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Chairman

I. Market Review for the First Half of 2018

In the first half of 2018, the property industry in China continued to develop under the guiding principle of "homes are for residence, not for speculation". Various macroeconomic control policies that were launched, such as restrictions on purchase, mortgage and sales, have mitigated the adverse impact of rising property prices to people's livelihood, and effectively suppressed the potential bubble from rocketing property prices. Combined with the strict supervision and control by the government, initial results have been seen as the entire property market of China has gradually achieved a better balance between supply and demand. In the first half of this year, the increase in property prices has slowed down with buyers and sellers becoming more rational.

While the Chinese economy and society have steadily moved towards a "new era". For property development, the Group believes the key is to balance the development of various industries in cities and facilitate upgrade of the industry through property control, so that "value of properties" and "value of cities" can grow in complementary fashion. As a leading property agency in China, Hopefluent places great emphasis on mutual growth with the "realm of cities", by utilizing its up-to-date marketing capabilities and rich experience, in order to achieve business growth in different periods through flexible deployment and expansion of its four major businesses.

II. Overall Business Review

During the period under review, the Group has captured the opportunities presented by industry consolidation and continued to satisfy a range of diversified property needs in the market through providing comprehensive services and in-depth interaction, and building a platform for property services, trading and data collection. The primary and secondary property real estate agency services businesses, financial services business and property management business have all performed well. All recorded increases exceeding the industry average, which testified to its leading presence in the industry and outstanding capabilities.

As at 30 June 2018, the Group recorded a turnover of HK$2,421.2 million, approximately 8% higher than the same period last year (2017: HK$2,247.3 million). Profit attributable to shareholders increased by approximately 13% to HK$137.5 million from the last corresponding period (2017: HK$121.6 million). Basic earnings per share were HK20.59 cents (2017: HK18.20 cents), and the board of Directors has resolved to declare an interim dividend of HK4.5 cents per share (2017: HK4.5 cents).

The primary and secondary property real estate agency services businesses of the Group registered turnover of HK$1,520.0 million and HK$562.4 million respectively, accounting for 63% and 23% of its total turnover. The turnover from the financial services business was HK$72.1 million, accounting for 3% of the Group's total. The remaining 11% or HK$266.7 million was derived from the property management business and other businesses. By geographical location, business in Guangzhou accounted for about 49% of the Group's total turnover, while around 51% came from businesses outside Guangzhou. Total new home sales for the first half of 2018 amounted to approximately HK$186 billion. The total gross floor area sold was around 15 million square meters.

1. Primary Property Real Estate Agency Services Business Sustained Leadership in China's Property Market and Made Further Progress through Combining Strengths

In 2018, notwithstanding the more stringent and more innovative austerity policies for the property market and the expanding coverage of related measures, the Group's primary property real estate agency services business showed stable growth in both market share and the number of agency projects during the review period as it continued to build a rational nationwide business footprint and optimize its services. Currently, the Group's business network covers more than 150 cities in China and is the agent of more than 1,000 projects.

As at 30 June 2018, turnover from primary property real estate agency services business reached HK$1,520.0 million (2017: HK$1,383.7 million), an increase of approximately 10% from the last corresponding period.

The Group continued to enhance a range of Internet-based products, including computer and mobile apps such as iHouseKing (www.ihk.cn), He Ji Mai Lou (合記買樓) and HFmoney (合富金融) (www.hfmoney.com). Through adopting the advanced "Internet+" approach, the Group was able to realize online and offline inter-support which has further improved its service standards and operational efficiency, thereby boosting its brand awareness and recognition in China's property market.

2. Secondary Property Real Estate Agency Services Business Made Satisfactory Progress in Business Expansion and Formed a Solid Foundation for Future Growth

Performance of the secondary property real estate agency services business was lackluster during the review period. Turnover was HK$562.4 million (2017: HK$597.3 million) from handling around 29,600 secondary property transactions (2017: 32,500 transactions). Growth in China's secondary property market abated in the first half of 2018 due to the in-depth adjustments in the sector. Heeding that trend, the Group has effectively allocated resources targeting different development stages of its business presence across the country. Also supported by the Group's economies of scale and solid and reliable business foundation, the secondary property real estate agency service business nonetheless achieved satisfactory progress in its business expansion.

3. Financial Services Comply with China's Regulatory Requirements and Showed Steady and Healthy Growth

China has tightened regulation of the financial sector since 2017, which played an important role in fostering the long term healthy growth of the real estate finance sector. Moderate regulation and industry standardization can improve loan structure and reduce credit risk, and more importantly, strengthen the confidence of consumers in financial service operators, helping to build a healthy and trustworthy industry ecosystem. The Group's diversified products and services have enabled it to satisfy the unique demands from customers. The enhanced service experience it has offered has also facilitated the establishment of close relationships built on mutual trust with customers. These efforts have brought about higher service quality and, subsequently, a greater overall competitive advantage to the Group.

Since its launch, the financial services platform has delivered a steady contribution to the Group's overall revenue. During the period under review, the total transaction value of the Group's financial services reached HK$1.4 billion and turnover was approximately HK$72.1 million (2017: HK$52.3 million), representing a growth of 38% from the corresponding period last year. The Group's financial products boast the features of small amounts, diverse targets, short cycles and controllable risks, which are also the premium benefits that it has been offering to its customers over the years. These features also serve as proof of the Group's outperformance over its rivals in its financial services.

4. Property Management Service Build Strong Reputation of the Group and Reinforce Brand Image

The property management business has achieved steady growth during the period. While boosting the Group's overall revenue, this business has maintained a good interactive relationship with the market and has reinforced its brand image. In the first half of 2018, the business segment recorded a turnover of approximately HK$266.7 million, representing an increase of approximately 25% when compared to HK$214.0 million in the same period last year. During the period under review, the Group provided property management services to approximately 300 residential, office and commercial properties in Guangzhou, Shanghai, Tianjin and Wuhan with a total gross floor area exceeding 30 million square meters.

III. Prospects for the Second Half of 2018

Looking ahead to the second half of the year, the implementation of austerity measures for the property market is expected to continue. The government is evaluating the formulation of more long-term policies and a more effective long-term regulatory mechanism. The property price in China is expected to be maintained at a reasonable level. Moreover, state policy still has further room for offering demographic benefits and the market is facing diverse demand. Hence, it is believed that the property market still has growth potential in the second half of the year. Guangzhou and the South China regional markets, which are the key development focus of Hopefluent, are regarded as core regions in China's economic development strategy. Factors such as education welfare, social security and international business activity will continue to drive the inflow of population. In particular, the development initiative of the Guangzhou-Hong Kong-Macau Greater Bay Area will boost the overall housing demand and support the steady rise of property prices and will attract more residents from other regions in China and Hong Kong to purchase properties in the major cities of Guangdong Province. This trend will be more beneficial to the Group's sustainable development in the long term.

While expanding the integrated service chain for property business, Hopefluent has teamed up with Poly Real Estate Group Co., Ltd. ("Poly Real Estate"; Shanghai Stock Exchange stock code: 600048) to consolidate their respective primary and secondary property real estate agency services businesses and set up a joint venture. The business restructuring exercise will significantly enlarge Hopefluent's market share, more effectively utilize the market data and customer resources of both parties, expedite the Group's business development in the major cities in China and therefore enhance their respective core competitiveness. It is believed that, through this merger and restructuring exercise, Hopefluent will take a great leap forward to its goal of becoming a leading property real estate agency enterprise in China.

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