Earnings Call: H2 2020

Jun 26, 2020

Dear investors, welcome to attend China Gas Holdings 2019 annual results release. Let me give you an introduction of the management members. At Shenzhen Venue, they are Executive Chairman, Managing Director, President, Mr. Liu Minghui. Executive Director, Executive President, Mr. Huang Yong. Ms. Cathy Liu, Executive Director and Vice President, and Non-Executive Director, Mr. Jiang Xinhao. At Hong Kong Venue, we have Executive Director, Managing Vice President, Mr. Kevin Zhu. Assistant to President, General Manager of Capital Management Center, Mr. Frank Li. Now let's give the floor to Mr. Liu Minghui, Executive Chairman, for opening remarks. Dear investors, dear analysts, good evening. I'm very delighted to have this opportunity to communicate with you our 2019, 2020 annual results. It is such a pity that because of the pandemic, we cannot host you or see you in person. It is such a pity. I have parted Hong Kong for quite a long time, and I miss Hong Kong very much. But I know if I want to go there, I will have to stay there. Otherwise, I will have to have quarantine here or there. Anyhow, the pandemic is so killing to all of us. Even though I can't see all of you in person, I still wanted to leverage this opportunity to report and share with you the fiscal year 2019 to 2020 results. I will present to you the annual results for fiscal year 2019 to 2020. Mr. Zhu, Mr. Huang, and Cathy Liu, and Mr. Jiang, who joined me today to answer the questions of your concern. Without further ado, I'd like to give you a report on our performance and annual results on fiscal year 2019 to 2020. I know you are all concerned with sustainable development. Actually, ESG is so much attended to by all these large firms and fund-managing companies. ESG had been incorporated into our business blueprint. We have formulated a sustainability committee in which I am the head of the committee. We also had a sustainability secretariat, an office. We even hired professional advisors and formed different working groups. Of the 13 core functional departments, they all joined our ESG work together. We promote the sustainability issue in CGH. To say, ESG is incorporated into our business blueprint. I will not share with you the details, but one particular figure. In the last three years, because of our launch and efforts in using natural gas, we have reduced the discharge of over 100 million tons of carbon dioxide. In the 2019 year alone, we have reduced over 60 million carbon dioxide. This is a tremendous effort we made to China's green development. Let's now look at the returns we bring to our shareholders. Over the years, our CGH teams, first and foremost, they are very good at execution. This strong execution had enabled us to deliver maximized value to our shareholders in the last 17 years. Actually, 18 years, if we add last year in. We transformed from a company owning 34 concessioned city gas projects to over 600 last year. Last year, actually, the specific figure was 604 concessioned city gas projects. In the last 18 years, the CAGR, if you look at it from 2010 to 2019, the core EPS had been 27.5%. The DPS CAGR had been 36.7%. This year, the board of directors had approved that the payout ratio is HKD 0.5. Last year, it's HKD 0.44 per share. Now let's look at the connections. In the last 3 years, for 3 years in a row, we have refreshed the world record in the natural gas industry. What is that record in? The annual residential connections. If you look at in FY 2017, it is 3.92 million newly connected users, and 2018, 5 million, and last year, 5.44 million. For 3 years, we have created world records, and I am sure this year moving on, we will keep refreshing the record. Looking back of the last 18 years of journey, apart from very strong execution, China Gas Holdings also is very innovative. In the last 18 years, the Chinese city gas industry had seen new development models, business models, all of them were created and initiated by our holding. As a participator and initiator, as well as the founder and Chairman of the China Gas Association, I am very proud to say China Gas Holdings had created a lot of number ones in this industry. We lead the business model in this industry. For example, over the last few years, in the year 2004, we were the first, the pioneer, in fostering the long-distance pipeline projects, and then using these pipelines, we cover the surrounding cities. This model was actually quite mature abroad. However, in the year 2004, none of our peer companies had started to do so in China. We pioneered in Hubei a 144 kilometers long distance pipeline connecting the nearby cities. We created it. In 2007, we launched the Hub City and Satellite City strategy. We covered the nearby regions of the Hub City, and we leverage on the Hub City teams to replicate nearby. This is a business model initiated by our holding group. In 2009 and 2010, we started to reduce our reliance on the real estate market. We wanted to cover the streets, townships, cities, village committees. We wanted to capture all of these existing residential households. In 2009, we pioneered in connecting the existing residential households in large scale and connecting new households, and this model was also copied by other peer companies. In the year 2013, we answered to China's environmental protection policy. To some extent, we help fostering the environmental protection projects in China. In 2013, we started the conversion of coal-fired boilers with natural gas-fired boilers. In the year 2014, we pioneered in promoting key townships promotion strategy. In 2015, we started to initiate concept like beautiful countryside. We increased our investment in township gas pipelines. In 2015, we established Zhongran Smart Living, and value-added service was incorporated as one of our core businesses. In 2016, we started the pilot in Hebei, helping the Ministry of Environmental Protection to move along with the coal to gas project. In the year 2017, centered on Beijing, Hebei, and Tianjin region, we started the large scale coal to gas project implementation. In year 2018, 2019, our journey to innovation never stopped. Together with the Ministry of Housing and Urban-Rural Development of China, we were entrusted by the department to execute LPG micro pipeline network model projects, and we constantly innovate that business model. This year, 2020, we started our investment in LPG micro pipeline network. This micro pipeline network market will become another investment opportunity based on last 18 years of successful stories. This is China Gas Holdings' execution and innovation and where it lies. Number 3, I'd like to talk about our strong sense of social responsibility. Each corporate or business advocates and claim it is a socially responsible company. However, pandemic is a large test to our promise. Over the pandemic, our 50,000 China Gas employees started to work as great worker to make efforts to safeguard our livelihoods. Over that event, our performance was widely praised and acknowledged by Chinese societies, from Xinhua Net to CCTV, to local medias, to internet networks. Over the last few months, our performance had been reported by Chinese media for over 150,000 times. Our performance and the heavy reports of our performance had surpassed our reports in the social medias and media networks in the last 18 years. Why? Because our performance was widely acknowledged by Chinese society. What did we do? In 3 aspects. First of all, to safeguard livelihood. When the pandemic struck China, our whole company, over thousands of businesses, 50,000 staff, they started to move at the front line. No one single staff is left behind. All of them are devoted. Even including those people who were not physically at Wuhan, they traveled long distance to Wuhan because we were the main supplier of the natural gas in Hubei province. We have dozens of businesses, over 5,500 staff. At that time, to ensure gas supply was the first and foremost mission. At that time, the traffic had been locked down on road, and LNG cannot enter Wuhan. We had shared over a half of the LNG supply in Hubei. For LPG in Wuhan, at that time, started to demand large supplement. China Gas Holdings leveraged our fleet's capacity. We have created a route from Middle East to a receiving terminal in Wenzhou, and then our onshore fleets created another route from Zhejiang to Yangtze River to Wuhan. This has supplied over 5,200 tons, 3 batches of LPG. This is lifesaver to Wuhan, and this term was quoted by Hubei Provincial Government. So lifesaver. Without LPG supply, a lot of households in Wuhan cannot even cook a simple meal. At that time, we also created and supplied for 68 major hospitals. Our supplied 1,400 thousand tons of LPG to over 400,000 households in Wuhan. As you know that a lot of our staff members also went to the front line to deliver the gas to the citizens, which have touched a lot of people, including Leishenshan Hospital, mobile cabin hospital, and others. In Hubei, all of our gas pipelines, including the whole country, there's no incident or accident happened. In the whole process, we have guaranteed the supply of source and safetiness. Secondly, safeguard people's livelihood and address people's difficulties. During the pandemic crisis, China Gas has donated a total amount of HKD 57.48 million, not only the foundation, but also our subordinate enterprises. We also secured protective gears for our employees, and we delivered the daily necessities to millions of households. A lot of the normal citizens couldn't access inside or out, but our employees have the special certificates and pass. Our staff members volunteered to deliver the daily necessities to millions of thousands of homes with free vegetables and fruits. None of our staff members ever bargained for any subsidy. They even used their own private cars. Work overtime to serve the local citizens, to help them out of the difficulties. We are also facilitating the farmers to sell the strained agricultural products. We helped one county in Henan Province within one week. We helped them sold more than 500,000 tons of pears, also like eggs. On April 8, we signed a strategic agreement with Hubei Administration of Agriculture. By using one of China Gas platforms, we help them to sell the strained agricultural products. I myself, together with Ms. Cathy Liu, supported by all the staff members from China Gas, we become a streaming celebrity. We are online for about 130 minutes, and we sold more than RMB 27 million agriculture products, which demonstrated our concentrated determination to fight against the pandemic. We are also one of the earliest to reopen our daily work routine, and we are among the very first bunch of peers to resume work in Shenzhen. Also, we were one of the only who started resume work in mid-February. As a very unique pioneer or pilot in CBD area of Shenzhen, we also try to get all the subordinate enterprises to start resume of the work. We, the headquarter, started on February 3, which also showed our very strong corporate social responsibility. Now I am going to go to the details and the breakdown of our performance in the past year. First of all, the financial performance, our natural gas. In 2019, the volume growth was dropped down by 1.7%, and the total amount is 18,659.3 million cubic meters. That is due to the crisis. While the residential amount has growth 76.%. The first three quarters last year, we performed very well, but from January to March, it was negative, comparatively speaking, dropped by 23% Y-O-Y. But from April to June, we received a recovery. Customer breakdown of the natural gas. Residential Y-O-Y increase is 23.6%, while the industrial user increased by 5.2%, while commercial decreased by 9.1%, and urban residential growth is at 23.6%. It is understandable because the lockdown of the city and all the transportation got locked down. That is why the CNG, LNG stations dropped by 16.2%. Connection. Last year, residential connection household is 5.4 million, accumulated to 35 million, with 18.3% increase. While city gas projects is balanced. Newly connected, 2.3 million, and two years ago, about 2.7 million, so it is balanced. While township projects, 2.6 million compared to two years ago, with an increase. City gas projects, accumulative household is 28.869 million households, while township projects accumulated household is 6.23 million. The Y-O-Y growth is 76.1%. Industrial connection, 2,271, and commercial, 34 and 50, while CNG, LNG stations with 19 minus, because we shut down 19 stations. Connection fee. Compared to 2019, it maintained a balance. City gas projects, 2,494, while 2018, 2,500. RCG projects, 2,900, while in 2018, the price was 3,000, so it remained very much balanced. And the penetration is about 64.9%. Tariff. The signed connected There is a remaining about 3 million contracted projects needs to be connected Tariff and dollar margin. First of all, tariff. Residential was 2.53 in 2018, 2.52 industrial to 2.68, compared to 2018, 2.65. Commercial, 2.77 against the 2.79, while stations, 3.18 against the 2.93. Average selling price, 2.69 compared to 2018, 2.66. Average procurement unit cost, 2.09 against the 2.05. The general tariff and blended dollar margin is also pretty much balanced, 0.605 against the 0.610. The natural gas project, I will not elaborate. Let's go directly to LPG. I'm pretty sure you understand our past situation. We have the team, we import, and we have good logistic transportation. We have second tier and class 1, class 2 terminals. The terminals. We have 6 million terminals from the residential terminals, and industrial and commercial, more than 150,000 terminals. Business coverage increased to 21 provinces and autonomous regions. The distributed projects has been increased to 113. We also have two big, large-scale, heavy-weighted vessels set off to the U.S. directions. The second one will also follow in July. That concludes LPG. The crude oil price fluctuated heavily, which brings to the price volatility of LPG. But we have increased and gathered. We have gained very rich experience to adapt to the volatility and avoid the risk of price. Last year, although the sales dropped by 4.2% due to the COVID-19 pandemic crisis, leading to the business lockdown. As you know, LPG, the major application is in business and commercial. Therefore, the sales of LPG dropped by 4.2%, retail 2.2%, while wholesale 2% and retail 9% drop. Not only because of the sales volume, but also the selling price dropped down too. But the core profitability increased by 9%. 2019 increased by 76%, reaching about 100 million. The core net margin or profit ratio has also increased. Let's take a look at the value-added business. We are also leading the whole industry because we take a light asset business. The sales revenue increased by 28.8%, exceeding 500 million. It's still below our expectation because from January to March, everything is locked down, everything is stopped. We couldn't really go to the households for sales, and this has brought us a serious impact. While the gross margin, year-on-year increase or growth is 37.3%, amounting 1.9 billion. In 2018, the gross profit margin was 36.4%, while this year, in 2019, 38.8%. Operating profit increased by about 40%, from 1.1 billion to 1.5 billion. We formulated our own e-commerce platform called Yipin Smart Living. We started with gas bill. Now, we also had air purifier, water purifier, kitchen appliances, insurance as a combo. All of these products together serves our slogan, which is the value proposition. That is to enable our end user a more loving home, a more loving kitchen. Around that value proposition, we have deployed around the kitchen appliances, and we enlarged our impact, and that's our main strategy. If you refer to my slides, I've given an introduction on grid-type service, on vertical e-commerce, shopping guide, membership reward program, and social media e-commerce. This value-added service is quite booming for China Gas Holdings. Tencent, one of the senior executive of Tencent, visited China Gas, and he is surprised and astonished to find that of all the business models they know, for China Gas, a company enjoys such strong online and offline promoting ability is quite astonishing to them. I talked a lot about our value proposition and business to a lot of investors. They say, "Well, I still want to look at your financial performance because that's the key." Let me come down to financial performance. Our revenue, 59.5 billion, slight increase, among which the gas sales dropped slightly by 0.2%. Connection fees increased by 10.2%. LPG sales, because the price drop, it had dropped by 13.5%. Value-added service increased by 28.8%. Construction design services increased by 6.8%. The gross profit, over the last one year, reaching 17 billion. So, 17 billion increased by 21.6%. Profit attributable to owners of the company over 9.1 billion, increased by 11.7%. Earnings per share, basic HKD 1.76, increased by 8%, among which we have one-off and non-operational items, deducting over 296 million. The two general information to all of you is, first, core profit attributable to owners of the company. So that figure is 9.4 billion, increased Y-O-Y on 16.4%. Even in February and March when we're so severely hit by the pandemic, our last quarter, our core profit still maintained 16.4% increase. That's a manifestation of our strong execution. If we cannot deliver such core profit attributable to our owners, then we would be wasting our time deliberating these results to all investors. Based on core profit attributable to owners of the company, and our EPS is 1.81, increased by 12.4%, so dividend per share is CNY 0.5. We're quite generous to our investors. We've been generous to our investors for quite a long time. I know Mr. John should be thankful to China Gas. That's why our payout ratio is almost 27.6%, increased slightly comparing with last year. I'd like to stress, giving Q4, where we were hit so much by the pandemic, we still maintained core profit increase by 16.4%, given that RMB has depreciated for 6%. If all that added together, our core profits attributable to our owners of the company is quite substantial. Now let's look at balance sheet. Total assets over 112 billion. Total equity over 45 billion. Shareholders' equity almost 40 billion. Cash, 7.6 billion, slightly decreased Y-O-Y, mostly because at the end of March, we paid a little bit of overdue to our banks. Later on, Mr. Zhu will share with you his interpretation. Our net gearing ratio is 64%, quite prudent. Looking at the foreign currency, our foreign currency dominates less than 20% in our overall debt. That's 19.7%. We still maintain very ample financial resources. By the accounting year, we own bank credit 71 billion RMB. The already approved RMB bonds amount to 28 billion. So in total, we own over 99 comprehensive credit. So our financial resources, very ample and sufficient. One more information to all of you. When we fight against the pandemic, we see opportunities out of the crisis. Even though the pandemic has negative impact to our society and economy, however, it is not purely a sad story to China Gas. For example, the loans during the pandemic provided by Chinese banks. A lot of banks approached us and offer us preferential loans with lower interest, and we were approved with a lot of these bank loans. The government subsidized the interest, and the annual interest is as low as 1% or 1% plus. Therefore, we still own ample financial resources and there should be no worry to our financial prudence. Now let's look at our operating profit margin, 21.1%, among which gas sales taken up 12.5%, connection fees 22.5%, which has dropped comparing with last year's 32.7%. If you look at construction design services, that's 35.8%, LPG sales 1.5%, value-added services 31.7%. That's for operating profit margins. Now let's look at the AR recovery. I know you're all concerned about the AR recovery for our connections and contribution to the rural projects. Last year, we promised we would return and recover over HKD 4 billion. Actually, we have recovered almost HKD 5 billion. Over the last three years, for the coal to gas in northeastern China, we have connected to 5.57 million. We commenced over 2 million, and the total connection fee is HKD 16 billion, and we actually recovered HKD 7 billion. So the recovery rate is 44%. At the end of last year, we will break zero. This year, we have commenced over 1.82 million households. Over the last four years, we will reach commencement of over 4 million households, and at the end of the operation next year, all of them will start receiving natural gas, and we will start receiving our recovery. Let's look at future strategy and outlook. You know, China Gas had major three markets. First is northeastern China. We've been working hard in northeastern China for quite a long time, and starting from this year, we start to see payback and rewards from that market. A lot of analysts had been to northeastern China. Last year, to be frank, we promised the commencement of our service by the end of December. However, because of the problems with our pipeline, we had not fully launched the project. Harbin did not receive natural gas until February because there are lots of after maintenance for the pipeline. This year, we started to see benefits from our work in northeastern China. In the next three years, we expect to see the utilization rate in northeastern China increase year by year. That's one of the major regional market for potential natural gas. It's quite a hollow market in the past, and it will start to rise year by year in the future. The second is for the northern part of China, the clean energy heating. Hebei had started and other provinces are following suits. In the past, you might have a question, say, "Will that be like PV market or photovoltaic market? The government will not back it up." I think at this year's government work report, everything had been explained quite clearly. The Chinese government will unswervingly promoting the clean energy heating because clean energy heating is different from PV power generation. The clean energy heating had to be a regional effort. So we have to engage in the whole region because the pollution will be blown away from one part of China to the other. That's why Chinese Ministry of Environmental Protection is very committed. As this year's two sessions, the department leaders and ministry leaders, they stated many times that clean energy heating is a basic national policy, and the Chinese government will not change stance behind it. The third heated market is Shandong province. As you all know, China Gas owns very rich deployment in Shandong Province. From our organizational structure, China Gas had nine operational Regions, and each region manage several provinces. In Shandong Province alone, they manage Shandong Province only. Why? Because apart from the city gas projects, coal to gas project in Shandong, we are also a shareholder of Shandong Oil and Gas Corporation. Shandong Oil and Gas Corporation also engages on the northern pipeline and west pipeline projects in Shandong, which was approved by NDRC. For the western and northern pipeline, the power supply is over 20 billion cubic meters, which covers the LNG terminals outreach. Also, the energy storage facilitations and facilities also are responsible for China Gas and for all these regional terminals. They also want Shandong Oil and Gas Corporation to participate, and we will benefit from it. We are also restructuring Shandong Oil and Gas Corporation major shareholders, for example, Shandong Provincial Government and Luxin Corporation. In Shandong Province, we expect that by 2030, the demand will be over 47.1 billion cubic meters, more than three provinces in northeastern China together. We consider this as worth our focus and highlighted strength, and we are very optimistic. Besides that, we have also integrated a strategic planning, enhanced the cooperation, and coordinated development with other provinces in Shandong, including Shandong, Shanxi, Hebei, Yunnan, Anhui, Heilongjiang, Jilin, Hubei, and many other provinces. Guangdong Province also has signed a strategic cooperation agreement with us and require us or ask us to optimize and maximize the resources in the Greater Bay Area. We never emphasize this part or release this news because we think an agreement signed with the provincial government is not worth our publicity. More importantly is how we promote and execute the cooperation. Besides that, we have also signed with Sinopec, Sinopetrol, and we have consolidated a series of joint ventures, and we want to set up a specific company selling LPG, LNG in the Greater Bay Area. As you also know, Hubei Province has been struck heavily by the epidemic crisis, while the central government has given unprecedentedly support from national debt, government subsidy, and all other financial support to Hubei Province, which brings along a series of new projects. I have paid a visit to Hubei two times, and I have covered all the regions and the cities. Eleven cities in Hubei Province have signed comprehensive strategic cooperation agreement with China Gas. Each city has come up with a series of projects with us. We think by taking this first-class revitalizing and recovery opportunity of Hubei Province, we have firmly grasped the opportunity. We also have some other further strategies. Last year, we have initiated 18 projects, and this year we estimated no less than 18. Through the industrial and commercial coal to gas and also the distributed heating using natural gas together with the value-added service, we comprehensively promote the further growth and development of the company. In the past more than 10 years, China Gas has always played the top priority of execution and strategic planning. In terms of execution capability and competence, I am very proud, and I am very confident to declare that we belong to the number one team. After the epidemic, even Hubei Province provincial leadership said I was the first President of a big corporate who came to Hubei on site to help and develop the business. We also have initiated a new strategy called LPG micro pipeline networks. This will probably disrupt China's future perspective, 10 years pipeline network development direction. It's a light asset piped gas business. As we know, piped gas is a heavy asset business. Because of decentralize the pipe and also the supply system, it's not a big issue in the central cities, also in the northern part of China, in plain geographic featured rural areas in Northern China. But once it comes to southern part of China, when it's a hilly region or with mountainous geographic features, then it became very difficult because of the investment. No one in the world has ever taken this pace. We want to be a pace setter, and we want to be an innovator. As we know, we have done the statistics. According to the past data, older data, in the past three decades of years, in Europe and the U.S., Japan, South Korea, piped gas has experience of natural gas and also LPG micro-pipeline network development. LPG micro-pipeline, this name was given by the Ministry of Construction, while in Europe and America, they call it LPG mobile home business technology. In France, U.K., Germany, and the U.S., the newly increased piped gas users starting from 70% to 95% adopted this new technology rather than the ground natural gas pipeline. All the thresholds, households, they use the small-sized cans to support this business. Increased newly connected users in U.S., more than 95% of them use this new technology, while in China, we haven't set up the criteria or standard yet. So we have seen such opportunity. More than 8 years ago, we imported this technology and we digested, reformed, and researched in the past 8 years, including the equipment manufacturing and the production. We have filed up 15 patent rights. Without national criteria or standard, we drafted a national criteria and standards, which has gained the recognition from competent authorities from the national level. We have the right of the standards. Thirdly, we have imported the technology of big data, cloud platform, and Internet of Things. Abiding by the requirement from the Ministry of Commerce and Business Administrations. We have owned this technology, and we are more than ready to promote such technology in China market. China Gas is also the only ownership of LPG in mainland China. This technology requires the ethyl of And it is the cheapest LPG in the international community. That means the whole supply chain has been in favor to us. Now, let's talk about the technology in terms of the promotion of the technology. Why is it good? Because it's a light asset business. The terminal using the LPG small-sized gas supplier equipment. For example, if it is a village with only 100 households or even 50 households, we only need to set up a very small closed network connected to the 50 households with one LPG specific storage can, and using our mobile LPG adding vehicle, then it will work. The construction cost will be greatly or dramatically dropped. The usage cost of the citizens will be dropped, too, due to the following reasons. First of all, this equipment does not require high pressure network, no station, no central pipeline network, only needs to build up the last one mile or 100 meter, low pressure network plus a storage can, and the whole technology is owned by us. The cost will be dramatically dropped, which will bring the operation. The construction cost decrease will bring the operational cost decrease, which will lead to the citizens' usage cost of LPG micro pipeline, even 30% less than using the canned or bottled LPG, which will give us a very strong possibility to promote this business in China market. This possibility brings us another potential dramatic market, which is worth our expectation. I will give you the details about how big or how strong this market will be. When we set up such a close network, the construction cycle is very short, as fast as one month or even 15 days. Longest, no longer than three months. Once you have the can there, then you can start the connection of the gas. When the connection fee is paid, then you can start the fire. This is different from coal to gas in northern part of China. When the network is done, the tariff is not negotiated, nothing is settled. When you start the fire of the project, you have to start with more than dozens of thousands of thresholds, rather households, rather than only selectively a few. This is one of the very strong characteristics of this project. The return of the asset or capital investment is very fast. We started with the demo pilot projects in the four counties about two years ago, and we have received visits, government official visits from the ministry level, and we received high appraisal and recognition. At the same time, the occupation area of the site is very small. This is a very complicated thing. Sometimes it took us more than a year to start the newly added network site. Maybe you only need a five square meter place or 10 square meter place, then you can bring solution to the place. I think this is a disruptive, revolutionary technology. With the promotion of this technology, we will release a big potential market to possibility. How big is market in China? We estimate rural area, there will be another 160 million households to be connected. Excluding those very rare or remoted area, we estimate 90 million households relying on this technology to be connected. We think this is a huge market, massive market. Currently, the country is also playing a big support, with central government-released documents, especially highlighted that in the countryside or rural areas to increase the micro pipeline network construction. The Ministry of Construction has coordinating or aligned with another six ministries to draft a proposal to replace the current network with the LPG micro pipeline network to avoid the safety issues. From construction to operation to sales, it is all consolidated or integrated. From the government policy support, we easily give you the conclusion that this is with great market potential, which will be our highlighted focus for prospective construction. Okay, some outlook. You might think that I am bragging. How do you perform next year? I will share with you our outlook next year. Financial return, investment return. I give you some indicators. This year, we will give about HKD 8 billion to HKD 9 billion. In the past 3 years, the numbers I gave you are realized, and I am very confident that the account receivables will be HKD 8 billion to HKD 9 billion. Gas volume growth in city and township projects, the growth. LNG and pipeline will be excluded. Retail, and we give you a number of 15% gas volume growth. We are confident that we will make it. You are also very much concerned about struck by epidemic COVID-19. Q1, minus 13%. February and March, even worse. April, I will tell you, Y-O-Y growth is 8%. In May, Y-O-Y growth 10%. June, first half of June, the growth is even higher. We do believe that 15% growth is not a very challenging thing. Among the 15% increase, we have Two rigid increase. One rigid increase is the Russian gas Northeastern China market, which will have increased demand for 500 million cubic meters. That is taking up 3.3% out of 15% increase. Also, coal to gas, newly connected 1.8 million users, and newly increased 900 million cubic meters, which is 6% out of 15% increase. That together, we still need to have 6% increase for other businesses, and then we will deliver the 15% increase very easily. That is why I am very confident this increase rate will not be a challenge. The city and township projects new connections, 5 million to 5.5 million. For micro pipeline networks, 0.5 million. This year, together, we will have new connections for both of the projects up to 6 million households. LPG sales, 4 million tons. Gross profit of value-added services, another 30% increase on existing record. That is our goal for this year. Most recently, the pipeline gas and the trade volume both started to recover, especially the LNG trade business increased dramatically. CNOOC and China Petrochemical, they are willing to provide us a large amount of very cheap LNG, and that is why the procurement price of LNG is cheaper. We will have a much better gross profit and dollar margin. Last item is the share option scheme. This has been published for quite a long time, and we have confidence in it. China Gas, I am not joking on this matter because my staff had been with me for the last 18 years, and we deliver to our staff each time for our promise. It is 15 billion. All of us, we will not be taking the rip-off our shareholders, and we are very confident we will deliver these options