On behalf of the board (the “Board”) of directors (the “Directors”) of Dynamic Holdings Limited (the “Company”), I hereby present to the shareholders the management statement regarding the unaudited interim results of the Company and its subsidiaries (the “Group”) for the six months ended 31 December 2024, which have been reviewed by external auditor of the Company, Deloitte Touche Tohmatsu.

Interim Results

For the six months ended 31 December 2024 (the “period”), the Group reported total revenue of HK$33,784,000 (2023: HK$38,307,000) and gross profit of HK$22,196,000 (2023: HK$24,914,000), reflecting decrease of revenue and gross profit about 12% and 11% respectively, as compared with those of the previous corresponding period (the “last period”), whereas the gross profit margin slightly improved to about 66% (2023: 65%). These results were primarily due to a decrease in rental income from the Group’s investment properties in mainland China, that was denominated in Renminbi yuan (“RMB”).

During the period, the Group accounted for other income and gains amounting to HK$4,503,000 (2023: loss of HK$24,000), mainly from bank interest income of HK$4,074,000 (2023: HK$2,490,000) and net exchange gain of HK$236,000 (2023: HK$4,097,000). The reversal of imputed interest income was nil (2023: HK$7,188,000 on the amount due from a joint venture of the Group (the “JV”) in the mainland China).

Furthermore, the Group recorded a significant decrease in the fair value of investment properties, amounting to HK$64,162,000 (2023: HK$13,338,000) under subdued market sentiment. Administrative expenses were reduced to HK$16,006,000 (2023: HK$31,679,000).

The Group did not record any profit of the JV in the period, compared to a profit of HK$12,635,773,000 in the last period, which arose primarily from the initial recognition of a one-off fair value gain on a piece of land distributed to the Group by the JV.

Taking all factors into account, including the decrease in fair value of investment properties and related effect of deferred taxation, the Group recorded a loss for the period attributable to shareholders of the Company of HK$42,182,000 (2023: profit of HK$5,365,693,000), translating to a basic loss per share of HK$0.1775 (2023: earnings per share of HK$22.57). The significant difference in earnings per share between the two periods is mainly due to the above-mentioned one-off fair value gain on a piece of land distributed to the Group by the JV and related tax effect in the last period, and if excluding the effects of such one-off fair value gain and related tax effect in the last period, the Group recorded an underlying basic loss per share of HK$0.0592 in the last period.

Additionally, due to exchange difference on translation to presentation currency in HKD from functional currency in RMB, which devalued against Hong Kong dollar (“HKD”) by about 1.46% (2023: appreciated by 1.71%), other comprehensive expense amounted to HK$106,986,000 (2023: other comprehensive income of HK$71,638,000), resulting in total comprehensive expense attributable to shareholders of the Company of HK$148,591,000 (2023: total comprehensive income of HK$5,436,647,000).

Interim Dividend

The Directors have declared an interim dividend of 0.5 Hong Kong cents (six months ended 31 December 2023: 0.5 Hong Kong cents) per share for the six months ended 31 December 2024 to the shareholders of the Company whose names appear on the register of members on Thursday, 3 April 2025. The warrants for the interim dividend are expected to be despatched to those entitled on or about Friday, 25 April 2025.

Business Review

In the period, the Group’s overall revenue was derived from its property rental segment, primarily from its investment properties in mainland China and was denominated in RMB, whereas segment results of the Group were derived from segments of property rental from its investment properties and property development in mainland China. The performance of the Group’s rental segment was adversely affected by the decrease in rental income and the fair value of investment properties owing to ongoing depressed market sentiment of the property sector.

The Group’s rental income from its investment properties in Shanghai and Beijing totaled RMB30,933,000 (2023: RMB34,995,000), showing a drop of 12% income as compared with that of the last period. This revenue, reported as HK$33,784,000 (2023: HK$38,307,000) in the financial statements, constituted all (2023: all) consolidated revenue of the Group. The fair value of the Group’s investment properties, which included (1) shopping malls, car parks and other certain properties in Beijing; and (2) office units in Shanghai, decreased by RMB58,748,000 (equivalent to HK$64,162,000) (2023: RMB12,185,000 (equivalent to HK$13,338,000)). Consequently, the property rental segment recorded a loss of RMB38,563,000 (equivalent to HK$42,117,000) (2023: profit of RMB10,375,000 (equivalent to HK$11,357,000)).

Excluding the effects of the fair value change of these investment properties and related tax effect, the underlying segment results recorded a profit of RMB20,185,000 (equivalent to HK$22,045,000) (2023: RMB22,560,000 (equivalent to HK$24,695,000)).

Beijing

In Beijing, the rental income from the well-established community mall of the Group in Chaoyang District dropped, with an increase of average occupancy rate to about 87% (2023: about 85%). The rental income was RMB12,913,000 (2023: RMB13,588,000), representing a decline of about 5%, as compared with that of the last period. This translated into HK$14,103,000 (2023: HK$14,874,000), accounting for 42% (2023: 39%) of the total revenue of the Group. The decrease of rental income was attributed to weak consumption and retailing sentiment. The fair value of these investment properties decreased by RMB11,734,000 (equivalent to HK$12,815,000) (2023: RMB2,283,000 (equivalent to HK$2,499,000)), resulting in a segment loss of RMB5,051,000 (equivalent to HK$5,517,000) (2023: a profit of RMB4,611,000 (equivalent to HK$5,048,000)).

Excluding the effects of the fair value change of these investment properties and related tax effect, the underlying segment results showed a profit of RMB6,682,000 (equivalent to HK$7,298,000) (2023: RMB6,894,000 (equivalent to HK$7,547,000)).

Shanghai

In Shanghai, the average occupancy rate of quality offices known as “Eton Place” located in core financial district of Little Lujiazui in Pudong dropped to about 71% (2023: 86%), with rental income of RMB18,020,000 (2023: RMB21,407,000), representing a decrease of about 16%, as compared with that of the last period. This translated into HK$19,681,000 (2023: HK$23,433,000), accounting for 58% (2023: 61%) of the total revenue of the Group. The decline was due to tenant defaults and influx of new office supply in sluggish economy and demand. The fair value of these investment properties decreased by RMB47,014,000 (equivalent to HK$51,347,000) (2023: RMB9,902,000 (equivalent to HK$10,839,000)), resulting in a segment loss of RMB33,512,000 (equivalent to HK$36,600,000) (2023: a profit of RMB5,763,000 (equivalent to HK$6,309,000)).

Excluding the effects of the fair value change of these investment properties and related tax effect, the underlying segment results recorded a profit of RMB13,502,000 (equivalent to HK$14,747,000) (2023: RMB15,665,000 (equivalent to HK$17,148,000)).

Shenzhen

The Group is currently developing a plot of land no. K709-0003 located in Tung Kok Tau, Nanshan District, Shenzhen (the “Land”), which was granted to the Group by 深圳市規劃和自然資源局南山管理局 (Nanshan Administration of Shenzhen Municipal Bureau of Planning and Natural Resources) (the “Bureau”) in the last period.

The Land is primely located to the east of 後海大道 (Hou Hai Avenue), to the south of 蛇口新街 (Shekou New Street), to the north of 望海路 (Wang Hai Road) and to the west of 後海濱路 (Hou Hai Bin Road), which has a site area of approximately 65,000 square metres for multi-purpose development, with developable gross floor area of approximately 179,000 square metres (including 143,000 square metres for residential use and 29,000 square metres for commercial use and other supporting ancillary facilities).

The Group began development of the Land and had been working closely with various relevant government authorities and parties on different development options and master planning of the Land with the city planning and infrastructure (including development of metro line and station) for cultural and leisure facilities in the region and the opera house nearby.

As for the JV known as Shenzhen Zhen Wah Harbour Enterprises Ltd. (“Zhen Wah”, in which the Company holds 49% of equity interests with the expiry of its license period in 2014), the Group and the JV partner (the “JV Partner”) continued its liquidation after withdrawal of compulsory liquidation by the Shenzhen Intermediate People’s Court of Guangdong Province (the “Court”) and the land swap that surrendered its interests in a piece of land located in Tung Kok Tau, Nanshan District, Shenzhen (the “Previous Land”) to the Bureau in return for, among others, the Land distributed to the Group. After such land swap, in which the primary asset of Zhen Wah was exchanged, Zhen Wah no longer possesses a significant asset.

The share of profit of the JV was nil (2023: RMB11,543,284,000 (equivalent to HK$12,635,773,000), which was primarily arisen from the initial recognition of one-off fair value gain of a piece of land distributed to the Group by the JV).

Meanwhile, as previously disclosed, an ex-tenant lodged appeals (the “Appeals”) for the previous judgements of the Court on four administrative proceedings submitted by it as plaintiff against the relevant official authorities (the “Authorities”) as defendants regarding the Previous Land and joining Zhen Wah as a third party. The ex-tenant opposed the relocation compensation agreement (the “Compensation Agreement”) made between the Authorities and Zhen Wah in 2021 for demolition, relocation and compensation of those buildings, erections and equipment on the Previous Land; and claiming for compensation. In the period, the Court dismissed three out of four Appeals and upheld their original judgments, and for the remaining Appeal, the Court modified the second ruling of its original judgment to order the Authorities to deal with and handle the ex-tenant’s compensation request again, and upheld other parts of the original judgment. The Group and the JV Partner is monitoring the progress and will take appropriate actions as and when necessary, based on the advice of its PRC legal adviser.

Based on the PRC legal advice received by the Group regarding historical disputes over Zhen Wah between the Group and JV Partner, including the change of equity interests from 80% to 49% in Zhen Wah in prior years (the “Historical Disputes”), the Group was entitled to the distribution of profit arising from the relevant income from the Previous Land held by Zhen Wah before re-development, as supported in the arbitral award made in 2010 after arbitration between the Group and JV Partner in respect of the Historical Disputes. The Group continued to act and to seek PRC legal advice and to take expedient actions (including but not limited to litigation and/or arbitration) to safeguard the best interest of the Group in Zhen Wah and its assets in respect of the Historical Disputes.

Financial Review

Capital Structure

The financial position of the Group remains sound and liquid, and its financing and treasury policies are managed and controlled at the corporate level and in a prudent manner during the period. The main objective is to utilise the Group’s funds efficiently and to manage the financial risks effectively. At 31 December 2024, the equity attributable to owners of the Company amounted to RMB6,672,049,000 (30 June 2024: RMB6,712,492,000) with net asset value per share of RMB28.07 (30 June 2024: RMB28.24), translating into HK$7,204,925,000 (30 June 2024: HK$7,354,705,000). As at 31 December 2024, the Group’s total bank borrowings remained nil (30 June 2024: nil), resulting in nil (30 June 2024: nil) gearing ratio of the Group. The exposure to foreign currency fluctuations affected the Group in the period was mainly the fluctuation of RMB against HKD, resulting in the net exchange gain of HK$236,000 (six months ended 31 December 2023: HK$4,097,000) and exchange difference on translation from functional currency in RMB to presentation currency in HKD, amounting to other comprehensive expenses of HK$106,986,000 (six months ended 31 December 2023: other comprehensive income of HK$71,638,000). No financial instruments were used for hedging purpose in the period. The Group will continue to closely monitor the impact of fluctuation of RMB in order to minimise its adverse impact.

Financial Resources and Liquidity

The Group generated sufficient cashflow from rental income of investment properties and interest income. As at 31 December 2024, the bank balance and cash and fixed bank deposits of the Group stood at HK$423,753,000 (30 June 2024: HK$422,338,000) in aggregate and denominated mostly in RMB. With sufficient cashflow, the Group maintained un-utilised credit facilities of HK$1,000,000 (30 June 2024: HK$1,000,000) as working capital at floating interest rate. As at 31 December 2024, the Group’s net current assets amounted to HK$12,873,616,000 (30 June 2024: HK$13,057,439,000) with current ratio of 72.45 (30 June 2024: 74.17). The Group had a total capital commitment of approximately RMB6,747,000 as at 31 December 2024. Meanwhile, the projected construction and development costs of the properties under development of the Land will be substantial (subject to the development plan and the positive results of the arbitration and/or litigation in respect of the Historical Disputes if any), which will be funded by internal resources, bank financing and such other applicable means as appropriate.

Pledge of Assets and/or Contingent Liabilities

As at 31 December 2024, the Group had not pledged any assets as there was nil (30 June 2024: nil) borrowings.

Prospects

Looking ahead, China economy shows sign of recovery, despite the challenges such as prolonged property downturn, weak domestic consumption and business confidence, geopolitics and imposition of tariffs. It is believed that a series of ongoing stimulus policies as well as fiscal and monetary easing measures will stabilise the property sector and revitalise the consumption, sustaining high-quality steady economic growth in China. These will boost market sentiment for domestic demand and consumption as well as business activities to bolster leasing activities of retail and office sectors.

In Beijing, the retail market is anticipated to stabilise, due to upgrades in consumption scenarios and supportive policies to accelerate consumers’ spending. To maintain occupancy rate and recurring revenue, the Group will endeavor to improve leasing and marketing strategies, enhance brand portfolios and optimise the leasing services to deliver diverse and convenient quality shopping experiences for local residents’ needs, alongside competitive and effective rental strategies to attract new retailers/tenants and retain existing retailers/tenants.

In Shanghai, the rental rate and occupancy levels of office market still faces pressure from the continuing new influx of office spaces combined with weak demand and sluggish economy. The Group will continue to implement its competitive and effective rental strategies with fitting-out subsidies, value-added services and increase more flexible leasing terms, to attract new tenants and retain existing tenants so as to maintain occupancy rate and recurring revenues.

The metropolis Shenzhen, being the Shenzhen Demonstration Pilot Zone and high-tech hub, is expected to sustain diverse growth with high-quality development, fueled by recent positive policy and expansion of transportation network, bustling economic vitality and positioning as an international trade, innovation and consumption center and highly livable city. It will strengthen its core and pivotal role in the development of Guangdong-Hong Kong-Macao Greater Bay Area.

In addition, the recovery momentum of property market in Shenzhen is expected to grow, as signaled by record high price of land auction, and driven by a surge in sales recently, reflecting improved confidence to property market after unveiling a series of official supportive policies to combat prolonged property slowdown. This will enhance the development value of the Land in Tung Kok Tau, Nanshan District, Shenzhen.

And the Group will continue to utilise the city and master planning of the Land with the projects of adjacent opera house and infrastructure for a synergy effect. Meanwhile, it is expected that there will be substantial construction and development costs to be incurred by the Group in connection with the development of the Land in the future. In addition, the Group will continue to seek PRC legal advice and to further strive for the best interest of the Group in relation to Zhen Wah and its assets in respect of Historical Disputes.

Appreciation

The Board would like to thank the shareholders, bankers, customers, suppliers of the Group and other stakeholders who have extended their continued support to the Group and all staff of the Group for their contributions to the Group in the period.

Dr. TAN Lucio C.
Chairman

Hong Kong, 28 February 2025

Interim Report for the year ended 31 December 2024