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Public company info - MTR Corporation Ltd. , 00066.HK

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MTR Corporation Ltd., 00066.HK - Company Profile
Chairman Frederick Ma Si-hang
Share Issued (share) 4,294,967,295
Par Currency
Par Value -0.0
Industry Public Transport
Corporate Profile Business Summary: The Group is principally engaged in the following core businesses – railway design, construction, operation, maintenance and investment in Hong Kong, the Mainland of China and a number of major overseas cities; project management in relation to railway and property development businesses; station commercial business including leasing of station retail space, leasing of advertising space inside trains and stations, and enabling of telecommunication services on the railway system in Hong Kong; property business including property development and investment, management and leasing management of investment properties (including shopping malls and offices) in Hong Kong and the Mainland of China; and investment in Octopus Holdings Limited. Performance for the year: In 2016, the Group recorded revenue growth in all business segments. Total revenue increased by 8.4% to HK$45,189 million, reflecting mainly the contribution from Tiara, railway subsidiaries outside of Hong Kong, as well as the adjustment in fares under the FAM, net of fare concessions. Business Review: 2016 has been a rewarding year full of important achievements for MTR. From funding approval for the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“Express Rail Link”) in the first quarter of the year to opening two new rail lines in Hong Kong, one in Beijing and taking over the Stockholm commuter rail (“Stockholms pendeltåg”) concession in Sweden, all in the final quarter of the year, many key milestones were achieved. Amongst these milestones was the establishment of the MTR Academy in November, an important step towards fulfilling the Group’s vision of setting up a global training hub for railwayrelated professionals. These major accomplishments were achieved whilst continuing to provide world class services in Hong Kong, with train service delivery and passenger journeys on-time in the Group’s heavy rail network being maintained at 99.9% in 2016. Indeed 2016 saw the Group’s best ever performance in terms of train service reliability despite passenger numbers increasing by 31.0% since the merger with Kowloon-Canton Railway Corporation (“KCRC”) back in 2007. The Group’s businesses in Hong Kong performed reasonably, albeit impacted by the general slowdown in economic growth. In the Group’s Hong Kong transport business, passenger volume growth of 0.5% was muted when compared with average annual growth rates of 2.4% over the last five years while fares were adjusted in accordance with the Fare Adjustment Mechanism (“FAM”). Under the Group’s Operating Agreement, the FAM is normally reviewed once every five years and the next scheduled review was originally due to take effect in June 2018. However, MTR and Government agreed in April 2016 to an early joint review, bringing it forward by one year. Discussions are on-going with Government regarding this review. The Group’s station commercial and property rental businesses were also impacted by slowing economic growth and continued declines in Hong Kong retail sales, although the resilient nature of these businesses resulted in continued positive revenue growth. In the Group’s property tendering activities in Hong Kong the Group awarded two MTR property development packages in 2016, which were the Group’s tenth package at LOHAS Park and the first package at Ho Man Tin Station. The Group also awarded the first of the Wong Chuk Hang Station development packages in February 2017. The Group’s growth strategy targets opportunities both at home and abroad. In Hong Kong, during 2016 the Group overcame a number of challenges to open the Kwun Tong Line Extension on 23 October and the South Island Line (East) (“South Island Line”) on 28 December. This is the first time that the Group have opened two new lines in the same year in Hong Kong and is an achievement of which everyone at MTR is proud. These two lines have brought MTR travel to tens of thousands more Hong Kong people, reducing their journey times and increasing convenience. With the opening of the South Island Line, MTR now serves all 18 districts in Hong Kong. Outside Hong Kong, MTR carried on average 5.6 million passengers every weekday in 2016, with the Group’s rail businesses in all locations being recognised, and in many cases receiving awards, for superior service performance. In the year, important milestones were achieved including the opening of Phase 1 of Beijing Metro Line 16 (“BJL16”) and another station on Beijing Metro Line 14 (“BJL14”) in the Mainland of China, the taking over of the Stockholms pendeltåg concession in Sweden and the commencement of handover of completed units at the Group’s first property development outside Hong Kong, Tiara in Shenzhen. With the Group’s solid base, the Group continue to build the Group’s longer-term future at home and abroad. In Hong Kong, “Rail Gen 2.0” is the Group’s vision for the next generation of rail travel which includes the two remaining rail projects under construction, the Express Rail Link and the Shatin to Central Link; these projects were, respectively, 87.4% and 68.1% complete at 2016 year end. In addition to the Group’s new rail projects, Rail Gen 2.0 includes major asset replacements, such as trains and signalling systems, on the Group’s existing network, on which good progress was made during the year. When completed, Rail Gen 2.0 will provide even better connections and services for the Group’s Hong Kong customers. The Group’s longer-term growth in Hong Kong is supported by Government’s proposal to build seven new railway projects under the Railway Development Strategy 2014 (“RDS 2014”). The Group submitted the first proposal under RDS 2014, for an extension of the West Rail Line to Tuen Mun South, in December 2016. Outside of Hong Kong, the Group have submitted tenders or are in discussions regarding a number of new rail contracts in the Mainland of China, Sweden, the UK and Australia whilst also exploring integrated transit-oriented development opportunities in the Mainland of China. The Group await the results of these tenders and discussions. Turning to the Group’s financial results, total revenue for 2016 increased by 8.4% to HK$45,189 million, with operating profit before Hong Kong and Mainland of China property development profits, depreciation, amortisation and variable annual payment increasing by 4.2% to HK$16,947 million. Excluding the Company’s Mainland of China and international subsidiaries, revenue grew by 4.2% and operating profit by 5.3%, with operating margin up by 0.6 percentage point to 53.9%. Recurrent profit attributable to equity shareholders, being net profit before property development profits (from both Hong Kong and Mainland of China) and investment properties revaluation, increased by 4.1% to HK$8,916 million. Post tax profit from property developments (from both Hong Kong and Mainland of China) was HK$530 million, and was mainly derived from profit booking of the first batch of units handed over at Tiara as well as sundry income sources in Hong Kong, such as the sharing in kind of the kindergarten at Hemera. Excluding investment properties revaluation, net profit from underlying businesses attributable to equity shareholders fell by 13.3% to HK$9,446 million mainly due to a lower level of property development profits this year, representing earnings per share of HK$1.61. Gain in revaluation of investment properties was HK$808 million, as compared with HK$2,100 million in 2015. As a result, net profit attributable to equity shareholders was HK$10,254 million, equivalent to earnings per share of HK$1.74 after revaluation. Prospects: The global economy faces uncertainties in 2017, with rising US interest rates and geopolitical challenges offsetting potentially reflationary fiscal policies in some countries. As an open trading economy, Hong Kong will feel the effects of these trends and changes, having already witnessed a slowdown in GDP growth as well as continued declines in retail sales. In Hong Kong many of the Group’s businesses have a degree of resilience against an economic slowdown. Although patronage growth has slowed in the Group’s Hong Kong transport business, the full year effect of the opening of the Kwun Tong Line Extension and the South Island Line will positively impact passenger volume. However the opening of these two lines will also significantly increase depreciation and interest expenses, hence negatively impacting reported profits. Rental reversions at the Group’s station retail and property rental businesses will reflect market conditions, while the Group’s advertising business will be impacted by economic conditions and retail sales. In the Group’s plan to expand the Group’s shopping centre portfolio, the Group aim to open the Group’s new mall extensions in Maritime Square and Telford Plaza, in the second half of 2017. Profits from Hong Kong property development were muted in 2016 and will remain so in 2017, as the Group will have no new developments scheduled for completion in the year. In the Group’s property tendering activities in Hong Kong, subject to market conditions, the Group are looking at tendering out six more development packages over the next 12 months or so. These packages are likely to be the Group’s eleventh and twelfth packages at LOHAS Park, the Group’s second and third packages at Wong Chuk Hang Station, the Group’s second package at Ho Man Tin Station and, subject to re-zoning and other statutory approvals, the Yau Tong Ventilation Building site. If completely tendered out, these packages will provide about 6,380 residential units. As agent for the relevant subsidiary of KCRC, subject to market conditions, the Group plan to tender out the first package of the Kam Sheung Road Station site during 2017, which will provide about 1,650 residential units. For the Group’s businesses outside Hong Kong, currency movements will play a role, as they affect profits when translated back into the Group’s reporting currency, Hong Kong dollars. However, the recent opening of Phase 1 of BJL16 and the Stockholms pendeltåg operations will add to the Group’s overseas revenues. In Australia, the Group await the results of the franchise extension of MTM. In property development in the Mainland of China, the Group aim to hand over the high-rise units at Tiara in Shenzhen in the middle of 2017, which form the bulk of the development. Profits will be booked on handover of units.

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