SHKP Quarterly

集團中國首席財務總監 Chief Financial Officer - Mainland China Friedrich Lung 龍甫鈞 Friedrich Lung: Financial prudence behind mainland business strategy 龍甫鈞：配合集團內地業務策略 穩健財務發揮優勢 A focus on stable growth defines the Group’s mainland business strategy, which is built on a solid financial foundation. Chief Financial Officer – Mainland China Friedrich Lung oversees the Group’s financial management in the fast- growing mainland market to ensure proper support for business development. Financial prudence in line with corporate strategy Friedrich, a corporate finance and investment management veteran, says a company’s financial management should always follow the overall business development strategy, but it’s important to stay alert to market trends and make timely adjustments. He says the Group is prudent about capital management: “Our mainland business is still at a stage of development and there is a high demand for operating capital. So even though our completed investment properties generate recurrent cash flows, the objective of treasury management is not capital appreciation. Rather it focuses on capital preservation so that free cash flow can be readily available for projects under development.” He added that the Group keeps monitoring changes in policies and the market closely in order to respond quickly and mitigate any financial risks. Low cost-of-capital pivotal to building a long-term portfolio of investment properties Domestic real estate companies on the mainland are expanding very quickly amid a burgeoning market and they have many comparative advantages, resulting in vigorous competition. The Group, however, leverages its strengths, and its high-end residential projects and integrated commercial developments have earned an excellent reputation for quality. Large-scale complexes require huge capital and have long payback periods, so they need detailed financial planning and cost control. Friedrich said: “A project that has high funding costs may not produce the desired income and cash flow when it’s complete, even if rents meet expectations.” Prudent financial policies coupled with a good reputation in Hong Kong and on the mainland have helped the Group build strong relationships with many domestic and foreign banks, which ensure favourable terms for funding. Issuing bonds, in addition to getting loans from banks, is a relatively new way of funding that is encouraged by mainland authorities. Although bonds are gaining popularity, Friedrich is cautious and said the Group will continue to treat bank borrowing as the main source of external finance for the time being because of uncertainties with government 20 Profile Vol 82 • Q4 2016 • SHKP Quarterly