CHC — Investor Presentation 2021

Oct 12, 2021

Continental Holdings Corporation

3703.TT

Disclaimer Statement

• This presentation and release contain “forward-looking statements” which may include

projections of future results of operations, financial condition or business prospects based on our own information and other sources.

• Our actual results of operations, financial condition or business prospects may differ from those expressed or implied in these forward-looking statements for a variety of reasons, including but not limited to market demand, price fluctuations, competition, international economic conditions, supply chain issues, exchange rate fluctuations and other risks and factors beyond our control.

• The forward-looking statements in this release reflect the current belief of Continental Holdings Corporation as of the date of this release. Continental Holdings Corporation undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.

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Agenda

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Company Overview
Investment Highlights
Financial Snapshot
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Tracing our roots back to 1945 and gradually diversifying into adjacent sectors

1945

Our flagship construction company Continental Engineering Corporation (CEC) was established

1994

CEC was listed on the Taiwan Stock Exchange

2010

Continental Holdings Corporation (CHC) was established and listed on the Taiwan Stock Exchange with two member companies CEC and CDC

1964

CEC commenced real estate development business, the predecessor of Continental Development Corporation (CDC)

2006

CEC established HDEC Corporation (HDEC) to develop environmental projects

2017

HDEC became the third member company of CHC

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Company overview

Market Cap[(As of 10/8/2021)] NT$ 19.8B

Ultimate Parent’s Shareholding Montrion 50.05% Corporation

FY2020 Consolidated Revenues NT$21.7B

FY2020 Net Profit/EPS (NT$/Share) NT$1.54B/$1.87 (Second highest in history)

BVPS[(As of 6/30/2020)]

$29.1

Revenues/Net Profit Breakdown by Business

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Construction

59%/19%

Real Estate Development 27%/58%

Environmental Project Development 14%/23%

Note: Breakdown in FY2020

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Three member companies focusing on construction, real estate development and environmental project development

Construction

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Real Estate Development Environmental Project Development

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• 75 years of credentials

• Has successfully completed major civil construction works involving viaducts, bridges and tunnels for high-speed rail, highway, metro and railway projects

• Delivered a comprehensive range of building construction projects including hospitals, hotels, multifunctional complexes, high-end residences, as well as township

• A premium property developer specializing in residential, commercial and hotel sectors

• Has partnered with master architects including Richard Meier, Antonio Citterio and Benedetta Tagliabue on many landmark building projects

• Has ongoing projects in Taiwan, USA & Malaysia

• Strong track records in water treatment

• Established Taiwan’s first reclaimed water plant and is set to deliver Taiwan’s first government-owned industrial wastewater treatment plant with zero liquid discharge

• Expertise in processing sewage, industrial wastewater, solid waste, etc.

communities

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79% of backlog linked to the Sustainable Development Goals (SDGs)

Backlog as of June 2021

Corresponding SDGs

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Construction of
MRT and Railways
24%
Construction of
Urban Renewal Projects
and Public Housings
Water Treatment Projects 13%
32%
Urban Renewal
Projects
10%
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Selected 2020 ESG efforts

E

• Reduced 467 metric tons of CO2e and 1,024 metric tons of sludge waste

• • Nangang Depot Public Housing to be the first circular economy residence in Taiwan (Have obtained circular economy standard BS 8001:2017)

• Our EPC project in Tongluo Science Park will deliver Taiwan’s first government owned zero-liquid-discharge industrial wastewater treatment plant (Considered the most advanced industrial wastewater treatment solution in Taiwan)

• 97%+ customer satisfaction rate across all real estate development projects

S

• Fengshan Water Resource Center obtained Environmental Education Facility certification

• Awarded by Taipei City Government for our self-developed alert device to improve construction site safety

G

• Female members accounting for 28% (currently 42%) of our board, above Taiwan’s average of 14%

• No major unethical or dishonest behaviors identified

• 100% attendance rates of board and functional committee meetings

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Agenda

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Company Overview
Investment Highlights
Financial Snapshot
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Investment highlights

1 Positive market outlook underpinned by sustainable urbanization

2 Leading market position cemented by our credentials / brands

3 Solid backlog providing revenue visibility

4 Strategically and financially synergistic portfolio poised for growth

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1 Positive market outlook underpinned by sustainable urbanization

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Expanding /renewing Liveable cities
rail network
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• Increasing needs for intraand inter-city connection

• A growing number of urban renewal projects as >50% of apartments are >30 years old

• Renewal of the existing railway network

• 200,000 units of social housing by 2024

• Potential MRT/rail bids in 2021-25 amounting to NT$350 billion

• Government’s initiatives to upgrade city landscape

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Circular economy
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• 6 additional reclaimed water projects by 2026 after 5 awarded, with total reclaimed water supply summed up to 334K CMD

• Upgrade of 9 existing incinerators in next 3 years (TAM > NT$100 billion)

• Ramp up of bio-mass energy generation (from kitchen waste)

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2 Leading market position cemented by our credentials / brands

Construction	• •	Civil : • #1 in the rail and MRT sector and top 3* contractor in Taiwan • Beneficiary of government’s increasing adoption of most advantageous bids Building : CEC brand denotes high quality for home buyers in Taiwan
Real Estate Development	• • •	Leading brand in Taiwan’s high-end residential market Track records of mixed-use property development Achieve price premium through brand value, engaging renowned architects, exclusive service offering (e.g., residents’ access to facilities of adjacent hotel), etc.

Environmental Project Development	• Has won 3 out of government’s 5 awarded reclaimed water projects • Moving up the value chain from processing sewage to producing reclaimed water, to processing industrial wastewater • Beneficiary of manufacturers’ ramp up of production capacity in Taiwan

*Based on FY2020 construction revenues

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3 Solid backlog providing revenue visibility

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Environmental
Real Estate
Construction
Project
Development
Development
Backlog Signed contracts to close Contracts on hand
NT$ 67.0B NT$ 16.7B NT$ 39.8B
4.8x of 2020 Revenues 2.9x of 2020 Revenues 12.8x of 2020 Revenues
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Note:

1. Backlog and contract numbers are as of end of second quarter, 2021; Revenues numbers are 2020 consolidated revenues

2. Contracts on hand for Environmental Project Development business are calculated based on contract terms and project status. Actual recognized revenue amount may vary based on final execution for each project.

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3

Solid backlog providing revenue visibility Construction: Balanced civil/building portfolio

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Civil Construction - MRT

2021 Major Projects for Construction Business

Taipei MRT Wanda Line (CQ840) Taipei MRT Wanda Line (CQ850A) Taoyuan MRT Green Line (GC01) Taoyuan MRT Green Line (GC03)

Building Construction Bountiful Journey (Residence & Hotel) Nangang Depot (Public Housing) Guangci (Public Housing) CMP Midtown (Residence)

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Civil Construction - Railway

Tainan Railway Underground (C211) Tainan Railway Underground (C214)

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3

Solid backlog providing revenue visibility Real estate develo ment: Growth under inned b health i eline p p y y p p

Project Name	Location	Type	Residence Value1 (NT$)	Estimated Timeline2	Estimated Timeline2	Estimated Timeline2	Estimated Timeline2	Estimated Timeline2
				2021	2022	2023	2024	2025
Bountiful Journey	Taipei	Residence/ Hotel (by_My Humble House Group)_	8.20B (Retail included)	v
Drawing the Dream Life	New Taipei	Residence	2.84B		v
Timeless and Modern Expression	Taipei	Residence	2.39B			v
Tianjin Street Project	Taipei	Residence	2.23B			v
Arranging New Asia Bay3	Kaohsiung	Residence/ Hotel (Hotel Nikko)	3.51B			v
Belle Époque	Taichung	Residence/ Office	4.10B					v
Dakeng Project	Taichung	Township Community	3.54B					v
Sensuous Garden	Taipei	Residence	4.50B					v
Prologue Eternal	Taipei	Residence	4.40B					v
SERIF4	San Francisco, CA, USA	Residence/ Hotel (The LINE Hotel)	US$240M	v
Bangsar Project4	Kuala Lumpur, Malaysia	Residence	MY$170M					v

1. (1) Total residence value amounts for JV and subsidiary-owned projects; otherwise residence value amounts attributable to CDC. (2) Actual amounts for sold-out projects; otherwise estimated residence value amounts.

2. Denotes the year in which the project would start handover and recognize revenues.

3. Owned by JV between Daiwa House Group (65%) and CDC (35%)

4. Owned by CDC subsidiaries; 54.08% and 60% stake in the project companies for SERIF and Bangsar Project, respectively.

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3 Solid backlog providing revenue visibility Real estate develo ment: Growth under inned b health i eline p p y y p p

Hotel Products

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Hotel by My Humble House Group [1] Taipei, Taiwan Completion in 2021

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The LINE Hotel [2] Capri by Fraser [2]
San Francisco, CA, USA Kuala Lumpur, Malaysia
Scheduled opening in 2022 Scheduled opening in 2022
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Hotel Nikko[3] Kaohsiung, Taiwan Scheduled opening in 2023

Estimated total value NT$22B

1. Leased to My Humble House Group for rental income

2. Owned by CDC subsidiaries and managed by THE LINE Hotel and Capri by Fraser respectively. CDC owns 54.08% and 55% stake in each project company respectively.

3. Owned by JV between Daiwa House Group (65%) and CDC (35%) and managed by Hotel Nikko

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3

Solid backlog providing revenue visibility

Environmental project development: Full spectrum of water treatment solutions

Project	Location	Type	Duration	Current Status	Current Status	Category	Category	Category
				Under Construction	In Operation	Municipal Wastewater	Reclaimed Water	Industrial Water
Danshui Area Sewerage System	Taipei	BOT	2005 – 40
Fengshan River Wastewater Reclamation and Reuse	Kaohsiung	BTO	2016 – 33
Puding Area Sewerage System	Taoyuan	BOT	2016 – 56
Chungli Area Sewerage System	Taoyuan	BOT	2016 – 56
Linhai Wastewater Treatment Plant and Reclaimed Water	Kaohsiung	BTO	2018 – 36		(Operation starting December 2021)
Tongluo Science Park Wastewater Treatment Plant Phase II	Miaoli	EPC	2020 – 23
Anping Reclaimed Water Plant	Tainan	DBO	2020 – 37	(Reclaimed	(Wastewater
				~~Water)~~ ~~)~~

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4 Strategically and financially synergistic portfolio poised for growth

	Construction	Real Estate	Environmental
Business Cycle
Employed Capital
Profitability
Required capabilities	• Technical (design- build, BIM, etc.) • Management of contractual relations	• Project management • Financing • Asset management	• Project development • Management of contractual relations • Capital management

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4 Strategically and financially synergistic portfolio poised for growth

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•
Profitability over revenue
•
Participate in the civil portion of the
Construction emerging energy related projects
•
Use technology to enhance safety and to
improve productivity
•
Diversify into other cities beyond
Real Estate Taipei/Taichung
•
Cultivate more project in the
Development
commercial sector (office, etc.)
•
Well poised to gain more reclaimed water
Environmental projects
•
Participate in incinerator business with partners
Project
•
Leverage existing anaerobic digestion
Development
capabilities to enter bio-mass energy business
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Agenda

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Company Overview
Investment Highlights
Financial Snapshot
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Expanding gross margin

Selected Items from Income Statement (In NT$ millions unless otherwise noted)	2017 Amount %	2018 Amount %	2019 Amount %	2020 Amount %	1H 2021
					Amount %
Revenue	28,385 100	25,154 100	22,665 100	21,689 100	11,945 100
Gross Profit	2,349 8.3	3,72414.8	2,73312.1	3,292 15.2	1,750 14.7
Operating Profit	1,167 4.1	2,350 9.3	1,325 5.8	1,762 8.1	1,061 8.9
Non-Ops	(276) (1.0)	(198) (0.7)	(702) (3.1)	(41) (0.2)	(98) (0.8)
Profit before Tax	892 3.1	2,162 8.6	623 2.8	1,721 7.9	963 8.1
Tax Expense	84 0.3	144 0.6	470 2.1	88 0.4	121 1.0
Net Profit,attributable to owners of parent	788 2.8	1,942 7.7	97 0.4	1,539 7.1	803 6.7
EPS (NT$)	0.96	2.36	0.12	1.87	0.98

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GM expansion mainly because of favorable change in revenue mix

Consolidated Gross Margin and Revenue Composition

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14.8% 15.2% 14.7%
12.1%
8.3%
6% 7% 8%
14% 16%
17%
25% 22%
27% 25%
77%
68% 70% 59%
59%
2017 2018 2019 2020 1H 2021
Construction Real Estate Development Environmental Project Development
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Strong balance sheet

Selected Items from Balance Sheet (NT$ M)	2021.6.30 Amount %	2020.12.31 Amount %	2019.12.31
			Amount %
Cash and Cash Equivalents	4,846 7.0	4,512 6.7	4,423 7.0
Current Contract Assets	3,832 5.5	3,892 5.8	4,963 7.8
Account Receivable, Net	2,442 3.5	2,036 3.0	2,140 3.4
Inventories	28,474 41.0	28,363 42.2	26,369 41.5
Property, Plant and Equipment	2,416 3.5	2,346 3.5	2,287 3.6
Investment Property, Net	10,431 15.0	10,193 15.2	9,835 15.5
Long-term Accounts Receivables	6,748 9.7	5,808 8.6	4,548 7.2
Total Assets	69,459 100	67,155 100	63,548 100
Short-term Interest-bearing Loans	12,296 17.7	12,811 19.1	9,972 15.7
Current Contract Liabilities	8,225 11.8	8,121 12.1	6,555 10.3
Accounts and Notes Payable	5,521 7.9	5,784 8.6	5,908 9.3
Long-term Interest-bearing Loans	11,380 16.4	9,099 13.5	10,353 16.3
Total Liabilities	42,327 60.9	40,235 59.9	37,851 59.6
Total Equity	27,132 39.1	26,920 40.1	25,697 40.4

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Goal to maintain 75% payout ratio

CHC Cash Dividend (NT$/Share) Since Inception

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1.40
0.90
0.60 0.60
0.50 0.50 0.50 0.50 0.50 0.50
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Net Profit (NT$ M) 931 984 1,147 920 (980) 573 529 788 1,942 97 1,539
Payout Ratio1 54% 43% 37% 91% - 72% 78% 63% 38% 424% 75%
Dividend Yield2 4.7% 4.6% 4.5% 4.2% - 4.6% 4.3% 4.5% 5.2% 3.7% 5.1%

1. CHC also distributed stock dividend in 2013.

2. Calculated based on the closing prices of ex-div days.

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3703.TW 欣陸投控 Continental Holdings Corporation https://www.continental-holdings.com ir@continental-holdings.com +886-2-2700-4509

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