Earnings Call: H2 2016

Mar 22, 2017

Alexis, dear friends and DA Investors. Good afternoon. Welcome to China Overseas Land And Investment Limited 2016 annual results announcement. Now let me introduce the new measurement to you, Mr. Chairman. CEO, Mr. Yan Tianngou, vice president and chief architect, Mr. Loliang. As well as, Mr. Nie Reading, our CFO. First of all, Mr. Shao will report you our business performance in 2016. After that, we'll open the floor for questions. Mr. Shah please. Thank you very much for your coming. A lot of the people here, a bit crowd. I believe that you must hear to see our new management and eliminate, I will ask our new staff, a new member to talk to you. Dear friends from, investment, dear investors, and, well, thank you very much for your coming to this results announcement. And thank you for your joining. For our online discussion. Now I would like to share with you our business performance in 2016. Last year, our total contract sales reached 211,000,000,000, up by 16.6%. Net profit, we 3 37,000,000,000 Hong Kong dollars, up by 6.9%. This is, the net profit attributable to our shareholders. After strapping out the impact from, CitiIC, net profit attributable to their shareholders went up from 300 33,300,000,000 to 38,000,000,000 dollars, up by 14.1%. The shareholders' equity reached 220,000,000,000 homeholders, up by 6.1%. The Avaya City acquisition and auction, total land bank reached 56,800,000 square meters, Along with the, transferring asset to Sogou, the group is currently our total land bank It's a 5 meters, up by 37%. For the Tier 3 Cities, some projects were already transferred, to to Costco to Cogou. And the gross margin was, 27.8%, up by 0.6% than that of 2015. Taking part of aesthetic, the, GMP reached 29.2%. Based on the calculation of the equity of our shareholders, the overall return is 17.1%. Putting aside the revaluation of our property, the overall returns was, 45% of 14.5%. The SG and A ratio went up a little, but still below 4%, which is a very low level. Proposed a final dividend payout ratio of $0.42. Plus interim dividend, total dividend reached of 77 Hong Kongcents, up by 26.2%. And, it is, 26.9 percent of the payout ratio says to to the share the value with the shareholders. By the end of, at this year, we're holding the cash position of, 157.2 Hong Kong dollars as a cash. The long term debt maturing in more than 1 year accounted for 76.8 percent of the total debt The group's debt structure and the repayment schedule are both healthy. Compared to that end of 2014, US debt decreased from, 20, decreased to 27.8%. Other currencies other than RMB reduced from 82% to 56.5%. We enhanced that the, capital inflow to Hong Kong. Our total remittance was, 14,500,000,000, Hong Kong dollars as for the, As for the US, USD debt of $750,000,000, each was already repaid. We still maintain the highest highest, level of reaching, and we've maintained very smooth financing channels. At the end of last year, our total land reserves was, also 5.4000000 Square Meters. In Tier One Cities, It's, it's a 1.05000000 Square Meters, up by 5 percent. In last year, through the acquisition of a city, city project, we acquired 31.55000000 Square Meters, accounting for 76% of our total land reserves. Comparing the land acquisition from the public, auditing, the acquisition burns a more cost effective land acquisition. Lastly, in the public land market, it will we see a very hated situation. And, we bought altogether 18 pieces of land accounting for 9.72000000 Square Meters. Now let's look at the sales. In 2016, our sales increased by 16.6% and the unit selling price also increased accordingly. The total contracted sales was, 16.154000 Hong Kong dollars per square meters. Up by 12.7 percent based on 14,333,000 Hong Kong dollars per square meter in 2015. Our total collection, payment collection, Also increased by 28 in our, total payment collection, reaching 170 to 77,200,000,000 Hong Kong dollars. The year, we maintained the completion of a GFA 13.35000000 Square Meters in which 11.67000000 Square Meters are from our own projects. 80% of them already sold out. Because of, the, sales went by very successfully, our inventory was maintained at 2 86,000,000 square meters, which is a very healthy level. At the end of the year, are the sold not settled projects is, 1 is a 10,460,000,000 Hong Kong dollar. It's a 104.6 Hong Kong dollars. And, it was the highest level in the past years. 70% of them were be ready for sales, and there will be a bit major contribution to our core profit. As for our self and as for our investment property projects in Foshan, Changshan, Shahe, Sanjay, Sanjay supports already opened for business. And the total revenue was, 2 was a 2.14000000000 Hong Kong dollars, up by 6.2%. Hotels contribute to 420,000,000 Hong Kong dollars, up 1.5%. And, the by the book value, there was a 2.5 percent of, increase reaching 67.1000000000 Hong Kong dollars. At the end of the year, we are holding 2.5 milligrams Square Meters of our IPs. And, undercastronda to be constructed, constructed GFA is some 4.4000000 Square Meters in which 1.2 Square 1,000,000 square meters will be completed by the end of 2015. In this chart, you can see the 80 to 95% these IPs will be ready for lease. Now let's look at, the market outlook. There are a lot of, black swan instance in the market, a lot of uncertainties. Why are the influenced the economy, they also brought along a lot of fluctuations in the capital market because of the political uncertainties are a lot of instance in the markets and they have caused a great difficulty in our financing channels. We will keep continue to keep a close eye on them. China's market. Our economy, we have a full confidence on the economy. We had the 2 conferences in the ago. And, with the central government's targets plus our own prudent strategies, we will witness great opportunities in the market dementing medium to high speed of a growth. On the 50 15th March, the, FedEx announced the 1st round of our interest hike, and the Hong Kong MA also announced that the, the interest hike, and we reverse smooth feedback from the market. For EU and Japan, other in economic entities, the QE was continued, and, therefore, there's an there are more sun uncertainties in the market. Along with, there are central governments tightening the liquidity. According to our observation, the financing costs and the debt cost will also go up. So this is about the financing market in China. As for the property market, no matter the first hand or second hand or the land market, overall, we see the tightening in the market. As for the overheated market, it will be very helpful to curb the hiddenness so that we can build up very stable and why why ordered market situation. And meanwhile, you can we can see the tiering going down. For the auto auto renewal of land utilization, right, is getting more and more clear. For the step and uncertainty, we hold full confidence on them. As for the property market, as for the residential property market. Along with the, ongoing organization, as well as the implementation of our government's policies, they are already built up across those of the cities. And the, population is getting is power continue to poll polling 2 cities. The demands will be further released. We believe that very, very likely, the retro market will stand for a 1,000,000,000 square meters of a size after 10 years of a growth. The property market is slowing down in growth, and we can see the divisions between the cities. In the tier 1 cities, the increase of new built properties also slowed down and the tier 2 cities, they become more and more important. So therefore, a lot of people want to move to better houses for improvement. So therefore, we can see upper opportunities and challenges through better for lean management and better, efficiency of operations, we can allocate we can consolidate more resources so that we can improve our marketing share. As for the, IPs, there are limited premium quality commercial properties, therefore, made a risk from the developed commercial properties in Tier 3, Tier 4 Cities, and we will continue with the IP projects in China. Now let's look at our businesses get, or operations targets for 2017, I would like to invite Mr. Yea to share with you our operations targets for this year. Different city investors. Good afternoon. I'm very happy to meet you all. I would like to take this opportunity to thank you, 1st of all, for the for the support that you have been given to China overseas launch as well as to May myself. Now I would like to continue with the report after Mr. Shell to share with you our operations targets. In 2017, based on our judgment, our macro economy and the industrial changes, we stick to the principle of achieving steady progress and to stick to our brand building, we also keep a balance between the business under returns to our shareholders under balance between opportunities and, challenges in the first two years, our GFA, our sales sales under sales revenue and sales area increased by 44% 42% 28%. We increased an 19 pieces of land in some cities. It was altogether launching, the editable, area was, was a 29,000,000 square meters. And our sales package for this year is, jumped in a 10,000,000,000 Hong Kong dollars, specifically the same level as last year in the mid year, we will review this this target at the are settled, we are adjusted. And for the sellable, sellable resources increased by 12%. New products accounts for 23% the old projects of 24% under the rest for under the rest of 53. As for the supply Basically, it will be a half off situation. In 2013, our completion area, We'll be 1 in the 13, uh,000,000 square meters at the same level last year in terms of our CapEx as well as the the construction area. There will be a big increase. The new new construction area We increased from 7.56000000 in 2016 to 19.1000000 Square Meters, with an increase of 151 percent, theater JV also increased 38,000,000 square meters, increased by 37%. As for CapEx, it will be 160 1,000,000,000 square meters with a big increase as well. As for the land acquisition, we will also increase what increased one 65,000,000,000, that's, Hong Kong dollars. The new projects will also increase, which might take by 126%. The newly acquired land will go up to 160 milliseconds. In 2016, if you look at all the indicators, the macro economy will be very complex and the competition in the market will be very fierce. We have been very cautious in preparing these budgets for the management. We will stick to our principle and work hard to progress. We hope that we can build our size bigger. Now I'd like to hand the podium to Mr. Shelf. The last part about our future strategy. You can see here In this pie chart, you can see our operations strategy. Some and, if needed, we will adjust the strategy, but our overall strategy does not change. So, little bit elaboration about their strategy will then continue To stick to the active and prudent strategy, in terms of the overall risk management of a way to enhance our measures, And, why are we pursued for the profit volume as well as the continuous growth of returns for our shareholders? We hope that by 2020, we hope that by 2020, we'll over sprint be it hard or soft, soft we hope to be one of the top players. The we we hope that we can we can, realize a 30% of gross margin, 15% of returns to all our shareholders and, almost a near 30% of a dividend payout ratio. So this is our target. This year or in the near future, we will focus ourselves on the following areas. 1st of all, albeit actively and continuously participates options in land market for tendering Our thinking is that with more participation, we will be very cautious in passing. Moving continue to multi, diversify our channels of land acquisition through In addition to the acquisition and renovation in the shelter area in cities, we will conduct more cooperative programs. For example, with other SOEs, which have already got land reserves. So this will be a further diversification of our land reserve. Number 2, will further improve our capability in IP Investments as well as in operations efficiency, we will simplify the, operations structure and, so that we can improve we can improve the design construction and marketing as well as the property management so that we can deliver better services and realize the efficiency and the value of IP projects. Number 3, in terms of, the hose supply chain, we will work hard to enhance each of these, supply chains in order to deliver better and the satisfy improve for this satisfaction from our customers. Based on the, development base development phase, we will review our current operations structure, including The IPs, as well as other areas, in order to adapt to the changing market and more competitive market and improve our efficiency. And number 5, in terms of, human resources, we'll we'll work more on it. Will be able to implement a an optimized compensation system. And mainly, we will make more efforts to increase our fixed salary In the past, the fixed salary was, only a small pro a small too small in proportion, which doesn't fit for the market. And it doesn't help us to attract and return the talents. So therefore, from these five areas, we will focus more, and this will be the priorities for our 2017 work. With that, I would like to conclude our report. Now I would like to open flow for questions. Thank you. Thank you very much, Mr. Shao, Mr. Yang. Now the floor is open for questions. Please, I'd please raise a question raise a hand if you have a question. Thank a third gentleman, please? Jennifer from, Deutsche Bank. The first one, can you please share with us in the new environment? What is that strategy? Is the land acquisition and the selling properties? Look into the future, because in the in the past 4 months, you acquired a lot of land. Look into the future, how do you balance them? The gross margin, the turnover, as well as the the size growth. Because when I look back, you you actually prioritize the, efficiency very much. What about the size? The second question, I just want to know a figure. And then they said this year, you you have, the south that are not not settled, resources. And they selling price was over 11,000. So can you please share with us the gross margin? And, how do you think about this, what is the breakdown of at least 11,000? So the first question is about the efficiency versus size or scale. Actually, we have been all the same. We haven't changed. And, we pursue the growth in both profit as well as turns to our shareholders without any scale of a business, you can't really do it. So therefore, in the land market, we have been very progressive, very aggressive in terms of our acquisition, in terms of our options in the public market. This year, according to our land plan, as I reported before, this is about, the 111,000,000,000 yen for land acquisition. So, basically, this is our plan. So we pursue both growth in profit as well as the returns to the shareholders in order to achieve a this purpose, we have to build up the scale of economy. Therefore, in the future, our size will be borrowing. So this is our target. As we reported before before 2020, we will strive to hit this target. Of course, we have a prepared serious plans for that. Your second question is about, the unit price have sold, but not yet settled, projects. There are two reasons accounting for this. Number 1, in 2016, the overall profit market in China, saw a very good suggestion in sales. The, unit price was, going up last year. So this is the one hand. On the other hand, There were sales in Hong Kong as well. The selling price in Hong Kong was higher than 30 for men in China, yet this is not a major reason. The major reason is the first one, the overall sales was better. Their unit price was going up all year long last year. Said, that's why you can see the unit price, the selling price was higher. Thank you very much. Next question, please. I have three questions for you. Good afternoon, management. Just now, you talk about this future strategy. You also the slide 24 in your presentation. You hope that in the future, in major markets, you want to be Yeah. 1 of the top 3 players apparently, there won't be any growth in sales. So how can you become a top 3 player in the major cities, major markets in China? And, in slide 22, in the guidance, we saw a big of a new projects. I took the field that, these figures versus the 200, the 20,000,000,000 cells, it seems that it doesn't really match. Just want to know whether these targets are too conservative. So based on this, how can you realize these 400,000,000,000 cells in by 2020? This is the first question. The second question, Your gross margin, we hope to maintain it over 30%. Based on our analysis, and to the, land that you acquired based on our calculation, the gross margin was to be 25. Okay. Please share with us. Why? It's a 5 December to now. What is your prospect? Can you really do 30% of a gross margin? The third question is about diversify, diversification growth. In the past, China was this have been focused on the residential property, particularly in China. Recently, there were lots of reports of our media. Just want to know, have you changed your strategy? That in the future, we will see more investment in commercial properties or overseas properties. Thank you. Your first question, their top 3, target. It doesn't fit for our our yes. Actually, HSR target. Actually, have thought about it for quite some time, how to decide your target. It's true that we have, operations over 30 cities. And, so within these 4 years, isn't possible for us to be a top 3, us in all these cities. So perhaps it really depends on how you understand our wording. So anyway, it is our target. It is always our target. And without this pocket, so you don't know where to start and how to do. So this is, the best answer I can give to you. So do do you find do do you find it interesting? Do you find it funny? I'm a very honest man. And, try to answer your question honestly. As for the new projects, there's a big increase. And it seems that it is in the face for the 220,000,000,000 Well, actually, this is also a result of our careful consideration. We did calculations. And, actually, you have to understand him this way. For the new construction projects, So it's 19,000,000 square meters. How many area can be solved? How many can bring effective cells? It takes some time. You can see this year, our sales volume, our sales revenue won't increase dramatically this year. So because of this reason, And secondly, just as usual, we We usually propose a very conservative target at the beginning of the year. And, in the middle of the year, when we review our strategy, this face or face for our normal practice. This turned 20,000,000,000. It has a spaces. You have to make it very clear. This 220 210,000,000,000 is not kidding. It's, a result of our calculation is based on the calculation of all our projects. As for gross margin, Our target is a 30%. As for As for the, land land reserves, you may think that the gross margin won't be that high, but you have to consider them as a whole, because there are still a lot of uncertainties, it's you cannot calculate the gross margin one, per land. Our land reserve is, because it is a very big figure In some land, we bought it at a low price, some at a high price. Last year, through the acquisition, we have got more land, 76% of them are from acquisition. This is the total land bank. So the gross margin of this is usually higher. And also, we have a historical data. And we analyzed the market and made up and came to this conclusion. That's why we put forward 30% of our gross margin It's not that we must have hit it. So if we can't hit, what will it do? So this is the way you do the business, right? And so this is only an an anticipation. And there are evidence in the past that we can follow to God our future. As for the real gross margin in the future, oh, it really depends. We've got land reserve and it's not a 1 on 1, relationship. The 3rd question about IPs and the overseas projects. For the, IPs, we will continue to develop the, commercial businesses from the designing Sanna Sophos, we already got some IPE projects. We always think that in the core cities, this is still value for the IP investments. Even though the returns are not high today, it really depends on how you see this matter because of the price is low. That's why this potential. Now this is still great potential in the market, including We ourselves. Actually in the past, our performance was not fully satisfactory from this year on. Our overall IP will be reviewed thoroughly, and our target is to improve the operations efficiency because this is a still great potential. As for the overseas, our strategy doesn't change either. We are sick for the M and A businesses and M and A opportunities because they fit for our overall condition in the company. And this is, also what we are really good at. In this way, we will be able to deliver better returns to our shareholders Next question, please. Thank you, management. Eric, from a say from a from CSCC. Just now, Mr. Shah shared with us about the targets. Actually, what we concern a lot is about a target as well. Some strategic targets, targets other tactical targets. My questions on the tactical targets, the small ones. My first question is about the profitability. In the past, you have been the leader in the market because of your better profitability and a bigger size of a scale of economy your ROE, your net profit, both were leading in the market. In terms of your scale of business, you have a unique understanding So in terms of our profitability indicator, for example, the net margin, actually, we already seen that, in 2016, the there was a slight drop. Of course, it has a lot to do with the acquisitions. So, technically, I just want to know whether you have, decided for this year and the next year. Whether you will we will see a recovery of this, particularly for this, the city acquisition. A city actually dragged a lot of the operation's performance. Do you anticipate when there will be recovery? Do you have any deploy technical plans. This is the first question. The second question is about a gamer ratio versus land acquisition. Currently, your January show is very low. I just want to know, can we anticipate that, in the result in the debt level, you you will be a little bit more aggressive so that you can realize better launch acquisitions. The third question is about the financing cost. Financing cost, we see that is the 4.76. If there's a slight increase than before, just want to know in the future, any any guide on this, any any any trend for this. Thank you. Thank you. I will take part of your questions, and Harris will take the rest. Because, some of the questions are very difficult, and perhaps I cannot answer them very directly. In my understanding, your first question is about, net the the profit increase in the past, our profit enjoyed a 2 digit growth and that opens to 20% of growth. And this year, this figure was a single digit growth as I said before, money, it was because the because of the consolidation of our financial statements. I put aside this, our growth should be should be 14.1%. So this is the one, explanation Our target, our profitability has keep improving. And, our profit has to go up continuously as for how much, you know, understanding it should be Because our total size is about a 4 is a trend is a is about 40,000,000,000. We operate in such an environment, but always asked for 20% of our profit growth. So it's too high, of course. It won't be possible. So I can borrow a quote I can quote from, from, the water parameters that that we must be courageous enough. And so for adult, adult can do more, can can do more if it is a child, then the child can do less, but he already tries it best. And since now our total size is about 40,000,000,000, we will seek for growth. And, we have our track record. Our scale will continue to go up. Our gross margin will maintain at 30%. You can see the the total profit will definitely go up So as for gearing and, land bank, last year, in December, it was low. And now it is 17% already. Our garland is no more than 40%. This has been the principle. This has been that the percentage will have been sticking to all these years. Of course, at a proper time or continuously, We will continue to participate in the market in land acquisition no matter how how the price changes high or low, or we'll participate more petition patients and more cautious in bidding a price. So this is our philosophy. So we are very active in land acquisition. And the givers that will get high, you can see it. It's a consequence. As for as for the financing cost, Morrisville, take your question. I think Mr. Shout, Mr. Cheryl, answered to your other parts of the questions for financing costs. It is true that, we looked back our our our historical records. And we also list all the, the, the financing costs before we also see, an influence. I don't think you answered this question. Or if you don't answer, then we don't answer. If you want to study this question, about this, consolidation of our financial markets, what kind of impact? Of course, you can talk to me individually. The principle is very simple because we and, Citi, we're both SOEs we are all under SASAC. So that's why we followed the accounting rules and consolidate our assets. What we acquired, no matter what is the price we we paid, we have to consolidate the assets into our financial status. As for each item, including the balance sheet and the pay we have to we have to redo all these financial statements. So that's why this is a big impact. But As for the financing cost, there was, an increase. What I can tell you is that, mainly, for China overseas or the US the, US dollar currency and the RMB, currency our interest rate is very low and also they're fixed. So the the average of financing cost, there was this 4.7%. And it has a lot to do with, It's, the acquisition from a city because, this acquisition person in assets as well as borrowing is about a 70,000,000,000, Hong Kong dollars of a bank loans. Was, 70,000,000,000 hou dollars of, of allowance, somewhat nice, somewhat interest rates were nice, and quite similar to ours in there are some others that interest rates are too high, too expensive debts. So we have disposed some of it. In China, we arranged 28,000,000,000 for bank loans, to refinancing. This is also true that, there is still a part of our debt about to tend. It's still very expensive loans. And we have to continue disposing them. Personally, I estimate, on the one hand, the interest group will continue to grow a little 18 in the market because, as part of HFX rate, so comparatively speaking, it would be a little bit lower than other loans. From the other hand, for those, high end, the more expensive ones, products are a trust. We hope that opportunities both come quickly. In this way, the interest rate will be, low keep will be kept lower. Generally speaking, in 2017, our is in cost will basically be, at a stable level, and there won't be a dramatic Chris. This is my estimation. Thank you. Next question, please. For this tran 20%, you already gave up, right? 30%. It just the target. Right? The gross margin, 30% is only a thing. And the 20% of a profit increase, you don't have it, right, as a target? Am am I correct? So 20% is gone for a long time. You are here every year. But in the past, it's a it's a nationalist, anyway, it's gone. Okay. It's gone. Yes. The land the land bank, the slide 40, the land bank, why why is the 49 square meters of, of a equitable, area? Even if there's a transfer to Cogou, but in the second half of last year, you acquired about 9,000,000 square meters. For this, 49,000,000 square meters. This morning, I just loaded up this fake it's different from my my memory. It's about the 10,000,000 square meters loss. It's gone. Just want to know whether it because of the consolidation of a financial report or any other planning point? The second question. For the city projects, now you are quite a city What about the management situation? Recently, I noticed that in Chengdu in the Changdao acquired some about, in some land. It's 8 1009000 UAN per square meter. I remember it's, faucetic, in one town of Changdale in town to they have a 3,000,000 square meters of land, about 1200 gigabytes per square meter. If you still keep it, why do you why do you buy such expensive land in 8,009,000 square meters. Yeah, and per square meter. So you just want to know the update of the, acquisition? Let me take your questions 1 by 1. The first one about the target. I was saying now is the, is the, actually, the same. 20%. Just as Horace said, I also said, under such a business scale, under such a, Market situation, if we stick to at least a 20% or the so called a concrete commitment or promise, I don't think it is a responsible way. It is not fair, particularly considering the market situation, you'll still ask for 20%. As for 30% of our gross margin growth, we already explained a couple of times, we can expand it. We can anticipate it in the near future. As for the city projects, So how to acquire land? So there are 2 different there are 2 topics. Land acquisition and, city projects. You have already seen that last year, 76% of the land land reserves is from the city. In 2017, we will participate bringing, new projects If we'll give you a more straightforward figure, go into our estimation and calculation in 2017, 30 projects will contribute 7,300,000,000 square meters of available resources with sales revenue will approximately 14,000,000 in RMB. As for the profit, from all these projects, the gross margin First, for the, margin level of hours or even higher than hours, So some projects that they have higher gross margins. So this is about a city project. So you also asked about the Chengdu projects. Of course, all these projects are undergoing About land reserves, for these figures, I wouldn't read them all. If you want to, know the figures, you can talk to us individually after the meeting. And because the biggest on the hair, and sometimes it because of the different difficult different, statistical method. Last year, from, aesthetic projects, we we we brought in some land and we sold some land. So, actually, a lot of are changing elements. So I wouldn't waste your time, by explaining all these figures. So generally speaking, the city projects are very good. It's because of the achievement. And that's why we have a lot lot of things to do. We can do a lot of things about it. Next question, please. I'm talking about the Atento project. Good. Good afternoon, afternoon, Frank, from, CCBI. Mister Huddl left all of a sudden. And so please just send my best request to to mister Hao if you meet him. Because we still care a lot about him. What's her name? CCPI. CCPI, Frank. I'm serious. Frank, Yeah. Thank you. Just want to ask you that why are I working in CCB I I worked with Mr. Kong, Mr. Kong, Mr. Kong, Mr. Hao, and now Mr. Shao. And, Just wanted to know, in your term, what kind of, what kind of improvement you will bring to China overseas? For the pursuit of a construction projects will be will be better because your Chinese overseas con professional constructor. So how to balance the cost and the cost. As for the compensation, can you please elaborate a little bit more? It's a very macro questions. Thank you. Just now, you talked about the equality of our construction projects as well as our compensation. I'd like to take your questions. It is true that, just now we are set in the near future, We will try our best to improve the quality of our products and services as well as our services to their customers. This is exactly needed in the market. In our understanding, if you want to grow the volume quickly, It's not realistic, and because the market is changing gradually, you know, my understanding we'll have to work on the premium. It's the low output but better premium. It's not faster moving. So in this situation, we will pursue for a high level of quality in our products. Of course, The quality is not under constructional engineering, only. It's involved in designing as well as, service. In China, there are some, objective indicators on the service level. This is also something that we will have to do. We will hire independent third parties to do surveys so that we can know how well we delivering a service. As for compensation, we have, fixed the part, fixed the salary, yet it is too small in the overall package. The proportion is too small, and it doesn't fit for the market situation. Because the employees, the work, they get paid, and they have to spend, So it is true, that our compensation is very attractive among the SOEs. Is still very competitive, so we have to make some adjustments. The purpose of adjustments It's to motivate our employees and, to improve the quality as well as the quantity of our our working force. In the future, we will compete on human resources and our talents, and we need them for better communication. Next question, please. Good afternoon, ma'am. Good afternoon, management. Michael Stanley, John, two questions for you. USS target is 210,000,000,000, and 2020 is the 44100,000,000,000. Next year, that means it will be something around a 100,000,000,000. So I just want to know if we have 2018 2019, because they see the new projects, there will be more construction projects this year. And from the construction to sales, it takes some time. I just want to know that in 2018, we will see the, the, apparent increase of ourselves. And this is the first question. The second question, just nice of a set of results is about, 30, 350,000,000,000, saleable resources apply, 12% I'm talking to their sales. Does it mean that, in here, in your gross margin and the sales level, you would prefer sticking to the 30% of a gross margin instead of achieving a greater sales, bottom. Okay. Please share with us with us a little bit more about the Cogou. Of course, each year, they must, increase as for the COVID presence. I wouldn't elaborate too much about it. So this year, if remember correctly, we have more projects to be, to be constructed this year. Next year, there will be some others When the project's definition, the sales will be will start. For the sales target for 2018, We believe that there will be a there will be, big increase. As for Hong Kong, I wouldn't, answer this question today. Next question, please. Good good afternoon, Ronny from, Morgan Stanley, Morgan Chang. Two questions. Number 1, for the profit growth. In your profit this year, we noticed that you consume some assets. To get the profit. It's about 10,000,000,000 Hong Kong dollars. Just want to know that, Is this the increase based on this? In 2017, the means of 2017 will be a very will you give us very high expectation? The second question. For overseas, You spent a lot of, energies on consolidation, and then they will increase more projects and, sellable resources. Now if you have more construction projects, a lot of our sellable resources will be available in the quarter 4th this year the next year, do you worry that the market will not be good as good as today? What what about the risk management? The third, last question is about the regional deployment. Because in the past, you deploy, you there are a lot of deployments in northeast China, but now look at the lender of acquisitions in South China and Eastern China more. So do you doesn't mean that you're Jay changed, you focus more on Southern China. Your data is correct. Have a target to pursue the overall growth in profit in 2017, we still continue working to pursue growth as for how much is, hot is hard to say now? Since, actually, we we did our calculations because we know that we can get an increase this year. So this is, one thing. Secondly, a sales arrangement. So we have more construction projects this year, and the sales can only be available at the end of the year or next year and the market may not be as good as now. It's really hard to say. Who knows? You do the business. You are not a predictor. So we are such a big developer. We always pursue a long term strategy, long term development. So this is my understanding. It's impossible for us to to do something aggressively for this year, for a specific year, and then then you're trying to strategy, after some time, this is not the thing we do. We are a large, large sized developer have a long history, our business model is already there is already established. So just as we said, since and ability. No matter what kind of an, situation it is, we have to sis we have to sustain our biz business. To grow. Sometimes there are fluctuations in the market. It's quite normal. And even within the company, it's also normal. So after the fluctuations, you have to look back to your strategy, whether you are still following your strategy, your financial strength, your people, Whether they still keep their shape. So, this is our focus. Will be easy for us to understand, how we grow the, the business in the future. As for the northern region, it's a very important region for us. This strategy doesn't change. It's, the same as other regions. It's only that They are not so many land for sale. And, we went for auctions, yet we didn't acquire much of it, but our strategy hasn't changed. Well, we continue to invest there because they have their own characteristics and really fits for our strategy very well. Next question, please. Thank you, management. UPS, Eugene. Two questions. Number 1, it says, 400,000,000,000 cells by 20 20. This means that, you are going to enter more cities, tier 3 cities, particularly. So actually, for this question, do you really enter more Tier 1 Cities? If this if Natiya 3 city is operated by cocoa. Do you do you do you want to hand do you have it handed by cocoa or some somebody else. The second question is that for this 400,000,000,000 target, what about the gearing ratio for this target? Any guideline for it? Because for China overseas, 50% of their gearing in the past. And now it's, it's very low. Thank you. Your first question, For the sales increase, Well, look at it from the following principles, first of all, their new markets, and and then existing markets. F for coco. China overseas. We'll continue to operate in Tier 1, Tier 2 Cities. There are so many of them in China. And for some of the a lot of seasons, a lot of cities were haven't entered yet, So we will operate in the existing markets first and to make it bigger. And then we will enter more Tier 1 Cities as well as Gary Rachael, 40% as we have always been saying. Of course, at the end of last year, the 7.5 was very low. As I report to you earlier. 40. 40% of our game ratio, we did the calculation and generated this target. For the interest of time, the last question, please. Good afternoon, management. Women of, CIMB. About the dividend, your leverage is very low. Other developers and the dividend rates are very high. For overturn analysis, are you going to raise your dividend dividend, dividend policies? Number 1, about acquisition. Just include Hong Kong Market. 30% of our debt ended. For the investment at, this, 110,000,000,000, it includes Hong Kong. You know, Hong Kong is a very small market, and there are a lot of uncertainty is here. It's really hard, for us to say. And, for the options, if we win that auction, it can be a very big project. Otherwise, it will be 0. But generally speaking, If you look at our, company like us, you have to look at, long term, if you're whether we are making progress in the market. In Hong Kong and Macau. So I'm not sure whether we can get land in Hong Kong or Macau. We will continue to participate in the land auction the strategy the same, the more participation. And, maybe it will come true, our dreams. It's really hard to because this is how the market operates. So this is our strategy Thank you very much.