across the USD 5 million per day threshold. So we are aiming towards that threshold.

Yes. I think I just want to supplement a little bit on that. We don't really have a target. what's the volume. But at the end of the day, as Jim said, the higher the better. I think it goes both ways. When the stock is more liquid, it's more lucrative, it actually drives the share price as well to a more realistic value. I mean, personally, I think our stock under priced. So maybe I put the excuse on the liquidity. But I think that's one of the real excuse that we are having because of we are a relatively high dividend yield stock. A lot of people actually buy and hold rather than trade. So we do want to create more liquidity out there. In terms of AIDC, maybe we both can answer that question. I think, first of all, there's no set target of what how much we're going to put in these sectors. We -- I think we are a very -- first of all, we are very disciplined investors. We don't really say that we're going to expand this to overtake whatever portion of the logistics sectors. I think we just see that as a whole, the logistics sector or the infrastructure, I mean, CDFS traditionally has been an infrastructure company. And we just need to modernize ourselves to go into the new infrastructure. And when we do AIDC, we don't really do the high technology stuff. We don't do the chipset. We don't do the rack. We basically just do the box. So it is no difference. It is no difference to how I see the traditional warehouses. And in fact, we're looking at it like the traditional warehouses. We're looking at it using cap rate, okay? So we are not using the AIDC like VNET and all the other company where you're looking at the PE, we are not doing that because we're basically receiving rental on the rack and also on the operators. So again, I'm not going to disclose what kind of valuation that we are buying, but I can assure you whatever Brian is buying is very conservative. I mean we're definitely getting value of money on that. And we -- I mean, it's even below a disclosable transaction. It's a very small amount. So we are still building the base out of this particular sector.

Jeff from DBS.

I almost messed up myself. So just switching gear a bit to construction. Obviously, you hinted the margin is lower. So I just want to understand maybe what are you seeing? Is it because of the mix of the projects? Or is it still because of the labor shortage? If it is the latter, then can you give a little bit color on what we are seeing in the labor market for now?

I'm asking whether we hinted that because I don't realize we don't really.

The gross margin for the Construction segment this year was marginally lower as compared with last year. But bear in mind that the project that we're working on in FY '26, it was secured like 2, 3 years ago. And during that time, there was still a downturn of the property sector in Hong Kong. As a result, we need to be more competitive in terms of pricing.