Shui On Land Limited (272) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to Shui On Land's 2021 Annual Results Analyst Briefing. Thank you very much for joining us online this evening. Today, we are pleased to have 5 members of the senior management team with us. Mr. Vincent Lo, our Chairman; Ms. Stephanie Lo, Executive Director of Shui On Land and Vice Chairman of Shui On Xintiandi; Mr. Douglas Sung, Chief Financial Officer and Chief Investment Officer of Shui On Land; Ms. Jessica Wang, Chief Executive Officer of Shui On Land; and Mr. Allan Zhang, Chief Executive Officer of Shui On Xintiandi. We will start with the presentation by the management followed by Q&A. [Operator Instructions] Without further ado, may I invite Mr. Lo to start with some opening remarks, please. Mr. Lo, please?

Okay. Well, thank you, everybody, for joining our press briefing, not press briefing, sorry, analyst briefing. I'll be very brief because I believe my colleagues will be able to explain in greater detail to you all. We've seen a very strong rebound on our results last year compared to the year before. And then our property sales also jumped 8.4x. Our commercial portfolio have a very strong performance. And then our balance sheet continue to be very strong at 30% gearing, and we have over RMB 17 billion cash in the bank. And we have declared a dividend and also a share repurchase plan. I'll stop there because actually, I view in the past 2 years almost, I haven't been able to go back to Shanghai and Mainland. And our management team has really done a fantastic job, and we have recently appointed Jessica Wang and also Allan Zhang as CEOs of Shui On Land and Shui On Xintiandi. So they will be doing a lot more explanation to you later. I will just stop there first.

Hello, everyone. This is Stephanie. Thank you for attending our analyst briefing. So let me walk you through some of the highlights from 2021. The company achieved a really strong rebound in both revenue and profitability versus the prior year, which resulted from both a focused business strategy and a very strong balance sheet that has been maintained over the past several years. Together, this has helped put Shui On Land in a very good position to capture new market opportunities and continue to drive sustainable growth. So in terms of the revenue of the group, it was RMB 17.5 billion, representing a 282% increase compared to the last year. This was mainly due to a significant increase in property sales and a strong recovery in the commercial portfolio. The group recorded a profit of RMB 2.2 billion and a profit attributable to shareholders, which totaled RMB 1.6 billion. And this is a significant improvement versus the net loss recorded in 2020, which was due to the COVID-19 outbreak in China. Our property sales jumped 8.4x year-on-year. And this -- our revenue -- sales revenue from our property sales was RMB 13.6 billion, largely due to contributions from 3 major projects: Shanghai Taipingqiao, Lakeville Phase 5; Wuhan Tiandi La Riva Phase II; and Shanghai Panlong Tiandi. In terms of our commercial portfolio, we maintained a very strong growth momentum. Our total rental income was RMB 2.9 billion, representing a robust growth of 29% year-on-year. Our occupancy rates on average of both retail and office across our portfolio were above 90% average. We have a very solid balance sheet. This is reflecting a very prudent approach to managing our balance sheet with our net gearing ratio further lowered to a very healthy level of 30% in comparison to 45% at the end of 2020. Our cash and bank deposits totaled RMB 17 billion. In light of the company's strong financials, the Board has recommended a final dividend for the year of RMB 0.084 per share. In addition, the Board has approved a share repurchase plan of up to HKD 500 million with a view to enhance the earnings per share and the overall shareholders' return. So here are some key achievements in 2021 and some key milestones. In February, we acquired Nanjing IFC, which is a very city-center project in Nanjing, together with Grosvenor on a 50-50 basis. In June, we issued our first USD 400 million sustainability-linked bond, and we're the first China-based developer to successfully do so. We also, in June, formed a JV with Yongye on a 50-50 basis to acquire the last residential development site next to our Taipingqiao project right next to Xintiandi. And so this is the last site within our overall master plan facing the lake. In September, we had the soft opening of Rui Hong Xin Cheng-Hall of the Sun. It's our largest shopping mall today, 180,000 square meters, and we are seeing very strong sales and foot traffic since our opening. In December, we also established a 50-50 JV with Wuhan Urban Construction Group, [ Wuhan Chengshi Jianshe Jituan ] and won the bid for a large-scale mixed-use development site right in the city center of Wuhan. This is about 70% residential and sellable resources. On the next page, just sharing a little bit more about our sustainability achievements in 2021. We were the first China-based developer in the real estate sector to commit to the Science Based Targets. Since 2011 to 2021, we've reduced our carbon emissions by 53.5% in the 10 years. And over 90% of our properties have now received LEED, WELL or China Green Building certifications, and we have a number of other strong sustainability initiatives in line with our 5C strategy. If we have time, I can share more a little bit later. On the next page, you'll see some of our ratings and credentials. We're very happy to share that our ratings have been improving over time each year. We maintain rating AA- for HKQAA, and MSCI has upgraded us to a rating of A. And also, it's the first time that we've qualified for the Bloomberg Gender Equality Index in 2022. And we're only 1 of 3 Chinese companies to have joined the index, and 1 of 28 global real estate firms to have joined this index. So on the next page, we'd like to share a little bit more about how we see the market and some of the happenings in 2021. So while China's GDP continued to expand to 8.1% year-on-year growth, exceeding the government official target of about 6%, we do definitely see strong headwinds for the growth this year. Following the introduction of the 3 red lines and a string of defaults in the property market, we definitely see that 2022 will be a challenging year, mainly driven by a major restructuring and dislocation in the property market in China. In terms of the residential sector though, we do feel that the market will undergo an orderly adjustment and a soft landing rather than achieving a major hard landing. In terms of the retail sector, China's retail sales had an increase of 12.5% in 2021. A lot of this is supported by the reshoring of spending onshore through luxury goods and a number of new store openings. In terms of trends, we're continuing to see the growth of the affluent and upper middle class in China leading the shift in consumption from necessity to more lifestyle-based, discretionary and experiential retail. And the office sector, while China's office market staged a strong recovery and especially in first-tier cities in 2021, we do still see some headwinds this year, especially given the COVID situation right now that you see in Shanghai as well as a big supply essentially in the market. So we do see our rental growth rates moderating in the office sector this year. So just to share a little bit more about our competitive strengths because as some of you might recall, since 2016, we've very deliberately started deleveraging our company. And we are now in a very strong financial position, and we feel that it's the right time for us to start looking for good opportunities for acquisition in the market, and we do think that our competitive strength will allow us to better capture new opportunities. Firstly, we have a very strong presence in Shanghai, with a leading commercial portfolio. We have an iconic Xintiandi brand that is quite well known across the country. Our strength in urban regeneration and in building large-scale communities is actually a strong advantage in land acquisition right now, given that a lot of the new sites coming online are city center locations especially in first tier and strong second-tier cities. And we have a very strong balance sheet with prudent yet active capital management strategy, and we have a well-defined and well-developed track record in sustainability with very clear 10-year targets set. And lastly, I would like to share a little bit more about our future business strategy. So as mentioned, we are feeling that we are well positioned to capture new market opportunities for growth. We have recently signed 2 MOUs with Shanghai Pudong Bank -- Pudong Development Bank as well as Shanghai Bank to partner with them to make new acquisitions in this current market climate and also invest further in ESG-related projects. Our strategic focus will be also in restructuring our business. As some of you might know, we also put in a filing -- A1 filing last year to spin off Shui On Xintiandi, which is our commercial IP portfolio. And those plans are still in place. We are still very confident about the future of SXTD. However, we do definitely need to find the right market window to capture the best value for our shareholders. And therefore, we remain cautiously optimistic that this could happen in the second half of this year. And in terms of investment priorities, we will definitely continue to look at Shanghai primarily, where we have a very strong brand recognition and foundation. We will look at other first-tier cities in the Greater Bay Area and other strategic strong second-tier cities in the Yangtze River Delta and the Greater Bay. So with that, I'll hand over to Douglas for him to share more about our financial highlights.

Thank you, Stephanie. Let me just quickly go through the financial part. This page is just a highlight of some of the key financial parameters, Stephanie, already mentioned a few of them, so I'll just leave it for you as a reference. Let's go to the next page. So this is the property sales for 2021 sales revenue. You can see the major contribution coming from the 3 projects, first in Taipingqiao and then Panlong Tiandi and then in Wuhan, our residential projects. If we include the contribution from joint ventures, which is not consolidated as revenue, the total sales revenue would have been about RMB 22 billion. So quite a strong year for us. On the next page. Equally, you can see rental income from our commercial portfolio also performed very well. The total rental income on a consolidated basis is about RMB 2.25 billion. If we include the JV contribution, it's over RMB 2.9 billion. So that's a 29% year-on-year increase compared to 2020. On the right-hand side, you can see the overall valuation of our commercial property portfolio. So this is basically on a 100% basis the entire commercial portfolio in the Shui On Land Group, excluding joint venture and associates. So I will give you the detail later on, on separate page. So it's roughly about RMB 50.9 billion on a 100% basis, excluding JV. On the next page, you can see the income statement. I will just highlight a few numbers. We talked about the revenue already. It's about RMB 17.5 billion, up about 3x from 2020. And you can see the breakdown between sales and rental income and other income. Net of cost of sales, gross profit is about RMB 7.2 billion, up almost 3x from the year before. You can see gross profit margin at 41%, down slightly from 2020. It's mainly because of the composition of revenue in 2020, rental income accounts for a high percentage of total revenue. And typically, rental income has a much higher margin compared to property sales. But this -- but in 2021, the majority of the revenue came from property sales. So if we just look at property sales margin is about [ 35% ] in 2021. So that's a very healthy level, which is consistent to what the group has achieved in the past. Other income generally just interest income. And then we have a RMB 35 million increase in the valuation of our IP. I will go through the figures with you later on. Other gains and losses include, for example, expenses on our hedging for our FX loans and also some of the miscellaneous expenses and losses. And overall, you can see the finance cost of about RMB 895 million, including a RMB 255 million gain in exchange -- FX exchange translation. So the profit before tax is RMB 5.6 billion. And then on the next page, after tax is RMB 2.2 billion, and excluding minority interest, it'd be RMB 1.63 billion, equivalent to RMB 0.203 per share. And as mentioned by the Chairman and Stephanie, the Board approved HKD 0.084 per share for final dividend, same as year 2019. And then the Board also approved a share repurchase plan up to HKD 500 million. So on the next page, just, I think, some figures for you on our financial position and balance sheet. Again, I'll leave it for you as reference. I won't go through them. On the next page, you can see the company's total assets in the last 5 years have been very, very stable and consistent. It's roughly about RMB 110 billion of total assets, of which about 55% comprised of IPs and commercial properties. On the next page is the revaluation of our IP portfolio, which I mentioned earlier. We have broken it down into the SXTD portfolio, which we expect will be put into the new company when it's separately listed. And then the other investment properties remaining in Shui On Land. So you can see the SXTD portfolio. The total valuation, including JVs and associates is about RMB 52.8 billion on a 100% basis. And the group's share is about RMB 42.3 billion. And if we include the other investment properties, the total -- grand total value of this portfolio on a 100% basis is almost RMB 96 billion. So it's a very significant commercial portfolio. And if we exclude JV and associates, it's RMB 50.9 billion, which is the figure I mentioned to you earlier. You can see that the valuation has been basically stable from the year before 2020. The overall change is only 0.1%. The next page is our debt position. As mentioned, we continue to strengthen our balance sheet despite a very, very challenging capital market in the past year. Our gearing is down to -- net gearing down to 30%. And you can see also we have quite substantially reduced our overall net debt as well. And next page, I think, is something that investors, analysts would be obviously quite interested in this current environment. Our debt profile and maturity profile. So in the coming year 2022, we have roughly about RMB 6.4 billion of bank financing for maturity. And it's broken down roughly about 50-50 between first half and second half. Out of the RMB 3 billion in the first half, as of last week, we have already secured about RMB 2.4 billion of refinancing approved by the banks. So we have pretty much completed all the maturity refinancing of renewal in the first half, and we'll be working on the second half RMB 3.4 billion figure. The second piece is the USD 600 million perpetual notes which we can call in June, and we will intend to call. As noted, we have about RMB 17 billion of cash on hand at the end of last year. So we are very confident that the redemption can be met with our internal resources. Next page is for your reference, the maturity profile of our U.S. dollar notes. And then the last page I would just touch a point is the group has been working on innovative financial arrangements or financial packages in the past year, including the first sustainability-linked bond issued by China developer in 2021, we did USD 400 million. And also in the first quarter this year, we signed MOU with Shanghai Pudong Development Bank and Bank of Shanghai on M&A and ESG financing cooperation. We do expect to have -- to see a lot of opportunities in M&A in China due to a lot of the distress in the industry. And we are very delighted that these 2 major banks have supported us in this effort that we hope to be able to work with them on the new investment opportunities, both in development and also in terms of commercial -- completed commercial property opportunities. So with that, I'll pass over to Jessica to talk about SOL development business.

Thank you, Douglas. Next, I will show you for the property sales and development. Next. So as mentioned, we had very strong residential sales in 2021. Our contracted sales increased by 43% year-on-year basis to RMB 30.27 billion. I would like to highlight by the end of 2021, the total subscribed sales of RMB 5.5 billion were recorded. These sales will be converted to contract sales in the coming months. Next. So to further expand our business and build a strong pipeline to drive future growth, we have been active replenishing our land bank by acquiring high-quality assets in first-tier cities in China, particularly in Shanghai. In June, we signed an agreement with the Yongye Group to develop Lot 122 of the Taipingqiao project on a 50-50 basis. The land will be developed as a mixed-use development comprising residential, commercial and public facilities. And this investment enable us to further expand our development footprint in Shanghai Xintiandi area. The project expected completion date is in 2026. Next. The other very significant new investment we would like to highlight is the Wuhan shipyard project. As Stephanie mentioned, we won the bidding for this project with Wuhan Chengshi Jianshe Jituan in December also on 50-50 basis. The land is located in the ancient city of Wuchang facing the Yangtze Delta River, Yangtze River in the West and the second ring road in the South and is only 1.5 kilometers away from famous Yellow Crane pavilion. It is the original site of the Wuhan shipyard, and it is a representation of Wuhan's industrial cultural heritage. So the project is a large-scale, master plan district that includes the development of residential, office, commercial buildings, schools and other public facilities. The estimated GFA is 1.15 million square meters, and it is estimated to complete by 2031. Next. So looking ahead, we have a strong pipeline of 346,900 square meter of residential GFA available for sale in 2022, of which about 68% are from projects in Shanghai and a big portion is coming from Shanghai Rui Hong Xin Cheng and Panlong Tiandi. Next. For Rui Hong Xin Cheng I think most of you are very familiar with this project. Actually, Lot 7 was launched in January 2022. All units was subscribed on the launch day. And the Lot 167A is the last residential project of Rui Hong Xin Cheng. The estimated above-ground GFA is around 89,000 square meter. The project has 609 units in total and has received overwhelming interest to purchase. We started to accept subscription from early March with 1,904 subscription already received so far. Next. The other project, Panlong Tiandi, the first and the second phase of Panlong Tiandi generate very successfully response from buyers in the last 2 years. We plan to launch total [ 517 ] [indiscernible] units in June this year. Up to now, over 3,000 customers have shown purchase intention. So we are very confident that the good sales momentum will continue. Next. So in short, we have strong residential development sellable resources in the future. The total sellable amount is RMB 94 billion as of December 31, 2021, with attributable value at RMB 51.5 billion. RMB 43.6 billion sellable resources are in Shanghai and the rest in Wuhan and Chongqing. Next. For the commercial development, we also have a strong portfolio in Shanghai and other high-growth cities. It will drive for further rental growth and the capital recycling in the future. This slide shows the list of commercial properties already under development and in the pipeline. The total size of our commercial property portfolio will be 2,924,000 square meter, of which 55 were for office and 45 for retail. Next. So in the future, SOL, we will ride on our strong track record in master plan and the city land market development, our holistic capabilities in open regeneration and cultural heritage preservation and revitalization as well as our reputation, brand name and our strengths for future growth. So we will aim to create urban solution through developing premier sustainable urban communities for future growth and business expansion. These are all for my presentation, and I will hand over to Allan, please.

Thank you, Jessica, and good evening, everyone. In this section, I will quickly walk you through the performance results of Shui On Xintiandi in year 2021. Firstly, I would like to highlight that due to the focus in Shanghai, we actually have now a total owned and managed GFA of 1.72 million square meter, which actually ranked quite -- first in -- among all of the listed companies in Shanghai. We believe that this scale gives us a very strong position as the leading player in the Shanghai commercial real estate market, which is also very difficult for the competitors to catch up in the near future. Where next slide is actually some pictures about our portfolio in Shanghai. I will skip the details about this basically, for example, in the lower right part, we have the pictures for the Shanghai Xintiandi. This community actually has been growing from originally only 60,000 square meter to today we have more than 500,000 million -- 500,000 square meter. And the community will continue to grow. So we believe that in the long run, our portfolio in Shanghai will further grow at a very stable speed. Where next slide is a bit more introduction about our major business under the Shui On Xintiandi platform. As mentioned before, property investment is apparently one of our core business. And so far, the PI industry basically contributed more than 78% of our revenue. And to leverage on our brand and our competitive advantage in asset management starting from 2018, we have been strategically grow our real estate assets management business. So far, we are very happy to see that in year 2021, the asset management business contributed around 5% among our revenue. And property management is also one of the very core value creation procedure among all of the asset management business. So in the long run, we will keep growing the 3 segments of the Shui On Xintiandi business in the long run. And next slide, a bit more introduction about our financial results in 2021. So I believe Douglas already mentioned about how we grow the revenue by more than 20%, 22% to RMB 2.8 billion last year. And here, some other profit numbers, I will skip the details. And one last thing to mention about these slides, it's actually -- although our revenue and profit grew up by more than 20% and also the assets grow by 10%. On the other hand, our net gearing ratio actually dropped by 7% to only 15%. Next slide, I will go a bit more into the detail about the breakdown of our revenue. So as you can see from the left-hand chart, we have been successfully growing the revenue by 21% in the property investment business due to -- mainly due to the rebound after the COVID impact through the very active management and also our repositioning and also our AEI to achieve the organic and inorganic growth in this sector. And also, I would like to mention a bit more about the asset management business. As you can see, we have been successfully growing the revenue from only RMB 67 million last year only -- in 2020 to RMB 93 million in 2021. The growth rate is actually at 39%, which is a quite high digit. We believe that in the long run, we have the confidence to maintain the growth rate in this business sector. Next slide, it's a bit more about the asset type. So as you can see in the lower left-hand chart, our office grew by 9% and our retail grew by 30% in terms of the revenue. In the past 20 years, we have been strategically maintaining a very balanced portfolio within our -- all of our projects. We believe that it is very important for us to achieve the synergy among different types of assets. And in terms of the geographic distribution, as you can see from the right-hand chart, we have more than 74% of our revenue comes from our Shanghai portfolio. And we believe that in the long run, which is very helpful for us to capture the high growth potential of the city of Shanghai. Next slide is a bit more detail about the performance of our projects. So I believe Douglas already mentioned about the total scale under the SXTD management portfolio. We have now 1.3 million square meter. And last year, the total rental income already achieved RMB 1.6 billion, and the growth rate is actually 25%. And for the occupancy rate, as you can see, most of our property in Shanghai and other cities are very mature. The average occupancy rates are above 93%. And we have only 2 projects, which has a relatively lower occupancy rate. The first one is the Shanghai Xintiandi. Right now, we have an ongoing AEI in this project. And so the occupancy rate is only 79%. And the other one is Nanjing IFC which is also under AEI process. We believe that after the AEI, the occupancy rate of these 2 projects will be very mature and very high occupancy rate. Next slide is a bit more about the retail portfolio. So the total contribution of the rental is 61%. And as mentioned before, the occupancy rate is quite high. And starting from 5 years ago, we have been strategically shift our positioning to focus more on the young and premium clientele, and they're adopting a lot of unique content, especially from the lifestyle and the other new business concepts into our project. So by leveraging on this market demand, we have been successfully completed the repositioning for our Wuhan Xintiandi and also completed the AEI for Shanghai Xintiandi. The performance increased -- improved significantly after the enhancement initiatives. And the other thing is our -- last year, we successfully opened a mega retail complex, which is 180,000 square meter in Hong Kong district, the Hall of the Sun. So we successfully opened this project. And in this project, we have more than 30% tenants are first in Shanghai brand. And at the same time, we have more than 70% of our tenants are first in Hong Kong district brand. So this unique offering in terms of the trend mix helps us a lot to attract the traffic for and also maintain a quite stable and healthy operation in the past 3 quarters -- 2 quarters, I'm sorry. Next slides, it's a bit more about the office part. I think Stephanie already mentioned about how we leverage our brand and also our capability to provide a very holistic and flexible office solution to all of our tenants in the past 3 years. So through this very strategic initiative, we have been successfully maintained a very high occupancy rate which is also 93%. And if you look at the Shanghai portfolio, our occupancy rate is 98%. The average vacancy rate in Shanghai CBD area is 6%. So we are performing way above the average level of the CBD. And also, we have been strategically changed the structure of our tenant base. So right now, we have the first category of our tenants who are from the new economy sector. We have more than 80 -- more than 50 -- sorry, 50% of our tenants are from the tech background and the other new economy industry, including Dell, Agora, AECOM, Sunmi, so on and so forth. So we believe that focusing on the strategic location and the creating value for the tenants will be very happy for us to maintain a quite stable and healthy performance for our office sector. Well, next slide is a bit more introduction about how we grow the real estate assets management business, which I mentioned a bit before. So far, we have totally 5 mega projects and the total GFA is more than 679,000 square meter. And total valuation of the portfolio is RMB 26 billion. And the growth rate, as mentioned before, is 37% comparing to 2020. And through these types of partnership with the financial partners, we have established a very healthy relationship with both international and the domestic financial investors, including Manulife, Grosvenor, China Life, CPIC and Yongye who is a state-owned company. So we believe that in the long run, we will continue to leverage on this healthy relationship with the partners to grow the asset management business. Next slide, please. And in the long run, we believe that we will keep focus on the creating and operating sustainable premium urban communities and also adopt the social engines to bring in more and more unique content into our community and through which we believe that we can help our customers to transform their urban lifestyle. And as we all know that there is ongoing deep self-correction in the real estate business, we believe that this will pose us a lot of opportunity. Some of the opportunity are from the market trend side and the other opportunities are from the customer side. So by focusing on the need, the unmet need of our customers and adopt a customer-centric culture into our business, we believe that in the long run, we will keep leveraging on our capability in assets management and also our unique and iconic brand leverage our relationship with the partners. In the long run, we believe that all of these initiatives and the strategy will help us to further strengthen leading owner and investor and managers of quality assets in first-tier cities and other high-growth cities. Where this is all -- all of my introduction about Shui On Xintiandi side, I will hand over to Luna.

Thank you, Allan, and thank you, Chairman and other management for the presentation. We will now take some questions from the audience. The first question is from John Lam from UBS. So the question is about the tightening on the presales escrow account. What is the restricted cash and unrestricted cash ratio? And how will that -- or will that affect your expansion plan? May I invite Douglas to answer this question?

Yes, sure. Thanks, John. We don't normally give up the breakdown on cash between restricted and unrestricted, but I can say that out of the RMB 17 billion of cash balance we have at the end of last year, majority of that is free cash. We have, I think, a relatively minor proportion of restricted cash. So certainly, we do not feel constrained in terms of using the cash either for investment or for refinancing on some of our financing maturity. As I mentioned that we have a USD 600 million perpetual note coming up for -- available for us to call in June. And our intention is to use the cash to redeem it. So I hope that answers your question.

Thank you, Douglas. The next question is also on financing. So there's a question from [ Jupiter ] on the guarantee. So do you guarantee or do you provide guarantees to your JV, that's as of 2021?

Simple answer is no. We don't guarantee any of the loans on our JV projects. Majority of those are development loans, which the land title has already been touched in the bank. So typically, we don't guarantee on the JV projects.

Thanks, Douglas. I have more popular questions on the capital as well -- on capital management. So what is the consolidated net operating cash flow for 2021? And what's the expectation for 2022? And for that, then it's the tightening of the ratio, will that affect how you manage the capital going forward?

Okay. So the net operating cash flow, I think you will find in the financial statement, is roughly about RMB 10 billion as of 2021, financial year 2021. So the cash flow from property sales is about -- I think it's about 1.3, yes, [ 1.13 billion ] -- sorry, it's roughly about, yes, RMB 10 billion, of which about RMB 13 billion is residential sales, about RMB 2.2 billion rental income cash flow and then of course, we have outflow on the operating level on construction costs, tax payment and other SG&A. So the net is roughly about RMB 10 billion. I think that's the first question, right? That's the second part, sorry...

So I just wanted to ask to share a bit more on the strategy on capital management.

Okay. So we have been, as you know, adopted a fairly prudent approach to our capital management in the past few years as the Chairman has highlighted and also Stephanie highlighted. We adopted a asset-light strategy since 2016, I think precisely to avoid a lot of the problems that some of our peer groups' companies have encountered in the past year. So we expect to be -- continue to be prudent in managing our balance sheet. But at the same time, as you heard from Stephanie and Jessica and Allan, we do expect to see more and more investment opportunities because of the distress in the industry. So we will both be prudent, but I think when we see the right opportunity, we certainly will also be actively looking to invest. So hopefully, we will be able to strike a balance between being reasonably conservative, but at the same time, continue to grow our business.

Thank you, Douglas. Next question is on -- from Deutsche Bank on the investment opportunities that you are looking for. Will this be -- will you be acquiring projects or companies? And so can you share a bit more on the investment criteria or the investment priorities in terms of geographical locations? Which cities in, GBA, for example, outside of Foshan that you might be interested? Maybe may I invite Stephanie to answer that question?