Hutchison Port Holdings Trust (NS8U) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call for Hutchinson Port Holdings Trust interim results announcement for the period ended 30th June 2022. Now, I'll hand over to Mr. Ivor Chow, the CEO of Hutchinson Port Holdings Trust. Mr. Chow, please begin.

Thank you. Thank you for joining our mid-year results call. As usual, I will quickly kind of go through the first half, how I've seen first half results, as well as giving my feel as to the outlook for the second half. And then, Jimmy will go through some of the numbers with you, and then we'll end up with the Q&A. So my take away from the first half is this, I think, we've done well, overall. I mean, obviously, there has been a slight profit decline year-on-year. Throughput is flat year-on-year, but mostly because of Yantian up 7%, while Hong Kong is down 7%. Yantian has actually been -- throughput has been up, mostly because, if some of you remember, last year, Yantian was affected by a COVID case and it was basically closed for a better part of a month. And therefore as a result, the year-on-year comp was a little bit easier for Yantian in the first half, hence the increase. But overall, I think the volume was within our expectation. And the throughput decline was actually well within expectation in terms of what we have forecasted ourselves. So from that point of view, you can see that our second quarter results alone was actually an improvement over first half. So from that point of view, I think we have done quite well, despite what's happening in the market, which I'll kind of go through when I talk about the outlook. Of important note is that our DPU, our distribution for our interim results will be $0.065, which is basically kind of flat compared to what we have distributed last year. So from that perspective, despite profits being slightly lower, we're still maintaining our distribution per unit. I think what that means is that from a cash flow point of view, we're still fairly strong. And as such we're quite comfortable in terms of at least meeting our lower end of our guidance in terms of the $0.145 that we have distributed last year. So I think at a minimum, we will be able to meet or be par from a distribution point of view versus last year. And whether we can exceed that minimum guidance to hit the higher end, will very much depend on what the second quarter or second half of the year will look like. Of particular note is that from an interest cost point of view, a lot of you would know that Fed raised the rates quite a few times during the first half. And from my point of view, our active management of our debt level has actually finally paid dividend. We start paying down our debt quite a few years ago, paying down some -- at a minimum, about HKD 1 billion of debt a year. And as a result of that debt initiative, I think, our debt levels are a lot healthier. And as a result, despite these interest rate hikes, you see that our interest costs have actually gone down during the year, rather than increasing. So I think from that point of view, we are a lot more comfortable from a debt point of view, interest cost servicing point of view. I think a lot of the risk that the market was particularly worried about back 4, 5 years ago, we're sitting a lot more comfortable from that point of view, especially when interest rate are rising. And as well as having that confidence to maintain at least the DPU that we have been tracking along. In terms of kind of outlook and prospect, a tale of 2 cities, here. In Yantian, I think if you look at first half, export has been doing reasonably well. I think U.S. market was up low single digits, while Europe is down a little bit, not significantly, despite inflation, the conflict in the Ukraine and whatnot, we do expect Europe to be a bit softer, but not really a sharper decline than we have thought. Obviously, the outlook is muddled by the fact that COVID restriction in this part of the world remain very, very stringent. If you have seen some of the news yesterday, Shenzhen is again in a lockdown mode. And once again, cross-border into Hong Kong has been affected, the number of cross-border trucking, have seen quite a bit of decline since the beginning of the year. So from a Hong Kong perspective, the second half will be a bit more challenging as we see because of the closure of the border, local cargo is particularly affected. So that's why you have seen Hong Kong volume down 7%. So not until the borders start relaxing, Hong Kong basically is, we always rely on external trade. So the border being closed will negatively affect Hong Kong. Yantian, on the other hand, continues to perform quite well. Peak season is here. There's not as sharp as a peak as previous years, but it's fairly stable. I think for -- sorry, third quarter is -- pardon me. Third quarter is going to be okay from my point of view. Fourth quarter is the challenging part, especially whether inflation continues to be unchecked and if fuel prices continue to go up and whatnot, what would eventually affect consumption is something that we are particularly watching carefully. But overall, I think, second half is going to be a little bit more difficult from a year-on-year comp point of view because last year second half, the world logistics supply chain was fairly congested. And if you remember, we had a fairly substantial one-off storage income that we had received in the second half of last year. So from a comp standpoint, it's going to be a lot more difficult for us. So I do expect a decline in the second half as well and probably going to be a bit more than what we have seen in the first half. But again, I think all of this was a predicted by us in our forecast. So when we guided to our distribution, it was based on that comp. So again, fairly comfortable in terms of kind of meeting that minimum DPU guidance. So from here, I'll pass it on to Jimmy on the figures, and then we'll come back to answer some of the Q&A. Thank you.

Sure. Thank you, Ivor. As usual, we'll go through the -- in fact the presentation material we have published today. So if we go in through the numbers, we look at Page 9 that shows our throughput volume for the first 6 months of the year. We handled a total 11.7 million TEU, which as Ivor mentioned, was sustained at the same level as what we have done in the previous year for the first 6 months. But within that total throughput number, Hong Kong's throughput actually dropped 7% for the first 6 months compared with last year, and Yantian's throughput increased by 7% compared with the first 6 months of last year. On Page 11, that shows our revenue trend and also the breakdown. On the left-hand side, you can see that our revenue increased by 8% despite a flattish throughput trend. Revenue increase was predominantly driven by an increase in storage income over the period. On the right-hand side, you would see the segment information, continuing the trend that we have seen in recent years. You can see that the contribution from Mainland China continued to increase and now accounts for about 74% of our revenue for the first half of 2022. Then on to CapEx on the next page, was it Page 12? In the first half, we incurred HKD 170 million CapEx on a year-on-year basis, it's a substantial growth. But bear in mind, last year, for the first 6 months, we did want to spend more, but we couldn't because of COVID restrictions and because of a material supply delay and also movement restrictions in the same period last year. For the first 6 months, we spent HKD 170 million. And for the full year, we continue to expect to burn around HKD 500 million CapEx. And we think there will be some catching up to do in the second half of 2022. But we think we will be on track on the total year CapEx spending. Our next page that shows our debt position. We reduced our debt to HKD 27.3 billion. That total debt, including short-term and long-term debt, which was a reduction of HKD 1.7 billion compared with year ended December 2021. We continue our target to pay at least HKD 1 billion of debt every year, as I mentioned earlier on. And additional debt repayment we made in the first 6 months was a positive result from the good cash flow that was generated in 2021. And you will see in a minute, on the P&L, on the positive impact of this debt reduction and also the fact that majority of our debt is on a fixed rate. So despite the rising interest cost environment, our interest expense for the period is actually lower than the same period last year. On Page 14, that shows our distribution per unit. Our first half distribution, as I mentioned, is HKD 0.065, which is the same as the interim dividend payment last year for 2021. And we maintain our full-year guidance of distribution of not less than HKD 0.145. For the first half distribution, the record date will be 3rd of August, and the distribution will be made on the 23rd of September. Finally, on Page 15, that shows the P&L of Trust in the first 6 months of the year. Revenue, as I mentioned, increased by 8% on a year-on-year basis. Cost of services rendered at HKD 2.2 billion is roughly 12% more than last year, and that was a result mainly because of 2 reasons. The first is the additional cost of precautionary costs that were incurred on a year-on-year comparison basis. In the first half of last year, we didn't operate a closed-loop operation in Yantian. But as we have mentioned in previous and in of course, we have been running this closed loop operation since May of last year. So on a year-on-year comparison for the first half of this year, you would see an additional COVID precautionary cost. That's the first reason. And the second reason, the main -- the second main reason for the cost of services increase is because of the increase in fuel and power costs that we have all observed in the first half of the year. Another major factor driving our bottom line is the subsidies that were received from PRC and also Hong Kong government. If you refer to the other operating line, you would see that in the first 6 months, we received -- our total operating income is HKD 68 million, which is HKD 323 million lower than the previous period. That is mainly because of a reduction of the subsidies that were received in the PRC both from a railway and volume incentive incentives. The total amount is about HKD 327 million. Now obviously, we're helped by receiving the employment subsidy scheme, the payment from the Hong Kong government. But that amount is far less than what we have, not received in the PRC for the first 6 months of the year. So you would see that operating profit for the first 6 months is at HKD 2.4 billion, which is 4% lower than the same period last year. Interest and other finance costs, we managed to make some savings in finance cost as mentioned because of our lower overall debt level. Share profits from associates and JVs, we improved from a loss position to a small profit, primarily because of the better results in our Huizhou terminal and also in our Hong Kong ancillary services. Profit before tax at HKD 2.1 billion is 4% lower than last year. In terms of tax, we paid a bit more tax for the first 6 months this year despite a lower profit before tax, and that was because of the expiry of certain preferential tax treatment in the PRC. And overall, you would see profit after tax stood at HKD 1.5 billion for the first 6 months of the year, which is a 7% reduction compared with same period of last year. And that concludes our update on the results of the first half of 2022.

[Operator Instructions] We have got Tan Ping from Fullerton.

I just have 2 questions. For the first question, the company has a target that were in mind of seeing that you're continuing to repay HKD 1 billion a year? And then secondly, on the impact of the oil price -- high oil price and operating costs in second half this year. How much of the increase in operating expenses in the first half was due to the higher oil price?

In terms of comfortable debt level, I think for us, -- the Board is where we receive guidance. So far, in terms of our plan to continue to pay down at least HKD 1 billion in debt, that is continuing. In terms of comfort level, I would say that the Board is a lot more comfortable with our current debt level than previously before. And so we will, over the next couple of years, be able to open up to see whether we can channel some of that debt repayment back into distribution as well. And hence, I -- my kind of confident in terms of kind of maintaining that current level of DPU and potentially increasing it over time. I think right now, there is not a current hard target, but that's something that we're working towards. And then certainly, I think over the next couple of years, we'll have more flexibility in terms of thinking the balance between distribution and debt repayment. That's number one. In terms of number two, in terms of the cost wise, okay, as Jimmy has said, a lot of the cost is actually not -- not so much from power and fuel, power and fuel is one factor. But the larger factor from my point of view was the COVID precautionary measures costs because in Yantian, in particular, where we have to operate a closed loop environment. So far, we have not seen any relaxation on that requirement yet, and we are incurring quite a bit of cost on that front. And I am hopeful that if relaxation does come -- may not be in the second half of this year, but at least in 2023, we would have some cost reduction. In terms of power and fuel, we are trying to pass on some of that cost through tariff recovery in Yantian also. So I'm a bit less worried about the fuel but more worried about when relaxation comes.

Our next question is Simon Cheung from Goldman Sachs.

I have a couple of questions. Just the first one on the storage income. I hear that you have a bit of a benefit that's driving that 8% top line growth. Can you help us to quantify the storage income? Because I remember you also did have some storage income last year. And if you -- I would disaggregate that 8% top line growth against kind of the strategic volume. How much was a tariff increase and maybe by ports and how much of which was also against the RMB devaluation? Just wanted to get a sense on the impact of tariff. That's the first question. I think I have 2 more follow-ups.

Let me try the first one first, and then Jimmy can supplement. Overall, Hong Kong is not getting much tariff increase. Most of the tariff increase is on the Yantian side. So we have been able to get tariff increase in Yantian to the tune of at least 4%-5%. I think the tariff environment in China is positive. We're not the only one raising tariff. Shanghai and Shekou and everybody is. But because we are a price leader and we are already priced quite high as compared to the rest. So our ability to raise like 10% is a lot more limited, but we have been able to raise our price in reaction to at least some of the power and fuel costs. Certainly, from a revenue standpoint, the storage in the first half was a big part of it. I think, overall, our volume is flat, flattish. And if you look at kind of renminbi, kind of nets off the tariff increase in some way, then most of the revenue growth is basically from the storage revenue. If I break it down kind of simply, that will be the way I look at it.

So to follow up, would it be fair to say that your tariff hike would be roughly in the 5% range, just purely because RMB also...

Correct. Exactly. So basically, as that -- that tariff increase offset renminbi decline and then storage offset throughput.

And then the second question related back to this inflationary cost pressure. I remember a couple of years back, you've obviously done a great job in terms of changing them into variable costs, mitigate a lot of the cost inflation resulted in a preserved EBITDA margin for the company. I think now heading into maybe another inflationary environment, how are you thinking about controlling the costs? And equally, I think also how are you thinking about tariff increase? If Hong Kong can't really pass on tariff increase even in this environment and how should we thing about structurally, longer-term the tariff -- scope for tariff increase in Hong Kong?

Right. So in terms of inflationary pressure, most of it is actually on the power and fuel front. Inflationary pressure is more concerning from a consumption point of view and throughput, not so much our cost of services rendered. Yantian, obviously, we are able to pass on some of that cost increase. Hong Kong, on the other hand, is a lot more difficult. Certainly, I think certainly, Hong Kong is facing some margin erosion as a result. But mostly as a result of mix change rather than not being able to pass on. So we have been holding our tariff quite well. But definitely. But we have been able to offset some of that through our Seaport Alliance in Hong Kong. So some of the cost savings over the last couple of years anyway have been as a result of some of the optimization that we have done in Hong Kong when we are now working in tandem with COSCO and ACT as well as MTL. I think that has been able for us to drive costs down and to offset inflation. And then we are continuing looking at ways to do that.

Right. So I tried to get a sense how are you thinking about margins? Because we went through last decades where Hong Kong basically price varies, but you continued to have cost inflation, not as severe as now. Now we're going into an environment where cost inflation is actually getting even most of year and the mix change, actually, I suppose, will continue. So I just wanted to get a sense, how are you thinking about maybe the EBITDA trajectory for Hong Kong?

Yes. The good thing is it doesn't affect the Trust as much because now we're particularly more vulnerable to the changes in Yantian more in terms of Yantian being able to offset a lot of the decline in Hong Kong. We've been able to do that. So yes, margin will be compressed in Hong Kong, but the magnitude, the contribution and impact to the bottom line is a lot less as well. And the rate of decline in the margin is actually not that significant. I mean right now, I can't be too pessimistic in the sense that we are particularly effective due to the borders being closed. So I don't want to make the case that we are permanently structurally affected, and we have to wait until things normalize in Hong Kong, and the borders open up to see where we would land. So that's why I'm particularly not easy to kind of pinpoint a number for you. I have to wait to see whether a recovery can take place in Hong Kong.

And then I guess my last question is related back to the dividend, which also is a function of how much you repaid your interest. And you -- I hear that you feel a lot more comfortable about your current debt level. Perhaps you can share with us how are you judging the comfort level? Because I think EBITDA, depending on obviously EBITDA, right, the leverage ratio and all those. But we are in a rising interest rate environment. So I think how are you thinking -- I guess, what are the metrics that you are looking at? Because maybe I'm not sure whether 2 years down the road, your mentality would change. And equally, how are you thinking of preserving the dividend? I know this year, you're going to be doing a good job in terms of distributing dividend. But I guess the concern given the interest rate high and all those as a reminder how you're thinking about dividend mix, perhaps 1 or 2 years?

Yes. Thank you for that. Certainly, a very valid point. I think that the key is to look at our debt profile in terms of fixed and variable. And as Jimmy said, we have been actively converting a lot of debt to fixed debt. So some of that pressure is off now close to 80% of our debt is fixed. That's #1. And the other metrics to look at is really affordability of interest costs. If you look at our interest costs, we have now optimized it to the fact that our interest cost has peaked somewhat and slowly declining. So we can kind of maintain at that level or be fully comfortable. I mean, we're not particularly pessimistic about operating profit from that point of view. So current structure, it makes sense. And then if we can continue to kind of repay that HKD 1 billion for at least next 1 or 2 years or even more, then the affordability comes in even a little bit better despite interest costs being rising. So right now, the way that we have structured our debt in terms of debt level and the way that we have fixed a significant portion of our debt, hence, we're a bit more comfortable when we give our guidance to DPU. But certainly, if the rate hikes more substantially over time, will we be able to refinance our debt at the current level also becomes a question. But at this point in time, we're not seeing that excessively rapid rate hikes that cause a concern that impact DPU at this point in time.

And in terms of your guidance about DPU, is that premature to give any sense...

No. I think we stand by our guidance. We gave earlier in the year, that guidance was HKD 0.145 to HKD 0.155. I think management is pretty confident of meeting that HKD 0.145 level given that we do have cash to pay down the debt as well this year. So that's okay. But again, whether we meet the higher end HKD 0.155 will depend on some of the things I said about second half, especially in Hong Kong, when the relaxation comes. And that's uncertainly, at this point in time, I can't even predict that.

Our next question is Chew Peng from OCBC.

Can you please comment on the impact of COVID lockdown on 2Q on Yantian? And also perhaps the outlook second half this year as compared to second half last year or first half this year. How are we going to see the performance in second half?

Yes. Sure. I'll respond to your first question on the lockdown -- impact of the lockdown to Yantian now. Shenzhen had a 1-week lockdown in March this year. When manufacturing stopped but our operation -- terminal operation continued. Now that obviously has a short-term impact in terms of the cargo flow through our terminal. But since the lockdown finished the 7-day lockdown finished, our cargo volume has actually picked up very rapidly. So that's why you see in the first half of the year, our throughput in Yantian actually increased on a year-on-year basis compared with last year. But of course, last year, we're comparing against a relatively low base, as I mentioned. But still, if you look at the full 6 months of volume, I think it represents quite a good volume that compared with historical levels.

And I think if you look at the outlook, right, right now, it's really difficult to forecast. Even shipping line has been quite volatile quarter-to-quarter. Last year, if you look at the first half, we have a fairly robust first half when COVID measures have lifted and people were buying things. As a result, it resulted in significant congestion in the supply chain by May and June. And then there was a lockdown in Yantian and then there were congestion. So second half of last year was fairly volatile but third quarter was down. The fourth quarter pick up significantly as well as congestion eased. This year, it's a little bit different story. This year congestion is no longer as big as an issue as we have seen last year. This year, the issue is around 2 things. One of them is certainly consumption decline just because of inflation and the war in Ukraine and the situation in Europe. That's number one. The other side is on the supply side. On China, there has been lockdown. As a result, goods moving in and out, even more materials into China is very difficult because of regional lockdowns, trucking from factories to the port is also impacted due to basically travel restriction within China. So a lot of that is just governed by very different factors. And therefore, it's very difficult to -- unfortunately, very difficult to compare apple-to-apple. But overall, if you ask me, just kind of put a number, I think Hong Kong will kind of continue the trend that we have seen in the first half. So we're down 7%, probably the trend will continue till end of the year unless Hong Kong government has decided to remove the lockdown and open the borders to China. Until that happens, I don't think Hong Kong will be much different. Yantian, on the other hand, Yantian, you would see that first quarter Yantian was actually down. The second quarter Yantian picked up. But because of the lockdown, it was easier comp. I think third quarter is still going to be okay for Yantian. The fourth quarter remains uncertain because of those things that I mentioned. So Yantian is going to be somewhere between flattish and probably 4%, 5% growth, somewhere between that wide range depending on what the U.S. consumption market, as well as the Europe consumption market will react to all these different external pressures. I think that's the -- really the best I can do in terms of having a crystal ball on what the second half looks like.

Is it because of low volume at Hong Kong. So that's why being -- it's more difficult to pass on the higher cost to the customers of Hong Kong, as compared to the...

I think Hong Kong -- the question about why Yantian is able to increase tariff and yet Hong Kong is unable to. I think that speaks to the nature of the port itself. Yantian is an import export gateway. So these are local cargo you're talking about, meaning that the cargo is captive, it is from the hinterland. And if shippers doesn't choose Yantian they will have to choose Shekou and Chiwan, so tariff comparison is only between Shekou and Chiwan and Nansha and potentially Yantian, whereas Hong Kong because the border is closed so basically, there is little or no local cargo left. So all of the remaining cargo in Hong Kong is now transshipment. And when you talk about transshipment cargo, then it's not -- the cost is not borne by shipper, but borne by shipping line. And shipping lines has a lot more choices in terms of where it can transship its cargo, be it Singapore, Kaohsiung, shanghai, Korea, Pusan, et cetera. So the competition become a lot wider compared to local cargo. And hence, it is a lot more difficult to raise tariff on the transshipment hub.

Our next question is from [ Matthew Zheng, PIMCO ].

I was wondering if you can give us an expectation of what kind of -- what level of CapEx would be over the next few years? And second question is about your upcoming bond maturity in September. Do you have any insight into the financing -- refinancing plan today?

Yes, sure. The first question on CapEx. On CapEx, I think for -- with the exception of last year, I think we have been targeting around HKD 500 million annual CapEx, and that same number will apply in the near term going forward. So that's to your first question. Now, the second question it's regarding the bond maturity. Now we have already lined up a syndicated bank loan to refinance that bond coming to mature in September. Basically, all the execution -- all the preparation has been done and it's just waiting to be executed. So that would serve to refinance the bond that comes to maturity in September.

And can you also share a bit more about what kind of costs you would be incurring for the syndicating bank that you just mentioned?

Yes. Our overall interest costs for the Trust stands roughly around 2.2%, if you look at our disclosed financial information. And the new financing that we arrange would be around the same pricing.

So we shouldn't have any negative impact to our interest costs as a result, just to be clear.

Our next question is from Tabitha, DBS.

Just one quick question from me. What's the rough in EBITDA between Hong Kong and Yantian for the first half last year and this year?

Right. So I think we don't actually disclose that information in our results, but I think you can take the reference in the revenue and other income in terms of split, reduced split between Hong Kong and Mainland, and you can use that as kind of a rough estimate of what it is in terms of contribution. But knowing that, what I said earlier, in terms of Yantian being import/export cargo hub, whereas Hong Kong being transshipment hub and the margins are slightly better on the Yantian side than the Hong Kong side. So basically, that split is no less for Yantian and Hong Kong. The 72%-28% -- basically now about 74%-26% from a revenue split point of view.

We've got a question from Paul Chew, Phillip Securities.

Just 3 questions from me. The first one would be just on your storage. I just -- you mentioned less congestion. I just was wondering how does that impact your storage income?

Right. So on that question first. Basically, when the congestion comes, last year, basically ships are not -- the ships are actually stuck mostly on the U.S. West Coast in Long Beach. So the ships are basically stuck there for in excess of a month. They are not able to come back and turn around and pick up the fresh load of cargoes from the origin port in Yantian or Hong Kong. As a result, the -- if you think about airports, right, you want to board the aircraft right away after you get into the airport, at least within a couple of hours. But because the planes are not coming back or ships are not coming back, the cargo or the passenger just stuck at the airport. And when that happens, we do charge a fee because the boxes are sitting in the yard. And that's the storage income that we're talking about. And shipping lines were quite happily paying that last year because the freight rate rates were exceptionally high. But this year, freight rates have come down and the ships are turning around better and therefore, the boxes are no longer staying at the terminal as long.

So we can assume that you mentioned as congestion kind of eases then your storage income should start to go down.

Correct. Correct. And actually, we've seen tapering over the last couple of months already. So I do expect, as I said earlier, I do expect second half comp to be a lot more difficult because predominantly, the storage income that we enjoyed last year was in the second half, whereas a lot of them would not happen again this year.

My second question is just on the tariffs, again sorry to ask you, on the Hong Kong tariffs. I'm just wondering can you kind of read through this, it will also apply for the other transshipment ports because the shipping lines are enjoying, I guess, still enjoying record earnings, but the ports don't seem to get any pricing power despite the fabulous [indiscernible]. That is why -- like a read through for all ports or this is more of the Hong Kong port solution?

Now that's a very interesting question, and I can spend a lot of time on it. But when I say a particular port is transshipment or a particular port is local export cargo, it's not an absolute description because all ports does some level of transshipment, some level of import export. And the reason Hong Kong is less attractive right now is because Hong Kong -- unlike other -- most of the country, when the borders are closed, we lose a significant portion of our local cargo. And therefore, you can think of bus analogy, right? I mean, if you -- if the bus goes on at the terminal at the first stop at the last stop, it loads all the passenger on it and all the passenger gets off at the destination. Think of us as kind of like a midway point of the bus route, right, a few people get on and a few people get off. And Hong Kong is precisely those midway point, whereas Yantian is the origin port when the midpoint is, yes, there may be a couple of people who want to get off, but there's nobody wanting to get on. And therefore, that makes the port a lot less interesting to call. And therefore, when that happens, our attractiveness kind of declines as well. So pure transshipment port will face this more than other ports where we have a mix of local and transshipment cargo. I don't know whether that answer your question, but local cargo plays a big part in terms of shipping lines choosing where they do transshipment as well.

Just one last one...

This is all kind of COVID related.

Just [indiscernible]. I can't really see how the distributable income distributed, but at the interim, I guess, you're paying out dividends on roughly HKD 600 million. Your free cash flow is probably HKD 2.5 billion. And of course, most of it is used to pay -- so is it one way for us to read it that once you hit some comfortable level that your dividend, I guess, could actually climb. Is that one way to kind of interpret the situation or maybe I am putting it wrong.

I think the way we look at dividend all these years, we actually distribute 100% of our distributable cash. So from that point of view, you can actually look at it, all of the cash generated other than for CapEx and working capital and whatnot, then we would pay it all out. The question then becomes, as I said earlier, it's just a matter of, do we deploy some of that to retain debt or do we pay more dividend. And over the last couple of years, we've actually been paying down a bit more debt side. So assuming that's why Simon asked me earlier, how comfortable am I with the debt level, I think that's important to say that once we are happy with the debt level and assuming that we don't pay more down debt, then we actually have more room to pay up more distribution.

But just to confirm, the distributable income definition, of course, it includes your loan repayment. I just wanted to confirm, obviously.

Does it? Yes, I think it does. It does. It does. In fact there -- it includes a certain level of basic that we committed, but we actually have been paying in excess of what we have targeted to repay as well. So there is something...

So if I can use the -- in the cash flow statement -- pardon my ignorance here, but the line repayment of borrowings, that is [ deducted ] from your distributable income, just to confirm that?

Yes. Yes.

Thank you. Ladies and gentlemen, we have come to the end of today's conference call. Thank you for your participation. You may now disconnect.