HKBN Ltd. (1310) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to the HKBN FY '22 Annual Results Investor Presentation. As HKBN returns to doing business normally after 2-plus years of COVID, our annual results will be presented as a hybrid event before an audience of both virtual and in-person guests. The presentation is going to begin. We may now invite William Yeung, Co-Owner and Executive Vice Chairman to the stage.

Thank you for your joining of our annual result announcement, our investors, our shareholders and our business partners. Before I start, I still want to take this opportunity to thank our 4,000-plus talents in Hong Kong and outside Hong Kong for helping us to deliver what I regard is a good performance for financial year '22, even though under the impact of COVID, which is tough. Okay, at HKBN, our main responsibility is growth and our growth will focus on core business. Core business for our fixed telecom network service is a high-margin service, talk about 70% or above. With our acquisition of JOS, having the system integration arm 3 years ago, we are stronger such that in the market, we can fight or bid against those telecom alone or SI alone players, even though you have both, your execution won't be as quick or as fast as HKBN. And we have, I would say, already successfully integrated the different entities, I mean, JOS, WTT or HKBN's enterprise teams over the last 2 or 3 years. So we are well positioned to grow our telecom and grow beyond telecom, i.e., with the SI business. In the residential market, we continue our Infinite-play. That means fixed voice, fixed data, OTT, 5G mobile and also Infinite-play, whatever service or products that also once we will bundle together to offer the better value for money. That is the way we manage and run our business and outperform our competitors. Okay. Look at financial year '22, stable organic growth. When we look at financial year '22, we turned out the impact of about 50% less productivity time during COVID wave in February, March and April, basically, I think all of you will agree that financial year '22, those last 12 months, we have less than 90% working days or working hours, but the team still delivered and exceeded our target. So we have 1% growth in revenue, 2% growth in EBITDA, and we still maintain a similar level of AFF, adjusted fund flow. For the revenue, I want to highlight that if we look at this organic growth, actually, it is 6% growth. Why? Because we should exclude the Disposal Group, i.e., the JOS Singapore and Malaysia operation, which we sold 60% of our equity to Singapore's StarHub in the beginning of the year. So actually, in financial year '22, we only have 4 months revenue year, versus financial year '21 full year 12 months. If you take out our organic revenue growth invest for the whole group is 6% growth in revenue. So 6% growth in revenue, 2% growth EBITDA versus less than 90% productivity time. It is a -- I should thank our colleagues, our team members. Dividends, the final dividend will be $0.20, approximately $0.40 in the first half, total dividend will be $0.60, which is around 78% of our AFF. 78%, it is lower than our 90% to 100% guidance since our IPO in year 2015. On that, I will elaborate more later on. So when we have stable organic growth, we need to make sure that this growth is also sustainable. So I'll just share the past 3 years trend on the revenue, EBITDA and AF review, such that you notice that even at tough times, we can still deliver growth because our industry very resilient. Broadband or telecom services or some other SI services, all of them are just basically even better than the electricity or water. In those areas, you can use less and spend less. But we are talking about fixed monthly fee times 24 months or even longer contract period. So majority of our revenue are recurring revenue being protected. So if we look at enterprise and residential business, some parameters, the coverage, the customer number and also the ARPU, you will see that even challenging COVID impact, we will still spend CapEx to increase our fiber coverage such that we will provide service for more enterprise and more residential customers. On that, I want to let you know that in the enterprise market, we have about 37% market share, a strong number too. In the residential market, we have about 35% market share, talking about 900,000 residential broadband users. So when we have a 30% market share, you can imagine that whenever we roll out our fiber to new commercial buildings to new residential areas, particularly those areas that the government talking about they will expand and develop in the coming years, all these areas by default, we should have 35% to 37% penetration within the first 2 years because the contract period is 2 years. So it is very easy for us to get a decent return from expansion through the CapEx on the network. That's why I think HKBN is maybe the only one who is still spending a huge amount of CapEx for the rollout of our fiber coverage. For our customer number or ARPU, I would say, more or less the same. When more or less the same, it's still good in a tough year. And I always like to advise analysts or investors, don't just look at the ARPU, no matter if it's up or down, we should always look at ARPU times customer number. Look at the total service revenue. That is the total return that we want. So in the market, we will sometimes increase price, we will sometimes cut price. Why? Because we want to find the optimum point of pricing that can help us to get and retain the maximum number of customers for total service revenue. Our revenue breakdown, the green one is talking about the product, like the end-user devices, like the PC, server, Wi-Fi router or iPad that are used by enterprise and also households. The orange one middle -- one is our residential service, which is more or less the same for the last 2 years. The lower part, the blue one is talking about enterprise service revenue. As I mentioned, the drop is mainly because of the disclosure of Singapore's JOS -- Singapore and Malaysia's JOS and also a drop in the wholesale IDD revenue because in the last 12 months, people just use less IDD -- we can use many different apps or collaboration apps to replace IDD. So on that part, the revenue has dropped. But while we still delivered 2% growth in EBITDA because even like wholesale IDD revenues dropped, but the margin is so thin just a single-digit total margin. So it actually didn't hurt too much on our EBITDA. So I will say our team, smart and agile when service revenue growth can grow per expected, then we ship to sell more products. On average, those products, excluding the handsets on average, they have a double-digit product margin. And that is only the entry point for us because whenever our customer buy this equipment from us, we will have our professional team do upsell the maintenance or related value-added service taken help us to refer recurrent income. So talking about growth of revenue and EBITDA, of course, we must make sure that we control our cost in an automated way. Last year, OpEx dropped 4%, CapEx dropped 9%. When you look at this number, your question may be -- so what will be the trend for next year or next 1 or 2 years. I will say for support function or non-generating -- non-revenue-generating area, we will always control the cost or reduce costs by speeding up our digital transformation. But on the revenue-generating area, sales, marketing, network development, new partnership or collaboration with our partners, we will always invest time, manpower and also some more capital to buy your service, buy your products or even commit a bigger amount such that we can go out and together we sell out and get more. That is what we want. So basically, to maintain a good OpEx to revenue ratio or CapEx to revenue ratio is our target, but we don't have a fixed number. As far as we believe the OpEx or CapEx can spend in the right way to improve our EBITDA, we will go ahead full force. The debt profile. Today, we are talking about 4.6x. 4.6x is healthy, and we at HKBN, we have enough operating cash or cash on hand. So we don't have any issue. But having said that, because of the material economic change or charge we are seeing, inflation or interest rates increase, however, we will try to bring this 4.6x multiple down to a level that we feel more comfortable in a shorter period. That is how we manage our business and the balance sheet. So business assigned ESG sort of a hot topic, but it is not new to HKBN. We did start ESG initiatives many years ago, even since our IPO, because we have the CSI fund, corporate social investment fund that are doing something similar to ESG before. That's why when listed company are required to do something on ESG, we are already far ahead of our competitors. And this year, we have a new board member joining, we are very serious, we're highly committed with bond ESG committee just recently formed it will drive and monitor our performance on the ESG internally, we will have KPI on that, and we will share with you when we have these numbers ready. So for those who are new to us or not too familiar with us, I want to recap. We, HKBN, are a high-growth company. High growth since IPO. We IPOed in March year 2015. So over the last 7 years, through organic growth, through transformative growth, like acquisition of New World Telecom, acquisition of JOS, acquisition of Wharf and acquisition of ICG, the cloud service provider something like that. No matter organic or transformative, we have full force on growth. That's why we can deliver 20% CAGR growth in revenue, 15% CAGR growth in EBITDA. I'm quite sure that none of our competitors, nobody in Hong Kong's telecom industry could deliver this result. The way we could deliver and we will continue to deliver even higher growth in the coming years is that this company is very unique. It's owned and managed by shareholders and co-owners. When we are co-owners, we are skiing again. We look long term. We don't have silos. We will make sure that we maximize the impact of return from limited resources. That is the way we run our business. So I'm quite sure that in the months or years ahead, we will be more than happy to share with you to see how we grow our business. And of course, in this journey, we opt our partners and our vendors can try us through this growth path. I will pass the stage to William Ho, but before that, let me have a brief introduction. We have tried our best, spent much resources to be good, A+ CEO for our enterprise, William Ho. William Ho has -- he himself can introduce about in a second more. But he's someone with a solid experience and leadership in the MNC area in Hong Kong, Greater China and APAC. We do those big brands and also good friends with -- of you. Why I say we spent really much resources on him is that you can imagine in recruiting this -- he as the CEO. Our group CEO NiQ Lai, and I interviewed him after he was recommended by [ Helander. ] And then we asked all his future direct reports to have one-on-one chat, not interview with him. To feel that is this guy becoming good boss or not. And then he joined another Teams interview with all our Board members, all our Board members, all our Board members joined interview with him. And even between that, he joined some casual drink, casual dinner, and also we showed him some internal e-mails to make sure that he knows who we are, and we know who he is. So he is a very right match. William?

So now all of you know the tough process of Hong Kong Broadband, right? If you want to join us, you have to go through the same thing. So -- and by the way, everyone can go through that process. It's going to be the top talent in the industry. So again, thank you, everyone, to come to this session, and I appreciate the -- your time. I'm going to talk about the Enterprise Solutions business for this part of the presentation. This is one of the very important part of our overall business. This is like 80% of the -- our revenue. So it's very important that we do it right. With the right support, I think we've got a really good chance to accelerate this company. So a bit of a recap for FY '22 in terms of the overall operation and the numbers and everything. I think William has already said it that we have very solid performance. For the enterprise solution, the foundation business, our FTNS, that's the telco connectivity business and then the SI business, which is majority of the business that we acquired from the JOS acquisition performed really, really well, considering the international economic turmoil, the COVID limitation in Hong Kong, right? I think the team has done a tremendous job delivering a very, very solid number. Not only that we hit the number, our product revenue is actually -- we have a 2% growth in a very difficult condition. And on top of that, we also managed to grow the market share from 35% to 37% during the time. So very proud of the team. And I want to again say thank you here to the team for delivering a very, very strong year for the Enterprise Solutions business. Now on top of that, we also looked at the highlights and where we are, and it's very obvious that Mainland China was actually one of the key contributors to the growth. We managed to get like 20% in that space, which is, again, under the Shanghai lockdown, not being able to do business in here -- in there in China, 20% is actually a very, very solid number. We also see very strong momentum coming from ASEAN. We're seeing international traffic coming to Hong Kong. We see some of the companies actually move to Singapore, but they want to have a branch office. They're increasing the bandwidth between Hong Kong and Singapore. We see the hyperscalers expanding their footprint and capacity in Hong Kong. So very happy to see that ASEAN is becoming a very vibrant market for us in FY '22. The other big piece of the effort that we spent on FY '22 or at least the time that I spent with the company in the last 4 months, it's about really trying to squeeze the synergy between JOS and Hong Kong Broadband so that we will have a very strong foundation for the growth for next year. So what we have done in the past few months is number one, we've really aligned the sales organization. I mean this is -- for a lot of you guys, this is actually pretty basic. But what we really have done is, we align a lot of sales forces to the top market verticals so that now we have the right people with the right domain expertise to cover the right markets. Number two is restructure the organization internally so that our kitchen today has the capability of offering some very, very top-notch technology solutions to the enterprise customers. And on top of that, obviously, last 4 months, I mean, I met a lot of you guys is really to build a very, very strong alliance with you guys and also align with your strategy and getting your commitment so that we're very, very well aligned with our vendor partners. And last but not least, the enterprise leadership team that I tried to build and a lot, obviously, with the existing talents that we have in Hong Kong Broadband, but we did bring in quite a bit of top talent in the market. So just some of the highlights here, we brought in Kenneth Leung from IBM. Kenneth was actually the COO for the TSS organization for IBM. So he brings a lot of a service business experience, and he's going to be owning the sales and also the service business revamp. -- and packaging all the value-added services for the box moving business at one size. So help us to grow -- help us to improve the margin. And Jackal here. I mean, you guys probably know Jackal. He's background from IBM, but he's really the leader for the service delivery organization for HGC. Again, lots of experience of doing data center migration, extensive experience in implementing very complex projects in Hong Kong. So very happy to see Jackal to be with the team. We also got Rosanna Cheng joining us. And Rosanna, again, she was actually the previous competitor to JOS, in terms of the box moving business. Now she is joining the -- from the dark side. She's with us now and bringing all her expertise and the experience in the domain to help us to grow the box moving business. So very happy to see the new teams. And we have more leaders to come. In the next 2 months, we'll have the sales leader for public sector. We have the sales leader for strategic accounts. We will have the leader for the CTO for defining our overall strategies and bunch of talents coming in, in the next 2 months. So I'll introduce them to you at a time it comes. But I do want to share with you that we're doing really well in terms of attracting the talent and building the team and having the coverage. Now so how do we execute and after we have that vertical. So looking at the overall business, SME, obviously, is a very, very strong pellet of business for Hong Kong Broadband. We have over 40% market share in Hong Kong for that particular statement. Now in the past, we have a very strong and stable, sustainable connectivity business with the SME market. And this year, we're ramping up the speed in terms of offering more solutions to the end customers so that we can get a -- take a bigger wallet share of the customers. And not only that is the wallet share, it's about building our home a better place to live. How can we help SME customers to grow? How can we help them to survive or come back from such a tough economic situation. I'll give you one example what we are doing in terms of how we help the SME. We are launching a program called get set and grow. This is a program that we -- not only offering the connectivity to the SME customer, we're offering the Wi-Fi service to the customer. We're offering PCs. We're offering voice service. We offer software service. We offer IT support to the customers. So when they start to expand their business, everything is actually as a package that we can deliver within days, so they can start their business very quickly. And they don't have to pay for the first 6 months. It's a managed service recurring revenue-based business model. It really helps them to position and scale in a very short period of time. Now the other piece a lot of people talk about in the telecom space is about 5G, right? We talk about FMC, how do we leverage fixed network and mobile network and how do we do the convergence to help our customers? So we're partnering with 3 Hong Kong to provide integrated solutions that we offer fixed network connectivity, combining with 3's 5G coverage that we've developed a few applications that we have already launched. So one application is actually we're launching the 5G plus the fixed network to provide connectivity for the rural areas, that's one. Second is using 5G as a redundant link to provide business resilience for the stability of the network, right? So we're moving ahead on that. And as we go and some of the vendors that we already started talking with you, talking about developing managed service for the SME market, and this is the area that we will continue to develop and continue to grow in terms of building the ARR, the annual recurring revenue base as we move forward. Now the second pillar of the business is about the service provider. All of you know that we're very strong in the space because we're offering connectivity to 5G telco players in terms of 5G backhauls. We're providing optical DWDM connectivities between the data centers, and we connect players from Hong Kong to Singapore, to Europe, to Vietnam to China. This is what we do in the past. Now starting this year with the JOS integration with the SI capability, we are bringing in the SI opportunities with the telcos, so that we can -- we now not only to address their connectivity issues, we're now in a position to drive and help them to evolve their network into the next-generation platform. We're now in a position to work on the data center migration projects with the telco players. We now look at the cloud strategy with them now, so that we build hybrid cloud solutions for them. As we speak, we're working with 2 5G and mobile players revamping their data center. We're reviewing their existing IT or IP data network and look at the platform and see how we can migrate them to the next platform. So we see that as an absolute incremental opportunity for a market that we're very strong in the past with excellent executive relationship that we can leverage the new skills that we can go to the next level. Now enterprise business is the biggest piece in my portfolio, and this is the opportunity or this is the statement that I see the most of the synergy coming and most of the growth that coming in the next 3 years. If I look at the portfolio for Hong Kong Broadband, if I look at the portfolio and customer base for JOS, if I combine the 2, suddenly, I'm cross-selling between the 2 sectors. Now our customers are receiving the connectivity services at the same time, looking at the SI solutions that they can leverage. In most of the customers that I visited in the past 4 months, a lot of them actually came back and said, "Hey, we can't spend the budget for this year because they don't have enough IT resources now with people migrating out of Hong Kong, customers actually having a much higher demand in terms of getting SIs to help them to implement their projects." They need more managed service now. I have a huge organization come to me and say, "Hey, can you do managed service for my distributor network? Can you do managed service now for my hyper cloud? Can you do cloud managed service?" So there is a huge demand in terms of, number one, how do we build the next-generation platform. This is about network. This is about security platforms. This is about cloud platforms and data centers. And the question is, can you build, can you come and operate for me? So huge upside if we combine the 2, if we combine the telecom service plus the SI services together as a single service, right? So tremendous opportunity in the enterprises space. And most of you actually don't know, a part of the JOS business, actually a bigger part of JOS business is actually what we call the box moving business, right? So by definition, it's really selling hardware, and that's about it, right? Margin's a little bit thin, but big volume move very fast. So what we are doing this year with Kenneth is on Board bringing in the service capability with Rosanna coming in, selling solution, value-added solutions as part of moving, we're pushing this call box moving plus programs. So what we do now is not only we sell the hardware to the customer, the hardware will come with a very comprehensive IT support services. And we also bundle the IT outsourcing services as part of that plus the maintenance service. So suddenly, my box moving business is now becoming a double-digit or close to 20% margin business. And this is the thing that we're changing today with the new talents, with the new programs by leveraging the footprint as well as the capability of doing logistics for large hardware business and movements on to that. But last but not least, we said beyond Hong Kong, we're going to grow beyond and where we're going to be investing additional money if we're not giving you all the money that we make and saving on the dividends. What we're going to do is, we're going to continue to invest into China. I mentioned earlier that we grow 20% more in China. And I think we're going to do the same this year, but we're going to be investing a little bit more. We're going to be investing into the areas that we think we're going to get more return in terms of more projects by partnering with our vendor partners. So we're going to be investing offices and headcount into the East China part. We're going to continue to invest into the North China part of the business, and we have a presence of -- we have over 2,000 talents in China already, and we'll continue to invest in the Greater Bay area to capitalize what we already have, the footprints that we have by partnering with our vendors, partners, right? So very promising, extremely good momentum. On top of that, we also see a huge momentum coming from ASEAN. It wasn't even in the play when I joined the company. But when we look at all the traffics coming in, the company is trying to extend the coverage with the data center in Singapore, we decided that this is going to be an area that we're really going to be focusing on. We still have 40% of the JOS that we co-own with StarHub. So we have a presence there. But this year, we're going to be investing additional headcount to make sure that some of the international traffic will be routed to Hong Kong currently, and we will be handling it and we'll be extending it. And this piece of the strategy is very important because we only -- we're also seeing Chinese customers that they try to go outside of China using Hong Kong as a stepping stone, expanding into Southeast Asia. So as they go back and forth very comprehensive strategy, not only for Hong Kong, but helping customer to expand into all these areas. And this is not obviously for ASEAN -- Chinese customers, but more importantly, for customers in Hong Kong that they want to expand to China or Southeast Asia or they want to increase their capacity and support in those 2 new areas. Now we have the coverage, we have the right strategy, we have the right partnership, but what solutions should we focus on? Now I mean, this is almost like a no-brainer, but really by working with the vendor partners, our foundation is really about the next-generation infrastructure. As that -- as part of the digital transformation platform, we're going to be focusing on security as well as cloud business as the 2 key pellets as we move forward. So every network infrastructure that we do, every network migration project that we do, when we do data center migration, we implement security platform at this part of the overall solution. We have the consideration of cloud computing, the cloud capability as part of the network evolution strategy for our customers as a piece. We also see big data here and there, which is important. We're paying attention to that. We're getting a lot of business out of that, not from data side, but more from the infrastructure, the platforms, the servers and the storage that we use to enable those services. And then we also see enterprise application as 1 key area that we will sustain. Most of you actually don't know that we have close to 400 software developers in-house. What it really means is that not only that we can integrate the third-party software and make it a solution, we have the full capability of leveraging the third-party software and design and implement a very customized solution for our key customers in this space. Now the only requirement I have for the team this year is that we need to have decent margin for those kind of projects. But other than that, we see very, very good momentum and very, very good project pipelines for our software business as well. With all that said, technology strategy, segment focus, talent attraction, new organization and the other piece, which is extremely important to our business, is our vendor partners. So I'm very pleased to see that you guys are here to support us. I really appreciate the effort. And in the past 4 months, I visited all of you. I'm getting tremendous support from you, not only the support from you, but a lot of commitments from you guys that I feel very, very confident and warm that we're going to have a very successful year next -- in FY '23 that we're going to grow our business together. Now this ends my part of the presentation. Before I hand it over to William, I'd like William to come here and just say hi to everyone, and thank you for your support, and we look forward to a great year with you guys in FY '23.

Thank you very much.

Thank you, everyone. Back to William.

We don't have the 3 Hong Kong's logo here, right? Because this is mainly on the SI area. On telecom, we are very pleased to have 3 Hong Kong's top management joining us, dedicated -- dedicated, premium, premium, yes. because 3 Hong Kong is our FMC, fixed mobile convergence partners. Then we are committing to work together to grow together. They utilize our fixed broadband base. We utilize their mobile broadband base such that we can grow together. In our office, there's some areas dedicated for the 3 Hong Kong executives to come here and grow with us. So thank you 3 Hong Kong and thank you for all the partners. When I look at the pictures of the new leaders, William brought in, I noticed that there are some more are coming in the coming 3 or 4 months. Every one of them in my mind, we have a target assigned in for them. It's a very good morale, please. Okay. For the residential area, again, everything is going up. The subscriber number grew by 11,000. The entertainment or OTT subscriptions also grew more than 100% over the last year. And because of more people staying at home, no matter work or study, whatever, the bandwidth demand is also increasing. So all these numbers also relate to the average revenue per user increase because we can upsell or cross-sell. So mainly -- as I mentioned, growing demand for over 1-gig. In our base, there is still quite a portion of customers, they are using 500-megabit, 200-megabit or 100-megabit. So for this, we can always approach them even earlier than the contract renewal period to ask them to pay more and join 1-gig or above fiber speed. So let's look at the Chinese [Foreign Language] the money. So going forward, we need to make sure that we have a prudent use of our cash on hand, which will strengthen our balance sheet. And we should also focus on our high-margin core telecom supported or strengthened by the SI element. And we want to make sure that we have the flexibility and to agile for any growth opportunities such that we can spend much higher OpEx or CapEx for growth. So if I ask you, I don't know if you know so far so many PowerPoints. You have heard so much from us. If there are only one word, you can pick that most in the PowerPoint. What is the word? Grow. HKBN equals to grow. So grow is the way we go forward. Dividend recommendation, I need to elaborate a little bit. So this year, final dividend, just $0.20, whole year $0.60. It's talking about 78% payout ratio, lower than the close to 100% payout ratio before or since our IPO. Why? Because we really need to have prudent use of our cash on hand. You should remember that on the first page, we actually have similar amounts of AFF on hand in financial year '22, even though the market was so tough. We still have the same amount of money on hand. But we want to make sure that we have prudent use of this money. How much of them are investment for growth such that we generate higher revenue. And then how much or basically, I would say, we will use quite a major amount of the money on hand for paying bad debt to bring down the ratio from 4.6x to a lower level. We need to be flexible. I want to remind our investor shareholders or analysts, NiQ, our group CFO -- CEO and I, both together, we hold more than 4% share of HKBN. So we are basically major shareholders. So our interests are fully aligned with our investors, our shareholders. What do you expect is almost the same as what NiQ and I expect, but we are also top management. So apart from the alignment of the mind of the shareholders, we also need to align our hands, our next execution arms with the operating team to deliver. So in the coming years, we will focus on our core. We will focus on EBITDA growth because we believe that with our well-positioned enterprise and essential competitive edges, we should grow EBITDA better than our competitors. And you, the market, everyone will give us what we deserve in our enterprise value. Thank you. May I have...

Any investor for Q&A?

We also have our then CFO, Almira joining us. So we'd like to have any... Yes.

We have questions from online first. So the first question is how much of the company's debt load is floating rate versus fixed rate? How should we think about the future increase in interest expense?

Okay. Let me take this question. Okay. Thank you for the first online question. We always proactively manage our cash and debt position. Currently, we have 1/3 of our syndicated loan was hedged at fixed rate. So the rest of 2/3 is a floating rate. Actually, we entered into this interest rate swap agreement a year ago. That means we are always looking ahead, looking forward to how the macroeconomic market evolved. So for this part, we are covered. And for the rest, we're continuously assessing the current situation and we have a lot of options opening to us.

So next will be question from the floor.

William and management team, good to see your face to face again. Okay. I think I got a couple of questions. First, on the dividend payout ratio. I understand your rationale behind, but how should we forecast this ratio going forward? I think that's my first question. And second is, you mentioned about the objective to lower the gearing ratio? Do we have a target that you feel comfortable so that we can have some -- have a number in mind that we can calculate? And my third question is, I want to know the dollar sign that you put on William Ho, how much growth are you expecting him to deliver next year. I'll just focus on next year, how much revenue growth.

Okay. I'll take the first 2 questions on the dividend payout, is that right? Okay. Basically, for telecom industry like HKBN, we have a very predictable cash flow pattern. Even for a very difficult, very challenging year FY '22, we still managed to have an adjusted fund flow -- cash flow balance of more than $1.1 billion. And if you look at our balance sheet, we still have a cash at bank of more than $1.1 billion. So the position is very favorable, especially in -- during a period of interest rising. The management, we make a conscious decision on the dividend recommendation to revise the dividend policy along with the market situation. So for this year, we declare a 78% payout ratio of our AFF. So moving forward, we are flexible, we are agile. We have sufficient cash to manage debt repayment that we strengthen our balance sheet and the debt profile and also reserve -- preserve our flexibility for future investment. So for the leverage to go down by how much. Interest rate is increasing. And for currently, our debt ratio is 4.6x. Actually, 4.6x is, I will describe it as a healthy and a normal ratio for a company like HKBN, but there is plenty of room to drive down this number. So moving forward, in the near future, I think to drive down this leverage ratio and also the managed interest risk is the top priorities of our financial strategy.

Maybe you tell your and then I -- premium...

Now so the -- if you look at the growth, we have 2 parts of the business as core business. One is the FTNS business, which is relatively stable and self saturate the market there. So the growth is really going to come from the SI business. The SI business has a very different nature comparing to the FTNS business because the cycle of recognizing the revenue is a lot longer, right? It's about starting -- winning the contract, doing the design, implementing the solution and then you got UAT and then you got vessel. What we're really looking for there are 2 things. One is this year, we're going to be flat. We're going to be flat this year, but the goal is really to build a very, very strong pipeline this year. So that most of the revenue that we're going to be recognizing is going to be coming up in FY '24, right? So that's what -- that's the plan that how we're going to be executing. So if you look at the people coming on board now, if you're looking at the people coming on board in the next 2 months and then we start executing build a pipeline, that's probably the right schedule that we can forecast.

I think what I would like to add is that when we are talking about tough environment, macroeconomic downturn factors, inflation or interest rate, something like that, that price to everybody. But each entity we add, how each entity or each player in the market execute and deliver will be different. At HKBN, we are managed mainly by co-owners, who have huge skiing the game. So we are -- we fully highlight any upside or downside will impact us even more than the shareholders. And if you look at all the PowerPoints. all the pages we shared, I will say it is very unique. You need in a sense that when you go to see the result announcement of some others or PowerPoints of some others, if you take away the company name more or less the same, you can't tell who they are -- but for these PowerPoints, the co-owners, the 7-year track record of, I would say, huge revenue or EBITDA, the new force, new leaderships entering into HKBN's SI area, they continue invest on the CapEx. Overall in both residential and also the enterprise area or no single major family-type shareholder who's going to micromanage you, I think we excel.

So next will be questions from online first. You mentioned you would like to reduce leverage given rising interest rates. Do you have a target leverage ratio in mind?

I think I have covered this question in my question with...

Floor, yes.

The floor.

Okay. So next will be a question from the floor.

Okay. It's not about interest rate. So I would like to ask, what are you going to tell your customer that they should give you the business, the enterprise customer that they should give you the business rather than the SI before that they use.

Yes. Well, so... Yes. So the -- it's not about if they should give us business. It's about what problems that they have and what capabilities that we have to solve their problems. And this is all about having the right sales organization, having the right coverage, having the right domain expertise. So they walk into the customer office, understand the challenges and they'd be able to working with the vendor partner to propose what are the right solution for the customers. Not only that, the ability to actually execute and implement and complete the projects is also very important. And those are the 2 things that we are focusing on right now. So as we move forward, when we have more leaderships coming in, and that's why we kind of organize the organization so that they're segmented in a way we'll be capable of understand and work with our customer for the right solutions. So that's what we're going to do. And with the vendor partners here, I think we have enough support in terms of coming together, have the right solution for the customers.

I think one point none of you will disagree is that, in fact, all enterprise customers face difficulties. They need to cut off. They have less IT people. Some of them migrated outside Hong Kong. So whoever want to increase their operational efficiency, reduce their OpEx through digital transformation come to HKBN.

Well, the other part that I kind of missed in my first question was, if you look at the SI landscape, it has been changed drastically in the past 3 to 5 years. I mean some of the usual players that you will see in those bidding process and all that, they're no longer there, or they're not really capable anymore to offer the same service that they used to do. And with the new talents that we have with the acquired company and the partners, I think we're in a very -- we're in a much better position comparing to the other SI partners to address especially the larger scale projects. Because if you look at Hong Kong SI market, there are not too many SIs actually have the financial capability of doing large-scale projects, right? So the cash flow, the capital capability is actually something that we're very good at. So if you -- from a customer point of view, if you look at Hong Kong Broadband, you should see that, number one, we're a lot more passionate comparing to the other SIs. Number 2, we are a lot better equipped in terms of the talents and the resource that we're going to go implement, and number 3, obviously, the very fundamental operation that we have the right sales organization covering the right customer, working with the vendors, coming right with the solution and implement the projects properly as a flow. So with all that, I think we're in a very good position to win more business in the next period of time.

Maybe you can tell us why not...

So the next question is from online again. So please, can you talk about the competition within both enterprise and residential businesses. How has this been during the past year? Have recent ARPU cuts been successful in winning share? And what do you expect for pricing going forward?

So I think in the market, this is a very -- FAQ that had been asked over the last decade. I will say, price war in both standard and enterprise area always happens. You just don't know who initiates and then who reacts or follows it. But for us, as I mentioned, we need to make sure that we price a product or service at the right level. No matter it's high or low, it is the product or service price times the quantity of product and service, you still search that, you get the maximum total service or product revenue. That is the way we calculate and then set our 5G pen in residential and enterprise. I would say price will continue. For the residential market, we will be very aggressive. When I say aggressive, the price point won't be higher than the last 12 months, whether you will further drop or not, I can't tell. But -- our expectation is that last year, we have about 11,000 net gain in residential subscribers. This year, we expect to have 30,000 to 40,000 net increase of subscribers. That will come from our expanded fiber coverage. That will come from our better value for money, particularly the bundling with 3 Hong Kong's 5G service. And on the enterprise area, I'm quite sure that you will have a very significant high growth. We do not need to cut price because today, our price is already a discount to our competitors. But William is just some 4 pictures, including himself, just 4 people. Invest for those who are committed to join, we have maybe 11 or 12.

12, I mean -- at least 12 executives coming on Board.

At least 12 executives, can't count more.

10 count. Only fingers.

10 fingers can count. So the number of new leaders joining us is even more than our existing leaders. So that means the target should be 2x.

Much higher, yes.

Something like that.

Well, for enterprise business, we have no plan to have a price war. In fact, it's quite the opposite, right? We like to increase the price. We increased the price so that we offer more services and more value to the customers. I mean looking at what customers are asking for today is, they're not looking for a cheap price service provider. They're looking for someone who can actually do a good job and help to solve their problem. This is where we are. And that's why I've been hiring a lot of people bringing even more talent to do the best work for our customers. So for the enterprise side, we actually see that we're going to be increasing price by adding a lot more value to the customer. So we get better margin and we get a better growth for the next few years.

Any questions from the floor? Okay. So more from online. Can you give us your guidance for this financial year, please? How are you thinking now about the rate of progress to the co-owner for targets? What is the current proportion of enterprise revenue from Mainland China? And what formation?

I think for Mainland China, you talk about this and I'll talk about the...

Yes. So Mainland China, we -- the business overall is about 15% of our business. And we do have over 2,000 staff and talent in China. And we do see that, that 15% is going to be one of the key high growing numbers as part of our portfolio. So we look forward to a very successful year this year from the China team.

I think we won't give a guidance. But I'm quite sure that our financial year '23 we will not be worse than financial year '22. It depends on, for example, like EBITDA. I'm quite sure that we can manipulate to deliver a better EBITDA in '23. But if you spend more and just deliver sort of a flat EBITDA in financial year '23, then the gain from financial year '24 and '25 is higher than the short-term gain in financial year '23, then we go ahead to grow. As we mentioned, we are here to invest for long-term growth. So I won't give a sort of single year guidance, which is contrary to what we say we want flexibility. We want to make sure that we will use all the resources, funding on hand, manpower, our time, limited resources for optimal impact or return.

So in wheel of time, we have to take one last question from online. What is the impact on bottom line for every 1% rise in interest rates?

Can you repeat your question again?

What is the impact on bottom line for every 1% rise in interest rate?

Bottom line price increase in... Okay. That's a very easy question. You can just check the balance sheet and then break it out using the syndicated loan. We have approximately $11 billion loan. Actually, our borrowing is very straightforward, very simple. So 1%, that's it.

Okay. So today's presentation has come to an end. We would like to invite you all to take a group photo to commemorate this moment.

Thank you. Thank you.

Okay. Thank you, everyone.