ORIX Corporation American Depositary Shares

our special time at 3 o'clock, so let us get started with this session. So thank you all very much for your participation to Business Performance Announcement Meeting for FY 2020 March and for Oryx. Thank you very much indeed. I'm going to be the emcee for this meeting from Corporate Planning Department. My name is Koora. I look forward to your cooperation in advance. As to the presentation material, you'll be able to refer to it on the screen, but also at the same time, you'll be able to download it whenever necessary. So please make sure that you can see the slides. As for the schedule for today, we'll start from the presentation from Mr. Yano, Head of Treasury and Accounting Headquarters, followed by Mr. Inoue, CEO and the Representative President, Director, President. And after the presentation of the two executives, we will be entertaining questions. We are scheduled to conclude the session at 16 hours. So because this meeting will be conducted online, there could perhaps be a possibility of you not being able to hear as well, but please do excuse us. As for the question, after the presentation by CEO, Mr. Inoue, on the screen, please send us or write out your question and send them on the template. questionnaire form. I'm sorry for this, but in the interest of time, we would like you to limit your question to just one question. Just one question. Now, if we don't have enough time to entertain all your questions, we will be sending back the response through the Secretariat later on. So, good afternoon. I am Yano of Treasury and Accounting Headquarters. Thank you very much for your attendance despite of the busy schedule to this business performance announcement meeting of our company. Let me share with you the actual results for FY2020 margin period. Please open page two of the handout slide. The page shows the net income and ROE for the whole year. So, harsh economic environment due to COVID-19 affected us in Q4. However, our net income was at 302.7 billion Japanese yen. This is lower than the prior year, but we did manage to achieve our target of 300 billion Japanese yen. ROE was kept at double digit at 10.3%. There was a reversal of deferred tax liability associated to conversion of Daikyo to 100% subsidiary in the third quarter. The reduction of corporate tax by 27 billion Japanese yen contributed positively to after-tax profits. As a result, although net income declined by 6.5% year-on-year, pre-tax segment profit grew by 4.1%. Now, please turn to the next page. The page shows the breakdown by business segment. Segment profit for the year was at 417.7 billion Japanese yen. Let me explain further by breaking down the profit into base profit versus investment gains. Until the third quarter, we were referring to the dark blue part of the bar chart as segment profits that exclude gains on sales. In order to facilitate for the ease of your understanding, we started to describe this as base profits from the fourth quarter. The base profit was down 5.5% year-on-year at 277.9 billion Japanese yen, defined in profit in corporate financial services and others, as well as a negative impact from COVID-19, of which the details will be shared later, affected us but a steady positive contributions were enjoyed from NXT Capital and Avalon investments we made in FY 2019. Now investment gains grew strongly by 30.3% from 107.3 billion yen to 139.8 billion yen. Gains on sales of PE investment both in Japan and overseas were posted while a rebalance of business portfolios such as RX Living Fulihan Loki, a department for ESG data collection, analysis, evaluation, and Robico SAM was done at the right timing. Now, please refer to the chart at the bottom of the slide. The bar chart shows the trend of segment profits for the first five years. Investment profits, pale blue part, may fluctuate due to changing environment. However, as a result of strategic capital allocation and timely exits, we have been successful in maintaining the level at around 130 billion yen on average, which we believe is a proven track record of OREC. As for the base profit, a dark blue part of the chart, it constitutes 70% of the segment profit for the fiscal year that is placed as steady growth over the past five years. Now, please stand to the next slide that shows segment highlights. It's page four, so segment highlights. As shown on the chart on the left, segment profits from investment and operation as well as overseas grew, while profits from all four other segments decreased. Now over to the table on the right. Details by segment will be explained later by using slides after page 16, so allow me to share with you just the highlights by making use of the slides. Now first, Corporate financial services segment, profit from the segment was down by 10.9 billion yen year-on-year at 14.6 billion yen. Negative impact came from reduction in agency fee income from life insurance brokerage business, but efforts to diversify product as well as the focus on online insurance is underway. But on the other hand, Yayoi, that provides accounting software services, The charge and support, in fact, increased the number of memberships and also the packaged products that increased sales. And the negative impact was 1.8 billion yen from the leasing account standard changes. Segment assets declined by 1% year-on-year at 948.3 billion Japanese yen due to a decline in the finance and leasing.

Now, let me move on to maintenance leasing segment. Profit was 33.7 billion yen minus 5.1 billion yen year-on-year. Auto lease profit was solid, and Rentex saw an increase in profit due to Windows PC repurchase demand. However, with the intent to enhance service quality, service costs and SG&A expenses rose, and IT assets needed to be depreciated, resulting in a profit decline. As with the corporate financial services, there was a negative impact from the accounting standard change of 2.6 billion yen. For segment assets, there was a slight dip in auto driven by key to competition, but Rentik increased its IT-related assets and all in all, a 2% increase year-to-date standing at 889.6 billion yen. Real estate segment profits was year-on-year minus 12.4 billion yen, ending at 76.9 billion yen. Logistic and commercial facilities, rental condo mediums were sold, and Oryx Living was sold as well, and profits from such neighbor sales were sustained. However, gains from sales dropped year-on-year. Asset-managed business is strong. Daikyo also saw a 1.6 billion yen profit increase due to last-minute demand before the consumption tax hike. Segment assets was 749.7 billion yen. New investments continued, but we proactively sold facility assets. New lease accounting standards pushed up assets by 90.4 billion yen, so year-to-date actual assets decreased by 60.9 billion yen. Next is investment and operations segments. Profit was 55.7 billion yen, a year-on-year increase by 17.5 billion yen. Investment in an operations segment enjoying two major gains on sales and private equity investment resulting in a 4.5 billion yen profit. Concession business, namely airports, saw profit of 6.2 billion yen. This was due to an increase in duty-free sales from increased inbound visitors and insurance income for typhoon damages from two years ago. Details will be explained later, but although this business is affected by COVID-19, impact on our financials will be from the year ending March 2021. Segment assets grew year-to-date by 16%, standing at 847.1 billion yen, This was due to new PE investments in Japan and wholly subsidizing our overseas investment in wind power business. Profits for the retail segment dropped 3.8 billion yen year-on-year to 80.4 billion yen. Life insurance contracts and premium increased due to enriching our product lineup with foreign currency whole life policies. However, COVID-19 has heightened market volatility and and suppressed interest rates, causing a loss for former Hartford Life Insurance's variable annuity. Real estate investment loans for banking and local financial institutions loan guarantees increase respectively, securing profit. As for segment assets, due to operating assets increasing for life insurance and banking, a 17% year-to-date increase amounting to 4.1839 trillion yen. Lastly, our overseas business segment. Profit increased year-on-year by 31 billion yen to 156.4 billion yen. Profits from new investments from the previous year contributed greatly. We also rebalanced our portfolio such as Hulian Valky, UAEF, RubicoSams ESG data collection analytics evaluation arm and benefit from capital gains. Segment assets increased year-to-date by 5% to 3.2874 trillion yen. Acquirement U.S. real estate loan and servicing firm Hunt Real Estate Capital contributed to this increase. Let me now move on to page 5. On this page, we are showing the impact of COVID-19 on our Q4 pre-tax profits. I will cover four major areas of business. First is the impact of the stock and bonds market fluctuating. The market value of securities held dropped and resulted in a negative impact of 3 billion yen. Former Hartford Life Insurance viability reserves for variable annuities shifted as well, a negative impact of 7 billion yen. OCE, formerly Robeco, AUM decreased, thus fee decline, a negative impact of 3 billion yen. Energy prices plummeted, and 3 billion yen was acknowledged as loan loss provisions for U.S. energy operators. In April, the market has recovered, and as of today, The factors explained earlier are impacting positively upon 2021 March Q1 results. The second area is facility operation included in our real estate segment. Here in Japan, we operate 5,000 rooms at hotel and inn facilities. Inbound traffic, mainly from Asia, has decreased dramatically, Domestic travel and business trips were put on hold, and occupancy rates dropped. Also, in an effort to stop the spread of the virus, we shut down aquariums and some other facilities, and the overall impact is a negative 2 billion yen. The third area is our concession business. Kansai Airport, where we have a 40% share, operates a total of three airports, including the Kansai International Airport. Because of the global restrictions imposed on travel, many international flights were either cut back or canceled. As a result, March arrival and departures for the three airports was minus 32% year-on-year, and passengers declined by 69%. Despite this decline in sales, we are conscious of sustaining employment and contributing to the local community, but we are seeing a major setback in profits. Having said that, there is a three-month lag in account settlements for Kansai Airport. Therefore, the concession business impact is not reflected yet in our 2020 January to March Q4 results. This also goes for the fourth area, aircraft leasing business. There is no impact for Q4 results. When we combine these four areas, the impact of the COVID-19 outbreak is approximately 15 to 20 billion yen before tax. I have now explained the results for the year 2020 March, and I will now hand over to our CEO, Inoue.

This is Inoue speaking. So I'll start my presentation, start from slide number six. I'm sorry to repeat what has been already being presented, but just as been announced yesterday, for 2020 March end, pre-tax net income at the 412.6 billion yen, in fact, was an increase by 4.3%. However, our net income was down by 6.5% year on year at 302.7 billion yen. That was the results. ROE was at 10.3%, which is lower than 11%. However, just as announced last time, we remain to be unchanged in setting our target of achieving ROE or above 11%, and we will continue to exert our effort in that regard. Now, due to market fluctuation, multiple numbers of credit rating agencies have changed their outlook to negative for ROX. but the credit rating of single A, in fact, is maintained. 2020 March end dividend payment has been scheduled for the full year per share of 76 years to be paid. First half, 35 yen. Second half, 41 yen. So thereby, the payout ratio will be 32% for the year. And just as we have announced in the last year, with a maximum of 100 billion yen a shares repurchase program was executed. So let me report the details on the shares repurchase program. 2019, November 1st through to May the 8th of 2020 was the exercising period. 34 million shares had been repurchased at the price of 55.8 billion yen in total. The average share price was 1,638 yen. shares outstanding of RX, in fact, compared to the Treasury's debt is 5.8%. So therefore, 11 million shares in excess of 5% will be cancelled or has been cancelled. Unfortunately, from February this year, there was an outbreak of COVID-19 pandemic that resulted in the sharp decline of the share price. So therefore, the shares we purchased may not have provided enough benefit to the shareholders. This is our understanding. So our initial target for the shares repurchased to the maximum extent of 100 billion yen was not being used fully this time. As to the extension of the exercising period for the program or the renewed program for the repurchase is not planned. because we need to place the highest priority to securing liquidity at this point in time. So we want to continue to watch over the development of COVID-19 pandemic and also the recovery of the macroeconomic conditions before we arrive at the decision to go ahead or whether or not to continue with this execution. So as of October of last year, we had made a mention of our midterm direction, but the As of now, we do not know how long this COVID-19 pandemic is going to continue and how much time is required before the macroeconomic conditions will be recovered. So all the major countries, including Japan, they are all trying to find their own way to prevent pandemic. So therefore, there is no alignment and no harmony between and among different countries of the world. So under such circumstances, as for RX, we have decided to refrain from disclosing any short-term direction as well as a mid-term direction because we find the disclosure to be associated with much difficulty. As has been said, 2021 March end, the major challenge for us would be securing liquidity. So COVID-19, the battle with COVID-19, It's very much so dependent on the timing. It would give a major impact to Ulrich's business performance. However, from a financial standpoint, our long-term debt ratio remains to be high, and we have an ample amount of liquidity as well. So the finance, as well as the operating cash flow of Ulrich Group, the impact that is given from COVID-19 will remain to be limited. So please refer to page 8. So 2021 March end, the cash on hand verification, although we have carried out the verification within the limited scope, however, it has been concluded. So the magnitude of the impact that is given to various different businesses has been verified from sector to sector, but we are going to maintain, other than, of course, the operation of the facilities. And assuming worst case, and 500 billion yen worth of new investment and loan extension is to be executed, we can still be securing 600 billion yen of cash. So we remain to be unchanged in upholding a basic policy of prioritizing the liquidity for the time being, but for this year, while funding stress will be considered in a conservative manner, By controlling the new investment and loan extension, we should be able to secure enough liquidity. However, in order for us to raise the level of accuracy for the midterm perspective, as soon as we start to see the end of the battle against COVID-19, of course, putting our effort in bringing our business back to its usual speed is going to be the first and foremost importance. However, we think that it would take a certain amount of time. Now, real estate segment, facility operation, inclusive of hotels and inns, unfortunately, they're all closed. So, therefore, the revenue generation from this total segment asset, $118 billion, is not to be expected for the time being. Because of the incurrence of HR costs as well as the depreciation costs, before we start to see the recovery in the inbound tourist demand, profit contribution will remain to be negative. And as for rentable properties, request for rent reduction has been received, and we are responding on a case-by-case manner. As for consensual business, centered around Kansai Airport, for four years, until March of 2020, vis-à-vis the total investment of 20 billion yen, we were able to receive a dividend income of 19.1 billion yen. However, we are assuming that this dividend income will be zero for the coming new year and that there will be no contribution being made to the overall profit generation. But over the four years, the accumulated amount of equity method income is 50.4 billion yen, including 3.1 billion yen of interest income from 12 billion Japanese yen of shareholders' loans. So concession remaining period is as long as 39 years. If you were to take that into account, even if we were to bear losses for a single year, we would be able to recover back the business just as easily. So as for aircraft leasing business, for 2020 March end, the segment asset was 555.3 billion yen, with segment profit being 44.6 billion yen. Many airlines have forwarded the request for deferral for the leasing fee, so we're responding to the request on a case-by-case basis. So we can start to see the full recovery in terms of the distribution of goods and people. I think the airline industry remains to be sluggish, but Oryx has long-standing experiences as well as knowledge and many and varied experiences and knowledge starting from 1990 as a result of experiencing Gulf War, SARS, 9-11, GFC. So based on my own experience, I am imagining that it may take more than a year. Well, according to a newspaper article, it says it may be perhaps extended until 2024, but I think that it would take more than a year before we can come out from the COVID-19 pandemic crisis. However, more than 50% Our investments, in fact, are intangible assets, so we foresee the downside risk to be limited. Asset management segment, Oryx Europe, or former Robico, in 2019, December, AUEM was 287 billion euros, but by end of March of 2020, unfortunately, it was downsized to 233 billion euros. But from April, we started to see some recovery in the amount of AUM. So, of course, we feel the need to watch closely over the development in Europe. As to the COVID-19 impact to other segments, it is in no way zero. So in the finance department, we have been receiving a request for these fee deferral, these repayment deferral. So some negative impact must be taken into account. So there are many uncertainties right now. And for this reason, we will refrain from disclosing any details regarding Midterm Plan for now. Once we start to see how things will settle with COVID-19 pandemic, we would like to take an opportunity to explain in a little more detail.

Now moving on to page 10, please. Having said that, Predictions for when the corona issue subdues or when it subdues, we analyzed the timeline for how long it will take to return to business as usual and estimated the impact on OREC's group's consolidated net profits. Considering the global situation and the status of Japan's state of emergency issuance, we do not believe that the outbreak will mitigate during Q1 nor Q2. However, with our tentative scenario, if by the end of Q3 things gradually return to normality, our estimate is that our group net profit will dip to a 200 billion to 180 billion yen range. If the impact were to prolong for one year, our net profit will drop to possibly 120 billion to 80 billion yen range. Now these numbers assume that we do not make any new investments or divest any assets during the given duration. So please understand that these estimates are for reference only. Now currently we have many new investments in our pipeline. And we are going to conduct physical due diligence. India, Europe, and the Middle East, there are many projects on the rise. However, we cannot allocate manpower to do due diligence. So once COVID-19 subdues, we will mobilize our team. However, unfortunately, we cannot forecast when COVID-19 will settle and when people can be mobilized. So depending on this timeline, these numbers will see an uptake. Now moving on to page 11. Our basic approach is that the spread of COVID-19 does impact us tentatively, but hereafter, the market will turn for the better. This trend will be an opportunity for Oryx to further accelerate growth. Worldwide, M&A entry prices inclusive of P investments have hiked, and we believe prices will begin to adjust. After COVID-19 is contained, we will be agile, not miss out on opportunities, and we are preparing ourselves for that timing. As of last October, we announced our midterm direction of 400 billion and 500 billion yen. This remains unchanged, and we plan to redraw our timelines. As for our new midterm business plan incorporating our midterm direction, we request that you wait until we see the COVID-19 impact mitigating. Our basic policy for the NICE-IR project remains unchanged. However, we do need to validate the impact of COVID-19. We must secure ample liquidity to endure prolonged facility closures. How the new way of life and social distancing will impact us. Will operating an IR facility be possible adhering to such concepts? And we will closely monitor the reopening of Las Vegas. For Osaka IR, The MGM Oryx Consortium is the only operator participating in the RFP process. However, since the state of emergency issuance continues, the government has yet to disclose IR basic policy. Uncertainty around future processes remain, but our understanding is that the Osaka City government will issue its own stance. As a candidate operator, we are not in a position to comment on this matter. We are, however, undergoing necessary considerations and analysis and will reflect these findings on future proposals cited. Let me now move to page 12. Oryx Group believes that the outbreak of COVID-19 will possibly bring about various new business opportunities. This is why that we are not changing our mid-term direction. In other words, not changing our group net income expansion to 400 billion and 500 billion yen. We realize that COVID-19 will greatly change values in many areas here in Japan and around the world. Digitalization New investments in light of AI acceleration, office space cost reduction due to more people working from home. We do anticipate many new themes will emerge. Let me move on to page 13. As mentioned earlier, it is extremely difficult to disclose our forecast for the year ending March 2021. However, our interim dividend forecast for the fiscal year will be the same as before, 35 yen. And considering the circumstances, the payout ratio is planned to be raised to 50% for this term only. As for the second half dividend, please do understand that this is dependent on the COVID-19 situation, as well as our future performance. Until we see a containment of COVID-19 and can judge that the world economy is on a recovery trajectory, there will be no share buyback. We do realize that recovering from the COVID-19 crisis will take a certain amount of time. However, fiscal year 2021 march and beyond in some shape and form We trust the world economy will revive, and a minimum 300 billion yen profit will be our goal, and then thereafter 400 billion and 500 billion. That will be our commitment. When the economy revamps to normality, our intent is to allocate surplus capital into new investments for the growth of Oryx Group. On that occasion, we seek your understanding that we will revise our dividend payout ratio to the level of last year. As for resuming share buyback, we will consider liquidity, ROE, and equity ratio. And after the chaos surrounding the world economy subdues, announcements will be made accordingly. Now please move on to page 14. This will be the summary page. The outbreak of COVID-19 has imposed great damage upon Japan's and the world's economy, and we must prepare for an unprecedented state. Unfortunately, at this time, we could not disclose any concrete numbers for our future outlook. For the foreseeable future, our basic policy will be to secure liquidity and take a very cautious management approach. Lastly, let me report to you that the impact of COVID-19 has been limited in our day-to-day business operations. At our overseas businesses, including Europe and the U.S., all of our managerial members are working from home, and there has been zero impact on business operations. Here in Japan, 60% of our managerial members are teleworking, and again, I would like to report to you that there has been no impact upon our business operations. We will continue to be mindful of the health and well-being in continuing our operations. So this will conclude my presentation, and I apologize for the inconvenience of having to present to you over the phone, but this has been an explanation of the year just ending, as well as our outlook for this fiscal year.

So we'd like to start the Q&A now, start entertaining your questions. So if you have any questions, please input to enter onto this form. And we have received the first question from Nomura Securities, Mr. Sakamaki. On page five, with regard to the decline of energy price, what kind of exposures Oryx holds in the energy space? Oryx USA in fact as an exposure to energy related or they do own some energy related portfolio so there are some requests for rescheduling but at the moment it is not subject to impairment as of now so with regards to the portfolio size it is about tens of billions of yen so we do not foresee any major negative impact so from Goldman Sachs Securities, a question from Mr. Nakamura. And with regard to the increase of the risk for allowance provision, so by applying CECL for first quarter 21 March onwards, how do you see the risk increasing for the cost of provision from second quarter 21? and the later. So from the first quarter, yes, we're going to be applying this new model, CECL, and we are now collating the information as of now. So as of now, so the total amount of provision as of March end is less than, just less than 60 billion yen. And so I suppose the amount is going to increase pretty much, but there will be no major negative impact given to P&L. And for second quarter, And later on, this is going to be my personal opinion to a certain extent. But I wonder if we should be reflecting our view to this. But for the first quarter, in any case, in light of the current situation, the whole life will be reflected. So from the second quarter, we cannot foresee us increasing the subject. So that is what we foresee at the moment. And as for the second question from Ms. Nakamura again, and this is regarding aircraft leasing business. So there has been no changes in terms of the cash flow generation from the lease income from aircraft. So therefore, the risk for impairment is, I think, limited. So how do you see the downside risk from RX Avalon in the next one to two years? So there has been some requests for deferral, three months of deferral. of the leasing fee has been received from the airline companies. So the deferral for the principal part is going to be accepted, but at the moment we are carrying out negotiations so that we can continue to receive the leasing portion, the interest income part. Virgin Atlantic or Avianca, and also there have been cases of airline filing Chapter 11, So therefore, whether our aircraft will continue to be used by these airline companies or not is yet to be known. But in any case, we're carrying out the negotiations right now. And even in light of this possible filing of Chapter 11, and even if they are to continue to use our aircraft by leasing, in fact, it will be calculated on an hourly basis. So therefore, we would have to closely watch over the development. And as of now, Avitas, And from the appraisal company, the aircraft valuation, in fact, the devaluation, in fact, has not occurred as of now. But in thinking about the timeline, to much of the extent, maybe 20% or so of an impairment risk may be possible. This is what we think for now. And in light of what had happened in the past, the volatility of the aircraft, in fact, was to the maximum extent of 25%. So I think the biggest risk would be to the maximum of 25%. So if it was to continue for 2024, then there could perhaps be an impairment risk sometime in the future. This is our way of thinking right now.

So we have from Mizuho Securities, Sato-san, a question. So as listed on page 9, MICE-RR, which is a major investment for the future, the prerequisites for the investments has changed dramatically. And so if nothing is done, then obviously the demanded capital costs will rise within the capital markets or the markets itself. And so in terms of portfolio rebalancing, have you changed your policy or thinking pre-corona and post-corona? So to be quite honest, MICE-IR project, we are in conjunction with MGM, and MGM themselves have closed their facilities in Las Vegas. So we do need to carefully watch what they do, and at the same time, will MICE-IR investment be a good investment for Oryx? We are revisiting this concept. I cannot say anything solid at this moment. but in terms of the bidding timing, nothing has been announced to date. But we can assume, or I can assume, that there will be a dramatic delay. So for the upcoming few months, we will validate the situation, and once again, we will judge whether it is a positive investment on behalf of Oryx. Now, from that perspective, rebalancing the portfolio, again, to be candid, We have approximately 5,000 rooms, accommodations for hotel. We do have some new projects, but again, with the impact of COVID-19 for operational activities, we have to be a bit more rigid in our outlook, perhaps. But at the same time, the mid- to small-size hotel accommodations, it is also possible that a round of purchasing can occur as well. So again, another question is when inbound will come back? When will people become more mobilized and travel? So for real estate portfolio, we will rebalance, recycle, but at the same time for new investments, the possibility of such investments is also in the horizon. Now for rebalancing the portfolio, again, the COVID-19, regardless of this issue, our stance is that the 12 trillion yen portfolio total assets rebalancing is as usual. In other words, we will adhere to our previous policy and enhance or improve our ROA and ROE.

So from CT Group Securities, this is a question from Mr. Niwa, or Ms. Niwa. So What will be the subject for acquisition? Will it change in terms of the criteria? If you could be so kind enough to elaborate on the menu that appears on page 12. So I think the investment that you have been making recently has been focused on around the infrastructure. But what we have gathered as a result of COVID-19 is that the diversification in terms of the investment was not enough. and also the public company's stock price, the share price, tends to be high globally. So I think the valuation remains to be too high for you to carry out any acquisition in that regard. So just as we mentioned in your comment, do you think that the level of the target, the price-wise, would come down to your expected level? So let me answer to the question. So you said that we have been focusing our investment activities around infrastructure. So it is more of a photovoltaic solar power infrastructure here in Japan that we have been making an investment for. But fortunately or unfortunately, with regard to solar power, there has not been any request for rescheduling. So therefore, with regard to the solar power, investment. We do not foresee any major issues because the payment will be made by the government, the national government, or the EPCOS. So therefore, I think they tend to be safer in terms of the nature of the investment. And in the United States, service provision related to infrastructure, PE, are the subject for investment in the United States. And that is for the sake of the service company for the maintenance of infrastructure-related assets. So the state government and also federal government in the United States will be the subject to a credit extension. So we don't foresee major issues arising from there. And as to the entry price, would it continue to rise and would it be higher? So with the current conditions, there will be some sectors that may start to see a decline in the entry pricing. And in the case of Japanese real estate assets, so with many people working from home on a telework basis, with regard to office buildings, there could be a decline in the pricing. But in the prime location, that could not be the case. And the warehouses or logistics-related facilities, we foresee an uptick of the price rather than a decline. So therefore, we do have more than teens in numbers of the numbers of assets that we own. So if we start to see an overheat in the pricing, there could perhaps be a possibility of us disclosing of some of the assets. So unless they are truly a good quality, we will not be making any renewed investment. But in the case of overseas, We cannot judge in a unified manner as to the valuation being too high or low. But of course, we would base our decision on whether the valuation is high or low. But I'm sure we would be able to start to see how things would develop from maybe September of this year. The outlook may become a little more accurate. So basically we would be putting together a plan for IRR of more than 15% and with exit in mind. And so if we can identify any deal that falls into or that fulfills all these criteria, we may be perhaps forthcoming in terms of making a new investment. If not, we will not just buy those assets. So please understand that our basic stance remains to be unchanged.

So from Daiwa Securities, Watanabe-san, we have two questions. So this term DPS on page 10, your estimates and your payout ratio of 50%, and when we consider this prerequisite, then normality of within this year, 76 yen would be a good figure. Last year, you had considered the minimum line for a dividend, but do you have resistance towards a decrease in dividend? And also, What are the conditions for you to deem that the corona or the COVID-19 has been contained? So 35 yen interim and 50% payout ratio and 76 yen or equivalent to maintain this level as we did last year. The after tax has to be 190 billion yen. That will be the bottom line for the full year net income. Now, 190 billion yen give or take, I do believe that we can reach that threshold. However, some of our activities are interdependent on other activities, so that is why we have given you this number. Now, we do have resistance towards decreasing our dividend. We do not want to do that, but again, considering the circumstances, this may be a possibility, but our approach is to make sure that we uptake every effort to make sure that this does not happen. and sustain the 76 yen mark, which is on par with the previous fiscal year, which means that payout ratio 50% is obviously quite reasonable. However, again, if the COVID-19 impact prolongs for a year or even longer, then in terms of liquidity procurement, we have to prioritize liquidity. So this will perhaps result in a lesser dividend. I know that I'm going in circles, but that is our approach and intent. Now, the second question, what is your definition or conditions to deem that COVID-19 has been contained? Now, here in Japan, Japan as a country is moving towards containment, but the PCR testing here in Japan is extremely limited at the moment. So perhaps we do not have that many patients, or perhaps with the BCG shots, Japanese are perhaps immune to the virus. We do not know. But recently, perhaps from China, if they carry with them a proof or a passport saying that they are negative, perhaps we can welcome them in. So if we can be confident that it has been contained in China and Apparently, it is called a negative passport, and apparently the Chinese government is concerning such an issuance. So if they possess that, we can perhaps have them come in. And once China begins to mobilize, it will have a ripple effect. So the containment of COVID-19 equals people are starting to travel. That will be the minimum condition. And if people start moving, inbound traffic will increase, and our operational business will increase, and aircraft business will increase. Whether we can go back to what it was prior to corona, it will take some time. But again, to contain the virus, it is to minimize the number of the spread and cases. But obviously, we cannot just judge by the Japanese numbers. The U.S. is undergoing quite severe or dire situations. And what will happen with the southern hemisphere, we do not know. The African continent, obviously, will be impacted greatly by the virus as well. So all in all, we do not know which direction this will take. And I am not, obviously, an expert in this field, so I will have to refrain from making any solid comments. But containing the number of cases and seeing a dramatic decrease as well as secondary contamination is put to a stop, that will be the condition.

So from SMBC and EcoSecurities, this is a question from Muraki-san. So the net profit, 180 billion to 200 billion yen, and also a reduction of maybe a possible 80 to 120 billion. And in that case, what would be the prerequisite for base profit as far as investment gain? And what would be the amount of losses that would be drawn from aircraft leasing business as a concession? And also, how do you foresee an investment opportunity from here down the road? PE fan that remains to be highly competitive and also there will be some intervention from the government as well as the central bank so I do have an interest in this so with regard to 180 billion to 200 billion yen of assimilation for the net profit is based on no investment no divestment no new divestment no new investment and so 20 to 30 billion yen in fact will be an impact to aircraft leasing business and the concession will be damaged by 20 to 30 billion. And in the case of KICS, so there is an equity income, equity method income, which means that the loss will not be reflected P&L directly, but the revenue may come down to as low as zero. So in other words, which means that 10 billion yen worth of income may perhaps go altogether. So therefore, the personnel cost and also taking into account the depreciation charge about the 20 to 25 billion yen of negativity may perhaps be anticipated for. With regard to the investment, the second part of your question, so some of the rehabilitation, restructuring investment out there in the regions may be the case. There could perhaps be a possibility by making use of OREC's servicer, which we up and run. So NPL, non-performing loan investment, may perhaps start to increase. as a result. But of course, there's a relation between among regional banks that we have to take into consideration. But we don't intend to issue uncollateralized bonds. So therefore, a project or maybe some investment through the means of perhaps a municipal government bond perhaps would be the way in which we'd be making an investment. And also at the same time, I don't know whether there would be some possibly your acquisition or selling of the business, especially in real estate. But, of course, as we have said, we would stick staunchly to the direction, policy, and the criteria. And as to the competition with PE funds, up until now, we have been engaging in a battlefield in the area where the competition is not that harsh with the PE funds. So especially not SMEs, but really middle to smaller sizes, we have been making an investment. So it was not a crowded market as such, especially between and among different PE funds. And also in regards to government as well as the central bank intervention, we do not foresee any intervention or any deals that the government or the central bank may be interested. We have been avoiding those deals. So we... And that, of course, attitude of ours remains to be unchanged.

So from Mitsubishi UFJ Morgan Stanley Security Tsujino-san, we have a question. Now, you explained the payout ratio and considering the prerequisite, then 180 billion to 200 billion yen net income scenario. If you go below that, then can I understand the dividend will decrease? be lower than last year? Yes, that will be the worst case scenario, but we will do our best to not make that happen, not have that happen. Now, for the first quarter and second quarter, round about when Q2 ends, we do believe that we can see more or less of an outlook of what will happen. And then at that point in time, we will see what the numbers will be for fiscal 2021 March. And then 50% payout ratio, do we execute that? Do we fine tune that? We will consider at that point in time. But again, unfortunately, 35 yen interim. And if there's zero revenue for the second half of the year, then we may be below last year's level. But we want to avoid that at all costs. Now, for real estate, the pre-tax profit, there was a $2 billion impact. And so for the real estate service profit... for the operational business says the profit was QO of quarter on quarter. Okay, quarter on quarter, five billion year on year. It dropped by 10 billion, I believe. So in terms, you absorb a lot of this through expense reduction, correct? So this is Yana speaking. Let me respond to the second question. And now for the operational business, Fujino Sun, I'm not sure which number you are referencing to, but we sold some of the services a service business, and for the operational business in nature. It is prone to seasonality. So usually Q4 is the worst, usually. So the numbers that we are relaying to you now are for this quarter is an estimate that we work from, and we are comparing that. So there will be a slight difference from the actual statements. Now for the operation business, hotels and the inns as well as the seminar facilities and the aquariums, this is what we refer to. So the real estate service income, we do have other services income. No, we are just carving that out. If you do have a more detailed question, if you could give us a call, we will be explaining this in more detail. I know we cannot have a conversation at this point, so let me stop there for this question.

So the question is from Mr. Tom Grubb of Alma Capital.

Is it the case that 50% is the maximum you will pay this year, so there is a possibility of no H2 dividend if things become very bad. Yes, that's right. That is our worst case scenario. But as I say, I try to avoid this worst case scenario. That is my effort. So I try to maintain maybe around 18 billion yen net income. But it depends upon coronavirus issues. Therefore, you know, this is the 50% is I declare today. And then maybe half-year result, when we announce the half-year result, if this is a worst-case scenario happen, there is maybe chance to revise this idea.

From J.P. Morgan Securities, Otsuka-san, we have a question on page 10. for net income, let's say the range was 200 billion yen. Then, in comparison to the 300 billion yen for 2020 March period, which business is seeing a decline? So, this will be operational business and aircraft and concession. So, these three.

So, from MSNBC, NICOS Securities Pakistan, I believe, is how we pronounce this Chinese character. So... being affected by COVID-19, would you be focusing very much on the maintenance of the current credit rating, S&P, Moody's, Vichy, all those credit agencies, disregarding the numbers that we have been announcing? Whether it is the reflection of COVID-19 crisis or not, but automatically, they have changed the outlook to negative. So they may... we have not been receiving any negative impact to our liquidity. However, our outlook is now a negative watch. So in terms of credit rating maintenance, I may have mentioned the same back in October. But, you see, we would like to, at the best effort, maintain single A. But, you see, we're not adamant about this. So we may let the credit rating go a little lower. But, of course, it would remain to be our target for sure. So it is time for us to conclude this session. So I would like to close the Q&A opportunity for now. So the presentation this time, in fact, was conducted online. So please do excuse us if you have any difficulty in hearing. So I would just like to conclude the business performance announcement session for 2020 March for Oryx. Thank you all very much for your participation into this session. despite of your manifold duties. Thank you very much.