NWS Holdings Ltd

HKEX:659

Earnings Call Transcript 2022-Q2

[Catherine Tsang, executive]

Good evening, ladies and gentlemen, thank you for joining NWS Holdings Financial Year 2022 Interim Results Analyst Presentation. I'm Catherine, today's MC. First of all, let me introduce our panel members: Mr. Gilbert Ho, Executive Director and Chief Operating Officer; Mr. Jim Lam, our Chief Financial Officer; and Mr. Ben Wong, Director of Corporate Development, Investment and Investor Relations.

For today's agenda, Gilbert will first walk you through the key highlights of our company's results and strategy. After this, Jim will present to you the financial highlights. And then Ben will cover the performance of individual business segment and then followed by the Q&A session. [Operator Instructions].

Without further ado, let me pass this on to Gilbert. Gilbert, please.

[Chi Hang Ho, executive]

Thank you, Catherine. Thank you, everyone. First of all, I would like to give you a brief overview of our business. For the last few years, our company has gone through its portfolio optimization. As you remember, we have done a number of key disposals with a total considerations of around $20 billion. But at the same time, we have done a number of key acquisitions of around $30 billion. After this portfolio optimization, we have a lot of capital on our hand for further growth.

Our earnings growth is more visible and it's more quality -- and has more good quality. We are very well positioned to deploy more capital for further growth. We also have done a number of actions to improve shareholders' return and to optimize our capital structure, which include adopting a sustainable and progressive dividend policy, redemption of senior notes and early repayment of bank loans using our excess cash. We also uphold a very strong risk management practice to optimize risk and return for our shareholders.

With the 3 segments of the disposals, including Environment, Logistics and Transport, you can actually see our disposals has gone through a very careful consideration. All 3 segments have fairly similar characteristics, with growth trending down over the last few years, and also we see little visibility of the earnings in the coming years. But at the same time, we are not disposing these assets at a low valuation. We actually disposed all of these at premium valuations against market competitors.

Turning to our business, we're going to have our growth strategies in different segments. First of all, in our Roads, we can see organic growth of -- steady growth of over 5 -- over the last 3 years, especially in the central regions of the new roads that we acquired, the AOP actually increased by 5%. For Construction we see solid demand from private developers and institutions and also more new government contracts coming along together with the Northern Metropolis, which is going to support the medium- to long-term supply of projects.

For our Insurance, with the new products as well as expansion of the distribution channel, we are confident that it posed a very healthy organic growth coming along. In the Logistics sector, which is actually a preferred resilient business even with growth during COVID period. ATL continued to deliver a very strong result with over 99% occupancy rate. And CUIRC in China, which actually had very solid growth together with ancillary logistic Services.

For our facility management, our hospitals continue to ramp up with EBITDA breakeven since 2021 and it's continued to grow together with the outpatient and inpatient growth. For HKCEC and Free Duty, although it is impacted by the COVID during this period, we can actually see a strong rebound that will come along together with the border reopening.

Together with the organic growth, we also will continue with the inorganic growth for different segments. For our Roads segments, we will continue to look for new acquisitions. In fact, after the 3 acquisitions over the last few years, our average remaining concession period decreased by 2.4 years. For Construction, in addition to the traditional projects that we have been doing before, we will also look for civil-related projects, which we've managed at risk, such as piling work, brand investigation works and site formation, which is our core competence.

For Insurance, we will apply it for the Mainland license. For Logistics, as we mentioned before, we have been looking for different acquisitions. In fact, over the last years, we have done 2 major acquisitions in logistics as well as products. We aim to build an ecosystem within our Logistics segment. And for Facilities Management, for GHK, our hospitals, we will also look for new business initiatives such as management contracts for clinics. And for HKCEC, we will also partner with local brands to broaden our F&B choices to boost branding and ancillary revenues. And for Free Duty, we have new businesses such as product stores as well as our online sales.

So going into our results, you can see our recurring business is actually very resilient. So excluding our strategic investment, our recurring business AOP, in fact, increased by 5%. Our quality assets with sustainable recurring cash flow and growth potential, including our Roads, ATL, our Construction segments, [indiscernible] as well as our Insurance, all with different characteristics to generate fairly recurring income stream and cash flow as well as strong growth prospects. Over the last few years, we have delivered a very solid balance sheet as well as dividend growth.

As I remember, over the last few years, [indiscernible] questioned about our gearing ratios after the acquisition of FTLife, which was 31%, which we lowered to now 13% within less than 2.5 years. This actually demonstrates our very strong cash flow within all this business even during this very difficult economic period.

In terms of the asset value, you can see after the revaluations of ATL, which we have done this year, which increased to $7.3 billion upon reclassifications. Our total NAV is actually $74.4 billion, which we can see is actually trading a very deep discount to our NAV where our market cap is only around $30 billion. As I also mentioned, we have adopted a sustainable and progressive dividend policies since 2019, and we have continued to deliver that our value to our shareholders with our increase in DPS in last financial period, and also as well as this period, which we increased our dividend by 3.4%.

I will hand over to Jim, our CFO, to highlight to you some of our financial information.

[Jim Lam, executive]

Thank you, Gilbert. Financial highlights. In the current period, our revenue increased by 15% year-on-year to $16.3 billion. And the growth was suffered mainly by the increase in our Insurance business revenue, which was up about 49%. The Construction segment revenue was relatively stable, but for the Roads accounted for about 10% year-on-year.

Moving on to the attributable operating profit or, AOP. During the period, our overall AOP declined by 30% to $2.3 billion. As mentioned by Gilbert just now, if you just look at the AOP of our recurrent businesses, which exclude the disposed assets held-for-sale and the Strategic Investment segment, which we think offer a better year-on-year comparison, the AOP actually up 5% year-on-year.

The core business, AOP was down 8%, but the strategic portfolio was down 82%. During the period, there was a substantial reduction in the loan operating losses to just $76 million, which represents provision impairment of about $289 million, mainly related to Guangzhou, which is offset by a less disposal gain from a disposal of SUEZ NWS and Xiamen Container Terminal Group of [ $230 ] million. Last year, we had a very large non-operating loss of $1.97 billion, and this represented mainly the remeasurement loss of $1.33 billion on our Wai Kee shareholding after we reclassified the shareholding to asset held-for-sale. In addition, we provided about $460 million on Goshawk in terms of this asset impairment as well as ECL provision. Finance costs during the period decreased by 9% to $227 million as we benefited from lower HIBOR interest rate as well as the lower average loan balance. We paid about HKD 5 billion denominated bank loans after receiving the proceed from a disposal of SUEZ NWS as well as Xiamen Container Terminal Group.

Profit attributable to shareholders increased by 161% to $1.595 billion, and the increase was pretty much in line with our positive profit announcement disclosed towards the end of January. Basic earnings per share was $0.41, which is an increase of 161% as well. Our dividend per share was $0.30, which represent an increase of 3.4%. Adjusted EBITDA, which is a proxy of our cash earnings declined by 19%, and the decline was driven mainly by the absence of significant contribution from the Strategic Investments segment and also the reduced contribution from the disposed asset, or asset -- held-for-sale assets.

Moving on to the performance by each individual business segment. For the core business, the overall AOP recovered 8%. Again, if you strip out the disposed held-for-sale asset, which is Wai Kee as far as the core business is concerned, the recurring business AOP was down just 3% year-on-year.

For the Roads business, the AOP was 29% to $969 million, and the decline was driven mainly by the temporary prohibition of Type 5 and 6 trucks on the Hangzhou Ring Road. As you remember, Hangzhou Ring Road is one of the most important contributor to the Roads AOP, representing about 39% of the segment's AOP.

For the aviation sector, the AOP was stable, an increase of 1% to $274 million. On one hand, the business continues to suffer from the restructuring of some of these flat fees. But on the other hand, it recorded a stronger mark-to-market gain on the IRS contract of [ $426 million ] this year versus just $13 million last year. The Construction segment, AOP was down 23% year-on-year to $408 million. Again, if you strip out Wai Kee, which was reclassified as asset held-for-sale, and hence, we stopped doing equity pickup on this asset, the AOP of the Construction segment was representing almost 100% by Hip Hing, with AOP was stable during the period as compared with last year.

The Insurance AOP increased by 6% year-on-year to $491 million despite a still challenging environment because of the border closure because of COVID. That said, the business recorded a very strong increase in insurance premium, and this was partly offset by the high claims expenses post the initial COVID outbreak.

Moving on to the strategic portfolio. The overall AOP was down 82% to $185 million. If you exclude the disposed asset or held-for-sale asset, which are Xiamen Container Terminal Group under Logistics, SUEZ NWS and Derun under environment, as well as the Strategic Investment segment, the strategic portfolio's recurrent AOP was indeed up 381%.

For the Logistics business, the AOP was down 17% to $279 million. When you strip out Xiamen Container Terminal Group, the Logistics AOP was indeed flat year-on-year. Facility management's AOP was -- sorry, Facility Management's AOL narrowed by 50% year-on-year to $162 million. So if you look at the explanatory box to the right of the table, it comprised of a few businesses. GHK's AOL narrowed by about 20%, HKCEC's AOL narrowed by about 79%, and Free Duty's AOL narrow by about 32%.

Strategic Investment. We recorded a very large fair value gain on certain investment last year, which contributed to the $752 million gain in the first half of fiscal year 2020. During the current period, there was no such gain and we also made some ECL provision on certain investments contributing to a small loss of $54 million. Discontinued operation, Environment. As you can remember, the Environment segment comprised mainly of SUEZ NWS and Derun. During 2021 first half, we received a dividend from SUEZ NWS, which amounted to $121 million after we reclassified the assets held for sale, and not just $244 million representing equity pickup on both SUEZ NWS as well as Derun.

Let me stop here and pass over to Ben to walk you through the performance of each individual business.

[Ben Wong, executive]

Thank you, Jim. So I'll first talk about the Roads. So as you see Roads AOP was down this year, due to various reasons such as the resurgence of COVID in certain province where we operate, power crunch and also temporary prohibition of type 5 and 6 trucks using the Hangzhou Ring Road.

And second, there are also -- if you look into the 3 Central expressways that we have acquired recent in the last few years, the numbers are up about 3% year-on-year, and it accounts for 11%. So you can see the new -- the acquisitions that we made in recent years are very improved. If you look into our major expressway now contributes about 80%. Excluding the Hangzhou Ring Road prohibition and the negative effect, the overall traffic is growing slightly at about 1%. Our average remaining concession is about 10%.

So as previously mentioned by Gilbert, we are continuing to look into expand our growth portfolio. We'll continue to look for good opportunities with strong recurring cash flow as well as profit. In terms of the compensation measures, there have been quite a number of problems, such as Hunan, Hubei, Guangdong, Shanxi, have confirmed will be at least 79 days and some more provinces to confirm.

Switching to the next page on aviation, specifically Goshawk, if you look into the AOP, it's stable year-over-year, and we do have some one-offs and continue to see some lease restructuring from certain airlines and organizations. So our nonoperating losses has about HKD 274 million. And if you look into the overall collection rate has improved to 127% relative to Q2 2021 at 92%, obviously it has improved. And as you see in certain areas such as Europe and U.S., flights are resuming. So I think the darkest days are probably gone by now. But nevertheless, if you look into the recovery in certain areas and particularly in Asia, there might still be some challenges in the recovery.

And in terms of the interest rate swaps, we have accounting gain of $26 million. And with the continuing interest rate top trend, we may see more accounting -- mark-to-market accounting gains to come. In terms of outlook, we remain prudent and cautious in employing measured and disciplined business strategy. Obviously, the recovery path is also having some headwinds due to such as geopolitical tensions, due to COVID restraints and different variants of COVID. So we'll continue to uphold a very strong risk management policy, before we deploy further capital and we try to minimize the risk for our shareholders.

And thirdly, on the Construction side. As Jim has mentioned, year-on-year, down 23%, mainly due to the absence of the equity pickup on Wai Kee and share of profit. But if you look into Hip Hing Group, which is now the remaining business within Construction, it has been doing very well. And if you look into the new contract awarded, it's $8.6 billion. Contract on hand is up 21% year-on-year to $54.4 billion backlog of $28.3 billion. If you look into the type of projects, it's about 67% private and 33% government and institutions.

As we know, there has been a lot of discussions and news about the government's commitment into boosting housing supply and particularly the rollout of the new plants on Northern Metropolis will definitely be a very strong supply of projects in the mid- to longer term. So Hip Hing is very well positioned to capture those opportunities. And we are also expanding further in civil-related projects such as site formation, piling works , for example, for the Northern Metropolis in the northern side of Hong Kong, in new territories. So that should also be a boost for Hip Hing Group.

So turning into the Insurance side, if you go into the AOP, year-on-year is up 6%. And if you compare FTLife results versus the market, we're up 1% versus the industry down about 5%, and we've consistently outperformed in the market. And if you look into our agency forces, we continue to improve with 21% growth in the MDRT side. And if you look into the key metrics in the middle of that slide, particularly VONB margins, it's tough due to enhanced product mix and product repricing. Our overall investments is currently at about 5.3%. Our solvency is still well above the minimum requirements, 150%. Now we're sitting at 143%. And of course, the APE growth continues about 13% year-on-year.

On the outlook for insurance, if you -- we are continuing to strengthen our agency forces with higher productivity and MDRTs, who will continue to innovate different products to cater for the needs of the potential border reopening. We are also exploring further distribution channels and income streams. And of course, with New World Group as our parent, we are well positioned to benefit from the ecosystem.

And I would now like to switch to the strategic portfolio. If you look into our Logistics, year-on-year is down 17%, but that's mainly due to the lack of profit contribution of XCTG, which we saw last year. Year-on-year, excluding XCTG, it's about flat. There are 3 parts to the Logistics side. ATL Logistic Center. In this interim, we have reclassified from a PPE to an investment property to better -- to reflect the latest business model. And in turn, it has increased to $7.3 billion in terms of NAV, which represents about 10% -- 11% of the group's NAV.

ATL continues to do well with an average trend increase of 2% and occupancy standing high at 99%. In CUIRC, the AOP is up 9%, mainly due to the robust growth in ancillary logistic services. And operationally we continue to expand with the new Guangzhou terminal, commenced operation in late December. And we also are doubling the capacity of the Wuhan terminal. And also the expansion of Changzhou terminal capacity is underway.

We have also made some investments in the modern logistics, which we have talked about in previous results. In this interim, you've seen we have invested in ANE. We have also invested in Worldex, an integrated logistics service provider covering major ports. So we'll continue to expand into -- or expand in this segment and look into deploy further capital in technology-related investment of service-based logistics as well as warehouses, because we do see very strong demand, sustainable demand from the Mainland.

Further into the strategic portfolio in the facility management side, the 3 businesses, 2 of them have been improving operationally. If you look into GHK, outpatient is up 49%, inpatient is up 20% year-on-year. And if you look into the occupancy rate, it's hovering steady at 64% with increased regularly utilized beds. And in terms of HKCEC, the AOL narrowed noticeably in the interim, mainly due to the resumption of various smaller scale events and local events and the patronage is up.

In terms of Free Duty, we have also seen some improvements with -- although only one operating outlet opening with the Hong Kong-Zhuhai-Macao Bridge But we continue to work on different distribution channels such as online sales, pop-up stores. We'll continue to seek ways to improve returns while the main shops are closed.

So in terms of outlook, as Gilbert has mentioned, we will continue to look for opportunities for growth. We'll have -- in terms of GHK, you will see continuous ramp-up in operation, as well as new business initiatives such as managing -- having management contracts for other third party as well as potentially within the group. So Free Duty will be well prepared for the border reopening and international travel.

That concludes the business part of the presentation. But nevertheless, ESG is also what we have in mind. So I'll walk you through some of the initiatives that we have carried out this year, as well as some updates. So in terms of sustainable financing, now we have over HKD 4 billion financing, which is sustainable financing transaction. We'll continue to update and incorporate our commitment progressively to phase out some of the non-environmental-friendly businesses. And if you continue to look, we are very much pitched towards supporting the government's initiative and the Climate Action in 2050.

Moving on to the next page. In terms of individual businesses, Roads, we have entered into a 3-way MOU, with PowerChina and China Energy and strategic alliances to explore different alternative energy applications. And in terms of HML, which is a major company of HKCEC, we are a signatory of the Net Zero Carbon Events pledge in November committed to reduce 50% of carbon by 2030, moving towards Net Zero by 2050.

Moving on to some of the corporate governance update. We are undergoing review to be aligned with the revision from the Hong Kong Stock Exchange. We are also looking into tightening up and also, as a result of climate-related transition risk assessment in our ERM, we continue to review the status and impact of these transition risks.

And on the policy update, we continue to review and update various policy in terms of climate change policy, sustainability policy, reducing our energy consumptions, refraining, making new investments and debt or equity, coal-fired power plants or coal mining, and we have continued to invest into clean energy and energy-efficient technologies. Of course, we are also very mindful of the safety issues and also on the human rights as well.

And I think during this year -- this week, we have announced that we will donate 10,000 oximeters to the public, and we will also arrange to have -- GHK to arrange free teleconsultations in March. And for FTLife, they have also provided free protection for those taxi drivers to transporting COVID positive patients.

And here is an overview of the various ESG ratings and award updates. And if we flip to the next page, which is the last page of our presentation, we do have quite a number of businesses being recognized by various organizers, within -- by the industry in construction for Hip Hing, for HKCEC. So we're very proud that many of our business units have performed well and being recognized by the technology and the various business organization.

So I think that will conclude today's presentation, and we'll open up the floor for Q&A.

[Catherine Tsang, executive]

[Operator Instructions] Now we have our first question. What is the mix of fixed interest rate and floating interest rate debt on a consolidated basis?

[Chi Hang Ho, executive]

Okay. Including the truck, which is of an amount of USD 1.3 billion, we have total debt of about HKD 30 billion, of which HKD 12 billion is floating rate and HKD 18 billion is fixed rate. So the proportion of floating rate that would be 40% of total. I just want to highlight that of this HKD 12 billion floating rate note, about HKD 3 billion is related to renminbi loss. As such, the Hong Kong dollar loan would amount to something like HKD 1 billion or 30% of total debt, which will actually be impacted by the upcoming U.S. rate hike.

[Catherine Tsang, executive]

What is the reason for reclassifying ATL from PPE to investment property and why do you do the revaluation of ATL in this interim? And is the HKD 7.3 billion presale of the entire property of ATL?

[Chi Hang Ho, executive]

Okay. In the past, auxiliary services accounted for a meaningful proportion of ATL's revenue. However, over the years, we have seen the tenant mix change towards the retailers in Hong Kong or international retailers and third-party logistics company. Now this company, they do not have a strong requirement for the auxiliary services provided by ATL. As a result, rental as a proportion of the total revenue of ATL has become higher and higher. And we think that now is the right time to do the reclassification to reflect the underlying income mix of ATL.

[Ben Wong, executive]

The second part of your question is whether we have higher independent property value.

[Chi Hang Ho, executive]

Yes. Yes, we have high independent property value to assist us on the valuation of this property. And in addition, we want to highlight some of the parameters that we have chosen in that valuation exercise, we have adopted a cap rate of 5.5%, which we believe is very conservative compared with the transaction cap rate of 3% to 4%. And also, look, 100% of ATL valuation is about HKD 14.9 billion. This contract has a total area of about 5.9 million square feet. So that translates into a per square feet valuation of just HKD 2,500, which I think is very reasonable. It's not too conservative.

[Catherine Tsang, executive]

And now we have the next question. After we disposed several businesses in the past years, what are some of our plans to reallocate the recycled capital? And any priority for reallocating the recycled capital?

[Jim Lam, executive]

I think in this question, I think we have always been telling our investors that we will look for investments in the Road segment, in the Logistics segment. First of all, I think there is no priorities between these 2 segments. We definitely will look for assets that has recurring income, recurring revenue as well a very strong cash flow. They're always the focus of NWS.

I think with the simpler business portfolio now, it is actually in a position to look for good investment and not to rush into any investments, especially with the economic outlook that are currently being affected by COVID. I think going forward, we will remain focused on our current business, especially when I talk about the Road as well as the Logistics. But at the same time, we will also further expand our Insurance business, especially we are applying for our China license, and we definitely expand into GPA and China once we get our license. Also, I think I want to reiterate that we will continue our sustainable and progressive dividend policy. I think that is actually very important and actually demonstrated our commitment to generate value for our shareholders.

[Catherine Tsang, executive]

Any further non-core disposals?

[Jim Lam, executive]

I think, first of all, we have done -- as I mentioned from the very beginning of the presentation, we have done in number of non-core disposals over the last few years. But at the same time, I think the world keeps changing. We will continue to look at our portfolio and look at the, I think, look, at the risk as well as the growth potentials of each of our businesses. It is actually very difficult to tell you guys whether there will be any further non-core disposals. As I mentioned, I think the situation change with times. We will monitor the performance of each of our segments and we'll do disclosure as and when we think the timing is right.

[Catherine Tsang, executive]

What is the strategy for aircraft leasing business? What is the guidance on the aircraft lease side in the financial year 2022 and 2023? And are you planning to sell some of the existing aircraft and what is your expansion strategy?

[Chi Hang Ho, executive]

I think, first of all, the aircraft leasing business is -- although it's getting back to track. But at the same time, there is still risk involved in the business, including the potential increase in interest rate, also the COVID variance still affecting many of -- many countries. We will appropriately take more risk averse stands on the aircraft leasing business. Therefore, we don't have any plans on the aircraft fleet increase in the coming year.

Whether there's any plan to sell some of the existing aircrafts, it really depends on the opportunities. If there's good value that we actually generate from selling some of the existing aircraft and also as part of our portfolio management exercise within the aircraft leasing segment, we definitely do that. So regarding expansion strategies, as I said, I think it is more of a risk management in this business rather than any expansion mode for this business.

[Catherine Tsang, executive]

Another question for aviation. Have you ever considered disposing the aviation business at the right price or we don't have any plan to sell down this business at all?

[Chi Hang Ho, executive]

I think this question is very important. It's -- I mean, you asked at the right price. So what is the right price? The -- when we find right price, we won't rule out the possibility of disposing the aviation business. But first of all, we need to find the right price. And that answered my second -- your second question, whether any plan to sell down the business at all. So I think at the end of the day, whatever possibility to generate more value for the shareholders, I think we as management will consider.

[Catherine Tsang, executive]

Could you consider buyback?

[Chi Hang Ho, executive]

Yes. We definitely will consider. We -- it is -- I think with our cash on hand as well as our available facilities, we will consider different options to return value to the shareholders, as we have already done. In the last 2 financial period, we increased our dividend by 3.5% respectively, last year than this year's. And buyback is definitely one of the options that we will consider to increase value for the shareholders. But one would -- I didn't want to consider, I mean, for myself and for the management is we need to ensure that we have cash for potential acquisitions. I think that is more important for the long-term generation of value for the shareholders.

[Catherine Tsang, executive]

What is management thinking about a future dividend growth trend?

[Chi Hang Ho, executive]

That depends on the businesses. It is -- I think it is too early to say, especially COVID, Omicron is still affecting Hong Kong as well as other parts of the world. I think it's too early to project our future dividend growth. But as I mentioned, when we see opportunities that we can actually generate value for the shareholders, we won't hesitate to increase our dividend.

[Catherine Tsang, executive]

This question is related to FTLife. Do you have some updates on the China license application and what is the progress now?

[Chi Hang Ho, executive]

We are proceeding with the China license applications. We don't have any updates as of now. But once we have more progress, we will give out investors more updates.

[Catherine Tsang, executive]

Do you consider selling those assets and strategic investments given the volatility to AOP?

[Chi Hang Ho, executive]

The different investment within the strategic investments are actually investments that will, first of all, have full potential. At the same time, it will provide synergies to our other segments. I think we will continuously to review these assets or these investments and divest when the real opportunity arises. In fact, last year, you saw the -- again, within the segment is around HKD 700 million. Some of the gain is actually coming from the disposals of this investment. So you will see, as management, we always won't hesitate to sell less investments when we can generate value for the company and for the shareholders.

[Catherine Tsang, executive]

For the interest of time that is the last question. How do you see the outlook for Facilities Management segment?

[Chi Hang Ho, executive]

Very good question. Now within the Facilities management, there is actually greater benefit in this business. First of all, for Goshawk, I mean, for Gleneagles, I think it continues to improve since breakeven, EBITDA breakeven in 2021. So that will definitely continue to ramp up. We don't see any trend of it going backwards. Even during COVID, I think every single month, we still can achieve record-high results in terms of growth in the outpatients as well growth in the in-patients.

For Hong Kong Convention Centre that very much depends on the COVID situations. We definitely see some improvement since the resumption of local and smaller scale events since the beginning of this year after COVID becomes more stable. But with the recent outbreak of COVID variants, I think that adds the uncertainty. But we very strongly believe that once it is more under control, this -- with the quick facilities of HKCEC, which is pretty much unreplaceable, it will become the value of choice for different exhibitions and conventions. And once the borders reopened, we will see the recovery very stiffly.

And last but not least is our Free Duty business. Definitely, it really depends on the -- when the borders reopened, but even with now the borders closed, our -- only one shop which is opened in Hong Kong-Zhuhai-Macao Bridge is actually generating positive AOP. And also with e-commerce and pop-up store, actually, they are generating positive AOP. So we believe the reopening of the borders will definitely act on further catalyst to this particular business.

[Catherine Tsang, executive]

Okay, thank you, Gilbert, Jim and Ben. Now comes to the end of our presentation. Thank you for joining us today. If you have further questions of the briefing, you are always welcome to schedule a call with us. Thank you very much. Stay healthy and goodbye.