Annual Report 2015
RISK FACTORS
225
A. RISKS RELATING TO PROPERTY DEVELOPMENT, SALES, INVESTMENTS AND HOTEL
OPERATIONS
(continued)
10. The rapid economic growth and infrastructure development in Hong Kong and the PRC in recent years have
uplifted the costs of construction materials and wages of workers. In addition, in view of the improvement of
general living standards in Hong Kong and the PRC and recent policies of the government of the PRC (the “PRC
Government”) to increase the wages of workers from rural areas, the Group expects that labour costs will
continue to increase in the foreseeable future. Other than the higher labour costs, the rising labour demand
and in turn more intensified competition for construction workers in regions where the Group operates, such as
the growing shortage of construction workers and service in Hong Kong, has made it increasingly difficult for
the Group to hire sufficient well-skilled labour for its property development projects and investment properties,
hindering its property development business. In addition, labour shortage in neighboring regions such as
Macau has intensified competition for labour in the region, which may adversely impact on the Group’s
business. Increasing cost of construction materials and labor are expected to raise contractors’ fee quotes in
our new property development projects. In addition, the Group usually commences pre-sales of properties
prior to their completion. In the event that the construction materials and labour costs surge subsequent to the
pre-sales, such increases in costs may not be passed on to buyers of the properties. Escalating labour shortage
and/or significant increase in costs of labour or construction materials without corresponding reduction of
other costs to offset such increases or pass on such increases to the buyers or tenants of our properties may
adversely and materially affect the Group’s businesses, financial condition, results of operations and growth
prospects.
B. RISK RELATING TO FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
1. The following factors may lower the level of turnover and profit of the Group, while the Group cannot
guarantee that the turnover and net profit level will be sustained or improved. The Group may not be able to
sustain similar patterns or levels of turnover or profit in the future:
I. change in the mix of turnover contributions, such as income from property development, rental income
from investment properties and income from our hotels;
II. increased market competition;
III. unfavourable government policies affecting consumer sentiments;
IV. failure to achieve target sales volumes and prices;
V. failure to achieve target rentals, daily room rates and occupancy rates;
VI. decrease in the fair value of investment properties;
VII. our costs may not decrease in tandem with a reduction in turnover to be derived from properties, as most
of the expenses associated with owning and maintaining the Group’s properties are fairly fixed (including
land cost, development cost, administration cost, and selling and distribution cost); and
VIII. failure to negotiate volume discounts with suppliers on favourable terms.
