Earnings Call: H1 2018

Aug 21, 2018

Welcome to China Resources 2018 interim results announcement. To do with us, Mr. Tang, your Vice Chairman and Executive Director, Mr. Youti and CFO and Executive Director. Mr. Shetty, Senior Vice President And Executive Director. 1st of all, Mr. Tangin, Vice Chairman, we all deliver a speech. Dear analysts and the difference, good afternoon. Thank you very much for your coming for this results announcement. Still running outside, and thank you very much indeed. Today is a very good day. And I know that some big developers are conducting the results announcement today, and since that everybody has a very good performance. And I know that this is a very busy time for you. It's the result season. And It is also the peak system for you being analysis. So thank you very much for your great support from the investors and analysts. And I'm very happy to have this opportunity and communicate with you about our performance. And on behalf of China Resources, as well as our management team, I would like to extend our sincere gratitude to you. Your support is the most effective motivation to us. Our report of interim results is already available online and you may have already noticed the details of our report. So before our CFO shares with some shares with you more details, I would like to say a few words about our overall performance. First of all, in the first half, there is a big increase in our turnover reaching RMB43.8 1,000,000,000. We already changed the currency to RMB. And this means 40% of increase. And there's a 40 so this is this is the 43% of an increase in our investment property as well. And then secondly, including the, hotel sector, there's the RMB4.4 billion from our hotel sector, representing 22% of increase. And Thirdly, under settlement profit margin also reached a historical high, representing a 13.1% of an increase. In the RK sector, the 48.6% GAFA increase. In the IP gross margin, there was the 3.1% JFA increase reaching 36.6%. And the profit attributable to the shareholders is the 8,850,000,000, representing a 90 6 point of a percent of increase And the core net profit also increased by 152%. The dividend payout ratio, we also grew up by 30%. And the overall dividend payout ratio, will be maintained at 35%. The Board of Directors has already announced determined that the dividend payout will be 0 point 1 1 year RMB or equivalent to 0.13 dollars in Hong Kong dollars. And in 2018, our contracts have also delivered very good performance. The year target will remain the same. 30 at the beginning of the year, and their total contract sum reached 1,000,000,000, representing 6% of increase. And we have full confidence that we can hit the target, as said, at the beginning of the year on the contract sum. And number 7, in the first half, the overall financing environment, it became tougher and the cost also went up. And the overall financing cost is 4.4%, slightly increased by 25 basis points. The gearing results increased slightly, but our overall balance sheet balance sheet is also very healthy. The net interest bearing gearing ratio is 47.2 percent, still lower than the average in their market. We have a long term commitment to our shareholders. While managing the risk of the delay, we will realize the growth as well as the returns to our shareholders in the short to medium term will be a state of their stable growth of the company while the industry is going through consolidation, we are trying to expand our market share, meanwhile maintaining a very good balance sheet. Currently in the industry, we are one of the best performers in the market. In the long run, we are exploring the X strategy to realize the transformation and innovation in our business in 5 years to 10 years of time, we will transform ourselves in terms of our residential property and investment property. Being 2 engines of our growth, but we innovate in the operations, the long term rental, as well as other innovative businesses, in order to deliver the new compelling force of growth in our business. So we realized the progress in different business segments and then Mr. Wangjian will share with you more details in a minute. So I think I must stop here. Mr. Yujji, and we will continue with the presentation. After that, we will open the floor for questions. Thank you very much, Mr. Tang. Actually, Mr. Tang already talked about all the key points of our performance. First of all, thank you very much for your consistent attention and support. There will be 6 parts in my presentation So first of all, about the company overview, you have already known our company very well. So I will skip this. Now let's start from the performance or the business performance in the first half. As Mr. Tang already said that our overall performance increased dramatically and returns to the shareholders also went up dramatically. So from January this year, We changed the function currency to RMB, therefore, you can see in the financial statement that all the indicators all the figures I indicated in RMB as Mr. Downs said that our turnover was 1,000,000,000, up by 40% The investment property rental income increased by 22 percent reaching 1,000,000,000. Gross margin also hit a historical high reaching 48 percent, up by 13 percentage points. The profit as reported shareholders was 8,900,000,000, up by 96 percent. After the evaluation influence of investment property, as well as after that, the core profit and asset quality shareholders was 1,000,000,000, up by 152%. So this year, we see such an improvement in this area. EPS is 1.28 Yuan R&D, and the dividend payout ratio will be 13% 13% that is a 0 point 1,000,000 RMB or 0.13 Hong Kong dollar And this represents an increase of 30%. And the contracts also increased by 36%, reaching RMB 94,300,000,000 financing costs a facility at lower level in the market. In my estimation, the same period last year, there will be 25 basic points up reaching to 4.41%. The net interest bearing gearing ratio will be 47 2% because more expenditures on land acquisition in the first half. Now let's look at the financial performance. The income statement, our P and L with the improvement in all business sectors, the development properties and the investment properties. In the investment properties, operations efficiency improved gross margin reaching reached 66.6% And the net profit increased by 20% reaching 5.7%, reaching 22% reach increased by 5.7%. Core net profit increased by 7.3% reaching 16.6%. Now for this diagram, I wouldn't go into the details. Now let's look at next slide and the balance sheet. The cash balance increased by 13%, reaching 60.9% Interest bearing debt increased by 1,000,000,000. By the end of last year, by the end of June this year, we hold more cash in hand because of the macro adjustment from the government the financing environment, it becomes tougher. In the interim reporting period, the net interest bearing debt increased by 11.3% reaching 47.2%. Because of our more land acquisitions and therefore, more settlements and this influenced our net interest bearing debt. PCN in the first quarter, a lot of debt were due and about 1,000,000,000. In January, the billion in 1 month only. Meanwhile, the central government asked all SLEs to reduce the gamer ratio So often considering the overall financing cost, we have arranged a perpetual debt of 1,000,000,000 with a domestic bank in China. So if the within 3 years, it's a 45.9 And after that, for every year, there will be a 3 percentage points 3 basic points up. It will be a very flexible game So in 6 months after 6 months, we can pay the debt earlier. So our gain ratio can be reduced to a more reasonable level. If we consider the perpetual debt as your interest bearing debt, then it is estimated that the net interest bearing debt by the end of June will be 42%. At the end of the year, it can be reduced to 42%. That is the December this year. If we continue taking the perpetual debt as interest bearing debt, So by the end of this year, the net interest bearing debt will be 42% lower than the current level. In terms of the debt structure, in the first half, because of the new added debt, the overall increased deterioration increased by 35%, reaching 1,000,000,000. In the total debt, the RMB It's 1,000,000,000 bank loans, 75% bond financing, 25% fixed interest debt, 41% floating interest, 59%. So by the end of June, the weighted financial cost is a 4.41%. In terms of foreign exchange and exposure, as well as risks, Because of the RMB is weakening and perhaps you can say about it a lot, so therefore, we conducted a very detailed analysis at the end of June, our foreign currency debt to 29% of our total debt of the company in my memory is that RMB38.8 billion in foreign currency. The proportion was basically at the same level, but the total sum increased. At the end of last year, it was 1,000,000,000. So you can see there's 800,000,000 increase. But putting aside the overseas borrowing currency assets, as well as the currency swaps, the non RMB exposure, will be reduced to 22% from 23% of last year. In the future, we will take different measures to further reduce the foreign currency debt. Meanwhile, we will also continue to use the different vehicles such as a swap to hedge the risks at appropriate times. We also conducted sensitivity analysis. The end of June, Hong Kong RMB exchange, suppose that in the second half, so RMB continued to depreciate by 5%. Course, within RMBs still will be stable, say if each depreciates by 5% in terms of our cash flows, influence will be 1,000,000. In our P and L, the overall influence will be a loss of 1,000,000,000 in the whole year, in our balance sheet, we estimate that at the end of the year, there will be 0.5 of increase in their reserves. So this is our based on our assumption of a 5% of depreciation of RMB in the second half. Next slide is about the settlement of our development properties. In the first half, you can see the details of the settlement sum area and average price. And total settlement is 36.5 1,000,000,000. Total area is 1.94000000 Square Meters. The unit price increased by 82%, reaching 18 1544 per square meter. And for the high margin settlement projects, brought in 6% of increase in the gross margin, reaching 48.6%. In Tier One Cities, For example, Shenzhen, the settlement is RMB12.2 billion. Shenzhen, when you for animal for the gross margin were both above 70%. In Tier III Cities, the gross margin is even higher, reaching 41%. Basically, there are 2 projects. 1 is in Lantong. The other one is In Chicago, the 2 projects in Tier Three Cities both have very high gross margin. So therefore, the segment gross margin in Tier Three Cities are very high. In Changzhou, Changzhou and Nanong not not an answer on the Shijiazhuang. These two projects, the settlement sum is also very high, accounting for 40% of our total settlement among the Tier III Cities. As for the contract sum, it is quite transparent. Tier 3 statistics and the 3 statistics. First one is the 4 statistics. So we this is after full consolidation. Is the RMB44.2 billion. The other one is, the 83,300,000,000 by equity statistics as well as the 1,000,000,000 of the operating equity. From the allocation of the projects, 88% of the contract zone comes from Tier 1 and Tier 2 Cities. The top 5 Contract term projects are listed here. It's required to even distribute it. Next slide is about investment properties. And the performance in finance. Is 28% of our gross margin increase, including the hotel sector. And the overall gross margin, including hotel it's 66.6%. Putting aside hotels, the gross margin will be 4774.1%. So very good indicators. And, you can see we already realized profit of 26 or 27 1,000,000. In terms of our investment size, we are still a leader in the market. By the end of June, we have 27 shopping malls in China and in including including 16 the year mixes, assessed 11 high fines, and the off located in 20 cities. And our total retailing sum was 21.4 1000000000, up by 30%. And for the investment properties, the fair value was also has a 7.6% increase, reaching 106 700,000. So our investment properties are mainly shopping malls. As for the cap rates, we used the same catch cap rate as we did last year. Next slide. There are 2 types of receivables. 1 is Those that were opened before 2012, 7 of them very mature shopping malls from the end of 2012 to now 6 years already, such as Shenzhen, the mix the over 10 years, the overall yield on costs maintained around 10%. And the returns on from our rental increase of our 10% And the year down costs also increased by 3.3 percentage points to 35.1 percent. In there's another type of shopping malls that is those after 2014. In the Beijing Phoenix process, there was a they will see, a food court. And, therefore, you can see the occupancy rates dropped slightly. So in 2017, we opened 6 new shopping malls. The rental income increased by JPY 4.3 by 7%, reaching JPY 430,000,000,000 and yield on cost also increased. And annualized retail income from the retailing also enjoyed an increase. You know, that we have 3 shopping malls that did not perform well. One is in Wuxi, the other is in Tongxin and Zhengzhou's mix. These three projects, here is the performance of these 3 shopping malls. You can see that through the continuous automation of our tenants, the financial and operations performance both improved. The rental income and rate adding some both increased and occupancy rate also increased. Gross margin also improved. The overall profitability is pretty good. So this is the list of our major investment properties, the rental income at least the occupancy rate. In the first half, This is a 31.9% of increase in our rental income. Putting aside the Shanghai Times Square, because it is being renovated, And also, putting aside the new shopping malls that were opened between 2017 to 2018, there was the 14.1% of increase. And the organic increase. As for the rental income and occupancy rate of office buildings and hotels, the office buildings delivered a very stable increase. The 32% of our revenue in the rental revenue of Greece. And this is also 11% of our growth in the rental increase. As for the hotels, the performance also improved greatly through the stringent control on operations cost. As well as more market more campaigns, the overall performance also enjoyed a growth via same store growth enjoyed a 16% growth Without the newly added hotels, this is the same store increase. The occupancy rate also improved by 5.5%, reaching 62.2%. So this is our opening plan. Subaru have altogether 48 shopping malls, the shopping malls. And by 2020, there will be 48 and the total operating area will be 6,100,000 square meters. And in June this year, the Xiaochuan mix already opened in Lanthong, Taiwan, Kunxi, Shenzhen, Chairman and Chongqing. So this mix projects will also be opened. The general occupancy rate is also very good. Now this is about a land bank. By the end of June this year, our total our total land bank has we were holding 52.15000000 Square Meters. So we have learned in 62 Cities The total land reserve is some 43,220,000 square meters or equity land reserve of 33.6 6,000,000 square meters. In Beijing, in Beijing, changing the highway, in Tianjin river data as well as the Bay Area, we have our land reserves. And By the end of June, our investment property has the land reserves of 8.93000000 Square Meters or Equity Square meter, equity area of 6.56 square meters. This represents an 8.2% of increase. Now let's look at our 2 plus X business model. Now let me talk about the X we can say more about the organic connection between different business segments to promote the municipal upgrading or the renovation the city operations and the development, long term rentals and the so forth. And for some of these services segment, we started earlier And currently, we are holding over 26,000,000 square meters in our land reserves. Meanwhile, because of the industrial property, it's booming, we also expanded our channel of a land acquisition in order to cultivate a new growth source of growth. In terms of city development and operations, we also enhance our output. And currently, we increased the light access model currently, we signed contracts. And in terms of the total construction assets for third parties, this contract sum already exceeded JPY 40,000,000,000 in the X strategy The central government is supposed long term apartment rental business. And by the end of 2020, our target will be about 100,000 apartments. In terms of the senior current business, we have logged about 5000 beds for the senior citizens. If everything goes well, our total number of our best will be 15,000 by the end of the year. As for the smart property, in order further improve the operations efficiency, we are working together with Tencent to develop the smart property program to deliver value adding services and realize multiple services, such as firefighting, communication, transportation, energy, and so forth. In terms of property management, we're also working hard to improve the operations efficiency. The total revenue brought in brought by the property management is about is RMB 1,100,000,000. We are managing 72,000,000 square meters by 2020, this will be 200,000,002,001,000,000 square meters. So and then this is the Fandex Land acquisition. We acquired 41 projects in the first half, and the total land price is Rmb67.3 billion. Equity land price was RMB51.3 1,000,000,000. And in Hong Kong, the land price is higher, but putting aside Hong Kong, the average price is 7,650 per square meters. So this is for the schedule for bookable area. So this is the floor areas for settlement. In 2018, it will be 9.25000000 Square Meters in 2019, 11.15000000 Square Meters. So there are some other slides where you can see more details and you can check them out by yourself. Thank you very much. Now I would like to open the floor for questions. Please raise your hand if you have a question to ask just for the interest of time. So three questions maximum for each person. Please identify yourself before you raise the question. Good afternoon, management. Ronny from Mogli and Chase. 3 questions for you. Number 1, in terms of our development properties, you're also very active. After the injection of capital of the liquidation, you are working very aggressively in this. I just want to know, in terms of a senior carrying or long term rental apartment and property management, you have a 2020 targets, right? So in terms of development properties, can share with us what is the target for the, for this sector, continuous development or sustainable development is very important Mr. Chang said that in 2018, you're trying hard to exceed your target for the year. What about 2019? So I just want to know your target. So this is the first question. And at this is involved in their land acquisition in Hong Kong, you're more active than before in land acquisition, Hong Kong, Just want to know your land acquisition strategy. In the first half, you sent a lot of money in land acquisition, confirming with last year, and you also acquired more land. So what is your target for the growth of a development property? The second question is about the debt structure. You issued perpetual debt. So from the financial to reduce the financing cost. From this perspective, I see that in the first half, you, the dividend payout ratio reduced slightly. It's just a fair bit. The overall debt level also increased slightly, and the share price is not low. Just want to know that from the debt level, can you please share with us more details so that the investors don't have to worry too much? You don't have So the third question is about the investment property, the rental income. I committed this with missed year before for China Resources, your sales increase and the rental income increase doesn't match each other. You also adjusted your rental contract. Just a moment. Now what is the latest information about this? In the sales growth and the rental growth, are they matching with each other in the future? What do you think about the growth ability? Perhaps I can take the questions first. Number 2, and number 3. And Mr. Chang will take your first question. Dividend dividend payout last year the overall dividend payout ratio was moved was raised to 35%. We estimate that, as we said before, we were not lower the dividend payout ratio, but for the interim, fee income last year was not high. It's about the CHF10 Hong Kong cents. This year, we increased by 30% reaching 0.13 Hong Kong dollar. So the different payout ratio will not lower down. About the perpetual debt, CESEC asked us to control our, our liability assets ratio That is to say you have to enlarge your shareholders' equity. And this is one way for our allotment until your perpetual that is another option. In the long run, we will try to speed up our sales and the settlement, the overall cycling The reason why we issue perpetual debt is that we do not consider on the issuing any new shares or over allotment So this year, we don't see such a specific requirement for this unless this is the major requirement for M and A purpose. Or major opportunity arises. If you grow the business organically, I don't think we will consider on the equity financing. As for the investment property, this year, our occupancy cost, preparing theft last year, bounced back a little bit. Rental income increased by 31.9%, retailing increased by 30% occupancy rate is 14.4 percent. In the past, it was 14.2%. So you can see there was also a slight recovery So we will continue adjusting the tenant structure, including trying to set up the close connection with their rate savings. The first question, in the past few years, whenever we communicate with analysts and services, we repeatedly say that we pursue for organic growth and sustainable growth. This is our basic principle in 2016, 2017, there was a faster growth in our business. And this year, the 20% of growth only So I believe that based on our performance in the first half, confirming that of last year, there was also a very faster growth. Why are we pursuing higher efficiency and growth? We also consider other returns. So with 1000 returns, any growth will not be meaningful So the increase in this deal doesn't necessarily mean the increase of our returns to our shareholders. So we have to balance both of them. So our growth target will not change. We have also considered about the policy influence We also deployed more in the Tier 2 city as well as the presale permits from the government. We hope that we can do more than the target. Next year, I believe that the 2 digits growth will be a must. It will be guaranteed double digit growth. So in terms of our debt, you can see the debt increases very fast because of more investments. So in terms of our capacity of growing our business continues in the future, we see such a potential we have covenants I said that double digit. I believe that we can hit the target. As we said at the beginning of the year, as for the Hong Kong market, we hold positive view on the Hong Kong market in terms of demand and supply. You have already felt that Hong Kong demand is still strong. Land supply and house or apartment supply is quite limited. In Hong Kong, the marketplaces feature, the interest rate is high, but the IR is is a little bit lower. So this revenue in the overseas market, and now there's also asset allocation in this market. That's why we have made investments in Hong Kong in a reasonable manner and a rational manner. The other thing, we haven't increased more investment in Hong Kong This is also a rational decision. In 2019 under 2020, we will continue to maintain a good growth here in the past, I didn't share any figures. And I don't think it is rational for me to give you any specific this year but anyway, there will be a rationale growth income in this year. Good afternoon. Management, CRCC Eric, couple of questions. Number 1, gross margin. Channel Resources has been leading in gross margin. And this year, it increases to 48%. And of course, we know that the settlement may be under a very important factor. So just more for this the gross margin, how much is to be recognized of the sales? Last year, the land price for you, a little bit higher. So just want to know, what will be the gross margin from the sales? And what will be the trend? So this is about gross margin. 2nd question, by the land acquisition, in the market, the price control is more stringent than before. And in the foreseeable future, we don't see that such regulation will be will be loosened. So Sierra China Resources is a big SOE. In terms of SL Land acquisition, what's your policy? What is your strategy? In the market, do you think that you will have opportunities acquire more land? The third question, a very quick one, about motivation? And this is also a this is also some expectation for the market. Mr. Tanke, please update with us what is a motivation plan? Gross margin, the settlement gross margin will not be sustained 48%. It will be we will be in trouble if it can sustain. As for the gross margin to be recognized of their sales is about KRW201 1,000,000,000. And this year, about 96 1,000,000, and the gross margin will be 45%. And next year, it will be 1,000,000,000 and gross margin will be 40%. And in 2020, we were 40 1,000,000,000, and the gross margin is 35%. And after that, the gross margin will be around 40%. This year, the overall gross margin will be over 40% and no doubt about it. Next year, it will be at least above 35% gross margin. So this is about gross margin. As for the land acquisition, we estimated and calculated based on our feasibility study, 22% to 30%. So after the price the waiting pricing. So we acquired 41 pieces of land and the gross margin will be around 29% to 30%. Okay. This is about gross margin and land acquisition. The motivation, Mr. Tang. A quick comment to observe CFO first. So 30% to 35% of our gross margin will be percent after 2019. So if you look at the total number of projects that are sold to be recognized we have also considered about the curbing factor, the price curbing factor from the policy, from the government In the short run, this policy will not be loosened and the government is quite determined on it. But we also believe that this will help with long term growth of the whole industry. So this is my comment about gross margin. As for investment, so you may wonder that in some And the markets are not very good, and there are less public less policies from the government. Demand and suppliers not good. So if we want to sustain our business in the long run, so we have to go to those more more bigger and better cities, such as the core cities, the capital cities, the provincial capital cities. So this is the way we follow the demand. So because this is the way that industrial and the consumption will grow, So if you look at the United States, in the countryside, the properties are very cheap in Los Angeles, in New York, and the properties are more expensive. It's the same logic. As for infrastructure, infrastructure, the high speed railway, the metro, the underground or Metro Alliance. So this supplement infrastructure will come up very quickly. So this is a major consensus in the Tier 3 cities. In the policy of the market, under the your growth pressure, for me, I think for some pressures, there are 2 anxious for any industry, it's impossible to maintain the 30%, 40% of growth, right? So except 1 or 2 industries such as high-tech companies, high-tech company. So development, property industry is a very traditional industry. So we have to manage our own managed our strategy, while we have to manage our investment well, when we have to stick to the principle of creating value to our shareholders, that we can keep moving forward continuously and sustainably. So I think this is something that we have to pursue as an investment strategy. So this is about strategy. About motivation, is every time you try to touch this touch this pinpoint of ours. Generally speaking, So Sasak controls about the total payout, total payroll, but we have a long term motivation plan. The long term motivation plan is linked to our core profit. So in the past few years, our core profit has been growing steadily and healthily. So this is because of our persistence as well as the multi vision oriented program. So if we look at the program now, it is in compliance with the with creating values for the shareholders. So what is left after considering all the factors is really a core motivation program. So apparently, such motivation is needed in all SLEs, even though it is not sufficient enough, That's why we have to keep optimizing this program. I know that you can't wait to see more about the progress in our motivation program. But everybody's happy because our performance because everybody's happy. So with or without module mission, we have already done a good job in our performance. So this is a bottom line, right? So of course, with motivation plan in place, it will be even more helpful. And of course, within the limited framework, we are optimizing such a program, such as strategy, our organizational structure, the, the project evaluation as well as the distribution. Good afternoon, management. 1st of all, congratulations on your good performance. Solution from a BOCI. So first of all, a follow-up question, As Mr. Tang talked about the turnover rate. Last year and the year before last year, you mentioned about speeding up the turnover rate. I just want to know that you will continue with this, this, Dao. The second question is about the occupancy cost. You said that there's a slight increase. How should we understand it? Is it good? Is it bad? Or So is or is there a trend next for you to undertake at a high even higher or compares cost? Can you please elaborate a little bit more? 3rd question, every year you may be asked, but still we are still I want to ask that again. Recently, some payers, some colleagues, particularly those from IP said that, you are going to have some kind of securitization program in the near future. So after the value increase in the properties, in the past a few years. Your IP value already exceeded JPY 100,000,000,000 is the half of the market cap So this is the huge value that is not fully reflected in your share price. So will you do something about it? Three questions. The first one, I'll turn over. I think our attitude is very clear. We have to keep improving our capability and speed up our efficiency. So this is our arrangement and So we have already made progress. So in the past 1 or 2 years, our performance improved, and this is because of our hard work in this area. Secondly, we are trying, we are exploring on the evaluation and motivation based on projects. And we also made some progress. The 3rd one about the turnover rate, I must say that if you look at the returns to our shareholders, you turn over times by your market rate margin times by your leverage your leverage and the ROE, if for the company, our gross margin is higher, the return of turnover rate must be managed well. If it returns to shareholders are not high, then the turnover will be very low efficiency of returns. So I said it before, we are managing the projects at different categories. Some projects needs to be turned needs to have higher turnover. And so the value of the projects and the value of the company must be both optimized. The direction will be the same, but the turnover rate must be also down with good quality your the occupancy cost, your second question, occupancy cost went up slightly. For the company, for the tenants, it is good news because of their sales performance, their sales went up for the tenants and the returns that the company also went up. So this is a one one situation. 14.1% is not a very high percentage in the industry. I believe that the further improvement will be helpful for us to deliver higher returns to our shareholders. Optimizing tenants as well as improve our business performance of the tenants will also be reflected in our own performance. So this direction is a good one. So within a reasonable range, if the tenant's cost went up too quickly. Then the long term health the health of a long term structure will be influenced. I think that that's my part for your questions. The securitization securitization last time when we had a meeting and we talked about it already, we conducted systematic research on it, including selling to funds, including employees, as well as speeding off, spinning off, So we also produced a mature report to the headquarters, and that they are discussing about it. Generally speaking for the company by 2020, occupancy rental will be about 1,000,000,000, and we will be able to to survive independently. So if we do it speeding off, we'll be the best option But as for how in the future, the management excellence, our parent company, will analyze about different options. So we have good assets. We don't worry about our future. Thank you. Good afternoon, management. Griffin from Citibank, two questions for you. The first one you said that you want to be top 10, 1 of top 10, right? Mr. Tasas, in 2019, the double digit growth, so it will be conservative. So how do you think about the targets of being a top 10 company? What will be the difficulties for you? For example, the the liability assets ratio? The second question, you have about the 62,000,000 square meters in the city renovation projects. For example, in Shenzhen, Yohubei project, Will it be possible that in 2020 or around 2020, will you be able to form up a large supply of these projects? So perhaps, personally, if you look at our land reserves, our balance sheet and our capability of our team. I think becoming a top 10 company is reachable, and it is also something where we'll try best to to hedge this target. I have confidence that we can do it, but ranking. We're not any indicator to our performance. And this is not what we are looking for. The growth of that business the values to their shareholders, actually the profit increase, including the creating long term value. These are our targets. For example, our sales For example, your market cap, your share price, as well as the profit growth and value to the shareholders, So if you have anything to worry, you have to worry about the value that we you create. So how to how to stimulate to deliver what the market wants to say? This is a different story. Their long term value to their shareholders is more important for us. We do not do what the market expects us in the short run, but rather we focus the long run, we are more rational to keep a balance between short term and long term goal. You also talked about our debt level. As we said before, So some developers at the debt level is because our debt level is not very high. So we haven't received your recognition from perhaps because of the lower debt level to some and sometime you have to speed up the overall turnover. You have to development or investment. So when we formulate policies, we have reached the consensus with the parent company to set up a long term sustainable strategy. So this is my answer to your first question. For example, we have about JPY 500,000,000,000 in our total assets. So having such a big size of business, definitely, you have to be a top 10 company. So otherwise, how can you deliver returns to your shareholders? The bottom side, the investment property and the assets for it, you have to improve keeping improving your capability in order to deliver more the highway returns for the shareholders. As for the city renovation projects, there are a lot of projects So as Mr. Yu said that we have about 26,000,000 square meters in Shenzhen in Dongguan and in Guangzhou, In terms of city renovation projects, in this industry, we are one of the influencer and we are one of the pilot We have already won trust from our partners. From the communities to the governments. Other projects we mentioned today I think under construction, the government approved it and the communities also recognize it. So in the future, there will be more projects like those. In 2020, there's possibility that we will from such salable resources. All their projects are undergoing at different phases. So all these projects are mentioned. They are approved and they are recognized by government and the communities. For example, in Darchong, when the development is basically done, some more projects will be ready from our pipeline. And in Tier 1 Cities, we will be able to form our stream of sales, sellable resources to contribute profit and the margin to us. And this will be good news for us. So the speaker didn't use microphone just now. Good afternoon, management. 3 questions for you. 1st of all, commercial, they are retailing some is not growing as fast as before, and investors do care a lot that your rental income and recently some both had a very good performance in the first half, yet the trend has changed And the whole process is going is slowing down. For the management, you have shopping malls have also noticed such a trend that the growth of retailing is slowing down. In the upcoming 2 to 3 years, how do you think about the rental income? Will it be a positive rental increase? Is it upward revision or or if you renew contract, the rental income will continue to go up or you're not sure about the trend. The second question is about the Innovation business. This year, you talked a little bit more about the innovation business and your targets. Just a moment to know, so do you have a plan, for example, how much resources you're going to invest in innovation business? Okay. Thank you. Richling some. If you look at our own figures in the past few years, the growth speed is slowing down. So I'm comparing the figures within the company. So in the first half, the base is smaller, And, compared with the same period last year, it is higher The Nationally, it is 9.4, a little bit lower than last year. If you look at the figures in the company, This growth will be sustained and the growth will however, the growth will not as big as last year. This is because of the base, the base of comparison. Your second question about the rental income, the rental growth And we also think that it is sustainable whether the rental can be sustainable or not, It depends on the traffic, the members, the transactions, whether we can maintain the healthy growth of this indicators. So in this way, if all of them are growing, then our rental income will be sustained. So based on the indicators, right now, the renewal of contract is already growing quick comment. And recently, some big brands at the open stores in China and they worry a lot about the economic growth as well as the trade war. So when they open new source, So you may have to consider more about these factors, but currently, the worries are not reflected yet. Innovation Business, the resources for Innovation Business, we are rational in this area investing your resources in it, not a lot of investment, about less than 5%. So this year, it will be within 5%. I think for some of the innovation businesses, the ROI, is it still waiting to be to be discussed and analyzed, and we have to consider about our finance capability and the management capability as well. Good afternoon, Massimo and Tim Morgan Stanley. Your question about your figure. So just like you said, you estimate the end of the year, the net gain ratio will be reduced to 42%. I just want to know what will be the assumptions for this. Well, we estimate overall profit in the year will be more than what I said before. Of course, it was also based on the opportunity for us to acquire more land. At the end of the year, the land price If we get any good opportunity of a lender acquisition, gearing ratio will be higher But we have, you know, with this seasonality and and we we are maintaining our credit ratings so far. And I can share with you more figures so that you don't have to ask questions one by one. The cash flow Sales cash collection, 62,500,000,000 in the first half, investment property investment revenue 1,000,000,000. Serial land expenses, 1,000,000,000. Construction and installation 1,000,000,000 under sales and overheads. 14,000,000,000 tax, mounting,000,000,000. And from the joint ventures and the subsidiaries, dividends and investment collected about 1,000,000,000. Several resources I also read out the figures for you. By the end of June, our inventory says 76,800,000,000 it is estimated that in the second half, there will be, so 117 newly added resources for sales, in Q4, it will be JPY 5 30,000,000,000. So overall, the silver in the second half will be JPY 2 74,000,000,000. In the appendix, you can find all the details. For the sales and the retailing, About over 10% of our growth. In the mature shopping malls, 7 mature shopping malls, 13.4% of growth in retailing. So 21 comparable shopping malls, 17% of our growth. So this is a fully comparable Shopping Moss. In Shenzhen, the mix is the 2.8 you hangzhou, 30% in Shenyang is 26% in Shenzhen, the mix is 28 and in terms of 12, landing 14% of our growth. In Zhengzhou, it's a 23% Chongqing 35%. We see 12% Qingdao, 10% Half a 30%, KANJO 25%, KANJO 25% Any further questions? Okay. Once again, thank you very much for your coming in for the interim results announcement. Since the bus downstairs to long fall. Until JW Hotel.