Earnings Call: H1 2020

Aug 28, 2020

Quarterly report

I welcome you to attend the China Bank 2020 Interim Results Release. Due to the outbreak of COVID-nineteen, our meeting will be conducted in webinar and teleconferencing. And all the audience can get access to the live streaming of Menke official website, Yixuan Fan, WeChat Program, the Port Department app and the WeChat Mini program and trending.com. Right before the meeting starts, please allow me to introduce you our management team members being here with us today. They are Director, President and CEO, Mr. Zhu You Shen Director, Executive VP and Chief Operating Officer, Mr. Wang Hai Wu Executive VP, Principal, Madam Hanfu Hua. I'm the company secretary. My name is Zhu Xu. Today, we have 2 parts. For the first part, I will represent the company to report you on the performance of 20281. In the second part, we are going to answer your questions. And now I shall start the presentation of our interim result of 2020. And I'm going to cover 4 parts, including financial review, business overview and the key priorities of 2020 H2. First of all, let's take a look at the result summary. You can see in H1 of this year, due to the COVID-nineteen reason and the complex production work with the precondition of staff house. And in the 1st year, our contract sales amounted for RMB 320 420,000,000, down by 4% and which was 3.7% point lower than Q1, which is also lower than the Commodity Housing sales revenue reduction. Our revenue is RMB146.35 1,000,000,000, up by 5.1%. Net profit attributable to equity shareholders to the company was RMB 12,510,000,000, up by 5.6%. We have cash and cash equivalents of RMB194.29 billion, up by 60.9%. And our net debt ratio is 27%, still very low. Our cash to interest borrowing liability due within 1 year is 2. And at the same time, our contract attractive for project sold but not yet booked is RMB 695,360,000,000, up by 40.2%. And in terms of the Property Service revenue, it's RMB 6,700,000,000. And this is a consolidated result, up by 26.8%. While in terms of the rental housing, our occupation rate of the project with stable operation is 93.7%, up by 3.7%. In the Fortune Global 500, Benqi Group ranked 208th place, up by 46 places. Now let's go to the Page 4. At the same time, our business gradually recovers under the pandemic. Our property development improved its capacity for individual projects. Five projects were shortlisted for China Top 15 Best Sellers. Our productivity service has already been interpreted from the simultaneous development of the residential and commercial residences and the service coverage expanded to 7 City, our long term rental housing and currently occupancy rate is 88%. The customer flow and recovery gradually recovered in retail property development and operation and the outlook in operation up by 11% in H1. Our occupancy rate of the high standard warehouse rose back to 89%. Now I would like to share with you some of the key financial indicators. Please go to Page 6. In H1 of this year, our group achieved a revenue of RMB14635 billion, up by 5.1 percent y o y. Net profit attributable to the average shareholder amounted for RMB 12,510,000,000, up by 5.6 percent YOY. Basic earnings per share amounted for RMB 1.11, up by 4% YOY. And the WeChat, our aggregate fully diluted is 7.4%. And now please go to the Slide 7. You can see the revenue of the Property Development and the related asset operation amounted to RMB 138,140,000,000 and the revenue of the property service amounted to RMB 7,790,000,000 and which is different from RMB 6,400,000,000 I mentioned. The RMB 6,400,000,000 is a consolidated number. But for RMB 7,790,000,000, it also includes the property service to our internal organizations. And you can see that the Property Service Business Operation Asset is around 40.4%. We have adequate cash too. By the end of June, our total asset is around RMB1806 1,000,000,000. Cash and cash equivalent is RMB194 1,000,000,000 and which is higher than the number. Interest about reliability is JPY272,980,000,000, up by JPY 15,130,000,000. And our net gearing ratio is 27% and which is down by 6.9 pp, which is at the industrial low level. Please go to Slide 9. And now we say that our interest bearing liability accounted for 1.5% of the total liability. We're still ranking as the leading credit rating in the industry. Financial cost maintained at a very low level in industry. Moody's, S&P Global, Affair Trading and CCXI still provide us BA1, BBB plus, BBB plus and the CCX-one is also AAA. And also outlook for crediting are all on stable tracks. Let's also talk about the interest bearing liability and the financing activities. And you can see our interest bearing liability amounted for RMB 272.98 billion represent 15.1 percent of the total assets. And especially, you can see and we have around 55.8% from the bank loans, while for other loans, it represent 80.7%. The fixed interest rate is around 60 36.9 percent and the loan interest rate 63.1%. And for our interest, borrowing liability, and we have 64.5% of them over 1 year and 35.5% of them do within 1 year. At the same time, in terms of the financing, the company also reduced its financing rate. We successfully issued 6 tranches of the corporate bonds with a total number of JPY 7,000,000,000 at an average of 3.28%. We also complete the RMB 2,258,000,000,000 amounted for reasonable ABS preferred debt at an average cost of 2.56%. SAPG issued RMB 3,370,000,000 CMBS product with a coupon rate of 3.8%. VIAX Logistics Property issued RMB 573.2 billion quasi rates product. Now let's take a look at the business review. Please go to Slide 11. First of all, I'd like to share with you the industrial trend. Due to the COVID-nineteen, the sales of the real property products are on the downtrend. But since March, with the well content COVID-nineteen, the market started to be recovered. And at the same time, we see that with the principle of a house for living, not for speculation, so we started to stabilize the housing price, the land prime year and expectations. So according to the National Bureau of Statistics China, the sales area of commodity housing in China is around 694,000,000 square, down by 7.4 percent and which is 17.9% point lower than Q1. Sales amounted reached RMB6.69 trillion, down by 5.4%, which is 90.3% point lower than the decline in Q1. At the same time, for the 40 cities under the company ongoing observation in H1, the area of commodity housing approved for presale declined by 10 point 7% 1 on 1, and the area of the commodity housing sold declined by 11.3% y o y. At the same time, the sales circle of the new housing available for sale at the very end of June this year, which means our loans with the sales permit but not yet being sold in the above mentioned cities were about 10.4 months, representing a slight decrease from that of the end of 2019. Please go to Page 12. You can see in H1 of this year, the total investment of Property Development, up by 1.9%, which is 9.6% higher than Q1. New construction area declined by 7.6 percent y o y, which was 90.6% lower than Q1. Right after the COVID-nineteen and all government started to increase the land supply. According to the China Index Academy, in H1, in 300 cities throughout China, the area of the land supply to residential development increased by 1% YOY with area of sales declined by 5.4% YOY and the average land rate is 60.5%. We also have a very stable financial policies to continue with consistency and stability. According to the China Central Bank, at the end of Q2, the outstanding loan of the property development was RMB 11.97 trillion, up by 8.5 percent. Now let's take a look at Venky's development. We still would like to be the key developers. You can see we have the development business as well as other major businesses. In terms of the property development and the property services, it's been divided into 4BG. BG. But now yesterday, we just organized our Central and Western Region BG and including the Southern Region, Shanghai region, Northern Region, Central and Western Region and the Property Service BG. We also have other major business, including logistics, SAPG, long term residential housing, ski resort, overseas BU, education, enterprise service and food BU. Now please go to Slide 14. And you can see for Q1, the sales of the property development reached JPY 320,480,000,000, decline narrowed to 4%. Especially from May on, our sales started to see an increase. From January to June, we realized contract sales area of 20,770,000 square meters, representing 3.4% y o y decrease, which was 0 point percent lower than Q1. Contract sales amounted for RMB320.48 billion, representing 4% y o y decrease, which is a 3.7% point lower than Q1. The proportion of the sales amounted for each region is as follows: Southern Shanghai and Northern, Central and other areas. With a sales of more than 10,000,000,000. And in Hangzhou, this number is more than RMB 20,000,000,000. Now let's go to the Page 15. You can see that in Q1 of this year, we do have some single property projects that are selling very well, and 5 projects were shortlisted in the top 15 best sellers. On the right side, we show you the projects approved for presale amounted for RMB800 1,000,000 and with 80% of the project sold on the day of launch. And 9 of the project have 100% of the project sold on the launch day. And you can see on Slide 16, our collection for the payment recovered month by month. And since May on, we started see an increase compared with the same period of 2019. Let's go to Page 17. And here is what we do with the segment. And the book value of the property, which is JPY 128,970,000,000 and up by 24%. And at the same time, you can see that the average booked price of the Property Development business was RMB 12,280 6 per square meters. The contract area, the profitability is around the the operating profit margin is around 24 0.1%. And the contract error sold but not yet booked was 47,430,000,000 square meters and the sold but not booked contract amounted for JPY 695,330,000,000, up by 10.6% and 40.2% representatively. And our product are for the living purposes. And you can see residential amounted for 90.5% among the product sold. Commercial office property amounted for 90.5% among the product sold. Commercial office property amounted for 6% and other facilities accounted for 3.5%. And most of the products we sold focus with area below 144 square meter. Now let's go to Page 18. Now let's talk about the project acquisition. First half this year, actually there is land market is quite competitive. Wenqi stick to rational investment and match our risk and return and we did our best to explore all kinds of investments. We acquired 55 projects and with a line premium rate of 12.4 percent. The total planned GFA amounted to 9,800,000 square meter and planned GFA attributable to the company is 5,050,000 square. That means Benqi occupied about 51.5 percent. And the total line premium is about 32,000,000,000 yen and the average price is about 6,368,000,000 yen. And if we look at it by regions, from the highest region, there are the Central and Western region and then the North region, Southern region and Shanghai region. Shanghai region. If we look at the region by the line premium, highest is Shanghai, then southern and then central and western and then northern region. Now let's go to Page 19. So here we're talking about the resources we have. By the end of the reporting period, the total GFA the total GFA of the land bank is about 157,000,000 square meter. And among that, the JFJ projects under construction is 110,000,000 Square Meter. JFJ attributable to Yanqi's Equity Holding is 65,900,000 Square Meter. For that under planning, JFA of the project is 46,960,000 Square Meter. Among that attributable is 28,030,000 square meter. And if we look at by regions from the highest to lowest as Central and Western, Northern Shanghai and Southern. Let's go to Page 20. So we are going to talk about new constructions. With the impact with COVID-nineteen. The pace of new construction and construction completion has been slowed down. So new construction floor area 18,360,000 square meter and accounting for 68.8% of that plant at beginning of this year, Completed floor area amounted to 10,750,000 square meter, up by accounting for 32.4% of the plant at the beginning of this year. We plan that the area of construction completed is going to be consistent with what we planned at the beginning of this year. So what we talk Next, let's talk about the other business. First of all, the Benqi Property Services. Let's go to Page 21. Banky Service in 2020 H1, revenue included in the consolidated financial statement reached RMB6.7 billion, up by 28 point 26.8 percent YON Y. And 55 percent of the revenue comes from projects non LANQI. And we extended different business types, including residential property, commercial office property, etcetera. By the end of the property, by the end of the reporting period, banking service had an aggregate contract area of 6 80,000,000 square meter and we shaped the services with technology means. And let's go to 22. So we're going to talk about commercial and office properties. We established a JV with Cushman and Wakefield and we leveraged advantage of both party to provide customers with solutions for commercial real estate. And from January to June, Venki Services and Kush Wakefield JV had 97 newly added projects. And Venki Services regards to urban public space as a mega property service project and develops a new ecosystem. I think the end of June 2020, we our other management services has been expanded to 7 cities. We added such projects as Xiamen, Gulanyu and Tanabeulituan in Qingdao. And now let's talk about the port apartments, which is on Page 23. Our long term rental housing, by the end of the reporting period, we had 127,300 units in operation in 33 cities. Total number of units in operation is that. And the customers accumulated is more than 300,000 new units commenced is about 18,900. And the scale of the centralized apartments ranked the top one in the industry. For urban tenants. 2B, we provide 1 stop housing solution for corporate employees. The 2 gs business, we actively participate in Mohave's policy to support rental housing pilot schemes established with JV with local government and state owned enterprises in Shenzhen, Shanghai, Chengdu. In Page 24, we are going to talk about our contract sales with this long term rental housing. We made breakthrough in securing corporate customers, and we started cooperation with renowned companies like Ping An, CMB, DJA, etcetera. And the number of corporate customers accounted for 10% of the total units in operation. And for new projects, we they are well recognized by the markets. For example, we have Beijing, Chunshouci Community Beijing, Gaoli Drone Project, Xi'an University City Projects. And all the 235 units of the Phase 1 of the Jeansosu community projects were rented out 7 days before the launch. Cover 7 18 cities. And let's go to Page 25, talking about some of the retail property development operation. And but for the H1, the property business had a total operation area of 8.3 6000000 Square Meter, Y on Y, up by 11%. Revenue, RMB 3,000,000,000 and the occupancy ratio for the, overall speaking is 90.6%. So in the first half of each year, we offered a help for our tenants. We offered rental relief for our tenants and we established product center. And for example, like Songjiang in city, Wenzhou in city, we have the lead certification. And also we established also promoted digitalization. YiXiQin covered 50 cities from in the SEPG Group nationwide. And active membership accounted for more than 15% and online consumption accounted for 12%. We introduced traffic from offline to online. And in April this year, we issued Incheon number 2 CMBS total size as 3,370,000,000 yen with a coupon rate of 3.8%, which is the record low among the similar products. And let's go to Page 26. They are the top retail property projects with an average occupancy rate in H1. And in the 25th August, in Shanghai, which is the biggest shopping mall in Shanghai with an area of 340,000 square meter. So welcome to shop there. So let's go to page 27, we are going to introduce about Logistics and Warehousing businesses. By the end of the reporting period, the revenue from high stand warehousing is 570,000,000 square meter and the revenue from cold storage is 260,000,000 square meter. And the occupancy ratio of the projects in mature stage is 81.5%. And we have made deployment in 44 key cities. We cover customers more than 850. So we ranked number 2nd number 1st in terms of the scale of highstand warehousing and co storage scale. Our businesses is aimed to serve customers' daily life for that. Our customer covered e commerce, express delivery, manufacturing, catering, retail, etcetera. We covered the renowned customers like SF, JD, Walmart, etcetera. In the 3rd June, VX VENKIVX issued the first raised products and was successfully launched in Shintin Exchange. Let's go to Page 28. We're going to talk about our education business, which performed well in Shanghai DER's DTT Education vertical integrate from kindergarten, primary school, middle school and high school and K-twelve education. Horizontally, it currently comprehensively cover IB, IPDP, A Level and AP, the 3 major international mainstream curricula providing students with truly comprehensive diversified quality education. Bankhead School in Shanghai, Peugeot New District was awarded 8 Asia's 2020 Asian School with unique characteristics. For Shenzhen, Wanqimmechak Academy, we ranked the top 3 in Shenzhen, top 6 in Southern China and thirty 1st nationwide in HU'EN Education 1200 International School in China 2020. And in phase 2 with the pandemic and we established a cooperation with China Office of American College Testing, ACT, and Educational Testing Service, ETS, to provide AT and Tofo testing services for school students in campus. In terms of and in the school term of 2020, school received students received a total of 738 offers from institutes. And also, we use all kinds of technology method to push forward for this business development. For property development, in April 2020, Benkei Group joined hands with the Ministry of Housing and Urban Rural Development to launch the 1st pilot scheme in the industry by applying AI technology and the examination of architectural joint as an entry point to leverage AI technology to logistics and warehousing services through the fabrication of 3 information system platform of supply chain, food processing, sorting, assets management, we enhanced our ability to provide other value added services for rental housing. Through application of digital tools and digitalization for contract signing, online sales, Tenens Management and Retail Store Operation improved efficiency. For retail profit and development operation, SCPG established an online membership student, developed a database of retailers and brands. Let's go to Page 30. We have been trying our best to being a good corporate citizen. We embarked on targeted property alleviation rural revitalization. The company continued to push forward with Benqi Taked poverty alleviation village and village revitalization special fund projects with China Korea Foundation to support education public television in 5 severe public speaking cities in Guizhou, Gansu, Shunning and Fujian and Zhao Tong in Yunnan, back embarked on revitalization in Shanwei, Heiyuan, Shaoguan in Guangdong, the company also provided support to Hexi and Baizenguanxi in minority regions in Guangdong. We were accredit Accredit Public Declaration and Hardship Relief 10th anniversary outstanding contribution corporate award by Guangdong Provincial Government 20 June 2020. For the last part, I'm going to introduce about our key priorities for 2020. The operating environment of the second half of this year was still very complex. We will still persist with our focus on emphasizing products and services, intensifying organization restructuring and consolidating, strengthening fundamental performance of the following tasks. First of all, persist with proactive sales and believe everyday is a good day for property sale. And second, fully implement quality products, quality service and quality products. Consolidate, strengthen our fundamental to enhance competitiveness in industry. 3rd, intensify delicacy operation, enhance the effectiveness and efficiency of various business segment. 4th, improve investment quality, maintain security and flexibility in financing to support long term quality development. And 5th, continue to intensify organizational structuring, ensuring correspondence of a person to related task. So this is my introduction of our interim results. Now let's go to the 2nd part, which is Q and A and interaction with interactions. So let's welcome the investors. So as we are waiting for the question from the online and teleconferencing channel, now we see we have a 220,000 audience online. You very much for supporting our interim results release. Now we have 22 applicants for the Q and A. To make sure that we have everyone enough time for Q and A, only 2 questions allowed for each one to raise a question. Now let's welcome Cixin Zhao from China Securities Paper to raise a question. Good morning, Mr. Can you hear me? Yes, please. I come from China Security Paper. I have a question to Mr. Zhu. We know that by last weekend, the government just launched the management principles for the key property enterprises, cash monitoring and financing management. There are some news and said the government actually drew down the triple red lines, including the NAC gearing ratio. So does the company know about this policy and whether this policy is going to impact our business operation? Thank you. Thanks for the question. I'd like to repeat your question to see whether it is accurate or not. You mentioned the government announced the key property enterprises, cash monitoring and financing management rules. Do we know it? And how it's going to impact our business, right? Yes. Mr. Zhu, please. Thank you very much. Thanks for this journalist for your question. Well, for the capital monitoring and financing management principles launched by the government, and we do see this management principle from official China, where from the self media, it's been called as triple red lines. I see that for regulators, they are launching such key property development enterprises, capital monitoring and the financing management principles in order to mitigate the financial risks in the property market, we're going to study it and implement it. But we're still very confident on our performance. We have a very prudent and very stable financial and the capital status quo. Our net gearing ratio is 27%, which very low in the market. And our cash and cash equivalent to interest borrowing liability in 1 year ratio is 2x. And our interest borrowing liability only accounted for 15.1% of the total assets. And for the company, for the past consecutive 11 years, we have a positive operating cash flow. Even if with COVID-nineteen and the changing market landscape, but for H1, our operational cash flow is still JPY 22,600,000,000. I see we're going to have a refined management and capital monitoring policies from the government. We're going to update our countermeasures with the change of the regulation. But in longer run, we are still confident on our performance. Thanks for this question from our journalists. Thank you very much. Thank you. So I'm not sure whether we'd like to welcome the next question, please. Next, Lend Resources, I see in H1 of this year, the company have reduced payment for the be more aggressive in acquiring the land resources? And how you're going to comment on that, whether H2 is a good time for the land acquisition? Thank you. Thanks Bokken from Citibank. You were talking about the YYO Land Acquisition. Our investment strategy and investment philosophy, we're going to stick to our investment philosophy and the principle for investment project. Currently and our land resources on our hands can support our next 2 to 3 years development. We're still confident on that. But at the same time, we're going to keep an eye on the changes of the market, including the changes of the client. And we will be very sensitive to grasp good opportunities of while. We will not be too conservative, but we won't also only working on land acquisition. And thank you very much. Let's welcome the 3rd question. Next, we'd like to welcome Tidong from Kayyuan Securities to raise the question. Thank you very much. Congratulations in achieving such a good performance for the interim result. As Juan pointed mentioned, the company is working on the development of Vengk. What is advantage of Vengkhi on TOD land acquisition? And what would be the advantage of Wenqi in acquiring the Tod projects? Thank you very much. Thanks for your question. I think your question is that you noticed 1 case developing TOD projects. You want to know our advantage in developing TOD projects, right? Yes. Mr. Zhu, would you mind to answer the question? Yes. Thank you. Thanks for the question. And thanks for keeping an eye on our slides. Yes, for the past few years, TOD has become a very important focus, carrying the same weight as urban renewal project in our company. A TOD, according to its definition, T means transit or transportation. So TOD is a kind of transit based property development. In the past, developers take TOD as a value added service, but now it's masked for each developer because for developers, we have to work on the urban development. Urban development always works with the traffic flow and the development of transportation and the transit. That's why since 2010 on, Venki worked and invested a lot on TOD in order to further consolidate our capacity and also improve our operational efficiency. In 2010, we started to have 1 single station mounted Tod projects to multi business format Tod. Now we have already made 49 TOD projects. The total planned construction level is around 80,000,000 square meters. And we have already invested 240,100,000,000 into the DoD projects that we acquired. And around 70% to 80% of those TOD projects are for residential purposes. And you can see that for the self owned properties, around 66.6% of the area are for commercial and office purposes. And the Venki made many years exploration, started to further understand each setting we are operating in. While at the same time, we also would like to leverage our structure advantage, Especially after Shenzhen Metro being a shareholder of Venky, I was starting to have a better understanding and much more operational understanding over the ToD product project. And we now understand the underground transportation TOD project development. In April of this year, And we're working with the Shenzhen Metro Property Development Group of acquiring the Foshan Sky City project. And from construction to project understanding to operation, we're working very closely on this project. While at the same time, you can see we also have better capacity for the multi segment operation from residential to rental housing to hotel to commercial and area, we always make a balanced approach to make sure that all those can be combined into 1 TOD project. And that's one of our advantage. And another advantage is that we also accumulated the TOD design and construction technology. We'd like to leverage the global resources and so as to take care of the TOD projects in China in the past, we probably need some improvement on TOD design, plan, construction and operation. But now we have already leveraged the global resources and expertise in further consolidating our planning, designing, construction and operation capacity of our TOD projects. And 5th advantage is that we are now working with the metro companies, transit companies, local governments for a very good cooperation different models, including a BOT, BT and EPC. So you can say that based upon the TOD calculation model, the most easy one is EPC or BT or BOT. And we are also working on the transit construction PPP project. So jointly speaking, we have 6 corporation models with the local government, QOD project. Well, for Benqi, we adopted the Equity Corporation, the secondary development and the 3rd tier and the 2nd tier collaboration model and which was greatly recognized and responded by the local government. Thank you very much. Thanks. Thank you. Next question, please. Next, I would like to welcome Wang Tian from SINA.com Finance to raise the question. Thank you very much. I'm Wang Tian from SINNAM Finance. My question goes like this. Recently, Hangzhou of household living in NatWest calculation won't be changed. So how bank is going to comment on the policy trend and industrial trend in H2? Whether this kind of government monetary policies is going to impact the industry? You were talking about the limited sales of the housing policies being tightened. So how bank is going to comment on the market and whether those monetary policies is going to impact the market? Okay. Thank you very much. Thanks for your question. And I'd say that every time I will encounter this question, and it's an issue talked about in this industry And still, how are for living, not for speculation? And still, house are for living, not for speculation. And we also have the simultaneous development for rental and as well as the commercial housing residential housing and the 3 stabilities, including stabilized housing price and premier and expectations. These are the general tools and the framework for the property market. I believe, according to our observation, such a kind of tune won't be changed in the long run. And by having those policies as a combination, I think the government really want to stabilize the healthy development of the property market. Then as one player in this market, we need to catch up with the trend, adopt ourselves to those new policies and also contribute to this market with our due work. So in long run, we really wanted to be refined on what we're doing now As a player in this market, if we play our due role and do our due job, then I think the market will still be very healthy and the monitoring policies are still going to hit its purpose. So we'd like to do what we're supposed to do in this market. Thank you. Thank you. Thank you. Also thank Ms. Wang for your question. Now let's welcome the next question. Now let's welcome from Wang Feng Ms. Wang from CICC. Good morning. I'm analyst Wang Hou from CICC. So my question is about the markets. We've seen that the first half of this year, the gross margin has been declined a little bit. Can you introduce about the reason? And also, can you give us outlook for the booking gross profit margin for the over year? And also, what's the profit margin for sales and the resources sold by not booked. You've noticed that the gross profit margin has going down for the revenue booking has been going down. So you would like to know the trend for gross profit margin for the over year and you want to know the profit margin for sales and also for the resources so far not booked. Is that right? Okay. Let's give the floor to Ms. Han. Thank you for your question. Yes. This year, the gross profit margin has been down by 4 percentage points compared with last year. In 2019, that was a high peak time for the gross profit margin because of the most of the projects booked was down in 2017 2018 with high margin. And this year, we've seen not. The land premium has gone up, especially the proportion of line premium accounting in the overall prices, property housing. So we estimate this year, there will still see a little bit of a slight decline for the booking gross profit margin, but thank you. We'll stick to our stable operation and reasonable management of resources. Okay. Now let's welcome the next question. Now let's welcome Ms. Lin Zhang Hong from UBS. Thank you. I have a question that we've seen that So 2 business, we've seen that 2 businesses that they have quite heavy assets and occupied high percentage in REU. Will that be broken down? You mentioned about the main business. Which business are you talking about? Logistics and the commercial property, will these be split and get listed separately? Okay. I will ask Mr. Wang to answer this question. As you've mentioned, the commercial and logistics, special logistics, they are the actually becoming important task in our exploration for us on our way to be a tiny city developer. On this process, we hope that all those business can get listed, but at this stage, we do not have a clear plan for that. And in this material of interim results, we have showed that we have logistics business as a result that the high standard warehousing ranked number 2 by scale, cold storage ranked number 1st in China. And for commercial property business, I know we have performed very well. We commenced about projects occupies like 8,000,000 square meter. And for like the first half of leisure in May, At that time, the pandemic was still a big challenge for us, but the in city in Taiwan was opened as scheduled. So several days ago in Shanghai, Jiaqing, there is an in city. It's a very big shopping mall opened as well, very big one. And for that in city, there are a lot of highlights in terms of operation, in terms of design architectural design. They achieved good very good result in terms of revenue and food traffic on the day of open. So we welcome you to go there and see to understand and have a look at our commercial businesses and the logistic business. Of course, we will try our best to disclose more on our reports to satisfy your requirement. Of course, we will make more effort in the actual business development as well. Thank you. Now let's welcome the next question. Now let's welcome Stuan from Xinjinpa. Can you hear me? Yes. Ms. Zhang from Xinjin Bao. I have a question for Mr. Zhu. First half of this year, we've seen there's a very short recovery in the property market. But since the interim results, the overall sales decline growth rate has been declined for the overall real estate market. So what's Venky's view for the second half of this year? So you noticed that they are a short window of boom for the property market. But when looking at the interim results of different listed property developers, they're still seeing decline of the growth rate of the sales. So what's our view for the second half? Is that your question? Yes. Okay. I'll give the floor to Mr. Chu. Thank you for your question. Yes, for our industry, the previous 7 months was like quite different. There is down. 1 on 1 sales was down by 2.1%. In May June, there is a short run of a boom. But we think that was like periodic boom of requirement that was released. So right now, growth rate was still negative. And what you mentioned about and what you care about is our view for the second half of this year. And actually, a lot of things we can't predict. The only thing we can do is to do our business well. Of course, we hope that we perform better and better, stronger and stronger. We have better results for the second half, better than the first half. And also, we noticed that there are policy changes from regulators' point of view, the main thing, the main tone won't be changed too much though. For the overall market, our observation is still that we think it's going to be consistent and maybe with a slight fluctuation. That's our observation. So for your reference. Thank you. Thank you, Mr. Zhu. And also thank you for your question. Now let's welcome the next question. Now let's welcome Ms. Tong from Haitong Securities. Thank you. I'm Annoules from Haitong Securities. My question is I have 2 questions. First of all, please. So about your deployment among different industries, For example, Venky have made investment in ICBC and Baker. And what's your view on this strategic investment or deployment? Would that be a similar trend in the street like to broaden the arena? And the second question is, investor already raised is that the we disclosed the revenue of several businesses like for long term rental housing and logistics, for the first half is already, if we've annualized that amount, it could amount to 10,000,000,000 yen more than 10,000,000,000 yen. And my question is that among all the business that generates operating cash flow, what's your plan for the mid and long term in the future development, how much proportion this business is going to occupy? And what's your budget or what's your plan for those business? Was there future proportion for the future cash generating in the future? So you raised question about that. Some of the peers have made a strategic investment in upstream and downstream companies. So what's Venky's view for those same kind of thing? And second, you noticed that we disclosed some of the operating indicators for different business, including their revenues and you wanted to know that in the future. For those businesses you mentioned like long term rental apartments, logistics In the future, was their proportion was the contribution to Venky's revenue? And what's the plan for those business in 3 to 5 years is that question? Yes. Thank you. I'll give the floor to Mr. Zhu. I will then have Mr. Wang to answer your question. And maybe Ms. Han to add a few things. Thank you for your question. Of course, the overall industry has seen many changes, no matter from the point of customer or from the market. We've noticed a lot of the peers made a strategic investment in upstream and downstream companies. In the future, I think this kind of deployment in ecosystem, we think is going to be a trend for the industry. And you mentioned that we've been in this market for so many years. We've cooperated many partners like decoration company and financial company. We maintain very good relationship with them. We build our ecosystem already. Of course, we'll be sensitive for the market changes and market trends, new trends. And right now for the investment in upstream and downstream, we currently, we do not have clear plan for that specific plan for that. And let me add a few things. Also, you raised that if we consolidate those business into your balance sheet, was there a contribution to the overall revenue. Right now, the revenue disclosed, some of them are on sheet, some of them off sheet. And for the long term rent, actually part of the revenue, they are most of the on sheet. And commercial business, they are run by associate company. The revenue occupied like twothree of the overall revenue disclosed. And for the future, if we consolidate into our balance sheet, we think we will consider other factors like the company's overall strategy, the scale of the business at that time and our capability ourselves. I think we will control our pace of development while we are improving our capabilities. Thank you for your question. Now let's welcome the next question. Let's welcome Mr. Liu Jia Dong from Guanghua Securities. I'm Mr. Luo Jia Dong from Guanghua Securities. I have two questions. First of is about ROE, because the overall industry, the ROE has been seeing downtrends for Venky specifically and the future. Leverage and turnover ratio, what's your countermeasures to mitigate the downtrend of the ROE? And second question is about property services business. For the Urban Development Business, I would like to hear more introduction from that segment. Thank you. Thank you for your question. You may raise 2 questions. One is ROE. The industry peers had seen declining ROE. So that was Benqi's countermeasure. And second, you mentioned the one of the urban development business for banking services, property services. So you would like to know one key's plan, right? About ROE, I would like to have Ms. Han to answer. And about Wanke Property Service Business, I'd like to have Mr. Wang to answer your question. Okay. Thank you for your question. As you've already observed, the ROE for the industry have been overall declining. So for Renki, for interim result ROE, we've seen slight decline 1 on 1 comparison. And then also you mentioned the leverage ratio. We will stick to our strategy of provincial development operation to keep a healthy development strategy. A lot of things we did, a lot of actions we took, for example, you mentioned that like the granular development, improved efficiency of management was mentioning in the report. I think these are important things we need to do to support us for future development. And okay. And also when the line premium is going up, when the margin has been further narrowed, these are the important things we need to do to keep our margin, to keep our efficiency and capability. So for Venky, what we like to do is be above several tasks to keep our ability to further profit. I would like to mention about the property service and some of your concerns you mentioned. In terms of the Choika or the 3 pronged strategies, You can see VENKi Service started to provide the property service in our residential and other commercial office projects. We see it as a very important fundamental service we provide. But from the end 2,050 on, we started to expand our business coverage in the market. And tier moment of the day and in the nonvenkey projects, our market share of the property service is almost the same as the property service we provided to the Yuenki project. And we made a lot of progress in the market and also win the recognition from other ESPY developers. And the second choice is our commercial and office building. And last year, we are working with Cushman and Wickfield for the JV. And you can see for this JV for this year, we started to work for the Center of Green and the High-tech Center of Chengdu for this JV to provide its services so as to provide the property service and the property management for those projects. This would also be a very important pathway we're going to take. The 3rd troika is the urban property service we would like to provide. In H1 of this year, including H2 of 2019, we have already expanded the high-tech center as well as Guwangyu of Xiamen. These are all very important components of our urban property service. We started this model from Hanqing of Zhuhai City, and now this model has been popular in the market for both government and other companies. We're going to further consolidate our development in this way to truly make sure our 3 program strategies are working together to support our property service business in the near future. Okay. Thank you very much. Thanks for the question. If you need any further explanation, you can also approach us after this meeting. Well, for this year, we're also going to organize our investors to have some on-site experience later. Now let's welcome the next question. Next, let's welcome Huang Yu from Janyan News to raise the question. Thank you very much. My name is Huang Yu. I would like to talk about the northwest BU. And the northwest BU, why should you establish it? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] In the near future, and what other cities are going to penetrate in northwest part of China? And how what's your development strategy? Can you hear me? Yes, we can. And what are the different tasks for the 5 regions? And I was still going to make a refined plan for the region kind of layout. And you also mentioned you're going to still trying to further consolidate your structure. So what is the reason for that? Thank you for this, friend. Your question is asking about where is damaged the Northwest VG, you want to know why should we establish that? And how many cities is going to be penetrating and how the company is going to comment on the northwest market? And your question second part is talking about what's the difference of the tasks for our 5G? And your third question is that what would be the time line schedule for the separate listing, not for separate listing. I know that for other BG, do we region, do we still have the refined layout in the near future? And you mentioned about the structural restructuring. You'd like to know what's the mission of our group? Thank you very much. And let's welcome Mr. Wang to answer the question. Okay. Yes, for sure. Yesterday, we just established our North West region DG. Why should we establish it? I think it's been here for long written In northwest part of China, including 5 provinces in China, it covers around onethree of the total territory of China. And in the past, we keep an eye on the issues in those regions, and that's why we made some explorations in the past. For example, for the past 2 years, and we have already established the Northwest region sourcing center under the central and the western region BU. And at that time, we started to provide service in Xuan Xining Rural Market as well as Lanzhou to form a Y4 alliance to make sure the business could be mutually supported for that 4 cities. That used to be the second layer under the central and the western region BG. But why should we establish the Northwestern Region BG? It's more like the second steps to go. We really want to further consolidate our business in northwestern part of China and to fully leverage the northwestern region as a key pleasure in China's Central and Northern Economy to truly leverage the Belt and Road initiative, especially deep dive into those new cities for our business expansion region. That's why we established the Northwestern Region BG. And we hope that it can also present us a good scorecard in the near future. After establishing the Northwestern BG, now we have 5 BGs together. And for each BG, and the management area would be within a 3 hour speedy trend as a downmeter or 1.5 airway travel downmeter. And that's the general coverage plan for the 5 BGs. We don't have any further plan to refine those BGs in the near future. And you also mentioned about 1 group headquarter and the collaborations between different units. So besides the property development, we also have logistics and commercial as well as other BUs that are working together for other major business. So I'd say that we have already made the multi segment expansion of our business. We hope that this BU can work together and to form a synergy for future collaboration. And that's why we have already 3 centers in order to serve the 1 quarter philosophy where collaboration centers and headquarters is going to be the coordinators between different BU. For example, our logistics BU and the housing BU and also the other BU, they can always work together to be more collaborative to serve one place. And at the same time, we also made some explorations on BU. And with our strategic background, we made such changes of the BU. We have 3 handquarter: 1 major quarter, 1 collaboration handquarter, 1 major quarter, 1 collaboration quarter and 1 group quarter. I believe by so doing, it will always work for our internal and external changes, and it can also help to support our future business growth in the long run. Thank you very much. Thank you. Thanks for the question from the journalist. My name is Chuntian Sheng from Tianping Securities. I have two questions for you. The first question, that is net gearing ratio. Your net gearing ratio is very low, even lower than 2019. On one side, I think it also shows a good financial performance, where on the other side, many investors are worried if you are too conservative on the net gearing ratio and your investment and whether your financial decisions being truly worked on the future outlook so that you have a very low net gearing ratio? And how are you going to comment on that? And the second question is regarding logistics BU. And I'd like to say that for VX Logistics, how are you going to comment on its future growth? And how the company is going to comment on the turnover impact of the logistics in the near future. Okay. Thank you very much. Thanks for the question. You have two questions regarding the net gearing ratio. You find out our net gearing ratio is even lower than that of 2019. Many investors may believe it's a good sign for robust financial performance, where some others also worried about we are too conservative. You asked us to comment on the outlook of this industry. And secondly, you asked about the growth of logistics, especially when Gomerase being VX Logistics issued the Ritz product, how it's going to impact the logistics business? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Let's have Madam Wang to answer the first question and Mr. Wang for the second question. Okay. Thank you. And thanks for your question. Regarding the net gearing ratio, internally and on our financial management side, we always hope that net gearing ratio can cap below 40%. And for the interim result, this number is 27%, even lower than that of 2019. And I think this is a very prudent financial policy we always offer to. In H1 of this year, even with the outbreak of COVID-nineteen, our operational cash flow is still RMB 22 point 6,000,000,000, a very high number. Internally, this is also the principle we have. We need to have cash on our hands so as to survive in this market, especially with outbreak of COVID-nineteen. I think a great landing we have from the market is that cash flow is the live bottom line of any company. If you have cash on your hands, it will make you more flexible in taking the opportunities from the market. We're going to stick to this policy the near future. We're not going to maximize our leverage for aggressive developments. We are still going to be safe, be prudent for our future business development. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Thank you. You mentioned about the logistics business. Let me just give you a few words on that. At current reporting period, and we have around 6,000,000 square meters for the logistics and 5,000,000 for high standard storage, 3 140,000 square meters for the cold storage. So we'll still be very positive on the cold chain, the cold storage and high standard warehouse business and its future outlook. And we also assigned Zhangshi to be the responsible person of our logistics BU, which also shows how the company attaches green poutents to the logistics business. And everyone knows that right after the COVID-nineteen outbreak and people's life is somewhat more rely on the safe product for food and the pharmaceutical side. We believe the cold chain and the logistics service would be a very important part of our urban life service. We hope that we can further our investment in logistics segment to be more sensitive to take any opportunity from the market. I believe logistics service can also help to promote the energetic development and the collaborative development of other BU at the same time. And you also mentioned about VX Logistics and its quasi REITs product. I think the impact would be positive. It's not only for our Logistics business, the rental housing business, but also as a relatively heavy asset business, it will be a new opportunity window for those business. Why did I say that for take logistically, for example, if the high standard warehousing and cold storage warehouses are qualified and then rent rate was good, then the investors would be willing to hold and help us to issue the rates. So then so it shifted from like a venture to shareholder holding this from the market institution holding it. Just put it simply, if we do it well, then some are willing to pay for it. And it's not even in our balance sheet. Of course, the management will be the VX management. So we earn the management fee we earned based on our operation and ability to operate it and manage it. We are not making money on money. So it's good for logistics, but also good for long term rental housing business for commercial property and other business. They're a good thing for them, will benefit all those business. And the second is, of course, the benefits is long term rental housing. The rates different regulators are researching related policies and we're doing advanced a bit like forward looking research as well. I will add a few things for the VX. In the 3rd June, we issued the rates. But this rate is quite similar to public fund rates, it's pure equity, it's pure equity no bond. So the cash flow all comes from the operation of our warehouses. We did not provide any guarantee or pledge. So we communicated with the regulator. We're trying to get we're trying to participate in the first phase of the rate. And I think it's a very good thing for Bancubx. Now let's you must my next question. Let's welcome Ms. Yang Yi from Kallian Shloh. Can you hear me? Yes, very clearly. I have two questions. First of all, Mr. Chu mentioned that when you mentioned about financing management policies, I want to further ask about it. Benqi has attended the conference, how I heard. Can you tell us some of the more content of the meeting? Are your bank already in the list for the 3 triple red line? And what's the and for the financial indicators? And when do you think the acquisition was a good acquisition with a good deal? And what's the synergy? And for Taipei Bancie, will you enhance your effort to acquire other non performing assets? Well, thank you for your question. You raised the 2 questions. First, you mentioned that the financing management rule, you want to confirm whether we attended as can we tell you more about it? And you mentioned about the acquisition of capital. And the logic of doing it was the synergy of doing it and whether Venky will enhance the efforts to acquire such non performing assets. Yes, Vincent. Thank you for your question. For your first question, I think your information you will get more information than me. And then I will focus on answer your second question. So did our acquisition of Taihe, why were we doing it? Why we have such a strategic memo. Actually for Taihe, they have challenges in terms of financing and cash flow for its products. And it has good products and good technology. And we know that Taihe, it asked like several institution to discuss how to face the challenge. As we disclosed, we yes, we were in the game, but we have conditions. The logic is that we are in the similar we are in the same industry. We are in the same membership. We are in the same association. Of course, I think for this company, it has good fundamental, it has good basic condition and we should help them to find out the solution together when it faces burden with challenge. This is our consideration when we're doing this. Maybe like Benqi eventually will be the 2nd biggest shareholder of Taihe, then even that's true then that LanQe will still will get in operation onto the guidance from its Board. Maybe the Board will require banking and other market institutions to help Taihe. And I think Taihe has done a good job for in terms of its products portfolio. Whether it will be a successful one, it depends on 3 factors. First of all, it depends on type of mindset for survival. And second, it also depends on the understanding of other financial institution. Of course, it's overburdened with liability. And everyone if everyone asks us to pay back the principal and interest, then the capital will face broken down of cash flow. So I think we would like either survive together or think together on the boat. You can't get out individually, leave others on the boat thinking that's not possible. And on the boat thinking that's not possible. And for other market and financial institution, I think we are trying to reach a consensus. And third factor is that it depends on the government regulator for Fujian and also it's what the government's attitude and response when the company under its governance faces a challenge. We will participate the issue, the process. We will doing our best to resolve the question, but the condition is that it will not impact the shareholder of Venky, it won't impact the shareholders' equity holding and won't impact shareholders' attitudes or sentiment, it won't impact the return of shareholders. So that's my question. Thank you. Thank you for your question. So let's invite the next question. Let's welcome Ms. Liqing from Nan Huang Doshi Report. I've noticed that for the long term rental business, you have 2B2C2G business model. 2G, you mentioned, is that what you mentioned that for the apartments for talents, is that what you mentioned in the March? And for the long term rental house, you started with it's driven by 2B. What's the operation situation right now? And what is the revenue breakdown? Okay. Thank you for your question. You mentioned Atlanta Rental housing business that you mentioned 2C, 2B, 2 gs business model. And you wanted to know that is 2 gs model is an application strategy mentioned by Mr. Zhu, for example, we want to provide apartments for like delivery food delivery staff? And also, you wanted to know the proportion that the different business model contributes among the long term rental housing business? Okay. I will give the floor to Zhu Shu to answer the question. For Venky, the long term rental housing, I've already mentioned in our slides, we cover 33 cities. We have 137,000 units in operation. And a lot more in construction. For the strategy of businesses, we have 2C2B and 2 gs model. You and then you mentioned about 2 gs. Governments push ahead with renting and housing purchase in parallel. So the government has been strengthened. The rental requirements be met from the citizens. And of course, a lot of the developers in the institution have pushed ahead with the similar policies. For example, CCB, they are in collaboration with us to provide like apartments for its tenants and for its talents and employees. Right now in Shenzhen, Beijing and etcetera, we have started cooperation with governments and major banks. We signed agreement with them, especially in Beijing, because in Beijing, there are collective land and there was government clearly mentioned that they're going to use collective land to build the talent house of all apartments. And in the future, about 100,000 units of this talent apartments will be built on collective land in Beijing. And you will see a lot of the similar projects. And governments will provide a lot of affordable housing for the young people in the city. This business has been just started and a lot of things, a lot of units are under construction or being constructed. And right now in Galizhong, Chenshouci, we've started our apartments and which was built on collective land, Anjin land. We built a JV with the local government and we are doing this thing together with them. And you mentioned about the scale. Actually the scale, we are just starting it. We're in exploration stage. We hope that we Vekki can make more contribution to the society in this regard. Thank you. Actually, okay. We will still have 3 more minutes. Now let's invite the final two questions. Now let's invite Liu Lu from Huatai Securities. Thank you. I'm analyst from Huatai Securities. My question is about a synergy of all business among Menki. In the past, we've been centered around property development and you mentioned the synergies. Can you introduce about it in more details? For example, the product together with like commercial projects. And then how you can lower the land acquisition cost by doing it? Okay. Thank you. You mentioned about the synergy and you want to hear more about it? Okay. Ms. Zhu will answer your question. Thank you for your question. Different BG and different BU of Venky have a strong synergy between each other. We some of the synergies are quite human or some of the anti human, which is a joke. For the Venky, we persist with the strategy for the synergy. Of course, we will in this cooperation principle, capability goes ahead and then we will develop synergy. While we're developing synergy, actually, the one who cost for synergy, they will be the one to pay for it and also they are the one who benefit from it. So for us, I think we would like to we all want to know more clearly why we like to have synergy. And because it is beneficial, it is truly beneficial for example like SCPG, it also arena, it also gains help, support from other segments. So in the end, we have this situation that everyone is helping each other. There's a strong synergy among everyone. So in a big group, we should not blindly focus in 1 or 2 singular VG or Ryu. Instead, we should have the whole picture in our mind always. Synergy is a mechanism, but also it's an art. For example, take an example, whether a parent, whether you're good with running your family, it depends on a lot of things. You will have similar equation or algorithm to as a criteria. We are still in the process of exploring it. We hope that investors as investors, you can guide us, you can provide us with more advices. Okay. Thank you very much. And thanks for the friends from Huata Securities. And now let's have the final question, please. Now let's welcome Xiaoming from Times Finance to raise a question. Hi, it comes from Times Finance. My name is Mr. Xia. Can you hear me clearly? Yes. I have two questions. A few days ago, we say big was being listed. Its market value is even higher than that of the VENKIE. How are you going to comment on that? The second question is, do you have any kind of new activities for your Food business? And I see that and it's already become some of the new changes of the position. So would you mind to elaborate on the question? The first question is, BIC has been listed, and its market cap is more than that of Venky. How are we going to comment on that? Secondly, we want to know some updates of our food business. Yes. Thank you. And for Beko, it's been listed. So about its performance after being listed, I think many people have their own observation. I think it's very natural for their market cap is more than that of other developers. And I see that the value of the company is truly depends on what kind of social issues and problems they can help to handle ways. So especially the source of their property and I think the Baker did a very good job. They were being favored by the investors and which is truly a very good model for us to learn from. Well, in the past, we also made some investments into Baek. And as the market cap of bake is on the uptrend, and we also get some returns for such an investment. And second question is regarding the food business. Now Mr. Tan Hua Ji has become the Chairman of our Food Business Group. And Hua Shan is our swan feeding business for agriculture development. Well, for Hwansea and its internal operation, its management and the quality of the team are still very good. So we are still very positive on the food business and agriculture related product development. But I think what we're doing over the food business is not seeking for the expansion of the business scale. I think Mr. Tan and his team is working very hard return level won't help to burden our return level of the whole company. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Thank you. Thanks for the answer, and thanks for the friend online. And I know there are more questions online, but as time is quite limited, we have to conclude our webinar. If you have any further questions, please send your question to irvanke. Com, our IR mailbox. So here is the end of the interim result release of 2020. Thank you very much. See you next time.