Earnings Call: H1 2021

Aug 23, 2021

Good afternoon, ladies and gentlemen. I am from COLI Corporate Communications Department, WU Yi. Welcome to COLI's 2021 Interim Results Analyst Video Conference. In this presentation, Our management is dialing in from Hong Kong and Shenzhen for communication with you. Now let me introduce Yu, the management in Hong Kong and Shenzhen Head Office. In attendance today are Chairman of COLI, Mr. Yanxian Guo Vice Chairman, Executive Vice President, COO and Chief Architect, Mr. Luo Liang CEO, Mr. Zhang Zuchang Vice President, Mr. Guo Guanghui CFO, Mr. Eddie Loy. There are two parts in today's presentation. First, Mr. Guo will take you through the 2021 interim results followed by a Q and A session. So through the telephone or online, you can ask questions. Now let me pass the floor to Mr. Guo to present our results. Dear analysts and friends from the investment community, good afternoon. I am now going to present to you COLI's 2021 interim results. The presentation comes in 3 parts. First, we review our interim results highlights and management review in first half of twenty twenty one. Then we will walk through the group's outlook and strategies for the second half of the year. First of all, we present to you a summary of the group's 2021 interim results. In the first half of twenty twenty one, the take up rate of COVID-nineteen vaccination continued to rise. The global economy rebounded rapidly With the accelerating growth of Mainland China's economy particularly noteworthy, a series of policy measures have been introduced Based on the principle of houses are for inhabitation not speculation causing the market to cool down and market divergence to continue. The group maintained quality growth in various aspects. Highlights include the following: 1st, Contracted sales, revenue and revenue from commercial properties achieved rapid growth. In the first half of the year, contracted sales rose 20.5 percent year on year to RMB207.2 billion. Revenue rose 21.7 percent to RMB107.9 billion. Revenue from commercial properties rose 23.3 percent year on year to RMB 2,500,000,000. 2nd, the group achieved double digit growth in core net profit, maintained leading position in value creation. In the first half, core profit attributable to shareholders rose 10.9% year on year to RMB 19,230,000,000. RMB. Net profit margin attributable to shareholders continued to lead the industry. 3rd, the group maintained financial stability with net gearing at 33.8 percent, average borrowing cost at 3.6 percent and cash on hand of RMB117.4 billion Under the current situation where financial supervision on real estate industry remains tight, the group showed its financial strength for stable and sustainable growth. The second part reviews the business and operations in first half twenty twenty one. In terms of contracted sales, the group series of companies achieved Contracted sales revenue of RMB207.2 billion, a year on year increase of 20.5%. Average selling price was RMB 19,700 per square meter or RMB 22,400 per square meter excluding Kogou. The group's performance ranked high in the industry. In terms of cash collection, we improved loan collection efficiency through deeper cooperation with banks. Cash collection of the group series of companies reached RMB179.7 billion with year on year increase of 24.3% and cash collection rate at 86.7%. The group adhered to the development strategy of focusing on major to ensure quality operation. Market share in sales amounts of major cities continued to grow. In first half, the group series of Company's market share ranked top 3 in 24 cities. Contracted sales of the group in 3 metropolitan areas, Greater Bay Area, Yangtze River Delta and Beijing, Tianjin, Hebei region accounted for 45.6% of the total amount. Contracted sales exceeded RMB 20,000,000,000 in Beijing and 10,000,000,000 in Guangzhou. In terms of land investment, in the first half, the land market saw fierce competition among some of the most Popular Cities. The company adhered to its strategy and pursued disciplined investments. And thus, its overall return on land investment was satisfactory. In the first half, group series of company's new total land premium reached RMB 77,800,000,000 corresponding to a salable resources of RMB174.6 billion. After including the company's non public project transactions, newly added total salable resources exceeded RMB 210,000,000,000, which facilitated sustainable development. The group had acquired 20 land parcels with Total land premium of RMB51.3 billion, attributable land premium of RMB45.8 billion and newly added salable resources of RMB 110.5 billion. The group adhered to investment strategy of major cities' mainstream areas and mainstream products. Among the newly acquired land parcels, total land premium of the 3 metropolitan areas accounted for RMB 24,100,000,000 or 47%. Salable Resources accounted for RMB 57,500,000,000 or 52%. The group continued to strengthen Blue Ocean strategy through active expansion in non public park markets in order to acquire quality land through multiple channels. In the first half, the group successfully obtained Suzhou Zhonghai project, Suzhou Super Skyscraper Project and Changshun Ruineda Project. We also won the bid for pre project service provider of urban renewal project in Songlonggang, Shenzhen. In terms of scale and composition of land bank, as at the end of June 2021, the group series of company's total land bank was 92,240,000 square meters. The corresponding saleable resources was RMB 1500,000,000,000 among which group series of company's land bank excluding Cogou was 59,400,000 square Attributable land bank was 49,850,000 square meters. The group's quality land bank focused on core assets to major cities. The group series of companies excluding Kogou total salable resources in 1st tier cities including Hong Kong and Macau accounted for RMB RMB470,600,000,000 or 40.1 percent. Total saleable resources in the 3 metropolitan areas accounted for RMB713,800,000,000 or 60.7%. Hong Kong, where the company was founded, is an important and significant international market. The group will maintain rational and WU Yi, Progressive Land Acquisition for Sustainable Development in Hong Kong. Currently, the group holds 7 projects in Hong Kong and Macau with total attributable GFA of 2,060,000 Square Feet, attributable salable resources of HK42 1,000,000,000 and Correspondent Singapore Resources of HK 128,800,000,000. Among the projects, One Victoria launched sales in early July and achieved market success. As at 17 August, sales hit 504 units And contracted sales revenue reached HK5.78 billion dollars In terms of profitability, the group maintained industry leading profit margin. In the first half twenty twenty one, GP margin was 28.5%. Core net profit margin attributable to shareholders was 17.8%, maintaining industry leadership in value creation. The company constantly improved delicacy, specialization and digitalization management, achieved industry leadership and cost control in first half Selling, general and administrative expenses as a percentage of revenue was 3.3%, maintaining a low level in the industry. Average borrowing cost was 3.6%, in the lowest range in the industry. In terms of financial position, the group upheld its robust financial position, maintained low liability to asset ratio and optimal net debt structure, was in compliance with 3 red lines so as to support its development as well as WUYI. As at the end of June 2021, liability to asset ratio was 60.2% And net gearing was 33.8 percent maintained at a relatively low level in the industry. Interest bearing debt was RMB228.5 billion, in which RMB interest bearing debt as percentage of total was 57.3%. Debt maturing within 1 year was 19.8 Chen, showing limited repayment pressure and optimal debt structure. Cash on hand was RMB 117,400,000,000, which was well capitalized to capture market opportunities. Meanwhile, the group maintained highest credit rating in the industry and leading financing advantages. In first half twenty twenty one, the group issued products such as MTN and the first ever domestic green carbon neutrality CMBS in China accounted for RMB7.6 billion, of which the issuing rates of multiple finance transactions was the lowest among similar products over the past 5 years. In terms of unbooked presale, as at the end of June 2021, group series of companies' unbooked presales was RMB 340.9 billion, an increase by 9.6% from 2020 year end. Group series of companies excluding Cogou attributable unboked Pre sales was RMB193.9 billion increased by 4.5% from 2020 year end. Unbooked pre sales will be booked gradually, bringing positive impact to secure the revenue and profits of the group. In the first half twenty twenty one, the group achieved rapid growth in commercial revenue and continuous scale expansion. Commercial revenue increased 23.3 percent year on year to RMB 2,500,000,000. In 2021, Quip series of companies prepares to launch a total of 21 new projects with total GFA of 1,010,000 square meters, which accounts for 20% of current projects in operation. Six projects accounting for 180,000 square meters had been launched in first half twenty twenty one and the remaining 15 projects accounting for 830,000 square meters will be launched during second half. The company owned ample commercial projects under Construction to support fast commercial revenue growth. Group series of companies have 50 projects under construction with total GFA of 3,240,000 square meters accounting for 64.5 percent of projects in operation. For the next step, the company will increase focus on shopping malls, facilitating business in offices and shopping malls to achieve quality and rapid growth in commercial revenue. As for different types of businesses, scale of office business is among the top in the industry in first half twenty twenty one. Revenue rose 14% year on year to RMB1.74 billion and occupancy rates reached 88.4%. Shopping malls development is rapid. In the first half of the year, revenue rose 31% year on year to RMB520 1,000,000. And occupancy rate as at the end of the period remained high at 96.6%. The group achieved or adhered to development framework of being a company of 4 excellences, adding 48 new green certified projects with certified GFA of 8,010,000 square meters. As at the end of June 2021, The group has accumulated 439 certifications with accumulative GFA of 80,800,000 square meters. The group ranked 1st among Green Credit Index of Chinese New Real Estate Enterprises Top 50 and 2020 China Green Real Estate Companies. The company continued to obtain higher rating in sustainability. It was included in the Hang Seng ESG 50 Index And for 11 consecutive years included in the Hang Seng Corporate Sustainability Index Series, its performance was recognized as 3 star by Global Real Estate Standards, rated BB by MSCI ESG ratings and received lowest risk rating of ESG performance. Meanwhile, the group promoted green finance during the year, commenced climate change movement efforts, established Corporate Governance Committee at the Board level to strengthen ESG governance and continued to enhance ESG data disclosure. The 3rd part introduces the outlook and strategy. In the second half of twenty twenty one, real estate policies is expected to adhere to the principle of houses of our inhabitation or speculation, Stabilized land prices, housing prices and expectation, so as to facilitate steady and healthy development of the market. Policy support for rental housing supply will continue to increase. Real estate financing remains tight. As for the market, sales growth is estimated to decelerate in second half of the year, while full year growth maintains study. Divergence among cities will continue. Land supply scale will continue to increase and competition for centralized land acquisition is expected to recede. Companies will focus more on risk control. Companies with high leverage and high debt ratio will face challenges, while leading companies with prudent financials will have more opportunities. The group will continue to pursue steady and prudent financial strategies, expediting turnover, consolidating advantages and cost control. It will also improve digitalization and organizational management capabilities to maintain industry leading profitability. The group will continue to devote efforts to major cities, focused simultaneously on the open market and the blue ocean strategy, so as to acquire quality and land parcels for sustainable growth with high efficiency. The group will pick up rates in pace in market entry and set benchmarks Yee for commercial projects, so as to further expand commercial assets and improve operational efficiency. It will also advance digital technology supply chain management and investment in upstream and downstream industrial supply chain to cultivate the group's 2nd growth curve. With abundant capital, the group will seize opportunities emerging from industry realignment to capture more market share and achieve steady and healthy growth, securing an advantageous position in Industry Realignment. Thank you. Now we are happy to take questions from you. Thank you. Thank you, Mr. Guo. Now we will move on to Q and A. Now let me remind you that you can ask questions over the phone or by leaving message online. We have received a lot of questions already. So please limit the number of questions each time to 2. Now let us take the first question please. Thank you. First question from CICC, Eric. Please go ahead. Thank you. Mr. Yan, Mr. Zhang, Mr. Guo, greetings. I am Eric of CICC. Just now you talked about strategy and outlook. So I have two questions for you. First, Just now Mr. Kuo talked about market trend and policies. And can you elaborate more? Right now concerning the downward trend in the market, there is a consensus. For this downward trend, what will be the speed In the process, what kind of feedback will that be in terms of policies? If we look towards next year, At which point in time do you think that this downtrend will reach the bottom? Would there be such a chance? In the process, If the industry continues to come down and the policies are still tight relatively speaking, and then For competitive landscape, there will be deepening competition. So with this overall environment, I think it is still favorable to your company, especially given your financials. So given such a situation, In terms of your financial advantage in terms of your land bank and also earnings growth, can you elaborate? That's my first question. So about company or industry trend, company strategies and so on. Next my question is about profit margin. Now COLI's profit margin in the past 2 years came down a bit, but in the industry Your profit margin is still relatively high among your peers. Your net profit margin is even more outstanding. So in the future, In the industry, when do you think your when do you think the profit margin will see a bottom? What will be the absolute amount? And in the future, if there is room for some improvement in profit margin, what will be the situation like? Can you share more in a clearer way. Thank you. Thank you, Eric. Thank you very much analysts, investors for joining us this afternoon. Just now, Eric asked a very good question, actually two questions. So our views about the market, our company's strategies. I will answer the question. The other question is about the company's profit margin and the industry's profit margin. I will ask Mr. Guo to answer. So first, About the market, Eric said a lot recently, there is volatility in the market. If you look at our company's development, now in the medium to long term, we are optimistic about the industry. In the short run, there will be volatility. But for medium to long term, we are confident. I want to share a few reasons why we are optimistic about the medium to long term. Secondly, the property sector is very important to China now as well as U. S. A. So in the overall macro economy, the property sector plays an important role. It also drives the development of other industry. So its share is also very big. So for countries that are developing or developed countries, Well, I think this is a positive sector. And if you look at China's stage of society, there won't be too many problems. And when we are moving towards a developed country stage, I'm sure things are positive. The second reason is about urbanization rates and population. In 2020, urbanization rate was 64% in advanced countries, usually 70%. And for the most advanced countries, 80 are percent. So if you look at that, there are still 10 years' time for us to achieve Urbanization Rates of Advanced Countries. So in this process, I think people will move from rural area to urban area. People will move from small to medium cities and then medium cities to large cities. So migration of population will continue. So as long as there is migration and higher urbanization, then there will be some room for development for the property sector. Station, then there will be some room for development for the property sector. And then about population, during this time, We have 2 children policy and 3 children policy being relaxed. And then In terms of population, at first, we are worried that the peak in population will be reached soon. But now in to 2030. We may see the peak. The 2 children, 3 children policy right now have some impact in the Chinese society. So population will continue to grow. So I believe that urbanization together with population will lay a strong foundation for the property sector. If you look at the macro economy, this year in the first half GDP was 12.7%. In the second half, it may come down. But for the whole year, 6% to 8% GDP growth should not see any problem. In the coming few years, When it comes to China's economic growth, we are full of confidence. There is a lot of organic momentum, resilience is strong. So we believe that the macro economy of China in the coming few years will still maintain sustainable growth. With Macroeconomic Development, people's per capita disposable income will be supported. So when the economy is good, Now our demand for housing will continue to be important. And then the third reason is about policies. If you look at macro administrative control and adjustment measures in the first half this year, if you look at land policies, financial policies, The main point is that, of course, they hope that rent will not go up and at the same time the power the property Yi sector can grow steadily and healthily. So in other words, all the control measures support a sturdy long term development of the property sector. So it will give foundation to stable development of the industry. Well, for short term measures, there will be impact to the market. But for medium to long term, we believe that the policies are favorable to long term steady development of the industry. And then if you look at the actual outcome in the market in the first half in the land market, The first batch of land supply seems to be hot and competition was intense. Rate of return is low. But if you look at sales, well, we have reached a record high in history. Growth Rate is very significant. I guess you have the exact data. If you look at the CAGR for the past 2 years, sales, 14.7% growth. And this is a big number. GFA CAGR, 8.1% and sales revenue, 14.7% growth. So at first, we thought that we have already reached a peak. And for a long period of time, we will be staying at that level. But now it seems that there is continuous growth and price is also increasing. So if you look at this trend, we believe that originally our conclusion is that the China property market at a high level is going to stay for a long time. It may be 3 years or 5 years. But right now, we think that this trend will stay. And if you look at market data, you can see that the Chinese property sector is very huge and there still is growth opportunity. With all these five reasons, in the future, we are full of confidence in the property sector. We will insist on developing this core business. And in the future, we will see good developments. In the short run, there is WU Yi. The Chinese economy this year in the first half was fast. Last year in the first half, the base figure was low. But in the second half, The growth rate may come down for the whole year GDP. Growth rate guidance 6% to 8% in the first half, 12.7%. So it is normal to see a decline in the second half. And if you look at policy adjustments, In the first half, land policies and also financial policies including policies about corporate debts and also mortgage loans for property owners, All these are being tightened. And for the rule breaching companies, there are now more stringent investigations. So in the short run, all these will lead to volatility in the market. At the same time, we can see bigger divergence in the market in the first half. In Tier 1, Tier 2 cities, well, they are doing quite well in Tier 1 cities. Sales was up 80% year on year in Tier 2 cities, up 40%, relatively speaking. Tier 3 cities and Tier 4 cities are weaker, 39% growth year on year. So Tier 1 cities are better than Tier 2. Tier 2 cities are better than Tier 3, 4 cities. If you look at different regions, our Yangtze River Delta, Hong Kong, Macau, Guangdong are better than Western and Northeast Regions. In those areas, economic development is better in the first half. All growth indicators look better. So I think there are all these factors finally. Divergence among companies in the first half of the year, Some companies experienced bigger difficulty on the finance end. And also in terms of land funds, Source of funds, there are now tighter requirements. And then the next step is that Divergence among companies will see quite a lot of change in the coming period. So in the short run, There will be impact on the market because of all these factors. For medium to long term, we are optimistic. In the short run, there will be volatility in the market. And in the second half, we believe that policies will continue. And that would be continuous administrative control measures. And then on the finance end, That would be the 3 red lines that will be continued. And then for mortgage loans for property owners, I think the quota will be tightened further. So that's about policies about the market. In the first half, growth rate was fast. In the second half Well, in the in last year, first half, the base figure was higher. So in the second half, growth rate will come down. For the whole year, I think growth was will be stable. And then number 3, for the land, I think things will be more rational. In the second half, things will not be as in the first half and there would be some adjustment measures from the state. The industry will develop in a more rational way. So I believe that for companies like us, we will see more opportunities. So that's our judgment for the mid- to long term and also our forecast for the second half. Regarding our company's strategies, we have already stated a lot. There are quite a lot of opportunities to us. Eric also mentioned the point For sound companies like us, which are looking over the long term, I think there will be more opportunities For our strategies, 1st, we won't change our original vision. We hope to become excellent internationalized Real Estate Property and Operator. So this vision won't change. This is the 1st year of the 14th 5 year plan in the coming 5 years. We will stick to this vision and we will continue to adopt a long term approach so that COLI will become a company that we would like to become. And then concerning our strategies and business today, tomorrow, the day So tomorrow the strategic structure will be capped. So we will focus more on residential development operation and sale. Most resources will be allocated there. And then some resources will be invested in properties that we hold, including future long rent residential apartments. That is part of our transitional or actually our strategy transformation. We have to look at the present moment as well as the long term. That is our strategic goal which won't change. For actual strategies, We will adhere to financial prudence principle. So we will be prudent and cautious in our financial management. That won't change. We will abide by the 3 red lines. We will make sure that we will stay within the green zone. And then all the indicators will be satisfactory. We will determine our investment based on our revenue. We will maintain adequate cash flow. We will monitor the exchange rate situation. We will optimize our USD RMB debt structure and maintain a reasonable debt portfolio. And then for our investment strategy, we will insist on 3 main development strategies. We will focus more on land acquisition in the high tier cities. And then we will ask for reasonable return in the first half of the year. The amount of land acquired is less than at first expected, but we think that we our investment discipline is more important land acquisition itself. So we will not acquire land for the purpose of acquisition. We will optimize Our investment flow and also product standardization. Right now, the rules are rather complicated. There are lots of things and elements of technology we need to consider in terms of the arrangement. And then in the public market, we will acquire Quality Land in the first half of the year. In 20 2 public markets, we took part in the 400 hour tendering. In the industry, I think we are leading in the number of projects invested. We hope to make use of our strengths so that our success probability can improve. We will continue to do that in the second half. In non public markets, We will adopt the Blue Ocean strategy. In the first half, we achieved a lot. In the second half and next year, we will monitor large Scale projects and we will go for collaboration. Good quality large projects will lay a good foundation for our future development. Regarding operations, we'll continue to strengthen our digitalization and refined management. Management efficiency has been rising in the past few WU Yi. In the first half this year in terms of project commencement and product launch and there is an advancement by 37 days 40 odd days. So for operating efficiency, it is improving and we will strengthen our cost control. So we want to make sure that there will be flexible cost arrangement. Right now, there are quite a lot of price restrictions. So we need to maintain product quality and also customer satisfaction. We need to satisfy our rate of return requirements. All these are tests to our professionalism. So we will continue to do a good job in all these areas. For commercial properties, in the first half this year, there was rapid growth. For the whole year, If you look at long rent properties, there are 21 commencements and next year that will be 27, 28 which will start We will be moving into high growth rate stage. So that would be commercial properties of like 400,000,000, 500,000,000 and we will be achieving the target of HKD10 1,000,000,000. So we'll see a high growth stage. We hope that as soon as possible, we can reach RMB 10,000,000,000 goal. We are not far away and for new businesses in the past half a year and also the earlier period in terms of our tech companies, Supply Chain Company and other new businesses, we are starting. For the industrial chain, upstream and downstream, we have closed collaboration Yee, an investment. We hope that our ecological chain can be stronger. And then for our return in our core business, Even though there is some decline, but then with the whole ecological chain, earnings can be balanced, then we can maintain a good profit margin. Finally, I want to talk about shareholders' return. You are all interested. Now for half a year, our dividend is $0.45 the same as last year and the year before. For this half year, it is an interim period. The most important thing is the whole year dividend. So given stable development instead of high growth stage, We will continue the dividend payout. So if we have adequate cash flow, we will continue to increase That is my brief introduction. For medium to long term, we are optimistic. And then we will focus on our core business to do our work for transformation and commercial and properties for holding. That is part of it. We will be doing it. The share will increase, But overall, 90% will be properties for sale. In our strategies, we face short term volatility. We will be sound and stable in order to ride out the volatility. We will use our advantage and sees market opportunity so that during the volatile period, we can develop steadily. That is our strategy. So that's my answer to the two questions. For the question about profit margin, I will defer to Mr. Guo. Thank you. Thank you, Eric. Just now you asked a question about industry's profit margin. I have a few points to share with you. 1st, industry's profit margin coming down. There has already been a consensus. And in the process, we think that the decline in interest profit margin will be within the average profit margin level. In 2020, for the Asia market, the average Profit margin was 7.6. And in 20 19, 2018 for the whole for the 3 year, average was 7.66. I think there is this trend in place. Number 2, in relation to the decline and also Being restrained by the average profit margin, there is big diversions among companies with much volatility. Last year, many companies were already lower than the average profit margin of 7.6% in the Asia market. Many markets many companies are higher than that though. So this kind of difference or divergence lead to some social impact and corporate impact In the future, these will drive the development of the industry. In the process, number 3, we have been talking to investors. We attach more importance to a high level of net profit margin of sales. It can better reflect a company's core competitiveness. And just now we said that there are restrictions on Purchase restriction on price and there is rise in wages and raw material costs and land price is also high. So when it comes to Selling expenses, administrative expenses and so on, we are doing some control work. Different companies are different in their cost control Yi. For us, the two expenses only account for 3.3%. And then for financial costs, 3.6%, down 20 bp from last year. So with our management as well as our overall cost control advantage, I believe that in the future competition, We will be higher than our peers by 3 points or 5 percentage points. So in this way, we can still maintain the leading position and competitiveness in the industry. Finally, I would like to say that you asked when we can see a bottom. Now instead of doing this so called weather forecast, we should review and do a good job to achieve high quality development. Thank you. Okay. Thank you. Now our next question is from JPMorgan, Ryan. Please start. Thank you. Mr. Yan, management, greetings. I am Ryan from JPMorgan. I have two questions. First, about operations. Now all along, Yi. Your company is based on ROE as the main target for return. If you look at your average ROE, it is around 15 Sands. And comparing with your 4 point something times of PE actually Return on your shares is higher than your operating ROE. And then for your company's operation and Efficiency, so now your net profit was around €35,000,000,000 in the coming 2 to 3 years. Is there a chance to exceed this profit level in the coming 2 to 3 years? Will you Keep your existing 30 odd 1000000000 profit. Just now Mr. Yan talked about dividend. And he mentioned a point that you will continue to increase dividend payment amount. And in the past, you also mentioned an increase in dividend payout. So this year, is it the same dividend payout as the past For share buyback, will you increase your efforts to increase the return on each share to shareholders? That's my first question. Next question. Your company is very different from other developers and that is you focus a lot on Tier 1 cities and Hong Kong. Your share of investment is the highest in these places. So you can take advantage of your low financing cost because land price is higher. Now in Tier 1 cities, You are doing more investment. How is your financial position different from other companies? Your GP margin is higher than other companies? Or is your turnover slower? How should we interpret this? So you focus A lot on Tier 1 cities. What is the logic behind? How is your financial Wu Yi. Thank you, Ryan. First question is about operations. So I will ask Mr. Luo to answer. If necessary, Mr. Guo can supplement. And there is a question about dividend payout and buyback. Eddie can answer. There's a question on Tier 1 Cities investment. So about Tier 1, Tier 2 cities, you want to ask for the logic behind the investment in Tier 1 cities and then security in the market and also financial. So I will ask Mr. Zhang to talk about the logic of investment in Tier 1 cities. Mr. Luo first. Yes. Thank you, Ryan for your question. Regarding ROE And net profit margin turnover, I think all these are related. So I think you have worked out the average value among property companies. Of course, there are big differences in this average level. You can do your own calculations. For the long run, long term average stable ROE level can reflect the growth in the industry. In the past, because of the industry leveraging was overall high, Some property companies had very high leveraging. Their ROE was much higher than the average level. At present, there are 3 red lines for property companies. And for mortgage loan and so on, there are 2 red lines that are related to financial policies. So the high leveraging expansion is not sustainable and it will be stopped. Now for profit margin and operating efficiency and turnover efficiency, We can say that our financial is sound. Leveraging rate is low for our investment and products. We try our best to create value. We control cost. We enhance our efficiency and lower cost. So just now an analyst asked a question And we are still confident to maintain a leading profit margin in the industry. If you talk about turnover efficiency, in the past, Our company's turnover rate is higher than the peers. You may know that In the past years in the industry, we have a leading digital management platform. And by means of this platform, Our company's operation and management are being enhanced in terms of the efficiency. In first half this year, our average Product commencement was faster, more advanced by 36 days. And the product launch was earlier by 48 Days. So I think we're able to collect cash or recover cash faster. YI. Turnover has further accelerated. So because of that, we believe that our ROE will stay at a better level in the industry. So in terms of turnover efficiency and profit margin, we are Wu Yi, also leading so that we can maintain a leading position in the industry. Thank you. Mr. Guo, do you think you have anything to add? Right. Let me supplement regarding ROE. So if you look at its calculation and estimate, as Mr. Luo said, you can look at Profit margin for sales and also asset turnover and also return on equity. So for this, If you look at our sales profit margin, we are number 1. And if you look at ROE, You also must consider the rate of return. ROE is such that We assume that our financial statements are more comprehensive. Information disclosure is more complete. So when there are debts both off and on balance sheet, then we may not be able to see clearly Whether the leveraging is positive or negative, then for overall calculation of ROE, We may not be able to achieve our original goal. So looking at it, You may not be able to do an apple to apple comparison. And then for ROE, it is not the only criterion to assess whether a company is good or not, but it is still important. So we will continue to work hard to make sure that our ROE will be steady. Thank you. Eddie, dividend payout and share buyback, please. Right. Thank you for your question, Ryan. For dividend and also share price, I think these are things that shareholders and investors are concerned about. Just now the Chairman explained our strategy. He said clearly that our company insists on creating value for shareholders. When we have the capability, we will not rule out the possibility of increasing dividend payout. It is true that in the past 3 years, every year, yield. It is true that in the past 3 years, every year, we have been enhancing dividend payout. At the end of last year, dividend payouts exceeded 30%. And in the past 2 years in the interim, We paid $0.45 and this year interim dividend was the same $0.45 So this year Is it true that dividend payout is more or less the same as last year for interim dividend? It is Actually some sort of a prepayment. At the end of the year, we will assess the overall profitability cash on hand to determine return on shareholders. If the situation allows, we will consider enhancing dividend payout. Now every year, there is actually profit per share which is increasing. And then dividend is also increasing. So every year in the past 3 years, dividend per share is rising in a double digit rate. And last year in 2020, the total dividend per share exceeded 15.7% increase. So we hope that our increase in dividend payout will be such that if we have the ability, we will actively consider. We want to rule out the possibility of further improvement. And then about share buyback all along. For share buyback, it is a basic operation. So The management may think that the current stock price cannot reflect our own value and our profitability. So when necessary, The company will make a move to do share buyback in the market. Last year, we did a fuel buyback And we spent 189,000,000 to buy back our shares. At the same time this year, Our majority shareholder increased shareholding from the market. So through our share buyback and the increase in shareholding by majority shareholder, We want to give the market some confidence because this means that we think that we are willing and we are able to improve and make a move when the share price cannot reflect our real value. Thank you. Thank you. The next question is about investment logic in Tier 1 cities. I will ask our CEO, Mr. Zhang to answer. Thank you, YI. Thank you, analysts for your questions. They are very good questions. In Tier 1 cities, well, they are places where we are deeply rooted in. We started in 1985 our development work in Hong Kong. And at the end of 1980s and in early 1990s, we completed our layout in Mainland Yi, Tier 1 Cities. So through our work in the past 30 years, we have accumulated our capabilities and brand and also our ability to react to the market in Tier 1 cities. You may be interested in our investment logic. So first, our rate of return and number 2, Our project turnover rate in Tier 1 cities, if you look at return, Well, the defensiveness is strong. And then last year and this year in Tier 1 cities, the overall Growth rate is strong in terms of its ability to rebound. And if you look at turnover If you look at daily data and numbers, there are some weak points. For example, presales standards in some areas may show some weakness. But if you look at operating efficiency and operating results, there are also some unique strengths because in these cities, we realized that first, these cities are high in defensiveness. So our sales rate speed and our cash flow performance in these cities are better than in Tier 2 and Tier 3 cities. And then for these projects in terms of low effectiveness assets including our Shop premises and car park spaces, the completion of sales is different from Tier 2, 3 cities. So if you look at overall operation efficiency, Tier 1 cities have their unique advantages. The point is whether we have formed our capability in these cities and our unique methodology. There will be a total resources or products of 140,000,000,000 yen in total. So This is very helpful to our achievement of target for property company at this stage. And given the industry policies, I think if you look at our investment portfolio, we have some projects, which show advantages in turnover Some are good for return. So I think Tier 1 cities In terms of rate of return, turnover, speed and asset quality are more balanced and more positive. So in the future, we will stick to Tier 1 cities and we will continue our investment strategy to allocate our resources WUYI, Yi. Management, greetings. I am Danielle. I have 3 Short questions. 1st, looking at your PPT, The 2021 full year target is not spelt out as in previous year. So for the double digit sales growth And also the investment budget of given in March, will they be capped? 2nd question. Just know the management said that your recurring revenue moving towards 10,000,000,000 and your path is sound. Then in terms of commercial assets, Commercial Management and Long Rent Residential Apartment Asset Securitization, what are your thoughts? Are you going to adopt the new platform in Mainland China to achieve asset securitization? These are my two questions. Thank you. Thank you. Ms. Wang, I will take your first question. In 2021, our target doesn't change. So that's why we haven't particularly mentioned it in terms WU Yi. We continue to follow the established targets and we will try our best to achieve them. So far, we are confident in achieving the targets. For investment target, at the end of the day, we have to look at competition in the land market. As I said just now one important point is that for non profitable land we won't buy it. We won't acquire for the sake of acquisition. So it all depends on the city and what the competition and government rules are like. But we will try our best to achieve our targets. Your second question is about asset management and also asset securitization and I will ask Mr. Wang to answer the question. Thank you very much for giving me this chance to do a sharing with you. So concerning the achievement of 10,000,000,000 yen in fact, we have made that point in our announcement. The Chairman has shared with you some insights. At present, our overall structure is that we hope to achieve the RMB 10,000,000,000 target. And this year This is the starting year of the 14th 5 year plan. So if you look at our overall business, We hope to seize the rhythm of the 14 5 year plan. Let me share with you our projects on hand. We have 161 projects. And this year, There are 21 projects that will be completed. At the end of the year, there will be more than 6,000,000 And there will be a total of 111 projects in the future. Where every year there will be 20 projects on average every year for GFA increase. CAGR will reach 20%. So If you refer to our 14 5 year plan, I think we will achieve a double digit high speed growth. We will focus on some segments. For example, shopping mall business During the 14th 5 year plan, in 2025, when all the projects are completed, Then the total scale will be 100% increased and there would be a lot of support for our development. In office buildings where we have a strength, we will continue to develop that. And I think there will be dual driving forces in that case. You asked about long rent Apartments. For this business, I think a lot of people are interested in this area. There is state policy Associated with that, for long rent residential apartments, this is not a new business segment. It is a traditional one. In the past few years, there have been more projects and organizations working on Property Management. So by means of these organizations getting into the market, I think efficiency can be enhanced. And then we have seen improvement in many enterprises. This is also a direction of the state. If you look at our resources on hand, for long rent apartments, They are in 11 cities of China. This is in line with our investment strategy. So if you look at our main projects, They are in core cities, which are better in quality. And for population and industry, There are advantages and we have seen a growth trend. So we focus on those cities. In Eastern China, well half of our projects are there. So the overall structure is quite good. Right now, there are 85 projects which can constitute a good scale. There are 2 main brands among our projects. We have got a good management system. At present, if you talk about Occupancy rate 96 percent for those projects which have been which have started operation for 6 months or above occupancy of 98%. I think If you talk about market management, well, we are looking at a closed loop. I think the state is giving a lot of support and push. There are a number of researches done Previously, we have taken part. And in the days to come, we will closely monitor policy change And we will do a good job in market development. If the market allows, we will continue to commence projects. Right. Thank you. Because of time, now we will take the last question. Okay. Thank you. Last question is from Karl of Bank of America. Please ahead. Management, greetings. I have one question. Some time ago, there was a news report saying that the regulator is asking large developers to not exceed 40% of land acquisition every year. Have you communicated the regulator, would there be flexibility in implementation? In Tier 1 cities, you are deeply rooted. So will you be at a disadvantage because land price is higher? If that policy is strictly implemented, what are some Solutions on your part. Thank you for your question. We'll ask Mr. Zhang, our CEO to take it. Okay. Thank you for your question. Last year, on behalf of the company, I went to the state authority and the central bank to attend that meeting. You asked about that indicator that existed already at that time. It is part of the reference that must not be all negative, it is an important reference point. So for reference companies, If they cannot reach green zone for all three red lines, that there should be some formalized management. I think it is a supplementary Restraint, we have communicated with the authority. We have given our feedback And we have got their understanding and acknowledgment. When it comes to 40%, well, it will Wu Yi. Yi. If all those can be deducted, then we can actually reach or approximate that level. So on one hand, it is not a mandatory requirement. On the other hand, for its impact on our company, the impact is not big. There won't be big problem. Thank you. Thank you. Thank you, Mr. Zhang. Thank you for joining KOLI's 2021 interim results announcement. Thank you, analysts and investors for your long term support and interest. On the coming days, during our result roadshows, we will have more in-depth communication. So we will conclude our announcement and presentation here. Thank you for your time.