Robinsons Land Corporation (RLC) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to our first half analyst briefing of the year. Joining us today is Mr. Frederick D. Go, President and CEO of Robinsons Land Corporation, and the rest of the IR team. Today, we will be sharing with you insights into our strategic progress, financial highlights and key achievements that have shaped our performance for the first 6 months of the year. Presenting with us is Mr. Kerwin Tan, our CFO; and Ms. Erica Lim. After the presentation, we will open the briefing for the Q&A session. Thank you. Mr. Kerwin, you may start.

Thank you, Ron. Good afternoon to everyone. We will be sharing with you RLC's unaudited financial results for the first half of 2023. We will touch on the financials of the company and operational highlights per business segments, including our CapEx spending, provide updates on future plans and strategies, updates on our ESG activity and journey during the period. And lastly, updates on our successful bond listing. In the first half of the year, RLC demonstrated strong financial performance, achieving a remarkable 23% year-on-year growth in net income, totaling PHP 5.78 billion. This was achieved despite the high base from the same period last year due to the recognition of our CDx by our China profit in 2022. Without the high base last year, net income attributable to equity holders of pattern would have increased by 71% versus same period last year. Our EBITDA and EBIT margin are the highest in company's history. Earnings per share for the first half increased by 26% to PHP 1.16 per share and net book value now stands at PHP 26.62 per share. Our Mall business maintained its upward trajectory, recording a high revenue growth of 36% to PHP 7.76 billion year-on-year. More rental revenues also saw a significant jump of 42% compared to the same period last year, with an impressive occupancy rate of 92%, while Mall EBITDA margin registered 59% in the first half of 2023 and 60% in the second quarter of 2023, beating the previous high set in first half of 2019 and second quarter of 2019 by 54% and 53%, respectively. This is with the adoption of the new accounting standard. The Residential business exhibited solid performance with revenues increasing by 28% to PHP 5.39 billion. This growth was driven by higher recognition of sales, reaching the equity threshold and a higher percentage of completion in the first half of the year. Additionally, our joint ventures ported PHP 1.01 billion in equity earnings. More importantly, RLC's organic net sales take-up more than doubled in the first half of 2023, reaching PHP 12.43 billion, while joint venture net sales take-up skyrocketed by 74% to PHP 8.79 billion. In the second quarter, RLC Residences successfully launched its third project for the year, Mantawi Tower 1, with a total salable inventory of PHP 7.9 billion. The Hotel segment experienced substantial revenue growth, outperforming last year due to the huge contribution from upscale home grown and international branded hotels. Our Logistics business maintained stability with commendable 9% growth in revenue, while our Industrial Development achieved a robust revenue growth of 68%, driven by the realization of deeper gains on the sale of land to our joint venture. Furthermore, our Office business demonstrated steady growth, increasing 4% year-on-year during the first half of 2023. Collectively, each business unit made positive contribution, serving as a strong testament to RLC's remarkable recovery and growth story. Our asset portfolio as of the first half of 2023 is composed of 53 operational lifestyle centers, 89 residential buildings, 40 housing subdivisions, 31 office developments, 29 mixed-use developments, 26 hotels, 9 work.able centers and 8 industrial facilities. Turning now to the financial performance highlights. RLC's financial position remains robust and well-capitalized with total assets amounting to PHP 242 billion, which includes a substantial cash position of approximately PHP 20 billion. Shareholders' equity stands at PHP 136 billion, reflecting the company's strong capital base and financial stability. The total outstanding debt stands at PHP [ 66 ] billion, resulting in a prudent and healthy net debt-to-equity ratio of 35%. In terms of earnings performance, RLC has achieved noteworthy results with an earnings per share at PHP 1.16 per share, marking an impressive 26% increase compared to the first half of 2022. Moreover, net book value per share now stands at PHP 26.62, indicating a considerable discount from its currently traded share price. This metric suggests that the company's intrinsic value exceeds its market valuation, presenting an attractive investment opportunity. Overall, RLC's solid financial position, healthy capital structure and the impressive earnings growth reflect the company's resilient and sound management practices, positioning it favorably in the market and enhancing shareholder confidence. For the first half of 2023, consolidated revenues is down by 29% year-on-year to PHP 19.63 billion due to a high base from China's contribution last year. Excluding China last year, our revenues would have increased by 32% for the first half of this year, driven primarily by our investment portfolio, as shown in this chart. Depreciation is flattish as the full depreciation of Forum last year was offset by the depreciation of new malls in our offices, resulting to an EBIT of 16% higher than the same period last year. Lower provision for income tax by 34% versus last year pushed the consolidated net income to increase by [Technical Difficulty] to PHP 6.45 billion, and higher ownership of RLC in RCR, currently at 66.14% versus 63.49% last year, pushed net income attributable to parent to increase by 23%. Again, we also would like to highlight, excluding our China net profits last year, net income attributable to RLC equity holders would have increased by 71% versus same period last year. All our businesses posted strong growth during the first half of 2023, except for China, as we have almost fully recognized profit. Higher revenues came from all our domestic business units, especially in the investment portfolio, which accounted 71% of the total revenue, while the Residential division also experienced strong growth including significant contributions from equity share in joint ventures. I will now turn over the presentation to Mr. Erica Lim, who will report on the operational highlights of our business unit.

Good afternoon to all of our participants, and thank you. Robinsons Malls remains a formidable force as the second largest mall operator in the country, proudly presenting 53 lifestyle centers encompassing an impressive 1.6 million square meters of leasable space with a remarkable 92% occupancy rate, housing over 8,000 esteemed retailers. This expansive footprint solidifies the company's leading position in the retail landscape. The sustained strength of consumer spending and the robust retail sales have propelled Robinsons Malls revenues to an impressive PHP 7.77 billion, reflecting a remarkable 36% year-on-year growth, contributing significantly to 40% of the consolidated revenues. Notably, the astute management practices have driven exceptional financial performance with EBITDA exhibited remarkable growth of 58% year-on-year, reaching PHP 4.61 billion, while EBIT surged an astounding 162%, soaring to PHP 2.9 billion. These outstanding results reflect the company's effective cost management and revenue optimization strategies. The Rental revenue segment demonstrated impressive growth as well, escalating by a remarkable 42% amounting to PHP 5.46 billion, underscoring the strong demand by Robinsons Malls. Meanwhile, Robinson's Offices ended the year with 741,000 square meters of leasable space with a total of 31 office buildings and an average of 89% leased percentage. Robinson's Offices delivered steady top line results with a 4% growth in revenues to PHP 3.72 billion in the first half of the year. This stable performance was primarily driven by the sustained occupancy of majority of its portfolio and higher rental rates during the period. EBITDA and EBIT were flat in the first half of the year versus same period last year due to higher OpEx, particularly in the second quarter. In the first quarter of 2023, RLC opened a new build to suit work.able centers in Cyber Omega located in Pasig. This brings our flexible co-working space to a total of 9 work.able sites. Amidst the backdrop of revenge travel and the bustling summer season, Robinsons Hotels and Resorts, or RHR, showcased an extraordinary feat, achieving an astounding 138% year-on-year revenue growth during the second quarter, surging to an impressive PHP 1.12 billion, marking the highest quarterly revenue in the company's history. This momentous achievement fueled the first half revenue growth to a remarkable 148%, reaching PHP 2 billion, driven by the strong contribution from both existing and newly established hotels. In tandem with exceptional revenue performance, RHR witnessed an unprecedented surge in EBITDA and EBIT, skyrocketing by an incredible 920% and 169%, respectively, amounting to PHP 443 million and PHP 132 million, respectively. These staggering figures underscore the remarkable financial prowess of RHR and demonstrate the company's effective cost management and operational efficiency. With an impressive portfolio of 26 hospitality developments, RHR proudly stands as the largest hotel developer and operator in the Philippines. The company's strategic expansion and unwavering commitment to delivering unparalleled guest experiences have solidified its dominant position in the hotel industry. Overall, RHR's outstanding financial performance coupled with its robust presence in the hospitality market positions it as a prime investment opportunity and a key player in the Philippines' thriving hotel and resort landscape. Last March, we opened RHR's newest 5-star hotels, the Westin Manila, located in San Miguel Avenue, Mandaluyong City, with 303 sweet rooms. The Westin brand is known for its wellness offerings, empowering guests' well-being and world-class service. New project launches in the first half of 2023, raised the combined net sales take-up of RLC Residences and Robinsons Homes to PHP 12.43 billion, up by 107% versus the same period last year, represented by the red and blue bar graphs. The strong sales comes from the company's existing and newly-launched projects. Meanwhile, net sales take up from joint venture projects with Hong Kong Land, Shangri-La and DMCI, represented by the yellow bar graphs, outperformed the previous year by 74% to PHP 8.8 billion. This came with a robust sales from Aurelia, Velaris and with Haraya, the second project under the joint venture with Shang Properties. On the other hand, realized revenues climbed by 28% year-on-year to PHP 5.39 billion for the quarter. The robust performance was driven by higher collections and faster completion of our residential projects, coupled with a remarkable contribution from our joint venture equity earnings. EBITDA surged by 38% to PHP 2.16 billion, while EBIT jumped by 39% to PHP 2.11 billion versus the first half of 2022. In the first quarter of 2023, RLC Residences launched Mantawi Tower 1, which is located in Mandaue City, Cebu, bringing 3 new projects launched in the first half of the year with total salable amount of PHP 21.3 billion. Le Pont and Sierra Valley Gardens building 4 were launched in the first quarter of this year. Seeing healthy demand from affluent buyers, our joint venture with Shang Properties launched Haraya, our second project with RJV. Haraya is in our Bridgetowne destination estate and is defined to be an iconic home address in the east of Metro Manila. Moreover, RLC continues to make significant strides with its existing JV projects, registering healthy sales tick up across all 3 projects. Just a little over 3 years from launch date, Aurelia is already 79% sold, Velaris at 75% and Sonora at 50%. Robinsons Logistics and Industrial facilities or RLX recorded revenues, which modestly increased to PHP 295 million in the first half of 2023 versus the same period last year. EBITDA increased by 22%, while EBIT accelerated by 27% to PHP 280 million and PHP 209 million, respectively. RLX has 8 industrial facilities located in Sucat, Muntinlupa, Sierra Valley in Cainta, San Fernando and Mexico in Pampanga and in Calamba, Laguna, all with the total gross leasable space of 199,000 square meters. These industrial facilities are fully leased out. RLX completed its eighth logistics facilities, RLX Calamba 2A, located in Calamba, Laguna, with a total gross leasable space of 33,000 square meters. In the first half of the year, Robinsons Integrated Development recognized revenues of PHP 446 million from a portion of deferred gain on sale of land to joint venture entities. EBITDA and EBIT settled at PHP 251 million and PHP 249 million, respectively. For our China project, remaining revenues is for the car parks. In the first half of 2023, revenue was at PHP 17 million, while EBITDA and EBIT were both at PHP 8 million. Additionally, the second tranche of the $25 million cash dividend has been paid last June. Moving on to CapEx. RLC spent PHP 9.25 billion in capital expenditures for the expansive development of malls, offices, hotels, warehouse facilities, acquisition of land and the construction of residential projects for its local operations. To support our growth plans, our land map now spans across more than 800 hectares. With the crystallization of land map values in Metro Manila, RLC's landback value is estimated at about PHP 182.6 billion as of the first half of 2023, 46% of which or PHP 84.4 billion is attributable to the lag back value of our destination steps. For this year, we will open new or mall located in New Star Integrated Resorts Cebu. This is a unique mall positioned with a tenant mix comprised of luxury, high-end fashion, specialty shops, beauty & fragrance, premier dining, casual dining, cafes, pampering, wellness and family amusement. We look ahead to the opening of our premier upscale lifestyle center and Bridgetowne Destination estate. Next year, Robinsons Malls will unveil Opus Mall to the public and we'll complete the new mall in Pagadian, Zamboanga del Sur, Mindanao. For offices, slated to be completed this year is GBF Tower 1, which will increase office leasable space by 7% to 794,000 square meters. While for next year, GBF Tower 2 is expected to be completed. Both GBF buildings or premium top-of-the-line development, courtesy of Robinson's offices. Both properties will rise in the Bridgetowne Destination estate. Cybergate Iloilo 3 is also expected to be completed next year, which will increase office space by 12% to 886,000 square meters. Our Logistics and Industrial Facilities division completed our RLX Calamba 2A warehouse in the first quarter of 2023. We are targeting to complete additional 2 new warehouses for the year, namely RLX Calamba 2B and as well as a second site in Sierra Valley. For next year, RLX is expected to complete Calamba 2C and Montclair, bringing our logistics facilities above 300,000 square meters of leasable space. Our Residential division is actively launching various projects nationwide. This year, we've already launched a total of PHP 21.3 billion with Le Pont Residences, Sierra Valley Garden 4 and Mantawi Tower 1. We will continue to sound off to the market and respond accordingly with foreseen demand. Lastly, Robinsons Hotels and Resorts successfully opened the Westin Manila last March and has completed the remaining rooms of Go Hotels Plus Tuguegarao. Next year, we expect to complete NuStar Hotel, our foray into ultra luxury segment. This will be located in NuStar integrated resorts Cebu. With this, our rooms show grew by 6% to 4,499 rooms next year. Finally, we placed a spotlight on RLC's various ESG initiatives. We remain to be a market leader in solar energy usage, with 24 Robinsons Malls harnessing solar power with a total capacity of 31 megawatts nationwide. This translates to 6.7 million kilowatt hours of clean energy and over 4,795 metric tons of carbon dioxide avoided, equivalent to more than 79,000 trees planted. 7 of our office developments have acquired LEED or EDGE certifications, and we held tree planting activities in 8 different localities this year. All Robinsons Malls are designed with the system for waste water conservation and recovery. 29 of our malls have rainwater collection systems and 15 malls use recycled water for nonpotable use. Aside from this, Robinsons Malls and Offices installed water-efficient fixtures in its restrooms, to further reduce water consumption in its establishments. We focus on giving back to communities with our Robinsons Land Foundation Inc. and to date, RLC has conducted relief operations in Imus and Tagum last January and February. For community development, we are active in the livelihood programs through RLove Livelihood carts and Entrep Corner. Finally, we continue to support schools through our Brigada Eskwela program. We have a long-standing commitment to good corporate governance and stewardship. We have adopted an anti-bribery and anti-corruption policy to uphold appropriate, ethical and responsible business conduct. Moreover, RLC has duly complied with the registration process of the Anti-Money Laundering Council pursuant to the Anti-Money Laundering app. Kindly allow us to briefly share pictures of our ESG efforts through the next 2 slides. RLC market listing of its 15 billion fixed rate bonds with the Philippine Dealing and Exchange Corp. on June 30, 2023. This constitutes the second and final tranche of the company's shelf-registered debt securities program in the aggregate principal amount of up to PHP 30 billion. The transaction received overwhelming support, prompting the company to fully exercise its oversubscription allotment of PHP 5 billion. This marks the first fully-filled oversubscription by a Philippine company this year. Robust investor demand enabled RLC to price at the tightest of spreads, locking in rates of 6.0972% per annum for the 3-year tenure and 6.1663% per annum for the 5-year tenure. The issuance also received the highest credit rating of PRS AAA with a stable outlook. This came from the Philippine Rating Services Corporation or PhilRatings and indicated that the company's stability and healthy balance sheet and has a strong capacity to meet its financial commitments. For the last 2 years, we have provided equivalent to 37% of 2021 NIAT and 48% of 2022 NIAT in terms of shareholder return in the form of both cash dividend declaration and buyback program. As of June 30, 2023, the company has repurchased PHP 5.08 billion worth of shares, equivalent to 56% of its PHP 9 billion buyback program. This was launched last November 2021. This ends our presentation. We will now open the floor for questions.

[Operator Instructions] The first question comes from the line of [ Yvonne To ].

Hello. Hi. Can you hear me?

Yes, we can hear you.

Congratulations on a good set of results. So EBIT and EBITDA margin reached an all-time high this quarter. Wondering if you could explain how the firm achieved this? And what would the new accounting standards adopted that was mentioned in Slide 3? And how did these new accounting standards contribute to the higher EBIT margins?

Kerwin, do you want to answer that on finance?

Sure. I will answer that. The new accounting standard was in effect since 2021. With this, we restated our numbers for 2020 and 2019 figures to reflect the new accounting standard. The new accounting standard, FYI, was just a reclassification of our -- some of our expenses we splitted from -- to revenue and OpEx whereas prior to the new accounting standard, it was on a net OpEx. So if we use the previous accounting standard to this first half of 2023, our EBIT margin increased the old accounting standard, our EBIT margins would be at 46%.

Sorry. So if I understand right, right now, it's 42%. But if you apply the old accounting standard, it's even higher at 46%?

It is even higher. That is correct.

Okay the next call comes from Carl Sy.

Good afternoon. Let me just check if you can hear me?

Yes, we can hear you.

Yes. So I'll ask first about the residential business. So for RLC stand-alone projects, reservation sales were actually very strong in the second quarter. I do recall in the fourth quarter last year, reservation sales were also very strong. But I think almost half of sales came from a single project in the fourth quarter. So I want to ask if this round in the second quarter, if maybe there was a project or multiple projects that accounted for, let's say, at least 20% of sales, were there any such -- basically, if it was driven by blockbuster projects?

Carl, this is Ron. Yes, thank you for the question. The sales take-up was driven by our existing and significantly of our new launches. Remember, in the slide, we showcased our 3 project launches, Le Pont last January, Mantawi and also Sierra Valley Garden 4. So if you look at Le Pont, the sales value is around almost PHP 20 billion. So yes, it's a combination of the existing and also of the new project launches.

Got it. And when you say there was, I guess, some -- was there any project that was more than 20% or more than 30% of 2Q sales, if you happen to know?

For the -- okay, if you look at, again, for Le Pont now, so we mentioned we had at least around 40% already sales taken up. When we launched it, I remember, it was only around almost 15% or 20%.

Sorry. Ron, can you just answer the question? Are there any projects that represent over 20% of 2Q sales? Are you on the line? If there's none, there's none, right? Yes. Now anyway, I think, Carl, the fact that nobody can come up with an answer means probably none.

Okay Yes. So basically, it looks quite broad-based than your sales for second quarter. And -- but anyway, still very strong sales in the second quarter. I wanted to check a couple of things if you -- what if you credit this to, have you been -- well, are there more foreign sales? Are there more OFW sales? Are you doing more road shows? What are the efforts on your part, I guess, that could have bought this out?

I think basically nothing new from what we've been talking about for the last, I guess, 6 months. Yes, a lot more roadshows, a lot more international sales are coming in. But I think it's just a confluence of all our efforts on the residential front, improving the product, improving marketing, improving the brand, beefing up the sales force, increasing international sales activities. I think it's basically all of that. But it always starts, I believe, with a better product.

Fair. And are payment schemes still looser then back in 2019? Have you started to tighten?

I think they're probably similar to 2019. We have tightened a bit from the pandemic levels, and we were obviously more loose. We've definitely tightened since then. Compared to 2019, I might be guessing a little bit here, but I think it's similar to 2019 levels.

Got it. And can anyone tell me what -- how much of sales whether in 2Q or in the first half was from foreigners?

Yes. Carl. Okay. Again, for the nationality, Filipinos 74%, foreign 26%.

Foreign 26%, okay. Moving on to the Office segment this time. I guess 2 questions for me. First, what is the pre-leasing level of GBF 1?

Carl, James here from Offices. Pre-leasing, we're 13% pre-leased in GBF 1.

Got it. That's 13%.

That's correct, Carl.

Got it. And for your office tenants, I was wondering if you -- maybe you've spoken to any of them and ask them their views on AI. If -- will they need less people? Or do they think it's a big opportunity and they all need to increase people or anything really?

Carl, I'll take that question. I think the -- I was just guest speaker in the Contact Center Association of the Philippines meeting just 2 weeks ago, and I also with the BPAP also 2 weeks ago. The way they are presenting this matter is that, yes, AI will make people more productive, which means there could be, on a like-for-like basis, maybe people become 20%, 30%, 40% more productive. So you can compute backwards on how much less people you might need if indeed, they become 20%, 30% more productive. But the way they look at the business is that the addressable market has only been tapped to the level of maybe only 10%. So they believe that there are so many companies out there that have not started outsourcing their work. So much so that they believe that they've only tapped -- the entire BPO industry globally has only tapped probably 10% of the addressable market. So let's say, for the sake of discussion that BPOs become 20% more efficient, say, with AI or 30% more efficient with AI. But the potential for growth is 900%. So there's still a lot of growth in the industry, at least that's what they say or what they believe, but I think they have to be the expert in their own field, right, their own industry. So the addressable market is still is still huge, so much more potential for growth for the BPO industry and for the Philippines, I guess, as well.

Next question comes from the line of Jelline.

Can you hear me?

Yes, we can hear you.

Okay. I have several questions for the resi segment. I think number one is, how is management thinking about your launch pipeline? Pre-sales have been doing well. Which specific segment income strata or even location do you think will be well received by the market? That's the first question.

Well, in general, so far, all our projects are well-received by the market. If you ask me which are the next in line, the next in line or in the pipeline or it's an expansion of Woodsville Crest in Parañaque and Sierra Valley Gardens in Cainta. Those are the 2 next in line for expansions. These are buildings basically 3, 4, 5, something like that.

So an extension of existing developments. How about potential incremental joint venture maybe for the likes of Shang or Hong Kong Land, anything in the pipeline?

There are always discussions in this regard, but nothing for us to announce today.

Okay, understood. May I check how much was the unsold inventory as of second quarter? And if you have more -- something to share about the cancellation trend, how much reversals, if any, in the quarter as well as your outlook going forward?

The cancellations, nothing noticeable or nothing in particular. Nothing much different from what it has been in the past. But I'll let somebody answer the question on old inventory.

On the inventory, it's PHP 32.4 billion.

And my last question is on the resi margin. You noticed that both EBIT and EBITDA declined for the quarter. Any reason for this? And do you think that there should be a recovery going forward? And what specific costs drove the decline in margins?

Jelline, this is Kerwin. I'll take -- sorry. I'll take the question. For the resi, EBIT and EBITDA margin declined because of the huge recognition of the -- say, from the joint ventures. As you know, in joint ventures, we just record our revenue for the base is higher than you see a bit of a decline in the EBIT and EBITDA margin.

Does that mean that the joint ventures are recognized on proportionate pieces?

Yes, that is correct.

And the joint venture projects are of a lower margin as compared to your stand-alone RLC Residences?

No, that is not correct. The joint -- because how we record joint ventures is the net income of the joint venture, we take our share in [indiscernible] 50% and we record it as revenue. So the base becomes lower. Sorry, that base becomes higher and for the EBITDA, but the margins are low.

Okay. We'll now entertain the question on the Q&A box. First question came from [ Marco Molino ] of BDO, thank you and congratulations on the results. Question, what will be the EBIT margins attributable net income, excluding the net effect of the new accounting standard? I think Marco, we've already answered that. Next question, the project launches value for the remainder of the year, which income segment are you targeting? Again, Marco, we've also answered that. From Veronica of UBS. First question for malls. How are the rental rates for malls? By how much have this corrected post rental concession given during the pandemic?

For the rental rates for the malls, so our escalations are 5% to 10% annually. In terms of correction from the concession, so we've stopped giving concessions since July of 2022. So this is already using the normalized rents. And then it's a 5% to 10% escalation from that.

Follow-up question on Veronica. Why was Opus opening delayed? It was originally slated 2023 in the previous updated -- for RCR any asset for infusion line up this year and next year? So far for Opus first.

For Opus, it's just a matter of formal construction delays. I think everybody knows in the industry, it's getting more and more challenging. So just some minor delays there on the Opus targeted opening date. On RCR, we have already identified the potential assets for infusion to RCR. But I think we have to find a way to infuse these assets in the most tax-efficient manner. So we still have some preparation to do before we can actually infuse these assets.

For office again. Again, for office, how are the rental REITs, Wales and tenant profile breakdown as of the first half 2023?

So Wales of 3.29 years, our rental rate is stable at around PHP 700 per square meter, same as 1Q. And the tenant mix is 82% BPO, traditional is at 8% and others at 10%.

Okay. Okay. 2 more from Veronica. I think Veronica, the last 2 has been answered also. This is for resi, what is the current inventory and insight? This was answered earlier on resi. How have payments terms tightened so far? That it was answered also earlier. Okay. From [ Rubio ], how can we get a breakdown of office tenants by type? James, would you like to answer that?

I just answered.

Yes. Okay. This is for [ German de la Paz ]. Again, this is for malls. What are the reasons for the Q-on-Q decline in mall revenues?

Okay. Historically, looking at the 2019 numbers, the first quarter versus second quarter, the first quarter is higher because there is a carry-over from the holiday season sales that come in basically January of 20 -- of the following year.

Okay, sir. So again, from [ Rubio ]. Following the bond listing, what is the average interest rate for the RLC debt?

The average interest rate -- the weighted average is at 5.23% as of July 2023.

Okay. That's all now in the Q&A chat box. [Operator Instructions] Yes. There's one more from Yvonne.

Sorry, this is a follow-up question. So accounting standards aside, what led to the higher EBIT margins? And do you think it can go higher from here? Which segment will drive margins higher?

I'll let somebody else answer the first part of your question. But on the second part of your question, I always -- if you've been following us long enough, you'll know that I never promise better margins. I also refrain from making forward -- such forward-looking statements on financials. We generally only make forward-looking statements on the businesses that we actually can predict into the future. But we do have fantastic numbers for this quarter, but I would not -- I would never say -- direct you to think that it will just keep getting better and better over time, especially when it comes to margins. So yes, that would be my answer. Kerwin, you will answer the first part of the question?

Okay. The improving EBIT margins for this year is because of our strong domestic businesses, which led to high EBIT margins.

I think, Yvonne, we'd give a breakdown of our business as per business segment. And I think you can see clearly why our margins are improving. The malls are improving. The hotels are improving a lot. We continue to add other businesses like the Industrial Facilities division that also have very good margins or in fact, probably the highest margin segment now in our business, and the hotels are coming from negative territory, right? So it's also much better. And then our residential business also picking up quite substantially. So it's -- there's no secret here, you just have to add up each component and then you add up -- and then you come out with the total number.

Sir, there's one last question from [indiscernible]. What was the reason behind the higher mall EBITDA margins? Can we sustain it at a 58% to 60% EBITDA margin in the coming years?

Well, I can answer why -- I can answer that whereas Faraday, do you want to add something after. If you recall, in the earlier part of the year or last year, we were hit by very high oil prices. So the higher coal prices resulted in us having to absorb a lot of the higher electricity costs, which had a negative effect, obviously, on our net profit margins, right? But the price of coal, the price of oil has relaxed in the second quarter, which enabled us to recover back some of those costs, right, some of those expenses. I would say I would attribute a very large part to that particular matter.

And in addition to what Frederick mentioned, we also are doing first cost management or from the pandemic, we were able to find opportunities to save on costs. So we continue to apply those learnings. And in terms of escalations of our suppliers for cost, we try to manage that also, so lowering escalations. So basically, yes, right now, it's -- the biggest part is the lower energy cost for us.

Okay. Seems there's no more any question from the floor. So sir...

I just want to answer the -- if I may just answer also the second part of the question of Fidelity. I guess your -- how you view the price of oil or coal will probably help answer your question, trying to look into the future of how we might be affected by that. But thank you. So again, ladies and gentlemen, thank you very much for joining us again this afternoon. Our key message is our net income is up 71% without the effect of the China profit. We have record levels for EBITDA and EBIT margins. Mall revenues are robust and occupancy levels continue to improve. Our residential presales numbers continue to break records as we recorded the highest net presales for the company's history. And our hotels revenue registered likewise a top line figure of over 100% growth and our investments in establishing our 2 5-star hotel brands, Fili at NuStar and the Westin in Ortigas continues to -- I mean, it's now bearing fruit. RLX, which has the highest margins right now among all our businesses are -- is consistently growing and producing increased revenues. And our Offices business, probably our most -- or least growing story today continues to remain steady and show some growth. So we posted impressive first half numbers right after a record year, as we continue to set record performances for our business units. We are also quite proud that our bond listing last June resulted in an unprecedented achievement for RLC to be the first company in the Philippines to have a fully filled oversubscription this year. And we'd like to think that our performance serves as an affirmation that we have been executing well and executing the correct timely strategies to constantly create real value for our shareholders. Again, thank you very much for participating in this call, and see you next quarter.

Thank you, everyone, for your participation. You may all disconnect. Thank you, sir.

Thank you.