Earnings Call: Q2 2023

Aug 11, 2023

Ladies and gentlemen, good afternoon, and welcome to our first half annual briefing of the year. Joining us today is Mr. Frederick Go, President and CEO of Robinsons Land Corporation, and the rest of the IR team. Today, we will be sharing with you insights into our strategic progress, financial highlights, and key achievements that have shaped our performance for the first six months of the year. Presenting with us is Mr. Kerwin Tan, our CFO, and Ms. Erica Lim. After the presentation, we will open the briefing for the Q&A session. Thank you. Mr. Kerwin, you may start. Thank you, Ron. Good afternoon to everyone. We will be sharing with you RLC's unaudited financial results for the first half of 2023. We will touch on the financials of the company and operational highlights for business segments, including our CapEx spending, provide updates on future plans and strategies, updates on our ESG activity and journey during the period. Lastly, updates on our successful bond listing. In the first half of the year, RLC demonstrated strong financial performance, achieving a remarkable 23% year-on-year growth in net income, totaling PHP 5.78 billion. This was achieved despite the high base from the same period last year, due to the recognition of our CDX via our China profit in 2022. Without the high base last year, net income attributable to equity holders of parent would have increased by 71% versus same period last year. Our EBITDA and EBIT margin are the highest in the company's history. Earnings per share for the first half increased by 26% to PHP 1.16 per share, and net book value now stands at PHP 26.62 per share. Our mall business maintained its upward trajectory, recording a high revenue growth of 36% year-on-year to PHP 7.76 billion. Mall rental revenues also saw a significant jump of 42% compared to the same period last year, with an impressive occupancy rate of 92%, while mall EBITDA margin registered 59% in the first half of 2023, and 60% in the second quarter of 2023, beating the previous high set in first half of 2019 and second quarter of 2019 by 54% and 53%, respectively. This is with the adoption of the new accounting standard. The residential business exhibited solid performance, with revenues increasing by 28% to PHP 5.39 billion. This growth was driven by higher recognition of sales reaching the equity threshold and a higher percentage of completion in the first half of the year. Additionally, our joint ventures posted PHP 1.01 billion in equity earnings. More importantly, RLC's organic net sales take-up more than doubled in the first half of 2023, reaching PHP 12.43 billion, while joint venture net sales take-up skyrocketed by 74% to PHP 8.79 billion. In the second quarter, RLC Residences successfully launched its third project for the year, Mantawi Residences Tower 1, with a total saleable inventory of PHP 7.9 billion. The hotel segment experienced substantial revenue growth, outperforming last year due to the huge contribution from upscale homegrown and international branded hotels. Our logistics business maintained stability with a commendable 9% growth in revenue, while our industrial development achieved a robust revenue growth of 68%, driven by the realization of deferred gains on the sale of land to our joint venture. Furthermore, our office business demonstrated steady growth, increasing 4% year-on-year during the first half of 2023. Collectively, each business unit made positive contribution, serving as a strong testament to RLC's remarkable recovery and growth story. Our asset portfolio as of the first half of 2023 is composed of 53 operational lifestyle centers, 89 residential buildings, 40 housing subdivisions, 31 office developments, 29 mixed-use developments, 26 hotels, nine work.able centers, and eight industrial facilities. Turning now to the financial performance highlights. RLC's financial position remains robust and well capitalized, with total assets amounting to PHP 242 billion, which includes a substantial cash position of approximately PHP 20 billion. Shareholders' equity stands at PHP 136 billion, reflecting the company's strong capital base and financial stability. The total outstanding debt stands at PHP 66 billion, resulting in a prudent and healthy net debt-to-equity ratio of 35%. In terms of earnings performance, RLC has achieved noteworthy results with an earnings per share at PHP 1.16, marking an impressive 26% increase compared to the first half of 2022. Moreover, net book value per share now stands at PHP 26.62, indicating a considerable discount from its currently traded share price. This metric suggests that the company's intrinsic value exceeds its market valuation, presenting an attractive investment opportunity. Overall, RLC's solid financial position, healthy capital structure, and impressive earnings growth reflect the company's resilient and sound management practices, positioning it favorably in the market and enhancing shareholder confidence. For the first half of 2023, consolidated revenues is down by 29% year-on-year to PHP 19.63 billion, due to a high base from China's contribution last year. Excluding China last year, our revenues would have increased by 32% for the first half of this year, driven primarily by our investment portfolio, as shown in this chart. Depreciation is flattish, as the full depreciation of Forum last year was offset by the depreciation of new malls and offices, resulting to an EBIT of 16% higher than the same period last year. Lower provision for income tax by 34% versus last year pushed the consolidated net income to increase by 20% to PHP 6.45 billion. Higher ownership of RLC and RCR, currently at 66.14% versus 63.49% last year, pushed net income attributable to parent to increase by 23%. We also would like to highlight, excluding our China net profits last year, net income attributable to RLC equity holders would have increased by 71% versus same period last year. All our businesses posted strong growth during the first half of 2023, except for China, as we have almost fully recognized its profit. Higher revenues came from all our domestic business units, especially the investment portfolio, which accounted 71% of the total revenue. While the residential division also experienced strong growth, including significant contribution from equity share in joint venture. I will now turn over the presentation to Ms. Erika Lim, who will report on the operational highlights of our business unit. Good afternoon to all of our participants, and thank you. Robinsons Malls remains a formidable force as the second-largest mall operator in the country, proudly presenting 53 lifestyle centers encompassing an impressive 1.6 million sq m of leasable space with a remarkable 92% occupancy rate, housing over 8,000 esteemed retailers. This expansive footprint solidifies the company's leading position in the retail landscape. The sustained strength of consumer spending and the robust retail sales have propelled Robinsons Malls' revenues to an impressive PHP 7.77 billion, reflecting a remarkable 36% year-on-year growth, contributing significantly to 40% of the consolidated revenues. Notably, the astute management practices have driven exceptional financial performance, with EBITDA exhibiting remarkable growth of 58% year-on-year, reaching PHP 4.61 billion. While EBIT surged an astounding 162%, soaring to PHP 2.9 billion. These outstanding results reflect the company's effective cost management and revenue optimization strategies. The rental revenue segment demonstrated impressive growth as well, escalating by a remarkable 42%, amounting to PHP 5.46 billion, underscoring the strong demand by Robinsons Malls. Meanwhile, Robinsons Offices ended the year with 741,000 sq m of leasable space, with a total of 31 office buildings and an average of 89% lease percentage. Robinsons Offices delivered steady top-line results with a 4% growth in revenues to PHP 3.72 billion in the first half of the year. This stable performance was primarily driven by the sustained occupancy of majority of its portfolio and higher rental rates during the period. EBITDA and EBIT were flat in the first half of the year versus same period last year due to higher OPEX, particularly in the second quarter. In the first quarter of 2023, RLC opened a new build-to-suit work.able centers in Cyber Omega, located in Pasig. This brings our flexible co-working space to a total of nine work.able sites. Amidst the backdrop of revenge travel and the bustling summer season, Robinsons Hotels and Resorts, or RHR, showcased an extraordinary feat, achieving an astounding 138% year-on-year revenue growth during the second quarter, surging to an impressive PHP 1.12 billion, marking the highest quarterly revenue in the company's history. This momentous achievement fueled the first half revenue growth to a remarkable 148%, reaching PHP 2 billion, driven by the strong contribution from both existing and newly established hotels. In tandem with the exceptional revenue performance, RHR witnessed an unprecedented surge in EBITDA and EBIT, skyrocketing by an incredible 920% and 169%, respectively, amounting to PHP 443 million and PHP 132 million, respectively. These staggering figures underscore the remarkable financial prowess of RHR and demonstrate the company's effective cost management and operational efficiency. With an impressive portfolio of 26 hospitality developments, RHR proudly stands as the largest hotel developer and operator in the Philippines. The company's strategic expansion and unwavering commitment to delivering unparalleled guest experiences have solidified its dominant position in the hotel industry. Overall, RHR's outstanding financial performance, coupled with its robust presence in the hospitality market, positions it as a prime investment opportunity and a key player in the Philippines' thriving hotel and resort landscape. Last March, we opened RHR's newest five-star hotel, The Westin Manila, located in San Miguel Avenue, Mandaluyong City, with 303 suite rooms. The Westin brand is known for its wellness offerings, empowering guests' wellbeing and world-class service. New project launches in the first half of 2023 raised the combined net sales take-up of RLC Residences and Robinsons Homes to PHP 12.43 billion, up by 107% versus the same period last year, represented by the red and blue bar graphs. The strong sales comes from the company's existing and newly launched projects. Meanwhile, net sales take-up from joint venture projects with Hongkong Land, Shangri-La, and DMCI, represented by the yellow bar graphs, outperformed the previous year by 74% to PHP 8.8 billion. This came with the robust sales from Aurelia, Velaris, and with Haraya, the second project under the joint venture with Shang Properties. On the other hand, realized revenues climbed by 28% year-on-year to PHP 5.39 billion for the quarter. The robust performance was driven by higher collections and faster completion of our residential projects, coupled with a remarkable contribution from our joint venture equity earnings. EBITDA surged by 38% to PHP 2.16 billion, while EBIT jumped by 39% to PHP 2.11 billion versus the first half of 2022. In the first quarter of 2023, RLC Residences launched Mantawi Tower 1, which is located in Mandaue City, Cebu, bringing three new projects launched in the first half of the year with total saleable amount of PHP 21.3 billion. Le Pont and Sierra Valley Gardens Building 4 were launched in the first quarter of this year. Seeing healthy demand from affluent buyers, our joint venture with Shang Properties launched Haraya, our second project with our JV. Haraya is in our Bridgetowne destination estate and is destined to be an iconic home address in the east of Metro Manila. Moreover, RLC continues to make significant strides with its existing JV projects, registering healthy sales take-up across all three projects. Just a little over three years from launch date, Aurelia is already 79% sold, Velaris at 75%, and Sonora at 50%. Robinsons Logistics and Industrial Facilities, or RLX, recorded revenues which modestly increased to PHP 295 million in the first half of 2023 versus the same period last year. EBITDA increased by 22%, while EBIT accelerated by 27% to PHP 280 million and PHP 209 million, respectively. RLX has eight industrial facilities located in Sucat, Muntinlupa, Sierra Valley in Cainta, San Fernando, and Mexico in Pampanga, and in Calamba, Laguna, all with a total gross leasable space of 199,000 sq m. These industrial facilities are fully leased out. RLX completed its eighth logistics facilities, RLX Calamba 2A, located in Calamba, Laguna, with a total gross leasable space of 33,000 sq m. In the first half of the year, Robinsons Integrated Developments recognized revenues of PHP 446 million from a portion of deferred gain on sale of land to joint venture entities. EBITDA and EBIT settled at PHP 251 million and PHP 249 million, respectively. For our China project, remaining revenues is for the car parks. In the first half of 2023, revenue was at PHP 17 million, while EBITDA and EBIT were both at PHP 8 million. Additionally, the second tranche of the $25 million cash dividend has been paid last June. Moving on to CapEx. RLC spent PHP 9.25 billion in capital expenditures for the expansive development of malls, offices, hotels, warehouse facilities, acquisition of land, and the construction of residential projects for its local operations. To support our growth plans, our land bank now spans across more than 800 hectares. With the crystallization of land bank values in Metro Manila, RLC's land bank value is estimated at about PHP 182.6 billion as of the first half of 2023, 46% of which, or PHP 84.4 billion, is attributable to the land bank value of our destination estates. For this year, we will open The Mall at NUSTAR located in NUSTAR Resort and Casino, Cebu. This is a unique mall positioned with a tenant mix comprised of luxury, high-end fashion, specialty shops, beauty and fragrance, premier dining, casual dining, cafes, pampering, wellness, and family amusement. We look ahead to the opening of our premier upscale lifestyle center in Bridgetowne Destination Estate. Next year, Robinsons Malls will unveil Opus Mall to the public and will complete the new mall in Pagadian Zamboanga del Sur, Mindanao. For offices, slated to be completed this year is GBF Center 1 which will increase office leasable space by 7% to 794,000 sq m. While for next year, GBF Center 2 is expected to be completed. Both GBF buildings are premium top-of-the-line developments courtesy of Robinsons Offices. Both properties will rise in the Bridgetowne Destination Estate. Cybergate Iloilo Tower 3 is also expected to be completed next year, which will increase office space by 12% to 886,000 sq m. Our logistics and industrial facilities division completed our RLX Calamba 2A warehouse in the first quarter of 2023. We are targeting to complete additional two new warehouses for the year, namely RLX Calamba 2B and as well as a second site in Sierra Valley. For next year, RLX is expected to complete RLX Calamba 2C and Montclair, bringing our logistics facilities above 300,000 sq m of leasable space. Our residential division is actively launching various projects nationwide. This year, we've already launched a total of PHP 21.3 billion with Le Pont Residences, Sierra Valley Gardens Building 4, and Mantawi Residences' Tower 1. We will continue to sound off to the market and respond accordingly with foreseen demand. Lastly, Robinsons Hotels and Resorts successfully opened The Westin Manila last March and has completed the remaining rooms of Go Hotels Plus Tuguegarao. Next year, we expect to complete NUSTAR Hotel, our foray in the ultra-luxury segment. This will be located in NUSTAR Resort and Casino Cebu. With this, our room keys shall grow by 6% to 4,499 rooms next year. Finally, we place a spotlight on RLC's various ESG initiatives. We remain to be a market leader in solar energy usage with 24 Robinsons Malls harnessing solar power with a total capacity of 31 MW nationwide. This translates to 6.7 million kWh of clean energy and over 4,795 metric tons of carbon dioxide avoided, equivalent to more than 79,000 trees planted. Seven of our office developments have acquired LEED or EDGE certifications, and we held tree planting activities in eight different localities this year. All Robinsons Malls are designed with a system for wastewater conservation and recovery. 29 of our malls have rainwater collection systems, and 15 malls use recycled water for non-potable use. Aside from this, Robinsons Malls and Offices installed water-efficient fixtures in its restrooms to further reduce water consumption in its establishments. We focus on giving back to communities with the Robinsons Land Foundation, Inc. To date, RLC has conducted relief operations in Imus and Tagum last January and February. For community development, we are active in the livelihood programs through our LOVE livelihood carts and Entrep Corner. Finally, we continue to support schools through our Brigada Eskwela program. We have a long-standing commitment to good corporate governance and stewardship. We have adopted an anti-bribery and anti-corruption policy to uphold appropriate, ethical, and responsible business conduct. Moreover, RLC has duly complied with the registration process of the Anti-Money Laundering Council pursuant to the Anti-Money Laundering Act. Kindly allow us to briefly share pictures of our ESG efforts through the next two slides. RLC marked the listing of its PHP 15 billion fixed-rate bonds with the Philippine Dealing & Exchange Corp. on June 30, 2023. This constitutes the second and final tranche of the company's shelf-registered debt securities program in the aggregate principal amount of up to PHP 30 billion. The transaction received overwhelming support, prompting the company to fully exercise its oversubscription allotment of PHP 5 billion. This marks the first fully filled oversubscription by a Philippine company this year. Robust investor demand enabled RLC to price at the tightest of spreads, locking in rates of 6.0972% per annum for the three-year tenor and 6.1663% per annum for the five-year tenor. The issuance also received the highest credit rating of PRS Aaa with a stable outlook. This came from the Philippine Rating Services Corporation, or PhilRatings, and indicated that the company's stability and healthy balance sheet and has a strong capacity to meet its financial commitments. For the last two years, we have provided equivalent to 37% of 2021 NIAT and 48% of 2022 NIAT in terms of shareholder return in the form of both cash dividend declaration and buyback program. As of June 30, 2023, the company has repurchased PHP 5.08 billion worth of shares, equivalent to 56% of its PHP 9 billion buyback program. This was launched last November 2021. This ends our presentation. We will now open the floor for questions. Thank you, Mr. Kerwin and Erika. Before we open the Q&A session, just some housekeeping. To ask a question, please use the raise hand or for the Q&A chat box. When your name is called upon, please state your name before proceeding with the query. Thank you for your cooperation and understanding. The first question comes from the line of Yvonne To. Yvonne, you're now open to talk. Hello. Hi, can you hear me? Yes, we can hear you. Hi. Congratulations on a good set of results. EBIT and EBITDA margin reached an all-time high this quarter. Wondering if you could explain how the firm achieved this, and what would a new accounting standards adopted that was mentioned in slide three, and how did these new accounting standards contribute to the higher EBIT margins? Kerwin, you want to answer that or somebody from finance? Sure, I will answer that. The new accounting standard was in effect since 2021. With this, we restated our numbers for 2020 and 2019 figures to reflect the new accounting standard. The new accounting standard, FYI, was just a reclassification of some of our expenses, we split it to revenue and OPEX, whereas prior to the new accounting standard, it was on a net OPEX. If we use the previous accounting standard, to this first half of 2023, our EBIT margins, if we use the old accounting standard, our EBIT margins would be at 46%. Sorry. If I understand right now it's 42%, but if you apply the old accounting standard, it's even higher at 46%. It is even higher. That is correct. Okay. All right. Thank you. Okay, the next call comes from Carl Sy. Carl, you may start. Good afternoon. Let me just check if you can hear me. Yes, we can hear you. Great. Yeah. I'll ask first about the residential business. For RLC standalone projects, reservation sales were actually very strong in the second quarter. I do recall in the fourth quarter last year, reservation sales were also very strong. I think almost half of sales came from a single project in the fourth quarter. I want to ask if this round in the second quarter, if maybe there was a project or multiple projects that accounted for, let's say, at least 20% of sales. Were there any such? Basically, if it was driven by blockbuster projects. Hi, Carl, this is Ron. Yeah, thank you for the question. The sales take-up was driven by our existing and significantly of our new launches. Remember, in the slide we showcased our 3 project launches, Le Pont Residences last January, Mantawi Residences and also Sierra Valley Gardens Building 4. If you look at Le Pont Residences, the sales value is around almost PHP 20 billion. Yeah, it's a combination of the existing and also of the new project launches. Got it. Would you say there was any project that was more than 20% or more than 30% of 2Q sales? If you happen to know. If you look at, again, for Le Pont so we mentioned we had at least around 40% already sales taken up. When we launched it, I remember it was only at around almost 15% or 20%. Sorry, Ron. Yes, sir. Can you just answer the question? Are there any projects that represent over 20% of 2Q sales? None so much. Are on the line? If there's none, there's none, right? Yeah. Yeah. No, anyway, I think, Carl, the fact that nobody can come up with an answer means probably none. Okay. Yeah. Basically, it looks quite broad-based then, your sales for the second quarter. Anyway, still very strong sales in the second quarter. I want to check a couple of things if you credit this to. Are there more foreign sales? Are there more OFW sales? Are you doing more road shows? What are the efforts on your part, I guess, that could have brought this about? I think basically nothing new from what we've been talking about for the last, I guess, six months. Mm-hmm. Yes, a lot more road shows, a lot more international sales are coming in. I think it's just a confluence of all our efforts on the residential front, improving the product, improving marketing, improving the brand, beefing up the sales force, increasing international sales activities. I think it's basically all of that. It always starts, I believe, with a better product. All right, fair. Are payment schemes still looser than back in 2019? Have you started to tighten? I think they're probably similar to 2019. We have tightened a bit from the pandemic levels when we were obviously more loose. We've definitely tightened since then. Compared to 2019, I might be guessing a little bit here, but I think it's similar to 2019 levels. Got it. Can anyone tell me how much of sales, whether in 2Q or in the first half, was from foreigners? Yes, Carl. Okay. Again, for the nationality, Filipino 74%, foreign 26%. Foreign 26%. Yeah. Okay. Moving on to the office segment this time. I guess two questions from me. First, what is the pre-leasing level of GBF 1? Hi, Carl. This is James here from Offices. Pre-leasing, we're 13% pre-leased in GBF 1. Got it. That's 13%? That's correct, Carl. Got it. For your office tenants, I was wondering if maybe you've spoken to any of them and asked them their views on AI, will they need less people or do they think it's a big opportunity and they'll need to increase people or anything really? Carl, I'll take that question. I was just a guest speaker in the Contact Center Association of the Philippines meeting just two weeks ago, and I also met with the BPAP, also two weeks ago. The way they are presenting this matter is that, yes, AI will make people more productive, which means there could be on a like for like basis, maybe people become 20%, 30%, 40% more productive. You can compute backwards on how much less people you might need if indeed they become 20%, 30% more productive. The way they look at the business is that the addressable market has only been tapped to the level of maybe only 10%. They believe that there are so many companies out there that have not started outsourcing their work. Much so that they believe that the entire BPO industry globally has only tapped probably 10% of the addressable market. Let's say for the sake of discussion that BPOs become 20% more efficient, say with AI, or 30% more efficient with AI, but the potential for growth is 900%. There's still a lot of growth in the industry, at least that's what they say or what they believe, but I think they have to be the expert in their own field, their own industry. The addressable market is still huge, so much more potential for growth for the BPO industry and for the Philippines, I guess, as well. Got it. Thank you. Those are all of my questions. Thank you, Carl. Next question comes from the line of Jolene. Jolene, you may talk now. Hi. Good afternoon. Can you hear me? Yes, we can hear you. Okay, thank you. I have several questions for the resi segment. I think number one is, how is management thinking about your launch pipeline? Pre-sales have been doing well. Which specific segment, income strata, or even location do you think will be well received by the market? That's the first question. Well, in general, so far all our projects are well received by the market. Mm-hmm. If you ask me which are the next in line, the next in line or in the pipeline is an expansion of Woodsville Crest in Paraňaque and Sierra Valley Gardens in Cainta. Those are the two next in line for expansions. These are buildings, basically 3, 4, 5, something like that. An extension of existing developments. Yes. How about potential incremental joint venture, maybe for the likes of Shang or Hongkong Land? Anything in the pipeline on that? There are always discussions in this regard, but nothing for us to announce today. Okay. Understood. May I check how much was the unsold inventory as of second quarter? If you have something to share about the cancellation trend, how much reversals, if any, in the quarter as well as your outlook going forward? The cancellation's nothing noticeable or nothing in particular. Nothing much different from what it has been in the past. I'll let somebody answer the question on unsold inventory. On the inventory, it's PHP 32.4 billion. Thank you, Ron. My last question is on the resi margin. I noticed that both EBIT and EBITDA declined for the quarter. Any reason for this, and do you think that there should be a recovery going forward, and what specific costs drove the declining margins? Thank you. Hi, Jolene. It's Kerwin. Sorry. I'll take the question. Thank you. For the Resi, EBIT, the margin declined because of the huge recognition of the sales from the joint ventures. As you know, in joint ventures, we just record our revenue, so the base is higher. That's why you see a bit of decline in the EBIT and EBIT margin. Does that mean that the joint ventures are recognized on a proportionate basis? Yes, that is correct. The joint venture projects are of a lower margin as compared to your standalone RLC Residences. Is that understood correctly? No, that is not correct. Okay. Sorry. Because how we record joint ventures is the net income on the joint venture. Mm-hmm ... we take our share, and in this case, 50%, and we record it as revenue. That base becomes lower. Sorry, the base becomes higher. Okay Hence why the EBIT and the margins are low. Okay, got it. Thank you. Okay, we'll now entertain the question on the Q&A box. First question came from Marco Manalac, BDO. "Hi, thank you and congratulations on the results. Question, what will be the EBIT margins and appreciable net income excluding the net effect of the new accounting standard?" I think, Marco, we've already answered that. Next question, "Project launches value for the remainder of the year, which income segment are you targeting?" Again, Marco, we've also answered that. For Veronica of UBS, first question for malls. "How are the rental rates for malls? By how much have you corrected post-rental concession given during the pandemic? For the rental rates for the malls, so our escalations are 5%-10% annually in terms of correction from the concessions. We've stopped giving concessions since July of 2022. This is already using the normalized rents, and then it's a 5%-10% escalation from that. Follow-up question on Veronica. "Why was Opus opening delayed? It was originally slated for 2023 in the previous update. For RCR, any asset for infusion lined up this year and next year?" Sir Far, for Opus first. For Opus, it's just a matter of normal construction delays. I think everybody knows in the industry it's getting more and more challenging. Just some minor delays there on the Opus targeted opening date. On RCR, we have already identified the potential assets for infusion to RCR. I think we have to find a way to infuse these assets in the most tax-efficient manner. We still have some preparation to do before we can actually infuse these assets. Thank you, sir. For office, how are the rental rates, WALE, and tenant profile breakdown as of the first half 2023? WALE is at 3.29 years. Our rental rate is stable at around PHP 700 per sq m, same as 1Q, and the tenant mix is 82% BPO, traditionals at 8%, and others at 10%. Okay. Two more from Veronica. I think, Veronica, the last two has been answered also. This is for Resi. "What is the current inventory? Any insight?" This was answered earlier. On Resi, "How have payments terms got tightened so far?" Again, it was answered also earlier. Okay. From Russ Toribio of PNB. "Hi, can we get a breakdown of office tenants by type?" James, would you like to answer that? I think James already answered. I just answered. Yeah. Sorry. Sure. Okay, this is for Herman Dela Paz. Again, this is for malls. "What are the reasons for the Q-on-Q decline in malls revenues? Okay. Historically, looking at the 2019 numbers, the first quarter versus second quarter. The first quarter is higher because there is a carryover from the holiday season sales that come in basically January of the following year. Okay, sir. Again, from Russ Toribio of PNB. "Following the bond listing, what is the average interest rate for the RLC debt?" Sir Kerwin? The average interest rate, the weighted average, is at 5.23% as of July 2023. Okay, that's all now in the Q&A chat box. Once again, if you wish to ask a question, please press raise hand. Or you also may type in the Q&A chat box. Once again, if you wish to ask a question, you may press raise hand. Yeah. If there are no more- There's one more from Yvonne. Yeah, Yvonne. Hi. Sorry, this is a follow-up question. Accounting standards aside, what led to the higher EBIT margins, and do you think it can go higher from here? Which segment will drive margins higher? I'll let somebody else answer the first part of your question, but on the second part of your question, if you've been following us long enough, you'll know that I never promise better margins. I also refrain from making such forward-looking statements on financials. We generally only make forward-looking statements on the businesses that we actually can predict into the future. We do have fantastic numbers for this quarter, but I would never direct you to think that it will just keep getting better and better over time, especially when it comes to margins. Yeah, that would be my answer. Kerwin, who will answer the first part of the question? Okay. The improving EBIT margins for this year is because of our strong domestic businesses, which led to high EBIT margins. I think, Yvonne, we'd give a breakdown of our businesses per business segment, and I think you can see clearly why our margins are improving. The malls are improving, the hotels are improving a lot. We continue to add other businesses, like the industrial facilities division, that also have very good margins or, in fact, probably the highest margin segment now in our business. The hotels are coming from negative territory, so it's also much better. Our residential business also picking up quite substantially. There's no secret here. You just have to add up each component, and then you come out with the total number. All right. Thank you. Sir, there's one last question from Leon of Fidelity. What was the reason behind the higher mall EBITDA margins? Can we sustain it at 58%-60% EBITDA margin in the coming years? Well, I can answer that unless Fardy want to add something after. If you recall, in the earlier part of the year or last year, we were hit by very high oil prices. The higher coal prices resulted in us having to absorb a lot of the higher electricity costs, which had a negative effect, obviously, on our net profit margins, right? The price of coal, the price of oil, has relaxed in this second quarter, which enabled us to recover back some of those costs, some of those expenses. I would say, I would attribute a very large part to that particular matter. Yes. In addition to what Frederick mentioned, we also are doing, of course, cost management wherein from the pandemic, we were able to find opportunities to save on costs. We continue to apply those learnings. In terms of escalations of our suppliers for cost, we try to manage that also, so lowering escalations. Basically, right now, the biggest part is the lower energy cost for us. Okay. It seems, sir, there's no more any question from the floor. Sir, I hand it over to- Yeah, if I may just answer also the second part of the question of Fidelity. I guess how you view the price of oil or coal will probably help answer your question, trying to look into the future of how we might be affected by that. But thank you. Again, ladies and gentlemen, thank you very much for joining us again this afternoon. Our key messages are our net income is up 71% without the effect of the China profit. We have record levels for EBITDA and EBIT margins. Mall revenues are robust, and occupancy levels continue to improve. Our residential pre-sales numbers continue to break records as we recorded the highest net pre-sales for the company's history. Our hotels revenue registered likewise a top-line figure of over 100% growth, and our investments in establishing our two five-star hotel brands, Fili at NUSTAR and The Westin Manila in Ortigas, is now bearing fruit. RLX, which has the highest margins right now among all our businesses, is consistently growing and producing increased revenues. Our offices business, probably our least growing story today, continues to remain steady and shows some growth. We posted impressive first half numbers right after a record year as we continue to set record performances for our business units. We are also quite proud that our bond listing last June resulted in an unprecedented achievement for RLC to be the first company in the Philippines to have a fully filled oversubscription this year. We'd like to think that our performance serves as an affirmation that we have been executing well and executing the correct timely strategies to constantly create real value for our shareholders. Again, thank you very much for participating in this call, and see you next quarter. Thank you, everyone, for your participation. You may all disconnect. Thank you, sir. Thank you.