Earnings Call: H2 2015

Mar 18, 2016

Those who are watching webcast. Good afternoon. I'm very happy to meet with you here again. Before I found you, I noticed our results. I would like to give you a brief introduction as you have already seen on Monday of this week, we announced the confession in integrating the competency business, City Group. So in today's presentation, apart from going through our annual results and our operating results, we will also talk about the integration with, Sissippi prophecy, I guess you are all concerned about that. We will talk about our fee structure plan and arrangement as well. Now, let me move. Now, this car is not in the PPC. In the past years, because of counsel injection and spin off and some of the reorganization moves. Well, the financial structure has been reshaped and so there are major changes in some parameters. So year on year or quarter on quarter comparisons may not be very meaningful as referenced. I would like to stress that no matter what kind of capital operation we are engaged in, our objectives are the same. Our objective is to maximize shareholder value. Then we are striving for growth and rapid development. At the same time, we are too important to skill and profitability. We want to maintain stable shareholder equity return. So in this way, we want to strengthen ourselves, our company. So before I announce the results, this is the point I would like to stress. If you look at the financial statements after a few years of reshaping, there are many changes in many numbers. If you ask me about quarter on quarter or year on year comparison, I may not be able to give the numbers, but you are all very professional. I guess you all understand what is it all about, but I still want to make this explanation first. Okay. Now back to this theme, any results of 2015. In 2015, there is no serious market segmentation. The industry is in the process of payments of inventory, and we are adjusting to market changes. Our revenue, was 148,070,000,000 Hong Kong dollars, net profit 33.31000000000 Hong Kong dollars, up 22.5% year on year. The board proposed to pay out year end dividend of 4 or 4 new dividend of 401 who confirms per share, together with the interim dividend and special dividend altogether for the whole year, we are paying our RMB92.00 per share, up 57.8% year on year. So these numbers are shown on the slide. I will not read them out 1 by 1. No? You can see our revenue and our profits and the segment breakdown. The slide shows that within the period, our property developments records revenue of 143,700,000,000 Hong Kong dollars accounting for 97% of total revenue, up 7.2% year on year. Rental income from properties, grew 16.6% year on year reaching 1,920,000,000 Hong Kong dollars. Here you can see that our shareholders' equity increased 43.3 percent from last year reaching 191.6 1,000,000,000 Hong Kong dollars. Net asset value per share was up 18.3% year on year to 19.4 Hong Kong dollars. For the whole year, average shareholders return on average capital was 20.5%. So we have maintained that above 20% for a long period. So shareholders value generation ability is leading our counterparts in the industry. In the coming days, I believe, more and more property developers will announce their results So you can also see our figures. You can do a comparison. As of the end of December, cash on hand was 102,400,000,000 Hong Kong dollars, net gearing ratio came down significantly to 6.8%. Our balance sheet is very healthy. We have adequate financial flexibility. Next, financial and credit. In the second half of twenty fifteen, we successfully issued 1,000,000,000 euro bond and also 8,000,000,000 onshore RMB bond. Because, of the strong USD, we have opened up new financing channels. So we see the opportunity of, a low, bond interest rate of euro and RMP. Besides within at the end of the year, we are the 1st property residential property developer getting a minus rating from Fitch This shows that we are strong in cash generation ability. We have also diversified financing capability and sound business performance. Next slide, financial resources and debt structure. At yearend, Cash on hand, RMB accounted for 79.5 percent Hong Kong dollars and USD 18.7 percent. If we add the unused, bank credit facilities of 10,600,000,000 Hong Kong dollars, total financial resources available was 113,100,000,000 Hong Kong dollars. This is adequate preparation for future business development looking at types of liabilities corporate bonds totaled 66,200,000,000 Hong Kong dollars, bank loans, 49,260,000,000 Hong Kong dollars. Long term debts over one year term accounted for 93.7 percent. The debt structure and the debt repayment cycle are on healthy level. Last year, RMB against USD exchange rates, came down. There is a accumulated accumulated depreciation of about 5%. According to market changes, we have adjusted our financing strategy. We opened up financing channels So there are double channels and multiple currency financing to diversify risk. At the end of the period, our Hong Kong dollar and USD liabilities accounted for 78.3% falling to 69.7 percent for a medium term. So we're able to complete our interim estimates. At that time, back then, I said that our goal is 70%. At the end of the year, we have already achieved our estimate adjustment to the debt structure has seen some effects. Now let me do a bit review of 2015. For the whole year 2015, contracts at sales was 180,600,000,000 Hong Kong dollars. We completed the whole year target, the revised upward whole year target. Cumulative GFA was 100, was 4.6000000 Square Meters. And at the end of December last year, there is already the order, or subscription of 7,400,000,000 Hong Kong dollars contract is yet to be signed. Within the year, we maintained our stringent management, of payment collection. So if we do not include JV projects, we realized, payment collection of over 138,500,000,000 Hong Kong dollars, which is a high, collection rates. Including JV items, altogether, there are seventy four projects completed. Total pro total completed GFA reached, 12.57000000 Square Meters. Here you can see projects completed in the year 2015. As of the end of December, completed and saleable GFA, 86.1% was sold out already. Sales through ratio or sales through position is satisfactory. Here, you can see presales and inventory. In terms of booking of, sales for our own projects and Jamie projects, altogether 154,700,000,000 Hong Kong dollars was booked at the end of last year, including JV projects, we still have 4.78000000 square meters that have completed sale and, waiting for completion and intake of population. Total value was RMB86.2 billion. So for presale, overall selling price, was quite good. Now about land acquisitions. In 2015, in mainland China, in 13 cities, we acquired 17 pieces of land. Nearly other development area was 5,960,000 square meters. Land cost was RMB 34,500,000,000. Here, you can see that the average price is higher than usual, but that is mainly because of Beijing. The total volume was small. Average price in dating of land cost is, 13,000. If we exclude Beijing, we are able to maintain average cost of length at 3500 per square meter as in the past. If we add the, almost 10,000,000 square meters of land resources from the section of capital as of the year end. In 35,000,000 Cities in Hong Kong and Macau, we altogether have land reserve of 41,440,000 square meters. Here you can see our land bank distribution. I won't read out the information. Okay. And here you can see development of investment property. As of the year end of last year, we reached a new high in terms of, properties scale. So including a parent company injection project, we have completed investment properties of up to 1.73000000 Square Meters for the whole year, rental income rose steadily to 1,920,000,000 Hong Kong dollars. Now I guess you have already, seen a lot of, business resell figures. So I have just done a brief review with you. Now I am going to talk about the acquisition of property portfolio from Citigroup. On Monday, an announcement was issued So there are details about the transaction and also the structure and consideration. There are some explanations. Now I would like to briefly, do an overview with you. First, about the transactions and consideration. So the group will acquire city property and also the residential property business of Citigroup. Consideration is 31,000,000,000 RMB. So we will, pay through the issuance of, shares and also transfer of assets. The share consideration will be HKD 29,700,000,000. We will issue, 1.096 1,000,000,000 new shares at 27.13 Hong Kong dollars per share to Citi. And, the issue price comparing with the average closing price 3 months before the announcement, there's a 14% premium. Besides we will transfer, assets worth RMB6.15 1,000,000,000 to Citi as part of the consideration because of the shareholder requirement of our parent company, the consideration includes the premium share issue and also, the asset part. And the target, as a portfolio, there is shareholder loan, which is not included in the equity yet. So in the announcement, you see our debt structure as well. Here you can see our debts structure. So the consideration includes the net asset value of the Target Group and some shareholder loan And the remaining, net debt, will be taken over by the group, apart from the 33,360,000,000 shareholder loan, there is still, bank borrowings and other external debts. So if you look at the total assets for the transaction, that is the net asset, plus the transferred debt. Well, because I cannot go through with your number so you can guess yourself after some time, I can disclose exact figures, for you. You are also sophisticated. I'm sure you are able to, get a correct guess. So net asset plus transferred deaths, we believe that the total consideration is at a reasonable level. So that's about our debt and also financial numbers. So this transaction is a large scale strategic, M and A. The asset portfolio is distributed 25 cities in China. Total GFA is around 24,000,000 square meters. In 2015, at year end, total land reserve, of the group was 41.44 Square Kilometers. So there would be an increase of 58%. And the price per square meter comparing with direct, acquisition from the market is at an advantage. And it includes, the, construction cost that CITEC had already invested in. Now in the portfolio, property portfolio, 10 major cities, including Guangzhou Shenzhen, for Sean, Suzhou are included. For these 10 cities, well, in the past in our business layout, they continue to make important contributions to us. Besides quite a lot of land resources have been, concealed. In this asset portfolio, in these 10 major cities, total reserve has an area of 18,000,000 square meters, accounting for 3 quarter of the total. So this can effectively supplement to our land reserve. In the asset portfolio, the projects are in different stages of development. Project under construction have GFA of around 15,000,000 square meters. Under normal circumstances, there'll be more than half of the area that can, realize sales contribution. And we believe that this property portfolio for our operating scale of year will be very positive. I think you all are happy to hear this sentence. I can tell you Well, I can only say verbally, but I cannot give you figures. This transaction has important strategic meaning to the group. Through business integration, our group will be able to realize business leapfrog developments within a short period of time, and we are able to have our leading position realized and we can strengthen our leading position in the Chinese property sector. Besides, CitiTech will become our strategic shareholder in the future. Both parties will continue long term cooperation to achieve synergy. We will explore potential opportunities, in various areas. Target asset portfolio contains quality projects so they can effectively supplement to our land reserve in major cities. Finally, through this strategic acquisition and cooperation, our business growth prospect can also be strengthened. In fact, I have already explained these points on the slide. I won't, read out all the words. You can read them yourself. In this cooperation, we will, make sure that our own strengths can be realized to maximize the value of the asset portfolio. And they include in terms of profitability, We will. Capitalize on our strengths in terms of our brand and execute we will strengthen cost control, selling premium and, reinforce the profitability of projects Besides we will expedite the, turnover of the assets, we will also expedite development cycle. So within the short of time we're able to realize income and profit. In terms of asset structure, now for the target assets, and liability if the courses are on the high side. So after integration through, very diversified financing channels, we're able to adjust debt structure, so lower financing cost. So the group at the end of 2015, the net gearing ratio is on the low side. So if we can increase leveraging. This is beneficial to shareholder return. And after the announcement, all three rating agencies have made reports we expect that integration will not affect our credit rating. We will make efforts on all fronts to release the value of the asset portfolio. We hope, to strive for positive contribution in terms of UPS and NAV. This transaction will be in line with our development strategy all along. It will be favorable to the vision of our company. We will continue to develop property developments in order to capitalize on our strengths. Will continue to be focused on Tier 1two important cities in China in order to enhance market share. We will capitalize on our leading brand name to do a good job in quality, quality, sales management, cost control, execution, efficiency, and so on. These are core competencies. And in this way, we are able to create bigger economies of scale. Well, all these, have been read by me for the sake of your writing report. If I don't read the amount, perhaps it will make things difficult for you, in writing reports. Now for, China overseas and seating in the future, we will maintain long term cooperation to promote development in a mutually beneficial way. In the future, M and A and integration will become our normal growth model. So it will run parallel with organic growth. In the integration process we will exercise our strength in execution. We will promote integration with high effectiveness. And our value creation process Okay. This part is actually a norm every year. We will share with you our views about the market and strategies. I think you are all very familiar with our strategies, so I don't need to go through them in detail. I just want to share with you our judgment and views about the market. Believe that if you look at the Chinese property sector in the past 1 to 2 years, there are quite a lots of divergences. Ovarian, different people, different investors have different views about the Chinese property market. So I think, I can do some sharing with you here together. Concerning, sector outlook, we are cautiously optimistic. So concerning the market and the sector, we have not really changed our judgment significantly under the new normal economic position And while the 13th to 5 year plan is being implemented in China, in the goal is to build moderately wealthy society in 2020. And then, income per capita, should be double I think that this goal, this target can be achieved. There'll be reform in terms of household registration, and there will be breakthrough to These will bring about new development opportunities for our industry. There will be some actual demand that will be gradually released. I can share with you a figure. We expect that in by 2020, in the coming 5 years every year in the property market. There will be a clearance, scale of clearance, or sell through, scale of 1,100,000,000 to 1.2000000000 Square Meters, where we can expect that. We believe that market segmentation and market integration, will be normalized. Last year, in major tier 1, tier 2 cities, if you look at land price and property price, they achieved new highs. Even though, it is because of the mechanism, but then, property developers are being challenged. In their ability to face up to market conditions and their stable operation capability. It is a very, very stringent examination. Comparing with the past in these cities, concerning property price and also capacity of each market, or perhaps you will have some expectation, but now in many places, Both land price and proxy price are high. For companies with different financial position with different operations, companies with different degree of professionalism, It is a big challenge, a big test for them. In the past, you worked in the property development sector. Well, if, companies only use a very rudimentary or a broad brush approach, they will find it difficult to survive. And in the coming few years, in major tier 1, 2 cities. Market share will be concentrated on strong enterprises. So there will be a continuous market consolidation and integration. This is inevitable. In the past, I kept making this point some of you may not believe in me, but I believe that gradually, that will be the direction Again, I have a number to share with you. It represents my personal judgment. If you find it useful, you can write it down. Otherwise, just, listen. In the coming 5 years, in the top 100 developers, they will get 50% to 60% market share in total. So you can calculate. So how much will be the area for these top 100 companies? You can you can easily work that out. For the existing property developers, in previous communications with you, some friends asked me, what what is the maximum scale? Well, you can work that out. What should, constitutes a big scale? On this slide, you can see some statistics for the 13 5 year plan. I won't go through them one by one. Here, there's a piece of information that you should be interested in. When the open population used to grow, we expect that in 2020, urbanization rates in major cities of China will reach 65%. Next. Policies. And some hotspots. I think you can, you you often, receive such reports, so I would not go through them. Well, there are a number of times of, interest rate cut and benchmark cut and, that will be guaranteed for healthy long term development of the property sector. We believe that from 2015 to now, there are a few heart issues. In the coming long period, they will also be focused concern first. In some cities, there is a controlled land supply Well, you all study our sector. I think this is something that you are concerned about that is land supply. 2nd, down payment will be lowered and mortgage loan will increase. This will lead to changes in the industry. Number 3, financial and tax reform. This year. There will be a lot of financial and tax reform measures. Which you will be interested in. Number 4. Faster implementation of urbanization. In the past, we have been talking about urbanization. Actually, there are no specific targets and no rules, but in the 13th 5 year plan starting this year, there will be specific data and targets. So it will be like GDP number every year. People will refer to these numbers. Next, our operation strategy. I will not go through them 1 by 1. I guess you are all familiar with this. There is since major change. If there is change, I will tell you, but so far, there has not been changes. And our operation strategies are in line with our current position. So I will not read out these, points. So I will leave more time for exchanges. Next, our, financing and debt structure. I said earlier, we have multi currency financing as of the other year, we lowered, the number to, 70% as targeted So USD Hong Kong DRMB debt structure ratio will reach 50%. So while we are adjusting our debt portfolio, this is an important move. We believe that when the Chinese economy continues to develop well, RMB will regain stability. As a large, enterprise, adjustment to our debt mix is something that we have to closely monitor, continue today, at first, I was not going to talk about this part, but it may not be good. So I am going to briefly go through the guidance with you. I don't know how much you believe in it because the transaction is not completed yet. The important assets are still not included. So I hope that when we meet each other during interim research announcements, we can deliver, very realistic targets in line with the circumstances. But apart from that, we have still given you a sales target here. This year, for the whole year, without including Citake property portfolio. The target is 185,000,000,000 Hong Kong dollars. So there is a 10% increase from last year's target. So this is not low. Right? You still find it low? Your facial expression told me that. This year, there are a few things I would like to share with you. First, For the whole year, saleable resources. Now the numbers I'm giving you now do not include CITIC properties as a portfolio because that cannot be disclosed. So I'm telling you what I can. I am not breaking the rules. But they are not something you are most interested in. For the whole year, saleable resources amounted to 260,000,000,000. So our target is to complete it's at 70%. So 185,000,000,000. In terms of land reserve? Apart from integrating To get you money back. To take properties this year, if our financial position allows and if there are opportunities, we will, appropriately, replenish our land reserve. In order to enable shareholders to share the development results of the group, our future dividend payment ratio will be gradually, formalized. So without including a special dividend, now last year in spin off, Well, that was not included. That was not considered in different payments. So a special dividend. It is not paid out every year. So this year, there's special dividend next year, whether or not there will be I can't tell. So you can decide on whether you will look forward to it. So without including special dividend and without including revaluation gain of commercial properties. We hope that dividend payment can be at least 20% of net profit. In the past, I only said we hope to achieve a certain level. But now we want to make this a formal strategy. Or policy. Okay. That's all I would like to say. Now please don't ask me questions that I can't answer. Because our lawyer has given me this instruction. You are all professional. So just ask questions that I can answer. If there are questions, then I can't answer. I will be embarrassed. You will be embarrassed. So if I'm not allowed to say any to say something, I won't, give that answer. There are so many of you, and it's like an open, occasion But then if there is any guidance on future profitability, we can't skip those figures. So if I can't share with you the figures, why are you asking? So please just ask questions that we can answer. Okay? Thank you. Okay. Please raise your hands if you would like to ask questions, and please state the organization you represent. Front row, please. Mister Hau, I'm from DPS. My name is Carol. I have three questions. First, In the future concerning GP margin, what will be the trend? This year GP margin is around 28.6%. And last year, including city provinces, contribution, for 2014, GP margin was 28.4 percent. So there's like increased. So it looks good. However, comparing with 30% or above GP margin from acquiring land yourself, it seems that it is much lower. So in the future, what would be the trend of GP margin with city properties and sets, will it be true that GP margin will be more or less at this level or there is room there is upside? 2nd question, is related to the first question. Mr. Hal said in the future, M and A will be your normal way or normal growth model. If you can create over 30% GP margin by acquiring land yourself, and the GP margin from M And A cannot reach that target. So why do you consider M And A as a normal growth model? That's my second question. 3rd question. Above City Properties, the acquisition of SS from Sysik Properties. What is the current GP margin? I believe these are questions that you are interested in. As I said earlier, in the past 2 to 3 years, There are changes in our financial statements. There are big changes. There are spin off restructuring, reorganization, reshaping, and so on. So comparability is not high. Of course, a company needs to maintain high GP margin. That is something that we strive to achieve. But now we are concerned about overall profit growth. So in terms of booking of items, we have to strike a balance in a certain year. GP margin can be quite good. Then we will make arrangements in the selection of projects last year, 28.6 percent. Well, this is a result after some changes. But there is one point I can make last year at the beginning of last year. Now when it comes to past inventory accumulated over many years. Last year, we handled or disposed of that inventory. The value was around 20,000,000,000. GP margin is 23% of these assets. For so our overall GP margin was put down by 3 to 4 percentage points. What do I mean in the future? To maintain 30% or above GP margin is our goal, I haven't given up this goal. In a certain year, there may be changes. I can still explain things to you. It is not that our overall return is coming down. I can tell you responsibly that there isn't the case. That isn't the case. There may be ups and downs in different years, but I will, strive for balance. This year, I guess you will look forward to it. We are selling properties at very good GP margin. So I am highly confident I want to say decisional period. Well, it doesn't mean that, our strategies have changed. I am looking for 30% or above, but whether it will be 35% or 38%. It depends. If I tell you 38 you won't believe in me because the scale is too large. Every year when we achieve certain growth, if the growth can be so high, Then we will be like gods, like fairies. Fairies don't exist. Right? Secondly, about M and A growth, In our operating strategies, all along, we have 3 points. I said to you, we hope to have organic growth, M and A and joint development. These are our 3 growth models in the past in terms of scale. Our scale was relatively small, and we maintained good organic growth. That is, the a way of maximization of benefits. But then, in those cities, when we replenish land reserve, It is difficult to get the past cost or price to achieve that. If you calculate Well, there are numbers that I cannot disclose. After some time, you can see in this asset portfolio, you will tell the average land price. So later on, you will see if I buy 30,000,000 or 20,000,000. Now let's say every year I maintain, 15,000,000 meters of land reserve, then the average, price will not be that number. It will reduce our profitability. Our target is consistent. The direction and the approaches will be slightly different. It doesn't matter which approach we adopt. We want to maintain very strong profitability. We want to maximize shareholder value. So I have indirectly answered your question. About GP margin of the asset portfolio, I can't answer that, but I guess, very soon you will know. There are two points that I have entered. I don't know whether you have paid attention. There's positive impact. What does that mean? Positive impact. I didn't give you any numbers. I haven't spoken the rule. Okay? And whether or not this is credit worthy, you can come to your own judgment. If you think that, my words are usually rely both and, okay, that's your judgment. I cannot answer with numbers. I can only make these, less specific points. Next question, please. The one on the 4th row. Mister Hal Management, I am Ryan from Morgan. I have a few questions. First, in the past, question was asked to Mr. How about, Northeast and China. China overseas made quite a lot of investment there. So what do you think would be the northeastern China market? So back then, you said that the region was definitely good. Have you changed your view? Then about the, assets, you just said that the asset turnover will be made faster. Now, for some sites, they are relatively large. For example, in Guangdong, there are projects with over 1,000,000 square meters and also there are sites in Hainan. So in one year, The sales volume will be 100,000, but then, you have land reserve for 3 to 4 years, and some projects may take 10 years. So we'll as a turnover of this load down, what's be your measures or moves? That's my second question. Another question is in 2014 financial statements, There's a reinstatement, and then profit had come down. When Jong injected as if there was provision. So what is the value of provision for 2014 2015? My last question is, If I ask the right name, Mister How may I not be able to answer? So I put my question in another way. In Beijing, East Flooring, There is a site with a high rise building. So will that be included, under China overseas. Thank you. I can answer the first three questions. The 4th question is difficult. I will take the first two questions. The third question will be taken by our CFO. About the assets. Northeast in China. It's a place where it is worthy of, expectation we can look forward to it because in the past development, it has 2 different stages. One stage is before the, open reform of China. The major industry that is agriculture No. There is. Restructuring and adjustment of economic structure and also transformation of the industries. So now because of some historical reasons, these cities faced difficulties in the development of industries. However, I believe that no. The situation is different. For those cities in northeastern China, The 3 provinces, Heilong, Tianqi, Lin, and Liang name. For these 3 provinces, economic development left behind. The whole country. For our industry? That should be some diversification of investment You always talked about, nationwide country, enterprises. You won't say Beijing, Shanghai Companies. Because there must be different stages of developments. For the industry, you may have to avoid certain risks So you need to diversify investments. Looking at the current performance of Northeastern China, our development there, is quite okay. At least there are two numbers that can illustrate this point. First, we are performing better than counterparts. Number 2. For future business development, they have created and nurtured, many talents. So Northeastern China is a place where we need to develop we we need to develop and operate. I am not a leader in those, 3 provinces. I will say that I welcome you to that region, but from investment point of view, We, deal with, that as a region. You talked about the asset portfolio, and there some bigger projects. They may affect our future, turnover rates because of mark capacity. There are 2 important numbers. How much have you invested in? Now I cannot share with you figures, so I cannot I will find it difficult to answer your If I can tell you how much I've invested, then you will know what my asset turnover will be. Investment is small. So, it can be recovered very quickly. As for future development arrangements, things must be complementary. I can only make one point. In places where we are operating in We hope, the SS will not become on development burdens. If it is a burden, then it is a problem. If it is not a burden, then in your normal development, rhythm, it is just a different module. I can't answer your 4th question. Right now, it belongs to other people. I can't really say anything. I know what you're referring to, but I can't give you the answer. Perhaps you can talk to me in private. It is too influential. Okay? Thank you. Now, Horace will answer your other question. In 2014, provision was 3,100,000,000 in 2015 because recovery because of improvement in the market, there are 2 projects in which we have back provisioned a few 100,000,000. Next question. The one on the 4th row Good afternoon. I'm Lee Jin Ho from Morgan Stanley. I have three questions. First, The two questions. First two questions are related to the SITC transaction. The next question is for this transaction, did you approach Citi or Citi approach to you? And for this transaction, most part will be settled in shares. And then, the gearing ratio is still low. Why didn't you consider the use of cash for settlements? The third question, after the asset portfolio is, is in how much, will be the contract sales amount I didn't hear you clearly. After including the asset portfolio, then for a year, what will be the contract sales amount every year? Wow. That is alarming figure. That is an alarming figure. We are talking about free love. Okay? I think, if you only club with one hand, that is not workable, right? So it is free love. It is very it is the most modern thing. Both parties have the intention. We just want to have the best things realized. So the strong a strong player interacts with another strong player or connects with another strong player. As regards, shareholding. Your question is like another question asked by a reporter. I did not answer his question. Who approached whom and why did you give shares to the other side? The same question. But here, I think I can give you the answer, to be honest, So a strong player connects with another strong player. So take is a very good enterprise. I said that it is a great enterprise during the press conference. The 2 companies have a lot of things in common in terms of our culture, our philosophy, our background, our roots. So the shareholding arrangement is like an integration. And to them it is not a small sum of money. If they do not have enough trust in us, they will not accept our shares. That means they would like to see that in the future, Chinese property industry development, they want to see the 2 companies having close cooperation. So as said in my slide, there may be future further room for cooperation. There was a question that I could not answer just now and it is related to this part. This is the common intention of the two parties. So it is just normal for, for them to accept shares. You mentioned an indicator, to be honest, I have the broad numbers. Can I tell you that this year, we will be at 5,000,008,000,007,000,000? I cannot be that accurate. I only have a broad figure, but I can't I can't tell you. You have to wait. You have to wait. Please don't be too anxious. So after the settlement if you still have the need, I can meet with you again. I can tell you the specific numbers. So please understand that. I guess you will be able to calculate based on our speed, how much can we do? I think you have a good understanding of our company. Please don't put me in a difficult position. Thank you. Next question, please. The one on the first row on the left. Mister Hal, congratulations. I think this is very favorable to channel for seas. Just now, Mister Hal sounded happy. If we classify happiness in 5 grades, 1, 2, 3, 4, 5. How happy, how excited are you? I don't think this will be against the rule. Right? ABCD, okay, no numbers then, no numbers. ABCD, that's my first question. 2nd, now This is the second time you are acquiring assets. There are lots of good things inside, but then there are some smaller cities. So comparing with urumqi and some other places, there are a few million square meters of land. If more are added of course, you cannot just the good ones and leave the bad ones to the other. So how are you going to deal with them? Are you going to work on them gradually, or will you consider other means? My third question is, at the end of last year, there was an acquisition of land in Beijing, shooting sun is, very rare to have a piece over 1,000,000 square meters. And, so for this site, we could not get a lot of information about that site. So, Mister Howe, Can you tell us more about this site? My last question is Now with this big asset portfolio from Citi, the scale will be much expanded. And your leading position in the it can be further reinforced. Will you consider more diversification? For example, commercial, properties, or other diversification moves. Thank you. How can I answer the questions? You can't tell how happy or excited I am. You can guess the grade of happiness. In order to cooperate with enterprises like say take, I am very happy. We can have a good start of cooperation, and I think this is a good start, a good beginning. In the development milestone of an enterprise. With more good business opportunities, I think this is, the good luck of 6, 8, 8. So I think you can guess, my grades of happiness. Yeah. I don't think it would be below 3. Right? Perhaps 4, 5, or 6. Oh, there is no, great you can guess yourself. Well, we are only joking. I can't give figures. So I guess you want me to, convey a positive message a positive message or neutral message or neutral come negative message. I can say very firmly. That this is a positive message. Yeah. And I won't say anything else. I don't know how to perform, and I, and then and I am afraid of taking photos. Okay? As regards to the assets, first of all, I have to stress the points. In terms of asset classification in this as portfolio? There isn't good or bad. It's only about who is going to do it and how they are all resources. How can the resources at a point in time? How can the value be realized? So professional companies should think of think of that. As such as now, there are things that we don't mind appropriate, then we won't do it. In the deliberation process, we have got other considerations. So for things that we have acquired, I think that they are all good. It's a matter of how to turn them into maximum value. I understand, the hidden meaning of your point. So I really cannot answer the question. So please wait and see. In our business development process. I want to make sure that all the work done will be within your expectation. I don't want to give you any surprise. I don't want things to be unexpected. It must be within your expectation. What is the style of development of the company? Should be similar with your expectation. The 10 years are It should not be too uncertain. I don't want to be uncertain day after day. So over the past years, I'm very happy that the analyst meeting is of quite a big scale. So there are experts of different areas. I'm very grateful, and we are willing to maintain regular communication and contact so that you will have good understanding and support to our company. As regards to diversification. In the past, I said already that We will focus on our core business. But of course, there are things related to our core business. If they are in line with our strategies and business needs, then we will do more studies. About Shati Mishan, that is a complicated project. There are two phases. It is okay for me to talk about this project. The area is 3,000,000 square meters. We only, acquired a phase 1. It is an integrated hub. It is a demonstration point of redevelopment of Oak Town. So future figures can show the adaptation and changes. Now we have 1.3 1,000,000 square meters of the development scale. For this 1,300,000 square meters, it includes two parts. 1, well, some will be used for rehousing. Rehousing of the existing, residents And we can't give you accurate number because some will be, rehoused in situ Somni Lee after receiving cash payment. And then, the rest will be sale of property units. So I believe for this project. Now for our future market share in Beijing, I'm not going to talk about, monetary terms. So for our influencing Beijing and for our future market status in Beijing, it will give big help. Thank you. Next question, please. The one on the 2nd row. Mr. Howe Management I'm new. I'm from BOCI. I have two questions. The first question is about the acquisition of Citi. This is a very big asset portfolio. The area is around half of your total area. So can you share with us? Given this big portfolio, how can you improve its asset turnover and rates of return? In terms of organizational structure and people, what are you going to do? Can you share with us? That's my first question. Secondly, Now you have cash of around 100 odd billion. And how are you going to spend the money are you not going to spend it, Mr. Howe for 2016? Is it a good time to acquire land? In some cities like Shenzhen, is it overheated? How sustainable will it be? Thank you. Thank you for your Concerning a cooperation with sit take, I gave some introduction about the asset portfolio. I have delivered to you some messages, but I can't share with you numbers. But I have portfolio. So I won't go into all the details again. In the reorganization and cooperation process? I understand that you are concerned about the process in the press conference questions were asked. I think reporters are even more concerned about that. It seems that you would also like to listen to this kind of content. Okay. For this cooperation? Who approach whom? Why? Using shares? I think these are all related questions. For this cooperation, the senior management both sides attached a lot of importance. In the restructuring process, we formulated a lot of detailed rules, guidelines, and practices, to be honest. In the restructuring process, there may not be a lot that will be really successful, but I think that we can succeed because we have common, intention and will. On many internal occasions, I said that city is a very respectable enterprise. They have many outstanding talents. And with talents, there must be the stage or platforms for the that. In our area, both companies are good companies. So This kind of cooperation will not be a confrontational relationship. It will be a cooperative relationship. So who approached whom it is free love, why shares? Because future changes and developments are related. They are now our 2nd largest shareholder. So will they want to see unfavorable development and us definitely not? So all these moves and arrangements are worth your expectation. In the process concerning disposal and arrangement of assets, I cannot, give too much content to you, but one day, if I can list out all the numbers you can see very clearly, the actual condition, you said we have money. So how are we going to use the money? Well, we will spend the money. If there are good opportunities, please let me know when there are good opportunities. I really want to spend the money. Well, wealthy people have, hard times. Well, this is, a remark from my heart. We have to be responsible to shareholders. We have so many employees. We have so many segments. Okay. We have 100 odd billions. Is there any company with more than 100,000,000,000 of cash among the property companies in China? I haven't seen that in the financial statements. Is there any such company? No? So, we have had times. Of course, We can't, just spend the money in hastily. The money must be spent in areas which can bring about most value to the company and the maximum return to shareholders. So with this philosophy will continue to monitor and look for good investment opportunities. If you find very good opportunities, please contact me anytime. Thank you. Oh, over a heating in Shenzhen. Shenzhen is only a city. It doesn't represent the whole country. At present in Shenzhen, there are some small to medium sized units with quite large extent of property, price increased Well, but this is related to power supply. But if you compare that with Hong Kong, is it cheap? It's like, 4, 5 years ago, the level of Hong Kong price, no, where is the bubble? I don't think you can say that there is a bubble. Wherever you invest, there will be risk and there will be opportunities. There may be different projects in the same city and different projects in different cities. There may be different consequences and results In the past, I said that if you say there are risks in the city or if there are no opportunities in a city. This kind of remarks are not objective in Shenzhen. The still many companies running well, including Coley. Coley is doing well. We are searching for opportunities in Shenzhen. I think it depends of overall competencies and strengths, right? Thank you. Because of time constraints, let's take the last question. The one on the 3rd row. It doesn't matter is not a press conference. If you want to ask more questions, then I can answer. If, there are things that I'm not allowed to speak, I won't give the answers. I have three questions. First about the asset portfolio from Now if does half, and then China oversees also have your own projects. What is the difference in gross profit? For the 6 asset portfolio, what is breakdown between RMB and USD in the debts. And do you have any judgment about the tax reform? I didn't hear your question clearly. Oh, the the tax reform. For the Zhong Tian, asset portfolio, it is gradually realized. Now, our majority shareholder gave some assets, and they are in line with our estimates. In the past, after adjustment, some projects were adjusted. There were adjustments in the selling price and positioning, so more or less the same. So final sales results are more or less the same in line with our expectation. As regards, the asset portfolio of Citi, I can't give you the details. Weight, these don't, be anxious. I think it is going to be a positive impact Then there will be a lot of good things on the 1st May. There will be this increase in tax. And for our industry, it is neutral. It is going to be neutral. In some projects that will be, that would be merits. And for Kodi, I think positive is bigger than negative. In the past, VAT was high. VAT was very high. For business tax. After business tax was introduced, there may be positive impacts that is our internal analysis. And then gradually when the project, finalized and implemented later on, I believe. We can have more discussion on that. Our current assessment is neutral. In some cases, it may be favorable. Thank you. You, do you have any more question? Okay. The side Thank you. I'm from Macquarie. I have a question not about numbers, but it is also a sensitive question. In the past, the media said that there is big change in your personnel in senior management. And according to the reports, one reason is about your cooperation deliberation with Junfian. There are different styles. So looking towards the future. Have you already completed your integration and coordination in the future? Would there be things that need to be done in order to achieve more harmony between the two teams? For sales and acquisition, would that be good or bad impacts? I have another question about personnel, about city acquisition. Both China overseas and city, are 2 very great SOEs, property companies, But if you look at the past 10 years, if you look at Citi's performance in terms of land acquisition and sales and also cost control, regional, distribution, to be honest. They lack a lot behind China overseas. There is uncertainty and volatility in the sales, which is very big. So in the future, when you integrate with that team, will the difficulties encountered be bigger than what you encountered in your integration with Jong Tian? Now the, the the timing now is, maybe too early, but then concerning senior management, you have you may have to take up some senior managers in some areas or regions. Then will that dilutes your existing human resources. My last question is about data. Just know in your PPT, There is a reminder. Thank you, Mister Howe. Last year, there was a corporate bond in the city. There is total deaths of 100 odd 1,000,000,000 if this is integrated with China overseas. Your number will be, pushed up a lot. At the end of this year, will you won't exceed certain gearing, what is a comfortable gearing level that you won't exceed? Thank you. I really can't answer, questions about numbers. For your two questions, I think I can answer together as one. Some are related to criticisms or assessment judgment of Citi. They were announced results on 24th. So I think you can ask Chairman Chang. I cannot answer questions about them. In the integration process, I believe that you are all concerned about it in my presentation. I explained how we are going to do it, and what we're going to do In the integration process, people are most concerned of resources or conflict and so on. Well, these are things that we have to face up to. What we do want to see is the forward should not slow down. When the 2 forces are combined, well, definitely, we must not slow down. Not to mention, faster pace. We have to maintain the past pace at least. That's the direction and goal of us. I said already that in city, there are many very good talents in the development process. I believe you have strong understanding of the industry. When the 2 forces join hands, there will definitely be more opportunities. There are changes in our personnel where this is not a press conference. Perhaps I can, give com give some comments. If this is a press conference, then I won't take the question. In any industry, any enterprise, it is just normal to see personnel changes. As the person in charge, one of the persons in charge of a company, I most hope to see that an enterprise development Well, not. Be affected by change of 1 to 2 persons. That's my goal. And that's how I think. What'd you say? So I think that in the company's development milestone, well, you all We'll think of these things together. Of course, you are very knowledgeable and experienced every time when we communicate, I would like to listen to your inputs. And these are questions from shareholders through you as well. So we hope to have more exchanges in these areas. Since this is one of the growth models, we don't want it to be a burden. We want it to be a driving force for us to move forward. Thank you. Thank you very much. Oscar, This gentleman is not using microphone. The interpreter can't hear him. The gentleman is not using microphone. The interpreter can't hear him. A fight. It was, you know, I'm pretty interested because, for the whole COVID cruise, she had a GP margin is 30.2 then why is it that you are different from accounting standards and different from the past? Is there anything special? Well, your question is very professional. I think our CFO can take your question. Here, many of you may have studied accounting. Accounting, no matter, good or bad, is not something very scientific. So what is right? What is wrong? Well, I think, is must be right. But then if you look at property companies, How is GP margin calculated? As you said, there are two ways. I think you can refer to Vanki all along. They used the net to calculate. Next year, there will be the new tax system, the new sales tax room. Okay. Oscar. Now I only understand half of your question. I don't know how you do the calculations, but but, actually, we have been so honest even though there is the opportunity to exaggerate the numbers, we did not do it. We just tell you where there are impacts that have affected us I tell I've told you honestly, the impacts that we have, encountered. So can you still find other developers like us? Thank you, Oscar. When I go back, I will have to talk about this with our CFO. Thank you very much. Thank you. Thank you. Ladies and gentlemen, this is end of today's session.