MTR Corporation

MTR Corporation

MTR Corporation Company Overview June to July 2017 Page 1 Forward-looking statements Certain statements contained in this presentation may be viewe...

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MTR Corporation Company Overview June to July 2017

Page 1

Forward-looking statements Certain statements contained in this presentation may be viewed as forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements.

Page 2

MTR Today MTR was listed in the Stock Exchange of Hong Kong (2000)

Establishment of MTR

1975 1980 1985 st 1 Railway line opened (1979)

1990

1995

2000

2005 2010 Merger with KCRC (2007)

2017

4.1% YoY 2016 Recurrent Profit 16% 35% Underlying profit

HK$8.9 billion 94% of Underlying Profit

HK$9.4bn

6% 5%

38%

Transport Operations Station Commercial Property Rental Outside Hong Kong Property Development#

#Include Mainland of China property development profit, 2.8% of total underlying profit

Vision: a leading multinational company that connects and grows communities with caring services Page 3

Rail + Property Business Model

Railway

Share of Profit

Land Development Right

Government

Land Development Opportunity

Land Premium Funding Contribution Developer

MTR leads and coordinates the development processes including: • • • • • •

Agrees with Government amount of property development rights for new rail extension Land premium is negotiated with Government on “greenfield basis”*, prior to tender being offered to developers Tender property packages to developer partners MTR contributes property rights, oversees the design & construction Developers usually pay for land premium and development costs; MTR may contribute on a case by case basis Profit sharing with MTR by percentage of profits or assets in kind or lump-sum payment

*Greenfield basis = market value ignoring the presence of the railway

Page 4

Examples of MTR “Rail + Property” Development Tung Chung Station Development

Kowloon Station Development

• Total GFA: 1,030,634 sq m (Retail: 55,793 sq m; Office: 14,913 sq m) • ~12,400 residential units

Tseung Kwan O LOHAS Park Development • Total GFA: 1,654,600 sq m (Retail: 40,000 - 50,000 sq m) • ~25,500 residential units

• Total GFA: 1,096,169 sq m (Retail: 82,750 sq m; Office: 231,778 sq m) • ~5,800 residential units

Page 5

Hong Kong Transport Operations

Page 6

MTR Network 羅湖 Lo Wu

No. of Stations: 93(1) Route Length: 231km(2)

落馬洲(福田口岸) Lok Ma Chau (Futian Port)

 1. 2.

3 Rail Segments: Domestic Service, Airport Express and Cross-boundary Service 93 heavy rail stations and 68 light rail stops Includes 195km of heavy rail and 36km of light rail

Page 7

Market Share Hong Kong Franchised Public Transport Green minibuses 13.9%

Buses 35.1%

Green minibuses 13.9%

Buses 35.3%

Tram & ferries 2.5%

Tram & ferries 2.4%

MTR 48.5%

MTR 48.4%

2015

2016

Airport Express(1)

Cross boundary

Cross-harbour

Market share (%)

Patronage (m)

Market share (%)

Patronage (m)

Market share (%)

Patronage (m)

2015

21.5

15.7

51.3

114.2

68.8

428.6

2016

21.4

16.1

51.2

113.3

68.6

428.9

Sources: The Transport Department / Immigration Department / Airport Authority Hong Kong 1. Calculation based on the proportion of air passenger using Airport Express over the total air passenger figures reported by the Airport Authority Hong Kong Page 8

Patronage (1)

Airport Express (m)

12.7

1,431.0

1,475.7

1,547.8

1,577.5

13.7

14.9

15.7

16.1

YoY change

3.1%

Domestic Service (m)

1,586.5

6.7

665.8

2012

2013

2014

2015

2016

May 17 YTD

2012

2013

2014

2015

2016

May 17 YTD

Cross-boundary Service (m)

109.7

111.3

113.0

114.2

113.3

YoY change

-0.3%

2.9%

YoY change

46.5

2012 1.

2013

2014

2015

2016

May 17 YTD

Domestic Service comprises the Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland Resort, East Rail (excluding Cross-boundary service), West Rail and Ma On Shan lines Page 9

Hong Kong Transport Operations (HK$b) 24

44.8%(1)

44.3%

43.1%

42.6%

43.2% 40.0

19

17.66 16.22

14.52

30.0

16.92

Revenue

15.17

20.0

14

Airport Express 10.0

9

Light Rail, Bus and Intercity and others

6.5(1)

6.7

7.0

7.2

7.6 -

Cross-boundary Service Domestic Service EBITDA Margin

(10.0)

EBITDA

4 (20.0)

-1

2012

2013

2014

2015

2016

(30.0)

1. Restated due to retrospective adoption of Revised HKAS19, Employee Benefits Page 10

Fare Adjustment Mechanism (FAM)  

FAM – a direct drive mechanism providing a measure of certainty for fare setting Next scheduled review in 2022/23

Fare Adjustment = 0.5 *

CCPI + 0.5 *

WAGE INDEX - t

- Wage index: the yearly percentage change in the Nominal Wage Index (Transportation Sector) - t: productivity factor

 Productivity Factor 

t = greater of zero and 0.5 x CAGR in Productivity over a reference period (t = 0 from 2017 to 2022)



Productivity:

HK Transport Operations Revenue HK Transport Operations Expenses

 Fare Promotions – 3% rebate for Every Octopus Trip for at least 6 months (linked to profitability and service performance arrangements), and others  Special applications from 2017 to 2022  

Fare rise under FAM shall be reduced by 0.6 percentage point from 2017 to 2022 In 2017, it will be followed by a further 10% discount

 Past Fare Adjustments 2009: +2.05%, effective in June 2010 2011: +5.40%, effective in June 2012 2013: +3.60%, effective in June 2014 2015: +2.65%, effective in June 2016

2010: +2.20%, effective in June 2011 2012: +2.70%, effective in June 2013 2014: +4.30%, effective in June 2015 2016: +1.49% (rolled over to 2018/19) Page 11

Hong Kong Station Commercial

Page 12

Hong Kong Station Commercial Businesses

Station Kiosks

Advertising

Telecommunications

Page 13

Hong Kong Station Commercial (HK$m)

8000

89.2%

89.9%

89.6%

89.8%

90.4%

90 Revenue

7000

80 Others (1)

6000 5,380 4,963

5000 4000

5,544

4,588 3,680

4,830

5,012

70

Advertising

60

Kiosk rental Telecommunications

50

4,448 4,124

40 3000

EBITDA Margin EBITDA

3,283

30 2000

20

1000

10 0

0 2012

2013

2014

2015

2016

1. Include revenues from other station commercial business such as station car park and publications Page 14

Hong Kong Property Rental & Management

Page 15

MTR Investment Property Portfolio Elements (Retail) Maritime Square (Retail)

Telford Plaza (Retail) Plaza Ascot (Retail)

Ocean Walk Hanford Plaza Sun Tuen Mun Shopping Centre (Retail)

Citylink Plaza (Retail)

The Lane (Retail)

Luk Yeung Galleria (Retail) Two IFC (Offices)

PopCorn 1 & 2 (Retail)

Paradise Mall (Retail)

 

13 malls – 212,538 sqm, Office – 39,410 sqm Total Area: 251,948 sqm LFA

* Lettable floor area attributable to MTR, as at 31 Dec 2016 Page 16

Hong Kong Property Rental and Management (HK$m) 81.6%

82.2%

82.2%

80.9%

82.9% HK property management revenue HK property rental revenue

4,533

4,741

4,190

EBITDA Margin EBITDA

3,778 3,401 3,443

3,668

3,930

3,105 2,774

2012

2013

2014

2015

2016

Page 17

New Investment Property Initiatives Tai Wai Shopping Mall

    

MTR contribution: HK$7.5 billion Profit sharing in the residential development MTR will take ownership of and invest further in fitting out the shopping mall Shopping mall GFA: 60,620 sqm Target opening in 2022

LOHAS Park Shopping Mall



MTR contribution: HK$4.98 billion



Profit sharing in the residential development



MTR will take ownership of and invest further in fitting out the shopping mall



Shopping mall GFA: 44,500 sqm



Target opening in 2H 2020

Page 18

New Investment Property Initiatives Maritime Square Extension    

Adding 12,100 sqm of gross floor area to Maritime Square Shopping Centre in Tsing Yi Main construction works commenced in Jun 2015 Estimated cost at HK$2.4 billion (excluding capitalised interest) Target opening in 2H2017

Telford Plaza    

Conversion of office space into additional retail space Adding 3,400 sqm of gross floor area Estimated cost at HK$550 million (excluding capitalised interest) Target opening in 2H2017

Page 19

Hong Kong Property Development

Page 20

(1)

MTR Land bank – 1.95 Million sq m GFA • Tin Shui Wai Light Rail Stop Awarded Land bank: 0.09m sq m GFA

• Tai Wai Station Awarded Land bank: 0.25m sq m GFA

• LOHAS Park Station Awarded Land bank: 0.76m sq m GFA Unawarded Land bank: 0.32m sq m GFA

• Ho Man Tin Station Awarded land bank: 0.07 sq m GFA Unawarded Land bank: 0.06m sq m GFA • Wong Chuk Hang Station Awarded Land bank: 0.05m sq m GFA Unawarded Land bank: 0.35m sq m GFA

Awarded = 1.22m sq m GFA Unawarded = 0.73m sq m GFA MTR Land bank

Land bank acquired from KCRC

1. Definitions of landbank: - Property development rights granted by the Government as part of the “Rail + Property” model or through acquisition from KCRC - Where profit has not yet been recognised, status as at 7 March 2017

Page 21

Update on Hong Kong Property Development



Tendering activities 

Land Tendering



From March 2017 to March 2018, we target to tender out:    

Property Sales

Wong Chuk Hang Station Package 1 awarded to a consortium formed by Road King Infrastructure and Pingan Real Estate Capital (Feb 2017)

LOHAS Park Packages 11 and 12 Ho Man Tin Station Package 2 Wong Chuk Hang Station Packages 2 and 3 Yau Tong Ventilation Building Site (subject to re-zoning and other statutory approvals)



Sales of inventory units or car parks, subject to market conditions



Pre-sales of West Rail residential projects where we act as agent for KCRC

Page 22

Mainland of China & International Businesses

Page 23

Mainland China and Overseas Strategies Stockholm: • MTR Tunnelbanan • Stockholm Pendeltåg





 Asset Light • Focus on “asset light” operating rail concessions

Sweden: • MTR Express • MTR Tech

United Kingdom: • MTR Crossrail • South Western Franchise

  

Beijing: • BJL4, Daxing Line • BJL14 • BJL16 Hangzhou Line 1 Shenzhen Line 4

• Franchise operations in UK, Stockholm and Melbourne

Asset Heavy • Invest in urban rail networks in the Mainland of China • Focus on development of rail networks within cities

Sydney Metro Northwest Melbourne Train



• Operating rail businesses in Mainland China (Beijing, Shenzhen and Hangzhou). Sweden (MTR Express) and Australia (North West Rail Link) Page 24

Existing Businesses on Mainland of China – Beijing Beijing Metro Line 16 (BJL16) • • • •

49%/ RMB 2.45billion 50km/ 29 stations 30 years Phase 1: Dec 2016; full line: after 2017

Beijing Metro Line 14 (BJL14) • • • •

Beijing Metro Line 4 (BJL4) • • • •

49%/ RMB 700 million 28km/ 24 stations 30 years Sep 2009

49% ownership/ RMB 2.45billion 47.3km/ 37 stations 30 years Phase 1: May 2013; Phase 2: Dec 2014; Phase 3: Dec 2015; Full line: after 2017

BJL14 Phase IV (TBC)

Daxing Line Metro Line • • • •

% Ownership/ equity investment Route length/ no. of stations Concession period Year of service commencement

• O&M contract • 22km/ 11 stations (Southward extension of BJL4) • 10 years • Dec 2010 Page 25

Existing Businesses on Mainland of China – Shenzhen and Hangzhou Shenzhen Metro Line 4 (Longhua Line)

Hangzhou Metro Line 1

• • • •

• 49%/ RMB 2.2 billion • 54km/ 34 stations (including a 5.7km 3-station extension under O&M) Line 1 • 25 years • Nov 2012

100%/ RMB 2.4 billion 20.5 km/ 15 stations 30 years Jun 2011

Line 3 Line 4

Line 1

Line 4

Line 2

Line 1

Line 2 Line 5 Line 5 Line 1 Line 3 Line 4

Line 2 Line 1

Metro Line • • • •

% Ownership/ equity investment Route length/ no. of stations Concession period Year of service commencement

Line 2

Page 26

Stockholm Metro

Existing Overseas Operations - Sweden MTR Tech • Total investment: HK$180 million (for 50% interest in TBT) • 100% ownership • Rolling stock maintenance for the metro network in Stockholm fully under our management • Feb 2016

MTR Stockholm • O&M concession for 8 years to 2017 • 6-year extension from 2017 to 2023 • 100% ownership • Contract amount: HK$20 billion • 110km/ 100 stations • Since Nov 2009

Commuter Service

Stockholm Pendeltag • O&M concession for 10 years (with option to extend a further 4 years) • 100% ownership • Contract amount: SEK30 billion (14 years) • 241km/ 53 stations • Since Dec 2016

Page 27

Intercity Service

MTR Express • Total investment: HK$830 million • 100% ownership • 455km intercity service between Stockholm & Gothenburg • Since 21 March 2015

Australia

Existing Overseas Operations Melbourne Metro System • O&M concession for 8 years • 60% ownership • Contract amount: AUD3.8 billion • 390km and 217 stations • Since Nov 2009

Sydney Metro Northwest (PPP) • Equity investment: AUD63 million • 36km high capacity rapid transit between Chatswood and Rouse Hill • Design and delivery of railway system and O&M for 15 years • To commence in 2019

United Kingdom

MTR Crossrail • O&M concession for 8 years (with an option to extend 2 more years to 10 years) • 100% ownership • Contract amount: GBP1.4 billion • 118km and 40 stations, including 42km of new tunnels across London • Commenced first section of service in May 2015; full line operation in 2019

South Western Franchise • The new franchise from Aug 2017 for 7 years (with the option for an 11-month extension) • 70:30 joint venture between FirstGroup and MTR • 976-km network serving 186 operator managed stations • Covers routes between London Waterloo and south western England, including Bristol, Exeter and Portsmouth

Page 28

Mainland of China and International Businesses – EBIT

950

(HK$m) 46

612

(50)

2012

530

2013

852

888

2015

2016

611

2014

Note: Included subsidiaries and associates Page 29

Mainland China and International Businesses Subsidiaries EBITDA contribution : HK$954m 62.8% (1)

954



Metro Trains Melbourne (MTM) 

(HK$m) 2015

46

2016



Decrease in EBITDA due to additional expenditure on refranchising and lower contribution from maintenance and overhaul activities Existing concession ends in Nov 2017 – submitted a proposal in Dec 2016 to extend the franchise

(2)

586



MTR Shenzhen  

462 366

EBITDA was largely stable 5.1% increase in patronage to 199 million (average weekday patronage of 550,000)

305

 137 138

111



135 47 66



 (140)

1. 2. 3.

MTR Shenzhen

MTR MTR Express Tunnelbanan & MTR Tech

MTR Crossrail

Mainland of China property development

Total

Included net operating loss of HK$9m from the combined results of Mainland of China property rental & management, pre-operating expenses of MTR Pendeltågen and Sydney Metro Northwest Included operating profit of HK$29m from Mainland of China property rental & management and Sydney Metro Northwest MTR acquired the remaining 50% interest in Tunnelbanan Teknik Stockholm (“TBT”) on 15 Feb 2016. TBT was renamed “MTR Tech” thereafter



Patronage still below original forecast High levels of operational performance and customer satisfaction

MTR Crossrail  



Acquisition of remaining 50% shareholding of TBT, now renamed MTR Tech Record high customer satisfaction

MTR Express  

(60) (47)

Metro Trains Melbourne (MTM)

MTR Tunnelbanan & MTR Tech(3)

First full year of operations Improved operational performance

Mainland of China property development 

Profit recognised from the low-rise units in Tiara

Page 30

Mainland China and International Businesses Associates Post-tax profit contribution

: HK$286m

127% 

Beijing MTR 

2015



2016

(HK$m)

(1)

286

264



236

Hangzhou MTR 

Net loss reduced by 76% mainly due to optimisation of operation costs and higher revenue from patronage increase



Patronage 199 million up 12% (537,000/ weekday)

(2)

126



74 39

(36)

(151) Beijing MTR

1. 2.

London Overground

London Overground 



Hangzhou MTR

Total

Profit increased by HK$28 million mainly due to the commencement of PPP franchise for Beijing Metro Line 14 Patronage: Beijing Metro Line 4 (BJL4) and Daxing Line - 442 million up 3% (1.29 million/ weekday) Beijing Metro Line 14 - 191 million (591,000/ weekday)

Concession ended in Nov 2016

Tianjin TJ Metro MTR Construction (Tianjin MTR) 

Framework agreement with Beijing Capital Land in Mar 2017



Disposal of all 49% interest in Tianjin MTR



Conditional future acquisition of a shopping centre of approximately 91,000 sqm to be developed on Beiyunhe Station site

Included net loss of HK$16m from combined results of TBT up to 15 Feb 2016, Tianjin TJ Metro MTR, and associates related to Sydney Metro Northwest and MTR Pendeltågen Included net profit of HK$2m from TBT and the associate related to Sydney Metro Northwest

Page 31

Mainland of China & International Businesses – Property Development Projects Shenzhen Property Development - Tiara      

About 98% of 1,698 units sold by the end-Dec 2016 Profit recognised from the low-rise units High-rise units to be handed over in mid-2017 Total GFA: 206,167 sqm, including a 10,000 sqm retail centre Total Investment RMB¥4.1b (estimated) including RMB¥2b land premium Part of net profits shared with Shenzhen Municipality to support metro development in Shenzhen

Tianjin Property Development   

Framework agreement with Beijing Capital Land in Mar 2017 Disposal of all 49% interest in Tianjin TJ Metro MTR Construction (Tianjin MTR) Conditional future acquisition of a shopping centre of approximately 91,000 sqm to be developed on Beiyunhe Station site

Page 32

Growth Initiatives in Hong Kong

Page 33

Unprecedented HK Railway Growth Route length to increase 25%

Express Rail Link (XRL) – 26km HK$84.4B

Shatin to Central Link (SCL) – 17km HK$79.8B

Kwun Tong Line Extension – 3km HK$6.9B

South Island Line (East) – 7km HK$17.2B

West Island Line – 3km HK$18.5B SCL is service concession while XRL is subject to negotiation * Project cost estimates (before capitalised interest) subject to regular review

Cash grant

“Rail + Property” Page 34

MTR Ownership Projects South Island Line (East)

West Island Line  



Commenced passenger service on 28 Dec 2014 Sai Ying Pun Station (except Ki Ling Lane) opened on 29 March 2015 Ki Ling Lane opened on 27 March 2016

  

Project Agreement signed in May 2011 Development right for a site at Wong Chuk Hang was granted Commenced passenger service on 28 December 2016

Kwun Tong Line Extension   

Project Agreement signed in May 2011 Development right for a site at Ho Man Tin was granted Commenced passenger service on 23 October 2016

Mong kok

Mong Kok East

Yau Ma Tei

Ho Man Tin

Jordan

Tsim Sha Tsui

Whampoa Hung Hom East Tsim Sha Tsui

Page 35

Rail Projects under Project Management Express Rail Link (XRL) Project Background  The 26-km XRL to provide high speed crossboundary rail services connecting Hong Kong to Shenzhen, Guangzhou and the high speed rail network in Mainland of China

Project Progress  Over 90% complete as at 31 Mar 2017  Tunnel and track laying works substantially complete  Concrete structural works of various floor levels of West Kowloon Terminus (WKT) 96% complete Target Completion and Project Cost Estimate  Completion timetable remains in 3Q 2018  Project cost estimate remains at HK$84.42 billion

Page 36

Rail Projects under Project Management Shatin to Central Link Project Background 

SCL comprises two sections, the East West Corridor and North South Corridor



New link across the New Territories, serving residential and working population of 640,000



Entrustment Agreement signed with Government in May 2012 Construction commenced in June 2012



Project Progress  Overall completion at 72% as at 31 Mar 2017  East-West Corridor at 87%  North-South Corridor at 50% Target Completion and Project Cost Estimate  East-West Corridor target completion in mid-2019  North-South Corridor target completion in 2021  Complete a detailed review of the project cost estimate in 2H 2017

Page 37

Railway Development Strategy 2014 Total route length of about 34.8km Project

Route Length (km)

Tuen Mun South Extension Northern Link (and Kwu Tung Station)

10.7

East Kowloon Line

7.8

Tung Chung West Extension (and Tung Chung East Station) North Island Line Hung Shui Kiu Station

2.4

1.5 5.0 -

South Island Line (West)

7.4

Total

34.8

Page 38

Financial Results

Page 39

Financial Highlights (HK$m)

2016

2015

Change

Total revenue

45,189

41,701

8.4%

Total EBITDA

17,313

16,120

7.4%

EBITDA margin

38.3%

38.7%

0.4%pt

EBITDA margin (excluding Mainland of China & int’l subsidiaries)

53.9%

53.3%

0.6%pt

Total EBIT(1)

11,399

10,622

7.3%

EBIT margin(1)

25.2%

25.5%

0.3%pt

EBIT margin (excluding Mainland of China & int’l subsidiaries)(1)

34.8%

34.8%

Profit from recurrent businesses(2)

8,916

8,565

4.1%

530

2,329

77.2%

9,446

10,894

13.3%

808

2,100

61.5%

10,254

12,994

21.1%

Reported EPS (HK$)(2)

1.74

2.22

21.6%

Underlying businesses EPS (HK$)(2)

1.61

1.87

13.9%

Ordinary dividend per share (HK$)

1.07

1.06

1.0%

Post-tax profit from property development in Hong Kong and Mainland of China Profit from underlying businesses(2) Investment property revaluation Reported net profit attributable to shareholders of the Company(2)

1. 2.

Excluding HK property development Net of non-controlling interests

Page 40

Consolidated Balance Sheet Cash, bank balances and deposits

Property: 34%

Railway: 51%

Service concession assets

Railway assets

Assets

Debtors and deposits

Others

Investment properties

Property development in progress

Total Equity: 58%

Total Debt: 16% Deferred tax liabilities

Liabilities and Shareholders' funds

Others

Debt

Shareholders’ funds

Obligations under Creditors and service concession accrued charges

0 Note: As at 31 Dec 2016

50,000

100,000

150,000

200,000

(HK$m) Page 41

250,000

Progressive Dividend Policy (HKD) 2.0

Ordinary dividend Per Share

1.8



Underlying EPS

Recurrent Businesses EPS

1.6 1.4 1.2 1.0

1.06

1.07

2014

2015

2016

0.92

0.8 0.6

1.05

0.76

0.79

2011

2012

0.59 0.48

0.52

0.4 0.2 -

2008

2009

2010

2013

1. 2012 figures restated due to retrospective adoption of Revised HKAS19, Employee Benefits

Page 42



Investment Highlights  One of the world’s most efficient and highly utilised urban railway operator generating strong and stable cash flow  Successful property developments with limited downside risks  Clear growth strategy  Growth within Hong Kong  Strategic expansion in China and other countries  Progressive dividend policy  Professional management team  Good corporate governance with high level of transparency  Government remains a major shareholder until 2020  Superior credit ratings on par with Hong Kong Sovereign Page 43

Appendix

Page 44

Hong Kong Transport Operations Total Patronage: 1,948.8 million 0.5% Revenue

Cost (HK$m)

(HK$m)

16,916

17,655

975 950 3,172

1,010 998

Airport Express

3,252

Cross-boundary Service

Depreciation & amortisation, variable annual payment : 4,721

(1)

Domestic Service 11,819

2015

EBITDA: HK$7,633m 5.8%

1. 2. 3.

Operating cost: 9,702

12,395

2016

Margin: 43.2%

0.6 %pt

1,281

1,187

5,061 3,534

Depreciation & amortisation

3,780

1,433 557 1,324

1,403 538 1,379

1,482

1,511

General admin, Railway support & others Stores & spares consumed Maintenance & related

10,022

Energy & utilities

4,906

5,191

2015

2016

EBIT(3): HK$2,572m 3.2%

Variable annual payment

15,083

14,423

(2)

Others

Margin: 14.6%

Staff costs & related

0.1 %pt

Domestic Service comprises the Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland Resort, East Rail (excluding Cross-boundary Service), West Rail and Ma On Shan lines Others comprise Light Rail, Bus, Intercity and other rail related income After depreciation, amortisation and variable annual payment to KCRC

Page 45

Contributions to Underlying Profits (HK$b) 12 11

Profit*/ (loss) from businesses outside of HK

10

Profit*/ (loss) from property development

9

Profit*/ (loss) from recurring businesses (excluding property development)

8

Profit*/ (loss) for the year (excluding investment property revaluation)

7 6 5 4 3 2 1 0 Opening of Airport Express

-1 -2

Opening of TKO Line

Merger with KCRC on 2 Dec 07

Opening of Urban Lines

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 * Profits were on pre-tax basis prior 2002, and on post-tax basis from 2002 onwards

Page 46

Consolidated Profit and Loss Account 2016

2015

(HK$m) HK transport operations HK station commercial and HK property rental & management businesses Mainland of China & international railway, property rental and management subsidiaries Mainland of China property development subsidiary Other businesses Total revenue Operating expenses excluding Mainland of China & international subsidiaries Expenses relating to Mainland of China & international railway, property rental and management subsidiaries Expenses relating to Mainland of China property development subsidiary Total operating expenses EBITDA excluding Mainland of China & international subsidiaries EBITDA relating to Mainland of China & international railway, property rental and management subsidiaries EBITDA relating to Mainland of China property development subsidiary Total EBITDA HK property development profit Total operating profit Depreciation & amortisation Variable annual payment Interest and finance charges Investment property revaluation Share of profit of associates Profit before taxation Income tax Reported net profit attributable to shareholders of the Company(1) Reported earnings per share (HK$) Profit from underlying businesses(1) Underlying businesses EPS (HK$) Final ordinary dividend per share (HK$) Total ordinary dividend per share (HK$)

Favourable (adverse) change

HK$m

%

17,655 10,285 13,478 1,348 2,423 45,189 (14,004)

16,916 9,913 12,572 2,300 41,701 (13,595)

739 372 906 1,348 123 3,488 (409)

4.4 3.8 7.2 n/a 5.3 8.4 (3.0)

(12,890)

(11,846)

(1,044)

(8.8)

(982) (27,876) 16,359

(140) (25,581) 15,534

(842) (2,295) 825

(601.4) (9.0) 5.3

588

726

(138)

(19.0)

366 17,313 311 17,624 (4,127) (1,787) (612) 808 535 12,441 (2,093) 10,254 1.74 9,446 1.61 0.82 1.07

(140) 16,120 2,891 19,011 (3,849) (1,649) (599) 2,100 361 15,375 (2,237) 12,994 2.22 10,894 1.87 0.81 1.06

506 1,193 (2,580) (1,387) (278) (138) (13) (1,292) 174 (2,934) 144 (2,740) (0.48) (1,448) (0.26) 0.01 0.01

n/a 7.4 (89.2) (7.3) (7.2) (8.4) (2.2) (61.5) 48.2 (19.1) 6.4 (21.1) (21.6) (13.3) (13.9) 1.2 0.9

1. Net of non-controlling interests of HK$94 million and HK$144 million in 2016 and 2015 respectively

Page 47

Consolidated Statement of Financial Position 31 Dec 2016

31 Dec 2015

(HK$m)

Increase (Decrease)

HK$m

%

Assets Investment properties Other property, plant and equipment Service concession assets Railway construction in progress Property development in progress Interests in associates Properties held for sale Debtors, deposits and payments in advance Amounts due from related parties Cash, bank balances and deposits Others

70,060 103,613 28,269 17,484 7,015 1,394 4,073 2,171 20,290 2,971

68,388 79,576 27,755 19,064 17,983 5,912 1,139 5,135 1,636 12,318 2,197

1,672 24,037 514 (19,064) (499) 1,103 255 (1,062) 535 7,972 774

2.4 30.2 1.9 (100.0) (2.8) 18.7 22.4 (20.7) 32.7 64.7 35.2

Total Assets

257,340

241,103

16,237

6.7

Total Liabilities

39,939 30,896 123 11,783 10,507 12,125 2,411 107,784

20,811 22,860 953 1,858 10,564 11,209 2,677 70,932

19,128 8,036 (830) 9,925 (57) 916 (266) 36,852

91.9 35.2 (87.1) 534.2 (0.5) 8.2 (9.9) 52.0

Total Equity

149,556

170,171

(20,615)

(12.1)

Liabilities Debts Creditors and accrued charges Current taxation Amounts due to related parties Obligations under service concession Deferred tax liabilities Others

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Cash Flow 2016 (HK$m) Cash Inflow Cash flows from operating activities before tax payment and working capital movements Working capital movements Receipt of government subsidy for Shenzhen Metro Longhua Line operation Receipts in respect of property development Others Total inflows Cash Outflow Tax paid Fixed and variable annual payment Capital expenditure - Hong Kong new rail - Hong Kong existing rail - Property related - Mainland of China and international railway related Investment in/ net loan to associates Net interest paid Dividends paid Others Total outflows Net cash inflow/ (outflow) before financing Net drawdown/ (repayment) of loans Increase/ (Decrease) in cash Cash, bank balances and deposits as at 1 Jan 2016 Effect of exchange rate changes (on opening foreign currency cash balances) Cash, bank balances and deposits as at 31 Dec 2016

2015

Favourable (adverse) change

HK$m

%

17,475 1,661 625 5,403 1,160 26,324

16,186 271 653 8,234 940 26,284

1,289 1,390 (28) (2,831) 220 40

8.0 512.9 (4.3) (34.4) 23.4 0.2

(2,626) (2,399)

(2,169) (2,222)

(457) (177)

(21.1) (8.0)

(5,243) (4,615) (1,789) (292) (1,286) (519) (18,616) (99) (37,484) (11,160) 19,431 8,271 12,318 (299) 20,290

(4,760) (4,216) (11,983) (711) (152) (577) (5,905) (150) (32,845) (6,561) 154 (6,407) 18,893 (168) 12,318

(483) (399) 10,194 419 (1,134) 58 (12,711) 51 (4,639) (4,599) 19,277 14,678 (6,575) (131) 7,972

(10.1) (9.5) 85.1 58.9 (746.1) 10.1 (215.3) 34.0 (14.1) (70.1) n/a n/a (34.8) (78.0) 64.7

Page 49

Financing and Credit Ratios Company Debt Profile (31 Dec 2016)(1) Consolidated group borrowings outstanding: > 5 years 36%

HK$39,939m (HK$20,811m as at 31 Dec 2015)

Fixed 48% Hedged

2-5 years

Average borrowing cost(2) : 2.9%

0.6%pt

100%

1-2yrs

41%

5%

Up to 1 year 18%

52%

Maturity

Fixed/Floating

Net interest expense(2):

Floating

Net Debt / Equity

2.2%

HK$612m

Compared to 2015 figures

Currency

Dec 2016

Dec 2015

20.2%

11.3%

2016

2015

12.7x

14.4x

ratio(2)

Interest cover 1. 2.

Excludes Mainland of China and overseas subsidiary debts Including obligations under service concession and loan from holders of non-controlling interests of a subsidiary as components of debt

Page 50

Capital Expenditure & Investments

2017-2019

Maintenance CAPEX New Railway Projects China & Overseas

43%

Hong Kong Property Investment & Development

Total HK$37B

23%

8%

26%

Estimated spend: 2017 - HK$11.7 billion 2018 - HK$11.5 billion 2019 - HK$14.0 billion Page 51

Business Update Patronage

Jan to May 2017 (YoY%)

- Domestic services

Up 2.9%

- Airport express

Up 3.1%

- Cross-boundary services Fare - FAM rise Total tenant sales turnover

Down 0.3% Mid-2017 1.49% (Rollover to 2018) 1Q2017 (YoY%)

Station commercial - Station kiosks - Duty free shops

Up low to mid-single digit Down low-single digit

Shopping malls - Elements - Shopping malls excluding Elements Industry statistics - Hong Kong retail sales - Hong Kong tourist arrivals

Up low to mid-single digit Down mid-single digit 1Q2017 (YoY%) Down 1.3% Up 3.7%

Source: Company data and government figures

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MTR Corporation www.mtr.com.hk [email protected]

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