New World Development Company Limited (17) Earnings Call Transcript & Summary

Greetings. Welcome to New World Development Company Limited's FY 2025 Interim Presentation Online Analyst and Investors Briefing. I am the IR Director, [Patrick Chang]. I'm the moderator for this briefing session. First of all, let me introduce to you our management in attendance. They are New World Development Executive Director and CEO, Ms. Echo Huang; New World Development Executive Director, Mr. Sitt Nam-Hoi; New World Development Executive Director and CFO, Mr. Edward Lau; New World China COO, Mr. Benny Chan. [Operator Instructions] I will now pass the floor to Echo. Thank you.

First of all, thank you, investors and analysts for attending our interim results presentation today. This is the first time for me to preside over the results presentation briefing since I took over as CEO of the group at the end of November last year, and I deeply feel the responsibility. I would like to express my gratitude to our New World team for their full support as usual. I am confident that we will overcome all difficulties. In fact, the property market is facing a lot of challenges now. Interest rates is still on the high. Our company's debt is still at a relatively high level. The property markets on the Mainland and Hong Kong still need time to recover. The combination of these factors is a test for us. In face of various challenges, we need to be more composed. I am a person who is used to fighting winning [ battles ] and I will actively promote business development in the future and strive for better results in order to live up to the trust and support of the Board and our investors. Therefore, for a period of time in the past, I, together with the management and all colleagues have been doing our best to meet challenges in a flexible way. At present, our work comprises 2 major directions. First, we will continue to develop and promote our business, focusing on the core property business to ensure normal and stable operations and to speed up return of capital. Secondly, we will improve cash flow of the company. We attach great importance to cash flow. We will actively manage our finances and properly handle our debt. Our topmost responsibility or task is to reduce indebtedness. To be more specific, we will implement 7 measures to reduce indebtedness. First, we will actively sell our development projects. In Hong Kong, the STATE PAVILIA, North Point and -- Pavilia Forest in Kai Tak have already commenced sales. We'll continue to sell these projects as soon as possible and launch Wong Chuk Hang Island South Coast Phase V and [ATELIER King] Road project in [indiscernible] City as soon as possible. On the Mainland, we'll continue to sell a number of projects in Tier 1 cities, including Guangzhou Canton View; Guangzhou, THE SILLAGE; and Hangzhou, New World Art Center projects. At the same time, we will promote development of urban renewal projects in Guangzhou and Shenzhen so that they can be launched as soon as possible to accelerate return of capital. Secondly, we will continue to sell noncore assets actively. We'll continue to dispose of our noncore assets and business to realize cash flow. We are now deliberating about several projects, and we'll announce the details when they are finalized. In addition to property sales, we aim to achieve a total of HKD 26 billion by FY '25. Third, we will unlock the value of the group's farmland. Our group has a land bank of more than 14 million square feet in the North Metropolis with a lot of good quality land. We are also actively cooperating with central and state-owned enterprises, and we will accelerate our effort to develop more projects to unlock value. Fourth, we will improve rental return and increase recurring revenue. Our commercial projects in Hong Kong and the Mainland are operating satisfactorily. In particular, leasing of the group's offices has been maintained at a good level. We will continue to work hard to improve rental income in the hope of further expanding recurring revenue. Fifth, we will continue to streamline our costs and reduce capital and operating expenditure in a great way. We are now strictly managing our expenditure and both CapEx and OpEx have declined significantly, and we will continue to do so in the period to come. Sixth, dividend halt. We'll continue to suspend dividend payments and retain cash. Seventh, proactive treasury management. We'll continue to discuss with major banks on refinancing arrangements and make good use of the interest cut cycle that we have entered into in order to reduce interest expenses. Later on, Mr. Lau, CFO; Mr. Sitt, Nam-Hoi, Executive Director; and Mr. Benny Chang, COO of New World China, will give more detailed explanation later. The group's day-to-day operations are smooth. I am pleased to share with you that after a series of efficiency enhancement and cost cutting and revenue expansion measures, we have made initial progress in reducing indebtedness. First, the company's cash flow has improved. Second, our overall gross debt continues to decrease with short-term debt down by $9.4 billion. In terms of property sales, the record-breaking sales result of State Pavilia in North Point was very satisfactory, while the sales of Pavilia Forest was also very stable. Property sales on the Mainland is even more impressive with more than 70% of the original target for the whole year accomplished in the first half of the fiscal year, reflecting that the market has stabilized and stopped decline. And it also proves that buyers have full confidence in the New World brand. In the current environment, the support of our customers, investors, business partners and the community, especially the banks is very important to our group. I would like to point out that the support of major banks to our business shows that they have confidence in our operations, and this is a great encouragement to me. Right now, global economy is still full of uncertainties. And we believe that in the future, the overall economy and the real estate industry will continue to face many challenges. Our management will certainly rise to the challenges, and we are confident that the group is resilient enough to tide over the difficulties together with the Hong Kong community. New World will continue to give full play to our strengths and contribute to the prosperity of Hong Kong and our country. Now very quickly, I will share with you our first half FY '25 financial performance, specifically for core operating profit. In first half FY '25, although we recorded good contracted sales in both Hong Kong and Mainland China, due to the impact of the general market in recent years, the profit margins of our property development projects booked were generally lower than that of the same period last year. So core operating profit for first half of the fiscal year was HKD 4.4 billion, down 18% year-on-year, while our investment properties continue to perform well. Excluding the impact of sold assets on revenue, segment results increased by about 7%, of which segment results of K11 also increased by 5%. For loss, in first half FY '25, loss attributable to shareholders amounted to HKD 6.6 billion, mainly due to some one-off losses, including HKD 1.6 billion on fair value changes on investment properties. And recently, because of market downturn, there was a HKD 3.4 billion impairment on development properties. Besides we have sold noncore assets and business portfolio, and we recorded a HKD 1 billion one-off loss. For expenses, G&A expenses were HKD 1.8 billion, down 9% year-on-year, mainly due to the continued optimization of our organizational structure, enhancement of management efficiency, and drastic cost-cutting effort to reduce internal operating costs. For CapEx, it's HKD 4.9 billion, a significant drop of 35% from same period last year. And we have lowered our FY '25 CapEx guidance of less than HKD 15 billion to less than HKD 13 billion, mainly because we will continue to exercise stringent control over CapEx. So this demonstrates our determination to reduce indebtedness. For our debt, our gross debt has continued to fall. And as at end of December 2024, our gross debt has decreased by HKD 5.1 billion comparing to June 2024. For short-term debt, it's decreased by HKD 9.4 billion comparing with December 2023, that is over the past 1 year. Our total debt has decreased by HKD 11.4 billion. Now I would defer to our CFO, Mr. Lau, to explain our financial situation.

Thank you, Edward. Thank you, Echo. In face of the current uncertainty in the industry, we attach great importance to cash flow. At the same time, while maintaining the normal development of our company's business, reducing debt is our top priority. In first half FY '25, we saw significant improvement in cash flow from operations. Net cash flow from operations, together with sale of noncore assets, NCD, totaled about HKD 9.6 billion, which was nearly sufficient to cover our CapEx of HKD 4.9 billion. Net interest expense, HKD 3.9 billion and HKD 0.9 billion interest on our perpetual bonds. Our cash was reduced by HKD 6.1 billion in first half FY '25, which was largely used to pay down our debt. In August, we issued HKD 3.1 billion equivalent of U.S. dollar-denominated bonds, and we bought back HKD 1.2 billion of bonds and perpetual bonds. For bank loans, our net repayment amounted to HKD 7.8 billion. As a result of the above financial arrangements, our total debt during this period was down HKD 5.1 billion. For perpetual bonds, it is reduced by HKD 0.9 billion. As of the end of December 2024, total debt of HKD 146.5 billion, short-term debt amounted to HKD 32.2 billion, a decrease of HKD 9.4 billion compared to June 2024, mainly due to the refinancing of a portion of our short-term debt into long-term debt. Comparing with December 2023, that is in the past 1 year, our total debt decreased by HKD 11.4 billion. Due to the improvement in our operating cash flow, our net debt in the past half year has stabilized. In June 2024, it was HKD 123.7 billion. It slightly increased by HKD 0.9 billion to HKD 124.6 billion, mainly due to repurchase of HKD 0.9 billion of perpetual bond in August 2024. If this was not done, our net debt is basically flat. It stayed the same. Benefiting from the interest rate cut in Hong Kong and U.S., average interest rate in Hong Kong dropped from 4.9% in first half FY '24 to 4.7% in first half FY '25. Regarding net gearing, in FY '25 first half, it increased by 2.5% to 57.5%, mainly due to the noncash impact of the investment properties and development properties impairments. The buyback of perpetual bonds and depreciation of RMB. Excluding these one-off financial treatments and the impact of foreign exchange, net gearing ratio would have been 2.1% lower than now at about 55.4%, which is more or less the same as in the previous year. Over to you, Echo.

Thank you, Edward. As mentioned above, under the premise of maintaining the company's normal business development, debt reduction is our top priority. We will implement the 7 measures to reduce indebtedness with full strength. I would now explain the points one by one. For Hong Kong property development projects, in 2024, in Hong Kong, after the announcement of relaxation of all the stringent measures, in the second half of the year, interest cut cycle started, coupled with relaxation of loan-to-value ratios and other favorable policies, atmosphere of Hong Kong property market has recovered. Due to unnecessary speculations and reports arising from our NCD, which affected our work, we have decided to disclose progress of NCD together with DP contracted sales instead of disclosing progress of NCD alone. Taking NCD into account, our contracted sales attributable to Hong Kong in the first half of FY '25 amounted to HKD 5.2 billion. And our FY '25 target is HKD 11 billion. In other words, in the first half, we have completed 47% of the target. As of 31st December 2024, for Pavilia Forest in Kai Tak, we have already sold 514 units with contracted sales of nearly HKD 3.5 billion. And there are many big investors who are foreign buyers, and it is the highest selling brand-new project in Kai Tak Runway area in the past 3 years. In North Point, for the State Pavilia residential project, it provides a total of 388 residential units, and it has been highly sought after by the market, and it sells very well since its launch. Since the launch of the project on 11th January, a total of 313 units have been put up for sale in batches and 279 units have been sold in just 1 month. Total turnover was nearly HKD 3.2 billion. At the same time, State Pavilia has also set 3 records in 2025. First, it has set a record on the Hong Kong Island in terms of highest price per square foot. Highest price reached HKD 51,000 per square foot for the penthouse duplex unit. Second, it is the king of ticket for new developments in the urban area this year with oversubscription of about 95x. Thirdly, it is the first development that was sold out in the first round on the first day this year. This shows buyers' love New World Development's brand and our products, and they have confidence in our company. Taking into account the contracted sales of State Pavilia and other projects in January and February this year, our attributable contracted sales in Hong Kong amounted to HKD 7.9 billion, which accounted for 72% of our FY '25 annual target. In other words, as of now, in Hong Kong, we have already completed 72% of our target. Apart from residential properties, in West Kowloon, sales of our office buildings also performed well. Taking 888 Lai Chi Kok Road as an example, as of first half FY '25, all projects -- all units have been sold out already. Contracted sales in the first half reached HKD 1.2 billion. Contracted sales, the office building at 83 Wing Hong Street is our next focus project. And as the last commercial building project to be launched in the region, it is believed that it will continue to be highly sought after by the market. Now I will invite Mr. Benny Chan, COO of New World China, to give a brief account of development of properties on the Mainland.

Yes. Thank you. Property development on the Mainland, referring to the macro environment on September 26th last year, the central government explicitly called for the real estate market to stop falling and stabilize, marking a policy inflection point. And in December, the Politburo meeting further emphasized the need to stabilize the property market by 2025, injecting confidence into the market. Under this policy direction set by the central government, various local governments have responded positively with frequency of policy introduction accelerating and covering a wide range of potential measures including optimizing or abolishing the purchase restriction, lowering down payment ratio, lowering mortgage interest rates, optimizing the price restriction policy. In first-tier cities, we have seen decline has stopped and property market has stabilized. First-tier cities took the lead in stabilizing with Guangzhou, Hangzhou, Shanghai and Shenzhen market showing improvement in January. Thanks to our forward-looking planning in the early years, our land reserves are in these core areas in these cities. Through our flexible marketing strategy, we have successfully capitalized on the policy dividend and achieved satisfactory results in a number of projects. In first half FY '25, our Mainland contracted sales reached RMB 7.5 billion. In view of the current direction of the market, we have raised our full year target from RMB 11 billion to RMB 14 billion. Now I will talk about a few major projects. In the GBA market, as Guangzhou's luxury property benchmark, Guangzhou, a new Metropolis mentioned, we have introduced new phase of its property project, which has already sold RMB 2 billion at the opening, which can be set to have good price and good market. For Guangzhou, The Sillage, located in CBD of Bai'etan, it has been ranked first in terms of number of visitors and transactions for several consecutive months. For [indiscernible] in core area of Changlong, Panyu, it had the highest average transaction price in Panyu from January to November 2024. In the Northern market, Shenyang's Parksville has led the market. Cumulative sales in 2024 reached RMB 1.1 billion. It ranked the top in Shenyang. For Shanghai, we have [ Tianhui ] project, and it is expected to be delivered by June and will be booked in FY '25. For Hangzhou, as a national private economy demonstration city, it has recently continued to deepen its policies. And there is emergence of -- emerging technology forces represented by artificial intelligence DeepSeek. This has directly driven demand for commercial real estate with the residential and office markets experiencing strong supply and demand. In 2019, we are planning to build a 740,000 square meter urban complex, Wangjiang center. So it is a complex known as Hangzhou New World Arts Center. The residential portion of Phase 1 of the project, [indiscernible] was successfully delivered at the end of last year, while 120,000 square meters of commercial space, including large-sized, flat-sized apartments, offices and mini mall is expected to be delivered from June '25 onwards. Phase 2 of the project has also been topped out and is expected to be fully completed by the end of '25. I would like to highlight the sale of noncore assets. In first half of the financial year, we completed the sale of Beijing, [indiscernible] office, Ningbo New World Office; Guangzhou, Liwan New World, Shenyang and other places. We'll continue to sell our noncore assets in the second half of the year to speed up return of capital. That's all from me.

Thank you, Benny. In the coming years, the Group will continue to launch projects in both Hong Kong and Mainland China for property development. In Hong Kong, within 2025, we will focus on 4 projects. In addition to State Pavilia in North Point and also Pavilla Forest in Kai Tak and the remaining units will gradually launch the Wong Chuk Hang Station, Hong Kong Island South Coast Phase V project and Kowloon City in Long Road project, which comprise a total of more than 1,800 units. Besides, our JV projects will continue to be put up for sale such as Tin Long in Kai Tak and [ Tai Fang ] in [ Kowloon ] Bay, besides the [ Wangjiang ] Road project in Western [ levels ] will be launched within this year. In addition, next month, there will be 4 property development projects in Hong Kong that will commence construction. One of them is a joint project with China [indiscernible] in North Metropolis. The other 3 are in urban area, including Road Street in [indiscernible], [ Kwan Tam ] Road in Jordan and [indiscernible] Street in [indiscernible], all of which are urban redevelopment projects on old leased land and the timing for selling the units will be more flexible. It is expected that sale of properties can commence in 2026 to 2027. This will speed up our capital recovery. On the Mainland, the market has stabilized, leading to a rise in the popularity of quality land lots in key cities. and the emergence of Land Kings worth RMB 10 billion in first-tier cities. In December last year, China Resources Land and China Shipping jointly won the land parcel in Ruhi Street [indiscernible] District Shenzhen at a floor price of more than RMB 70,000 per square meter, refreshing the top 1 total price of residential land in Shenzhen, reflecting the developers' confidence in the future of the industry. Our nearby [indiscernible] project, which is about 1.5 kilometer away from the Sealy high-speed rail hub under construction has a high-quality location, and it is believed that it can bring considerable revenue and profit and construction will commence in March and it will be launched in 2026. The Longgang project in Shenzhen has also started construction. It will be launched in 2026. In this year and next year, we'll continue to launch key projects, including Guangzhou, Guangzhou New World, Guangzhou Village, Yuhang New World, Hangzhou Wangjiang Xincheng and Shenzhen Longgang Sealy projects. With the Group's forward-looking strategy to invest in core first and second-tier cities and core locations, coupled with our persistent high-quality development and brand appeal, we are confident that we will achieve satisfactory sales results. Next, I would invite our Executive Director, Mr. Sid Nam Hui, to explain the development of our farmland. Mr. Sid?

Okay. Thank you, Echo. Regarding farmland, the government is actively developing the North Metropolis in order to promote Hong Kong's future economic development and increase land reserve. New World has abundant farmland resources, including about 14 million square feet of farmland in the North Metropolis. Currently, we have planned projects that will provide a total of about 12 million square feet of attributable GFA, of which short- to medium-term projects can provide about 9 million square feet of GFA and long-term projects can provide an additional 3 million square feet of GFA. We hope to accelerate conversion of farmland through our farmland reserve, effectively reduce average land cost and related CapEx and significantly enhance and unlock value of the land. To complement the government's planning and development of the North Metropolis, we took the lead to sign cooperation agreements with a number of state-owned enterprises from the end of 2023, including China Merchants Shoko, China Resources Land and SZ Group as previously disclosed. In addition, in November last year, we signed a letter of intent for the development of the North Metropolis area led by the SARG and reached an agreement with other industry leaders such as China Overseas and China Railway Construction to jointly develop the North Metropolis. We'll continue to seek cooperation with more SOEs. As for the progress of projects, the land exchange for the Fanling [indiscernible] Road project with China Merchants Sherco, well, land exchange was completed in December 2024. Premium was HKD 1,627 per square foot, which is about 35% lower than recent transactions in the same area. Total GFA of the project is 1.12 million square feet. Our group's attributable GFA is 340,000 square feet. Construction is expected to commence next month. As regards the specific timetable for farmland Exchange, apart from Fanling Mark Road Project that land exchange was completed, it is expected that within 1 to 2 years, several more projects will see completion of land exchange. They are [indiscernible] and also the Lung Tin Tsuen Phase 2 and Lung Tin Tsuen Phase 4, which we work with China Resources Land. So this will add an additional 1 million square feet of GFA to the group. In the coming 3 to 5 years, we will make town planning applications and land exchange applications, and this can increase the group's attributable GFA by about 7.2 million square feet. Major projects include Tong Yan Sun, [indiscernible], [indiscernible], [indiscernible] Phase 5 and [indiscernible] Home Road. Among them, for [indiscernible] Phase 5 and [indiscernible] Road projects in [indiscernible], planning applications were approved by the Town Planning Board in December 2024 and January 2025, respectively. We are also studying different options to provide an additional 4 million square feet of GFA. As for the long run, major projects under planning at present include [indiscernible], [indiscernible] and [indiscernible], which will provide around 3.2 million square feet of GFA. Next, I will pass the floor back to Echo.

Thank you, Mr. Sid. Regarding Hong Kong investment properties, K11 has attracted many major international brands with its unique cultural business model and positioning. We'll continue to optimize our tenant mix. A number of major international brands have already confirmed that they will move into K11 [indiscernible] or expand their store. For example, Prada, Rolex, BV, et cetera, will move into K11 MUSEA, and Balenciaga, YSL and other existing brands will further expand. Besides K11, we'll continue to promote interactive experiences for customers. In July, K11 MUSEA will open the first C Ronado Museum in Asia. K11 Art Mall will also continue to launch experiential limited edition stores through collaboration with brands to drive foot traffic. For office, we have another project in this district that is 83 King Lam Street, which already started population intake last year. As the first [ swim ] tower project in West Kowloon and the new landmark in the district, we will use it for long-term rental income. Current occupancy rate is about 40%. With a number of tenants under negotiation right now, I believe occupancy rate will continue to rise. For tenants, local tenants account for about 60%, other tenants come from Japan, the Middle East and the U.S. For our other office buildings, occupancy rate has been satisfactory. Occupancy rate of K11 Atelia Victoria Dockside is close to 99%. K11 Atelia on Kings Road North Point has an overall occupancy rate of 93%. Occupancy rate of Manning House is about 93%. And after we moved our headquarters out of New World Tower, occupancy rate increased to about 80%. As for 11 SKIES, it will be the largest one-stop retail and entertainment landmark in Hong Kong, providing visitors from all over the world with a top-rate experience. For Mainland investment properties, some of our projects have further enhanced their consumer experience and brand appeal through brand upgrades and business adjustments. With precise market positioning and excellent operational capabilities, overall occupancy rates of our commercial projects remained stable, demonstrating strong competitiveness and market recognition as a benchmark for our businesses. The Park K11 Select [indiscernible] was opened in September last year, and that was grand opening at the end of December. It was highly recognized by the market. It has become a landmark in Ningbo and even in Eastern China. Currently, occupancy rate is over 70%. With more stores moving in, occupancy rates will continue to rise. We have several large-scale investment projects that will open this year on the Mainland. They include our first flagship project in Mainland China, K11 East Coast. It will open in -- on April 28, 2025, and it will be one of the largest shopping malls in Shenzhen. The second one is K11 Select in One Bo CBD in Chang Long, Guangzhou. It is the first K11 project in GBA, and it will also open in the third quarter 2025. For CapEx, you can see from this chart that in the past few fiscal years, our CapEx has been decreasing year-over-year. This is mainly due to the following reasons. First, we have strictly controlled our project expenditure, and we vigorously upgraded our construction efficiency starting from the design stage. Number two, our property development projects in the Mainland are mainly in the form of redevelopment of old areas, which gives us an advantage in terms of land cost. In the coming period, we'll focus on property development projects with a shorter cash flow cycle to accelerate capital recovery. In FY '25, we'll continue to control CapEx so that it will fall below HKD 13 billion. Regarding operating costs, thanks to optimization of our corporate structure and processes, we're able to save expenses. And so in first half FY '25, G&A amounted to HKD 1.8 billion, down 9% year-on-year. And since first half FY 2023, there's a decrease of 13% year-on-year. In the future, I will continue to optimize our corporate processes and enhance operating efficiency. In view of our current financial situation, we have decided to continue to suspend dividend payment. In the coming period, we won't pay dividend until we have made concrete progress in reducing indebtedness. Now I would like to review with you the progress of our financial management. First, the company's cash flow has improved. Second, gross debt has continued to decrease. Short-term debt is down HKD 9.4 billion. In the future, I will continue to improve the company's cash flow, actively manage our finances and properly handle our debt. We will discuss about refinancing arrangements with major banks. Finally, I would like to thank all investors once again, especially banks for their strong support over the past few months to me, which has strengthened our confidence in overcoming the challenges ahead. Once again, thank you all.

Thank you, Echo. Now it's Q&A session. Because we have already received many questions, we have already categorized the questions. Because of time, our management will try their best to answer the questions. First question is for Echo. Echo, as the new CEO, are you going to put the group's future development direction to the Mainland?

Thank you. Now real estate is New World's core business. And all along, the group is rooted in Hong Kong and looking towards overseas and the Mainland. So I guess people ask this question because they are concerned about my Mainland background. In the real estate industry, I have experience of almost 30 years. I have worked for New World for 10 years already. I am very familiar with the Mainland market. With my experience, well, to be honest, I have never left the Hong Kong market. All along, I have been living in Hong Kong. So for me, well, I have rich real estate experience, so I'm confident that I can navigate both markets. Besides, I can make decisions as soon as possible. As a manager, I believe that with my experience, in the real estate business and my very rich Mainland management experience and my interpersonal connections, well, regarding sales and also land acquisition, sales and leasing, I have got so many years of experience. So I personally believe that, well, since there are some concerns about my familiarity with the Hong Kong market, I can say for sure and with confidence that looking at the sales of State Pavilia, well, it has proven that I can master over the market. Will I turn my direction to the Mainland? As said in my presentation, next month in March, we will launch 4 projects. And then in terms of projects for sale, we will accelerate our progress. On the Mainland in Shenzhen, in Shenzhen, we have 2 projects. And in Hangzhou and Shanghai, we have never stopped our work. So I can answer your question for sure that in the future, in both Hong Kong and the Mainland, our development won't change from that in the past.

All right. Thank you, Echo. Next question. Now some time ago, there was rumor that the group has invited FTI and Link Latest to help your restructuring. And some time ago, there was a press release issued. So can you tell us whether you will consider a debt restructuring?

Well, our answer is there is no change. At present, our company has not done or has not discovered about any debt restructuring. Our group has been managing our finances actively. We are lowering our gross debt, and we are complying with our debt obligations. So we also comply with all disclosure requirements, and we also provide investors with the necessary and appropriate information. Thank you.

Next question. Some time ago, there was a report saying that your group has discussed with many banks about a super large-scale refinancing after expiry of some debt. And then there are 13 pieces of collaterals worth USD 19.1 billion. So when would the work be completed? And concerning this large-scale financing, what is the strategic meaning on your overall debt reduction?

As Echo said, our group has been actively managing our finance. So we work to reduce indebtedness with full force, and we are controlling our financing costs. We have been discussing with banks about refinancing arrangement, and we need to thank them for supporting New World a lot. At present, our major goal is to lower total gross debt and to improve our operating cash flow. We have complied with all disclosure requirements. At the same time, we will release appropriate information to investors in a timely way.

Thank you, Edward. Next question is about a recent rumor. For K11 Art Mall, they are asking when that deal will be completed. So this question is for me. Well, the group from time to time will receive from potential buyers some inquiries about our assets. So this shows that our assets are of good quality, and they are attractive in the market. I can only say that at this present moment, we have not signed any legally binding agreements about these assets. Regarding Art Mall or other malls, to be honest, well, I will only sell when my desire price is reached. As Benny said, on the Mainland in Beijing recently, the [indiscernible] project was transacted. It was sold to Changjiang Business School at RMB 1.4 billion, and we have sold an office building in Ningbo. Regarding the transaction date of Art Mall, well, I can say that if there is appropriate price or terms, then for sure, I will let you know promptly.

Right. The next question is about NCD. So which assets are now being sold by the group and which assets will definitely not be sold?

Just now in our presentation, I said that in the past regarding NCD disclosure, well, many rumors, speculations and reports have arisen, affecting our daily work. So the group has decided that in the future, we will not disclose NCD progress alone. So NCD and DP contracted sales will be disclosed together. In the future, we will actively and strategically dispose of noncore assets so as to achieve recovery of capital.