City Developments Limited (C09) Earnings Call Transcript

Good morning, ladies and gentlemen, friends from the media, analysts, bankers, investors and fellow CDL colleagues. My name is Belinda, and I'm the Head of Investor Relations and Corporate communications at CDL. On behalf of the CDL management, we warmly welcome you to CDL's briefing on its unaudited financial results for second half and full year ended December 31, 2020. 2020 has truly been quite an unusual and extraordinary year. The protracted COVID-19 pandemic has caused tremendous disruptions for all of us. It is affected the way we live, the way we work, the way we play, travel and, certainly, the way we interact, especially as seen in this room. I would, therefore, like to take this opportunity to thank everyone for joining us today and taking the time. This is a hybrid briefing format. We have guests that are physically here in this room at M Hotel as well as those who are joining us virtually via Zoom and also via a live webcast. For all of us in this room, in line with safe management measures and the seats are all spaced at 1 meter apart, and we would like to remind everyone to please keep your mask on at all times during the briefing and also be mindful of the prevailing safe distancing measures as you interact in very, very tight, small group. In line with CDL's commitment to environmental sustainability, we will not be providing printed materials for our briefing. Instead, we encourage all of you to scan the QR code on the screen found here to download and view the documents that are already available on our website. Now these documents were uploaded to SGX early this morning before trading. They include: firstly, a copy of the detailed financial statement; secondly, a press release summarizing some of the key highlights of our performance; and thirdly, a presentation deck that the management will be using in a very short time -- short while. So for all our guests joining us virtually, you would similarly be able to download these documents, which are available on the CDL website. I would like to introduce our management panel. In the center, we have Mr. Kwek Leng Beng, our Executive Chairman; followed by our executive members, Mr. Sherman Kwek, our group CEO; Mr. Chia Ngiang Hong, our Group General Manager; Mr. Kwek Eik Sheng, our Group Chief Strategy Officer; Ms. Yiong Yim Ming, our Group Chief Financial Officer; Mr. Frank Khoo, our Group Chief Investment Officer. In addition, we would like to introduce you to Ms. Goh Ann Nee, our Chief Transformation Officer in the Executive Chairman's office, who has been leading the special working group on our Sincere property investment. The format of today's briefing will be in 2 parts. We will kick off with a presentation of the key highlights followed later by a Q&A opportunity with the panelists. So without further ado, I would like to invite Mr. Sherman Kwek, CDL Group CEO, to kick start the presentations. Mr. Kwek, please.

Okay. Thank you, Belinda, and good morning to everyone who came to attend physically today as well as all those who are participating online. There's an update that keeps flashing on the screen for the iTunes. So -- but anyway, this is the agenda for today. I'll take you through briefly our overview and strategic initiatives. Yim Ming will dive into greater detail in terms of our financial highlights and our performance. And then, of course, as Belinda introduced earlier, we're very privileged to have our former colleague, Ms. Goh Ann Nee, rejoin us in late November, and she's been working tirelessly around the clock to lead a task force, to find ways to restructure since here. So she will give us more color onto the situation. The ops review is included in your deck, but that's just for your own personal read, and we're not going over there today. Yes. Unfortunately, the most unsightly slide in this deck, and we've obviously had a very, very challenging year in 2020. And obviously, we have been significantly affected by the write-down of Sincere that the Board decision has take -- that the Board has taken the decision on. So you can see here our performance for the year. I will not go through it in detail, and Yim Ming will give -- shed further light on this. Our NAV currently stands at $9.38 per share. As for the last roughly 2 years, we started disclosing what our RNAV would be if we fair valued our investment properties, excluding our hotel portfolio and, of course, excluding the development projects. So that's around $14 26. And of particular interest to many of you today would be -- this would be the first time, I think, we've also decided to disclose so-called what would the RNAV look like if we were to revalue our hotel portfolio now that we fully privatized M&C and own it 100%. And so we've pegged it at $16 88. And I would like to emphasize that this is actually a very, very conservative valuation. We did valuations as of 2020 year end. And we did external valuations for about 76% of our hotel portfolio, and the rest were done internally, but all these are extremely conservative valuations. And because they were done at the end of last year were actually impacted by COVID. But even then, you can see that the hotel portfolio has -- still has a huge amount of unlocked value. And we are certainly trading far below what the true RNAV of the company is. We have decided -- the Board has decided to propose a $0.12 dividend. This is -- although this is down from the $0.20 that we did in the year before, but we hope that shareholders will still appreciate that despite a very challenging set of results and a tough year that we've gone through we do want to reward our shareholders and investors for sticking by CDL, and, of course, demonstrate also that we are still in a very strong cash position with a strong liquidity and borrowing resources. Okay. In terms of the key operational highlights. You will see there that in Singapore, we've sold 1,318 units in the residential market. I would say that this is a very strong and credible performance. I think it certainly surpassed what many analysts have conveyed that they thought we would sell. Sales value is relatively speaking lower than previous years, but that's also because, in 2019, the preceding year before, I mean, we actually sold a lot more of the high end properties. So generally, with high end, the sales value will be higher. But last year was certainly a very credible performance, and our team at CDL really surged forward hard and also embraced a lot of digital strategies. We adopted various technologies that enabled us to sell better virtually and were able to wrap this up. And overall, I think, Singapore's market, as you know, in terms of developer sales for last year clocked in at around 9,900 plus, just shy of 10,000. And I thought that was actually a good sign as well that the market was still buoyant. Of course, I know lately, there's been a lot of chatter and rumors about potential cooling measures, but I will not comment on that. This year, we're probably expecting that new sales to come in slightly lower than this 10,000. I think some of the analysts estimates out there, about 8,000 to 9,000 for the year. So that's probably what we'll be expecting going forward. Prices ticked up. The price index for the whole Singapore ticked up by about 2.2% in 2020. So it's still an increase, but a slightly smaller increase than 2019, which is about 2.7%. So overall, I think, a very healthy market right now. And last year, we -- at the beginning of the year, remember, we were all anticipating before the whole virus situation got out of control, we thought -- we were anticipating there was going to be about -- probably about 14,000 to 15,000 units launched in the year. But in the end, there were only about 6,200 units launched. So less than half of what we actually anticipated. So it makes for a much healthier market. In terms of China, we sold 441 units. This China obviously doesn't include Sincere. Traditionally, we've always -- this is CDL China. And this predominantly -- almost all of it comes from our Suzhou project, our flagship project in Suzhou, Hong Leong City Center, HLCC for short. We've done very well on that project. It's a big mixed-use project, but it's coming to an end. It's more or less come to an end already with the sale of this chunk of units. So -- and that's part of the reason why we also invested in Sincere because we actually did not have any more further land bank in China to rely on. In terms of Australia, we sold over 77% of this project in Melbourne, called The Marker. So that's also been, I think, of a good relief to us. On the asset management side, our other core division, we are basically -- I think showed a resilient occupancy for the year. For the office side, we had a committed occupancy of 92%, which is above the overall island average occupancy. And we -- actually, in terms of rental revenue, we were down only about 10%, I think, for the year. And that's -- much of that is because we paid out rebates and stuff. So I would say our portfolios have been very resilient. We have some buildings where we've been increasing the WALE and, therefore, are providing more stability for us. On the retail side, we -- coincidentally it's the same number, but we also had a committed occupancy of 92.2%. So I think retail will still continue to remain stable for us. As you've all seen, retail has taken a massive hit last year. Retail was down overall for the whole of Singapore, I think, more than 12% in terms of rents. But I think, for us, I think, we're very lucky in the sense that we have -- our flagship mall is a suburban mall, City Square Mall. And so I think suburban malls, which tend to rely on more domestic consumption, will be relatively better shielded than a fringe or a prime kind of CBD malls, which are -- some of them rely more on inbound tourism dollars. And overall, for our overseas projects, we have office buildings in London, in China and elsewhere. They've all been very stable as well. Hotel operations, unfortunately, were very hard hit. So as you all have seen from our announcement, aside from the write-down of Sincere, I think, hotel operations and impairments there also substantially affected our results. And then I think everyone understands. I think aviation, tourism and hospitality was the hardest hit by the pandemic. Good news is that less and less hotels are closed since last year. At the peak last year, we had about 25% or 1/4 of our portfolio -- hotel portfolio closed. Now it's about 8% are closed, but obviously, all the rest of the stats don't look too good now. And in terms of the divestment, we have constantly said that we want to do more capital recycling, more asset divestment. We have already embarked on that with 4 hotels being inked last year. So we have in Malaysia we have the Copthorne Orchid in Penang. In Singapore, we have the W hotel, which we sold to CDL Hospitality Trusts. And then in U.K., we have this hotel in Birmingham that the city is planning to rejuvenate the whole area. So we're selling it into that scheme. And then after, in the U.S., we have Millennium Cincinnati, which we announced before. And we are looking at further divestments going forward. And then lastly is fund management. I'll talk a little bit more about one of the investments we made last year, not a big investment, but I think 1 that has panned out nicely for us, which is a further investment into IREIT, which is listed in Singapore. So we bought more of the units in the REIT. And also, of course, we can't talk too much about it for the time being, but we are still looking at the establishment of a REIT in Singapore, listed in Singapore with our commercial office properties in the U.K. We were looking at actually listing it last year. But obviously, with the pandemic, we felt it would be better to hold back till capital markets were more stable. So this is just to give you a snapshot of what our performance looks like. Adjusted EBITDA, meaning we have stripped out -- we have excluded the effects of all the impairment losses on investment properties, on PP&E, as well as from Sincere. Otherwise, that would negatively skew this and nobody would be understanding. So roughly, I mean, from an operational perspective, this is what took place last year. And again, as I mentioned earlier, hotels unfortunately took the brunt of the pandemic's effects. This just gives you a quick overview of what our geographic diversification is like. Because we have substantially written down Sincere, Sincere doesn't really factor into this chart anymore. So this is just all of CDL's -- mainly CDL's diversification. So you can see what it looks like. Okay. In terms of our initiatives, we still go back to our GET, our GET strategy of Growth, Enhancement and Transformation. For growth, we have pipeline launches coming up, Irwell Hill Residences and Liang Court redevelopment. And of course, we continue to aim to maintain a healthy and strategic inventory level in Singapore. So you'll see us continuing to participate in land tenders to replenish our land bank, which has been very well sold over the last 2, 3 years. On the asset rejuvenation side, I'll talk a little bit more later about these redevelopment proposals that we have. And of course, transformation, it's the REIT as well as M&C and Sincere. So for growth, these are the acquisitions and investments we made last year. So IREIT, Sincere, Irwell, which we bought in January, $1,515 per square foot. And we have also embarked on a Private Rented Sector, PRS strategy, which means buying either development already completed projects, residential projects for rental. And we bought 4 residential projects in Osaka under PRS, and this is our fifth addition last year, which is in Yokohama. So we're still very positive. And all 5 properties have performed extremely well. I think rental properties are still in high demand in Japan. And of course, on top of that, we also started doing our PRS in U.K. So in Leeds, one of the biggest and stronger cities in the U.K., we have a 664 unit development that we're developing from scratch, and that will also be a PRS project for rent. And so in U.K., rental apartments are also highly in demand right now. This is our launch pipeline. As mentioned earlier, we have the Liang Court redevelopment. This was several years in the making between us and CapitaLand, is 50-50. And after we amalgamated everything, we have proceeded ahead with planning. And we are not sharing too many details right now, and I understand neither is CapitaLand, but I think we are planning for a special launch at some stage to unveil full details about this impressive mixed-use development that is -- has impressive views in all directions, Fort Canning Hill, Clarke Quay, even can see MBS from there and is next to, as I said, Clarke Quay, which I think is one of the top premier entertainment venues in Singapore. So I think this will be very sought after. It's almost 700 units. Of course, closer to today is -- closer to-date is more -- is Irwell Hill, which we are planning to launch in second quarter of this year. Irwell Hill is, as you all know, a very prime site that's diagonally across from Great World City. And there's a new Great World MRT station as well. So I think this should be something that will be very sought after, 540 units. We did the design with MVRDV, this Dutch architect, that's known for its very contemporary futuristic kind of design. So we toned it down a bit. Initially, it was quite a crazy design, but we -- it's still -- it's very pixilated. You can't really tell from this small imagery put there, but it's an undulating pixelated facade, I think, that will be very interesting to our buyers and compete with beautiful landscaping. In terms of enhancement, enhancement primarily revolves around AEIs, renovations for our portfolio as well as repositionings, redevelopments. And of course, we've been buying a lot of operational efficiency within CDL. We've embraced digitalization. We've tried to ensure that our staff had necessary tools, so they can execute better. And of course, we've also worked out in the last years on shortening our time to market from the time we acquire a site to launch. And we've talked about that at previous briefings, so I won't go into it. We also did some minor AEIs on our industrial properties, 2 of them, City Industrial Building and Cideco Industrial Complex, I mean, have been in our portfolio for a long time. Both are freehold, but the rents have been plummeting quite badly there because they were very, very old. So we decided to spend just a small amount of money on both, and you can see that we kind of used CDL's corporate colors as well. So it's kind of yellow to give it more vibrance and hue. And one, CIB has already completed, the small AEI. And then Cideco, we're in the process of doing it. But it revamps everything in the buildings, the toilets, the public areas, all that and parking. So since we have done it, I mean, actually, we have seen a very, very strong interest from industrial tenants. In terms of redevelopment, we have, obviously, these 2 projects, and we have briefly mentioned both of them before. One of them is Fuji Xerox Towers, which sits at the gateway to the government's huge Greater Southern Waterfront master plan. And this is actually done by Nikken Sekkei. So you can see how beautiful the project will be, and it has magnificent views of the ocean. The bottom part, where you see the waterfall, that's actually the office component. So nowadays with COVID, people are looking for more wellness and more safe distancing. I think this will also allow the office tenants to have nice areas where they can relax or take a break or even socialize. And we have been continually tweaking the component. So right now, subject to approval. Once we -- I mean, approvals probably not anticipated until end of this year, I think. But once we get approval, we are looking for a 25% uplift in the GFA. And we have decided to go with -- we have kept at 40% commercial use and predominantly it's almost all office. There's only one level of retail. And it's all office, and the rest has to be -- because the -- obviously, URA wants to encourage a live-work environment. So we are doing 25% service apartments. That's for rent. And we are doing 35% residential, 286 units for -- 288 units for sale -- sorry, 286 units for sale. So that is the makeup of that. Central Mall right now, we're actually in advanced stages already, so -- but I still can't share too much because need to really wait for the provisional planning permission to come down. But we should be announcing this pretty soon. We have worked with our neighbor. We own Central Mall, which includes the office tower and the concert, retail shop, houses there. We've worked with our neighbor, which is Far East Hospitality Trust, and theirs is a mixed-use development as well, to jointly submit and apply for redevelopment of the whole area. And this is under the Strategic Development Incentive Scheme. So it's not specified what the GFA uplift there, but we are looking at a very, very attractive GFA uplift, should this scheme be approved. And so when you look at the picture, the one on the bottom side, that's actually ours. And the one on the northern side, that's Far East's project. So together, we will redevelop and rejuvenate the whole area, which, unfortunately, suffers from a lack of attractive offerings and foot traffic at the moment. Then the last bit is transformation. As mentioned earlier, transformation of several key initiatives, Sincere, M&C. Fund management is also one of the key pillars of it. And under this slide, what it basically just says is that we have 2 ways to build our fund management track record AUM. One way is we acquire assets onto CDL's balance sheet. So an example is like we acquired the office buildings in the U.K., 125 Old Broad Street and Aldgate House. And then eventually seed this into either a REIT or a private fund. Then the right side just talks about how we also strengthened our track record by investing in strategic deals or platform deals. So an example of that is IREIT. So last year, we took up a further stake in IREIT, which brings our combined stake in IREIT units to 21%. So we actually have a solid position in a REIT. We are also 50% of the manager -- of IREIT's manager, together with the other 50% is Tikehau, one of the large European fund management firms. And we also supported IREIT in their growth plans. As you know, IREIT was kind of sleepy for quite a while. They only had 5 properties, campus style office properties in Germany. We supported them to acquire 4 office properties in Spain, and it's worked out very well for us, and we are certainly very pleased with this investment. Last slide for me is our ESG integration. I think we all know that it's even more important. Nowadays, we have to pay -- we have to really put in a greater effort to accelerate our sustainability and environmental and social and governance. The world is warming up faster than any of us would like. And we really have to do our part, especially since the build environment contribute so much to carbon emissions. So we can see all the accolades that we've received. And on the right side, the Global 100. We are ranked the #1 real estate developer in the world for sustainability. So I think it's great that we're able to continue to maintain our strong track record here on the sustainability front. Okay. Thank you very much. On this point, I will invite Yim Ming to come over and go through the results. An enviable job, Yim Ming, but good luck.

Thank you, Sherman. Good morning, ladies and gentlemen. Kindly allow me to share some color on this set of financial statements. So I'll start with PBT reconciliation. FY 2019 PBT is $754 million. So just accounting for all the impairment losses for the hotels, for the ITs, which is actually also hotels. These are the CDLHT hotel portfolio that's on the master lease arrangement as well as the foreseeable losses for property development. So the next -- after that, the next 3 boxes actually reflect the underlying performance. The declines are, of course, ravaged by pandemic. You can see the biggest decline for hotel operations. And of course, you see a little up there, which is for others, that's a more resilient segment -- a noncore segment, in fact. So with that, I think our FY 2020, excluding Sincere, is a small loss of about $14 million. And clearly, the net loss from Sincere of $1.78 billion has distorted and kind of reduced our 2020 PBT to a loss of $1.79 billion. Okay. So let me adjust the net loss from Sincere to CDL financials for FY 2020. A recap of how this is achieved in our CDL P&L. So we invested in Sincere in April 2020 at agreed valuation of $8.6 billion. In June 2020, we have factored in the Cushman's draft valuations for the properties and estimated the net realizable value of the assets to be about RMB 9 billion. And accordingly, in June 2020, we have recognized a $43 million of negative goodwill and $8 million of fair value gain on the call option. For the same period, we also recognized $41 million of share of losses. For third quarter 2020, we continue to recognize $35 million of share of loss for the period. And with this, the total share of loss in Sincere is about $76 million up to 30th September 2020. In December '20, we prudently provided for substantial impairment losses to our investment in Sincere as well as the USD bonds and the amount that's going from Sincere. We also provided for a provision for the corporate guarantee, which I'll go into more detail in the next few slides. So in summary, the loss in this set of financial statements for full year 2020 relating to Sincere is about $1.78 billion. So as detailed here, of course, the light at the end of the tunnel was the investment in Shenzhen, which Ann Nee will go into more details later. So in addition, the interest income that we've recognized to date is about $128 million. This includes the loan that started back in 2019, when we announced -- first announced our strategic partnership with Sincere. So now let's look at our investment in Sincere, which will account for 51% as a joint venture. So with an entry valuation of $8.6 billion, the management accounts at the point in time when we were in as at April 2020 was about $15.4 billion for Sincere. So after the final round of valuations by Cushman, we worked hand-in-hand with the finance team on the ground as well as, of course, with the PPA adjustments with the auditors as well. So with that, the NAV of Sincere has actually went down to $0.8 billion. This is a 95% drop in RNAV. I mean you will ask, how do we shape of 95% in the RNAV? So looking at this table, Sincere is a highly geared company. So comparing the 2 sets of financials right now, an adjustment of 10% in the total assets and 9% in total liabilities has actually eroded the 95% RNAV. So the adjustments also relates to a few factors, largely being the properties. So those relating to investment properties is about $5 billion. These are supported by Cushman valuations. So of course, we are mindful that in line with accounting standards, we have accounted for all future taxes. We account for deferred tax for the investment properties. Going to the next slide for development properties, the adjustment of $4 billion also took into account the land appreciation tax. The next few adjustments were really upon deep dive of the financials, of course, more on grounds of prudent as well. So we have sent confirmation, done extensive work. And with that, we proposed an impairment loss on receivables and a reversal of the deferred tax assets. Over in China, the tax losses do have a time expiry. So of course, the last one is the adjustment for understated liabilities. That relates to largely interest, construction payables understated and, of course, deferred tax liabilities as well. So with that, I think the group has decided to fully write-off our cost of investment in Sincere. So next, really looking at how we assess our financial assets, which is the bonds as well as the loan that we extended to Sincere. So in live accounting standards, if there are more -- 1 or more events, that has a detrimental effect on the cash flows of the asset is considered credit impact. So on the left-hand side, it's really the accounting standard. It's prescriptive in nature. And on the right-hand side is how the group has assessed it. With the 3 red lines in place in the last few months, refinancing for Sincere appears challenging without further credit enhancements. And of course, to-date, we know that there's a portion of loans that's still in Sincere that currently is under negotiation to the lenders. And there's a huge amount, which is CNY 22.6 billion of interest-bearing liabilities that's due in the next 12 months. The most recent being the credit downgrade for the bonds, which was announced by the group earlier. And with that, one of the Sincere's bonds actually plunged by 65%. We understand from the source of Bloomberg on the Shanghai Exchange. On that note, we consider that the potential financial assets are actually credit impaired. And we made the impairment loss of $612 million. So as the cost of investment has been fully impaired, we just want to be mindful that the group was pleased to recognize further future losses of Sincere. And in total, the group has invested about $1.9 billion in Sincere. With this write-down, the amount relating to Sincere that still sits on balance sheet is actually only $0.12 billion. So that's actually very limited further downside. So the above process was indeed painful, but it was definitely not cavalier. It was a prudent measure that the group has undertaken. So I guess enough of Sincere. Let's move on to the financial highlights. So this slide here shows a brief analysis of each segment. So Sincere loss was actually segmented to each of the segment according to accounting standards. So for easier analysis, we've actually excluded that to look at the underlying performance. The property development segment declined from FY '19 due to the timing of profit recognition, slower construction progress of the projects in Singapore which is, in fact, impacted by the safety breaker measures and also the project constituents in each year. 2020 include the progressive contributions from Whistler Grand, Tapestry and Amber and, of course, the remaining units in New Futura and Gramercy Park. Relatively, for FY 2019, it comprised larger contributions from high-end projects, which commanded higher profit margins. So reflecting the challenging property market, FY 2020 also included a $35 million allowance for foreseeable loss vis-à-vis a write-back in the previous year. For the hotel operations, the segment was ravaged by the pandemic. Needless to say, global RevPAR was down by 65%. U.S. and Europe and Asia, all 3 regions generated pretax losses. And of course, the impairment losses definitely on the hotels that we have it further. For the IP segment, the decline is due to the rental rebates, especially given to the retail tenants and lower contribution from CDLHT hotels. There's also lower divestment gains in 2020 compared to 2019. So just comparing the PPS2 of $207 million recognized in FY 2019 versus $108 million Novotel Clarke Quay in 2020, they kind of also accounted for the decline in the IP segment. Others segment fairly resilient. In fact, it performed better than FY 2019 with a divestment gain from a non-core subsidiary and higher contribution from the property financing business. Next, let's move on to charts and have a quick look. Second half revenue, declining revenue of 44%. Hotel is a huge revenue contributor for the group. Second half suffered the brunt of the pandemic across Europe and U.S. For EBITDA, for clarity purposes, we have actually excluded a net loss of Sincere because it will distort the financials. So just going on to PBT for second half. The group will have still recognized a small loss of $18 million for second half, excluding Sincere. So for second half PBT, you will notice that the IP segment has actually better than of 2019 because the gain from Novotel is recognized in the second half of 2020. Revenue for full year. I'd just like to remind the audience that Sincere is a joint venture of the group. Hence, we have equity accounted for investment in Sincere from day 1. Accordingly, the revenue of the group does not include any contribution from Sincere. So the exclusions are actually only for the EBITDA as well as the PBT slides. So FY '20, I'll just jump straight to PBT then, sorry. Okay. For PBT, excluding Sincere, group PBT is a small loss, about $14 million. Of course, this included impairment losses. So excluding the noncash impairment losses, actually, the group PBT is $120.8 million. So all segments are profitable, except the hotel segment. Lastly, I would like to focus on the strong balance sheet of the group. The group has strong and robust fundamentals. As of 31st December, we had a total cash of $3.2 billion as well as $5.2 billion of cash and available committed credit facilities. So on this note, the group is really grateful for all the banks who has stood by CDL through good and bad times. Average borrowing cost is low at 1.8%. Gearing stands at 62%, including the fair value gains on IP only. This has not taken in the reval surpluses, so to speak, on the hotel that Sherman mentioned earlier. The group is very confident to weather this storm with the strong fundamentals and financial strength. In terms of capital management, the group continues to exercise discipline in capital management. It ensures that it has a balanced debt expiry profile as well as a debt currency mix. So with this, I hand my presentation over to Ms. Goh.

Okay. Good morning, everybody, and I must not forget to wish you Happy New Year and safe new year for the last day, okay? The presentation, thank you to Sherman and CFO to explain a bit more in-depth of the color of 2020. I think Sincere, basically, I think, was acquired last year, and I'd like to say that don't forget there was a COVID. Don't forget there was other factors involved. Later I will elaborate the general China property cooling measures. So I call it a perfect storm. The platform, in my humble opinion, is a very good strategic platform for CDL to expand its growth. China is a market that no one should ignore. If you follow the think tank statistics, I think, in a few years, China will be the dominant market globally. So let's embark on Sincere now. Let me give you the operation background of China. Some of you may not know. There's $8 trillion amount of China real estate loans outstanding. This actually led to a lot of policies that are three red lines and many other policies that if you follow the China real estate market, it is very similar to the Singapore cooling measures. Now if you look at it from this chart, statistically, the amount of loan outstanding, no new construction loans, but real estate loans that since 2012 has been growing. If I go to the next chart, if we all follow again the economics and political leadership, Mr. Han Zheng used to be Vice Mayor of Shanghai. He is now a very Senior Vice Premier in the Politburo. He's actually kept repeating -- and I think you read the message. The focus on real estate is for houses of our living and not for speculation. Now if you look at that, it is not different from any other markets in the world. These are some cooling measures. I thought I'd share this with you because maybe we are in Singapore. You don't really look at it from a China perspective. And frankly, Sincere's situation is not unique. There are many, many other real estate market in China. The big ones, Evergrande, also had the same problems. The borrowers just also face downgrading. And if you look at this chart, Shanghai's recently a new rule came up. And in fact, even the individual buyers of properties for staying, the approval of the releasing cash from the banks will not be released until certain due diligence has been done. Right at the bottom, I thought maybe give you a bit of flavor. That even reviewing, if you divorce -- you don't running in divorce, because in China they're very creative as well. You can buy more units. But these are subtle. If you don't follow the market, you may not be well aware of the various measures that has actually impacted a lot of the other real estate market in China. Okay. This is a breakdown of currently Sincere properties. There are 300 companies group in China, and 67 properties or projects over 17 cities. So the whole platform has very interesting diversity of assets that actually CDL can actually review with our partner, Sincere, to see how we can later transform or reduce the debt and also the liquidity improvements. We are recently -- sorry, we recently acquired, and I'll explain later, the 1 project in Shenzhen, near the Pearl River Data region. And you look at this map of China. It is not 1 simple, simple country. It is actually like a little EU with various heterogeneous market in the whole China. This is a portfolio of Sincere property by analysis that the working group has been working on the last 2 months to segment it. Now the business parks, which is the Shenzhen business park that we just acquired, this exclude it. And we have 36% commercial and office. Residential is 33%. So out of the whole Sincere property, 2/3 of the portfolio are actually non-residential. Okay. This is a debt restructuring framework. Now you all know that we have been working with Deloitte who has been appointed for Phase 1. Phase II, we're actually working hand-in-hand closely to review the whole Sincere debt situation. And basically, our objective is to improve its liquidity. CDL has also made earlier announcement that actually CDL has ring-fenced CDL's balance sheet, so that until Sincere by itself stabilize with its debt restructuring. Until today, I can only say that CDL will not be pumping in new funds into Sincere. Now this means that Sincere platform by itself has to review with this debt restructuring as well as the asset portfolio to be able to unlock, to monetize, to enhance. So various different strategies that they are currently working on. This chart, I think most questions come back on the Sincere maturity of debt. I think earlier on, I think, Yim Ming has also shown some debts and also the recoverable, whether it's written-off prudently. Now if you look at this chart, it's CNY 20.6 billion, of which bonds, of course, is one of the major ones. And there's also bonds, banks, asset management company, trust companies. And then you look at the other one, the interest rates. Now the average interest rate in Sincere portfolio is averagely double digit. If we can manage or renegotiate with the banks to reduce that interest rate to even 1, 2 percentage point to 3, it will flow down immediately to improve the P&L of Sincere and also improve the cash flow and the liquidity. So then if you look at the chart below, unsecured and secured loan. You can see that secured is about 78%. Unsecured is about 22%. Now again, this is the holistic review of the debt restructuring of Sincere. To see we can actually improve this liquidity, reduce its gearing, cash flow in sense that -- so that CDL will then review later, do we inject further new funds? At the moment, the decision will be. Until Sincere, like I said, is an ICU patient, resuscitate, get healthy, then we'll put in new funds. This is interesting chart that I think earlier on was mentioned, the policy of the three red lines in China. It shows actually interesting enough for here an improvement of -- a slight improvement, not major. On the right-hand side, the policy target, 70% of ceiling of liability to asset. And then the second policy is 100% cap on the net debt to equity. And the last, of course, is cash called unrestricted cash. So despite whatever -- I mean, if you look at the whole market, this morning caught my eye, I think I saw in Bloomberg. 81% of the real estate market are all facing -- the China real estate market are all facing pressure on their liquidity and advance. So Sincere is not unique. Okay. So just to give you this background. This policy was not new. It was being so mooted, and there was some pilot runs by the Beijing central government to evaluate whether going forward to make sure there's no fear of this housing bubble. Now again, for Chinese market, if you look at the last few years, the whole Chinese market, the housing -- home prices literally is said to be increasing about 6% to 8%. So I think we are very conservative. They want to prevent that bubble to happen. And as a result, you see all these policies come into place. This is a snapshot, focusing on what we will be working on to improve the liquidity position. And again, until we improve, see the stability of the platform, CDL is very unlikely to permit any more new funds, a real ring-fence. But meanwhile, we will look at the portfolio, which you can see in the earlier chart. It's a very interesting portfolio over China, selectively, where we looked at Shenzhen to acquire. And this is a win-win situation for all parties, actually. This is Shenzhen Longgang. It's a tech park. If you've not been to Shenzhen, it's is actually very close to Hong Kong. You can actually live in Shenzhen and work in Hong Kong. If you want to take the fast train, it is only about less than 25 kilometers. Now this tech park is interesting because this is near the Greater Bay Area, is connected by many highways and trains. Airport -- international airport, I think, is about maybe 40 to 50 kilometers. Phase 1 is totally sold, okay? So there are 4 phases. Phase 2 is currently being marketed. Phase 4 is still being -- not -- is bare bank at most. It's going to take about 4, 5 years. This is one asset that was identified between, I mean, Deloittes and us, to be one of the assets that we think is cash positive and profitable, that we can monitor it for Sincere. Not that we are financing them because there are some questions that gives impression there. We are not. We're actually helping them on, what to call, a win-win situation for both Sincere and CDL. #2 is that, if we look at this asset, we also have managed to have, for the first time -- CDL has, what we call, industrial park in China. And the new economy that everybody is watching now in China and in Singapore globally, this new economy that will require data warehousing, logistic part. And this is high tech. Some of you may carry a Huawei phone. It's about -- the headquarters of Huawei is about 40 to 50 kilometers actually away from this park. So in the terms of this, we have acquired a 35% effective interest. Longgang is a local government. And in China, move to China and work with the joint venture partners closely. And in that sense, we unlocked some cash, returned back to CDL. Earlier on, I think Yim Ming has presented a provision for recoverable. We have got some money back as well this year as well as we release some cash monetizing this asset back to Sincere to help in their liquidity situation. So I call it a winning situation. In Chinese called [Foreign Language], okay? So it's not just CDL directly or indirectly hold your perceivement. Okay. That's it. Thank you very much.

Thank you very much, Ann Nee, Yim Ming and Sherman for the presentation. We would now like to move to the second part of today's briefing, which is the Q&A. But before I move into the Q&A, I'm just going to open up to the panel. If you have any remarks that you would like to make, especially Chairman, if you have any comments, you would like to -- okay. We can go straight to the Q&A then. All right. We'll now move on to the Q&A. So there are -- as I mentioned earlier, this is a hybrid briefing. We will have questions from the room here. We have questions on the Zoom. We also have questions from the webcast. Before that, I'll let you know that my colleagues are standing by with the microphones. [Operator Instructions] Before asking your questions, please request that you introduce yourself and the organization you represent. Okay. Maybe ladies first, yes. We go with Rachel.

This is Rachel from DBS. I have 3 questions from my side. Firstly, I think on Sincere, I think -- just wondering whether you could give us some color on how much more liquidity will be needed for Sincere to stabilize? And based on the independent review, how much of Sincere's assets can realistically be divested? And how many of these assets would CDL be interested to acquire?

Ann Nee, you just pressed the button.

Okay. I'll try to answer your question. I have to be very careful because of certain confidentiality with Sincere partner and the commercial confidentiality because we are actually working very intensively. And also there are new parties that has expressed interest to enter into potential collaboration or asset acquisition. How much will be required? I think you saw the chart just now on the maturity of the Sincere existing, about [ $200 million ] loans. And also, you look at the three red line, okay? Now the bonds at the moment, you can see, I think, earlier, CFO has presented, is coming up for maturity. And should they get the worst scenario, default, or we get new capital into may be mitigated. It depends on the timing of the review that we are doing today, is February -- at the end of February. So the answer to your first question, at the moment, it's too preliminary to say anything to your first question. The second question on how the assets. You saw the chart that on the map of China earlier on. The working group started, I think, in roughly December when we appointed. And it took us nearly less than 2 months to actually negotiate work on -- there's a lot of things that we have to do. And this was the result of Shenzhen. There are other answers you're looking at as either a single or either portfolio. So my apology if it's not giving you the exact number. But at 61 -- I mean, you saw the map. There's so many assets. We have to focus -- very focus. And as I said, China, please do not assume it's homogeneous. The regulations on the ground are also very heterogeneous and different. So Shenzhen, we did it. But if we go to Shanghai or maybe the Western or Northern region, there are maybe commercial buildings, residential. And some of them has joint venture partners. So we also have to get the blessing, in principle, of the joint venture partners to work along. It's just that Longgang, the 35%, the district government. We first had to also go and say hello, who we are. Then Ping An was the seller. And I'd like to say that today, Ping An knows CDL very well, and who knows? We could also become future partners. So I'd like to think that whatever things we are doing now, there's a very interesting light at the end of tunnel for CDL to actually -- so this, to me, is not sort of bad clouds and everything. The write-down is there because this is more like the audit year-end review that we had to be caution -- prudent. But if the assets are unlocked, who knows, there could also be future write-up, write-back, in that sense. Is that all?

Rachel, you want to follow-up?

Yes, I have 2 other questions. I think the second question from me is, so you spoke about some divestments of assets from the M&C portfolio. Just wondering if you could give us some color on the assets that you have identified for divestment and which geographical, where are these assets located?

Okay. If I go back again to the...

Rachel, I'll take the question. I think the portfolio we are looking across globally. I would say that most of them are more from a redevelopment point of view. And I -- M&C is still interested to have hotels in key gateway cities, but we will review the whole portfolio. It really depends on what's the outlook for the market and the respective countries, being able to retain a presence, and, of course, the retail potential of those sites. So I would say, every region has a potential for such sites, yes.

Okay. So probably moving on to my last question, is on gearing. I think gearing has increased quite a bit this quarter or in FY '20. Just wondering, do you have plans to bring it down? And what would be your target of bringing down and a time line possibly?

Thanks, Rachel. I think our group's gearing indeed has right now is -- stands at 62%. That's largely because the base has been -- of course, has gone down a little bit because of the write-downs. So in terms of targeted gearing, I think the group typically looks at about 65%, including fair value. And that's, of course, the upper limit that we're looking at. So you are spot on. We are looking at, of course, moderating our gearing, and that goes with our key initiatives, which includes, of course, the -- what Frank will share with on the U.K. platform, and, of course, the divestments that I think you've alluded to earlier. But this is not -- I mean, stressfully, we are not distressed sellers, right? So it's got to go with the right time. So I think the unlocking of assets will be a key initiative for us to reduce our gearing.

Okay. Great. Let me just take Mervin first here.

Mervin from JPMorgan. Just on Sincere, the three red lines. Based on your internal assessment, residential project, you sold any other assets? Would there be sufficient to get below the 3 red line thresholds? Or do you need to eventually inject liquidity or find a joint venture partner? So that's question one. Second question would be in regards to the Greenland put option. Maybe you can give us some clarity on that? How does it work, implications in terms of cash flows for CDL as well as Sincere. I'll stop here.

Sorry. It's Mervin, right?

Mervin.

Mervin, to your first question on the 3 red lines, and you were focusing on the residential properties, am I correct? Sorry, I didn't really catch your first question closely.

Sorry, maybe the mic wasn't on earlier. But I just wanted to clarify whether do you need to eventually inject equity or find a joint venture partner based on your assessment? Because I don't know whether there'll be sufficient residential project to be sold or asset to be sold to get with all the three red line threshold.

Okay. Okay. Thanks. Now if you look at the earlier portfolio, the amount of residential property at the moment is about one-third. So if we have to give the time frame to stabilize the Sincere platform, as well as to make sure the liquidity. We -- I think the priority will also be balancing between the residential property and those as income-producing properties. Okay? We have to look at operationally as well. They have some shopping malls. They have some commercial buildings that are actually in operation. And we just have to also focus on operation leveraging in terms of cash flow. I think earlier on, I think it was Bel or CFO said that. In this time of unusual times, we do not think we want to be forced to sell under distressed asset condition. We want a fair value -- I mean, a fair win-win situation. So the 3 red lines, I would say, this is just a policy. It is not -- at the moment from my understanding is not, right, imposed formally as a rule yet. They're still asking many of the larger companies from what I understand the Evergrande of the world to actually submit some of their own internal cash flow forecast for 2, 3 years to monitor. So -- but we will have to watch that because the banks, although it's not so mandatory, they are watching this as a guideline to lend to the real estate company. Residential property, we also have to be careful to not over-reliant on because there are a lot of measures as I think if I could remind you on the chart earlier, #2 or #3. That even the new policy of mortgage buying, if you approve -- say, today, you and I go and buy a property and it's like a normal mortgage financing, the banks may not release the money to you, despite they approve your mortgage. And then there's also a topping up for the other side of the real estate company, whereby you don't collect the cash, until you top out. So there's 2 sites that are now containing the demand and the supply side. I can give you a very personal example about -- before Chinese New Year, a friend, Shanghainese friend got her mortgage -- personal mortgage approved about a month ago, and she could not still get the bank to release the cash. So these are things happening on the ground. So I wouldn't want to say focus on residential. I want to say, focus on the portfolio of Sincere assets at the moment. Some are really operational, generating cash, but may not be the cash expectation. So it's called operation leverage as well. Will we -- I think you asked, will we inject further funds? Is that your question? I think, as I said earlier on, until it's stabilized, CDL will have to monitor until the -- at the point that we think it's healthy and go forward that we will inject in funds.

And there's a question on Greenland put option.

Oh, Greenland, okay. Greenland is currently about 90.99% if I recall. The put option has a lapse date, I think, on...

So maybe Ann Nee, let me address maybe this question. So Greenland, as we know, when we acquired the deal, let me just take a step back, it was supposed to be a 51% plus a 9% call option. So, of course, even if you recall back then, even if we exercised our call option, our maximum interest in Sincere it's only going to be 60%. So clearly, for Greenland, there's actually a put option that was before our time. So basically, there's an option for Greenland to put the shares back to HCP Hong Kong, which is the JV vehicle -- which is the shareholders of Sincere, the JV vehicle of Sincere. So clearly, I mean, what, of course, the deal terms that went in earlier on, was that this was actually supposed to be the founders. It was technically between the founders and agreement so to speak. But clearly, in terms of legality-wise, it went through the JV vehicle. So of course, when we do the accounting for it, we went through it with a very fine comb, right? So the fact of the matter was as this is a potential liability, clearly, we could potentially have a recourse against the existing founder, but on grounds of prudence, we did not recognize the corresponding asset on both these. So bluntly, just to add on, especially from our perspective, it's a [indiscernible] right? We will have a put liability -- we have a liability as asset and recognize the liability like but not recognize the asset like here. So we really want to be more prudent and on, yes.

Okay. Maybe I'll take Joy. Then after that, I'll take Louis here. And just before you say, I just also want to address those in the Zoom room. [Operator Instructions] So maybe, Joy, you go ahead. Yes?

Joy from HSBC. Just to follow up on Mervin's question earlier. You mentioned about healthy status before you put in fresh capital. Could you sort of give a bit more detail as to how you define that Sincere is stabilized and healthy?

Okay. Joy, very difficult to give you a specific metric. I would love to give you an exact KPI. At the moment, as I said, the working group started, I think, end of December, January. You can see the maturity of the loans and the bonds on the chart earlier on, and the vast diversified portfolio of Sincere. The hope is that if we can -- how to use the word maybe some of the assets that we are really working on now, they are actually income-producing and cash generating. And we think of the operation metrics to further improve because if we are generating cash and there's only, say, less than a single-digit yield, okay, if they can improve it to maybe something reasonable like above 3%, 5%, 6%. And secondly, we are also in parallel discussing the bank, okay. You saw the maturity. And restructuring, stabilizing is not just focusing on asset. We are also going to communicate with lenders. And the lenders are also not 1 or 2 or 3. It's all over China and there are many bankers, many lenders. So this exercise that we've been working on since January is many prompts to stabilize. Hopefully, I hope, maybe I think there is no more quarterly reporting, by June, we could even share more color. Because today is really end of February and the intensity of the work has been really quite a fair bit. So my apology that I can't give you the exact answer. Hopefully, by June, I mean, the interim results coming up, you will see or hear more color.

Just one more on just Sincere. I mean just operationally, how is the company doing in terms of contract sales, in terms of leasing, rental? On the ground, I mean, sales still going on, could you share a little bit on that so that we know business is as usual, and they're not purely focused on the debt?

Yes, actually, they are still going on as far as I'm aware. I said there was a long break in Chinese New Year and although there are certain -- before Chinese New Year, I think it's not just Sincere, a lot of people demand cash because they all want to take -- go home to their villages. So you may hear some rumors in the web whereby there are maybe some little unrest here and there. But there are still sales going on. And there's still construction that I'm aware of.

Is there any contract sales data you can share with us?

Contract sales, too early to share at the moment because, as I said, we know they have forecast a loss, a budget loss for the whole of this year, but that's not unexpected anyway. Okay? Because at the moment, no new land tenders have -- as far as today, there's no new land tenders I'm aware of. Okay? But it's still going on. I mean, whatever the properties are being sold, they're still delivering their units to the buyers and all this thing.

Just one last question on Singapore. There's been some increase in construction cost. Does that affect your return on some of the ongoing projects? Or have you locked in all contract?

Yes, Joy. We have actually locked in most of our construction projects. But yes, it does affect our new projects including the 2 that I put up there. For Irwell, we have certainly seen an increase in the construction cost. Things like M&E, they have all gone up. And as you know, we also adopted PPVC, so -- and with the shortage of foreign labor, this has further driven the construction cost increase. So yes, we were susceptible to it for the latest 2 projects, but again, we did start quite early on to negotiate these contracts. So we were able to limit the amount of so-called adverse consequences of it. Definitely, construction cost has gone up. But for our older projects that are already under construction, most of those have all been maintained in terms of the cost structure.

Okay. Okay. Let me just take Louis, and I'll come back to you, Faris.

It's Louis from Credit Suisse. We have quick follow-up questions. Firstly, on the Sincere, would the management [ keenly be able ] to say that for 2021, there will not be further equity investments or cash injections in the Sincere planning? I'm asking this because we recognize that the restructuring takes time, there is a lot of assets that potentially could realize value, but I think at the same time, looking at the debt towers, most of it is coming through in 2021 and time is probably not something that is on Sincere's benefit right now. So in that scenario, actually if the banks are not willing to restructure, that equity has to come from somewhere and just wanted to get the assurance from management.

Louis, okay. I think restructuring and improving liquidity and stabilizing all has the goal not just in parallel in [ Street ] along its way. As far as I think we see that we'll not be putting any more equity -- new equity, I think I said that earlier on, or anything until -- and the situation as I said earlier on, we are in the discussion with the lenders to request to restructure in terms of either the influence of hold-on or postpone demands if we can. So although you may think that oh, CDL will have to put in new money in like tomorrow, I think at the moment, the announcement has been continuously been released is that we will ring-fence and make sure that Sincere platform, the poor ICU patient, because I came from health care before, can actually start getting oxygen and breathe again. And then we'll think about it. There are a lot of things going on in the last two months. I mean Shenzhen was only one of the assets that came out that we did. And if you look at the time line that was done, it was less than 2 months. It was very intensive. Trust me. I think the first poor team did not see light in day until 2, 3:00 a.m. in the morning. But it was done. It was a win-win situation for just not Sincere platform, also for CDL that we know got -- I think you will agree, it's a very nice asset in a new part of Southern China that will be deemed as one of the very big growth potential as well. So I hope that answers you, Louis.

Yes. Second one on Sincere. I think initially, in the press release, I see that a lot has looked at projected the 3 categories: the profitable and generating cash ones; those that can be divested; and those that need a detailed review to assess. Maybe you can just give us a sense of this rough split?

Okay. The Phase 1 that everybody was aware of were like you say, the 3 categories. The first category, first I quote caveat first. In fact, the lawyers had a very short time to actually review all the assets. And you looked at the map again, it's so vast in China and so diversified. The 3 categories are, a, where there's cash positive and profitable. Shenzhen happened to be falling into that category when we reviewed the assets. The last category is called C -- sorry, A, it's actually the assets that they think it could be divested to immediately unlock. And these are in my humble opinion, if you look at it operationally, it is cash generating but may not meet the target that is able to service their loans or their lending. So that group of category, we are actually reviewing it actually. It may not be divestment. It may continue because it just needs a bit more operational focus. Marketing, overheads review, it's like running a business, simple as that. Then the middle category between A -- I mean, the 2 extremes. So actually, the lawyers and us, I mean, all the 3 categories with a fresh look in a sense because there are some assets that really can be moved to the other category or vice versa. Because the market in China moves very fast. It is not -- I mean if you know China, I mean, policies can come out and you have to interpret it and whether it's executionable. And secondly, if you know China as well, the dynamics of the demand and supply generally can also move very fast. I mean, the market there is not just like Singapore.

And just the last one on M&C. Last year, 3 assets divested. And targets for this year/next year?

I don't think we can commit to a target but definitely, what I told Joy earlier, definitely every region has at least 1 or 2 assets that we can identify and we are reviewing those options right now.

Okay. I'm going to go to Faris first, since he asked, and then I'll come back to all of you. Faris, if you would.

Faris from Bloomberg. I have a few questions on Sincere. The first questions is there have been quite a number of issues that Sincere's facing even before CDL entered into a deal with it. So cash didn't coverage the bonds issue and some analysts was also questioning about its exposure to retail business parks and offices not doing as well as it should. So there's a question then that did CDL conduct due diligence before it entered into the deal? That's the first question. The second question is, when Chairman announced the deal, you said that the terms were favorable to CDL. Is it favorable now? Or has it become a burden that will continue to overshadow whatever CDL has done 'til today? And the last question is why is -- or rather, why was CDL so bent into entering the deal with Sincere when other major firms like Evergrande have looked away?

Faris, as always, I can count on you to ask the most pleasant questions. For the first one, due diligence, yes, we still believe we did do adequate due diligence. We had one of the top PRC [ go ] firms working on it as well as, obviously, our own internal legal department. We had a big 4. I can't name them, but we had the big 4 coming from work on the financial due diligence. We actually had HSBC as our financial adviser and, of course, after operating in China for 10 years, I mean, I started CDL China in 2010, after 10 years, we felt that we were ready for this big leap into China, right, where, as I mentioned earlier during my presentation, we were running out of residential inventory to sell in China anyway. So we needed to substantially increase our presence in what I feel, and as Ann Nee has reinforced earlier, one of the most populous, biggest markets in the world, especially for residential. And therefore, this felt like the right choice. I mean, it's not easy for a developer to get into the top 100. I mentioned this. When we first went into the deal, right? I mean, there are 90,000 developers in China and getting to the top 100 list is a very difficult thing. Since back then, we were entering, it was about 70 out of 100. So I felt the size was somewhat manageable, although yes, it turned out to be a much, much larger, more complex animal than we expected. And we felt that we were able to take on this company. We'd be able to recognize synergies and be able to turn this into CDL's platform in China. But to be candid, I would say that the one thing that was far more difficult, challenging and complex than we expected, was the debt restructuring. The debt in Sincere is very sizable, and it's very complex, and there are many, many financial institutions to deal with. So this was the part that I think presented a very, very tough challenge for the working team and myself. And therefore, I mean, I think looking at the situation now, we have also brought in Deloitte to help with its debt restructuring and, of course, set up a very strong and dedicated task force led by Ann Nee and at that point, when we entered, the terms were very favorable. I mean you can see that obviously, there's a big variance between China GAAP which is the accounts they keep in China, versus this IFRS, right, which is the international accounting standards. And this will be case I think if you look at any other company as well. And therefore, there's a big variance in it. I mean right now, Yim Ming presented earlier that I think based on KPMG's audit and all that, I mean, we are looking at about a 0.8 RNAV. I mean, since it will likely come out with a full year NAV of probably CNY 14 billion or who knows, CNY 15 billion. So there's going to be a wide gap, but I think there's a difference in accounting as well, accounting treatment, in accounting standards. So based on when we went in, you can see that even the auditors, still almost a full year, they still haven't finished doing the audit now, right? I mean, it's been a very, very tough process to grapple with. So therefore, I still believe that when we went in, our terms were favorable, but right now, obviously, things have panned out differently from what we have anticipated and we are still going to work hard to make the best of this situation. So I think that answers your question, Faris. I'm not sure if there's anything else.

Okay. Behind, I'll come back to you. I'll take yes, Brendan.

Good morning. Brandon from Citi. Just have 3 questions. I'll go one by one. The first one is with regards to the audit that I think Sherman just mentioned. I think it was the [first set] that we've seen subjective changes. So what's the worst case scenario that we could see post finalization of the audit?