U.S. Markets open in 8 hrs 49 mins

Edited Transcript of 1310.HK earnings conference call or presentation 24-Oct-19 10:59am GMT

Q4 2019 HKBN Ltd Earnings Presentation

Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of HKBN Ltd earnings conference call or presentation Thursday, October 24, 2019 at 10:59:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Chu Kwong Yeung

HKBN Ltd. - Executive Vice-Chairman

* Mark Lunt;Group Managing Director

* Ni Quiaque Lai

HKBN Ltd. - Group CEO, COO & Executive Director

* Tak Wa Yeung

HKBN Ltd. - CEO of Enterprise Solutions

================================================================================

Conference Call Participants

================================================================================

* Chi Ho Wong;Dymon Asia Capital;Analyst

* Chris Ko

DBS Vickers Research - Analyst

* James Wang

UBS Investment Bank, Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [1]

--------------------------------------------------------------------------------

Thank you, everyone. It's fantastic to see some very familiar faces, faces that have grown up together with our company. So a real pleasure to be here today.

Today, let us take you through the 12 month of results to August 2019. Now as a reminder, why we have August as our year-end is we get cheaper audit fees because there's not a lot of companies with that year-end.

So it's been an incredibly dynamic year for us. We have completed the acquisition after a 9-month waiting period for the regulatory approval. We have completed the acquisition of WTT, and we have already announced the acquisition of JOS, subject to shareholder approval.

What I do want to enable the audience to do is have an apple-to-apple comparison. We have 4 months of WTT integration into this year's results. But I want -- we also want you to have a sense of the underlying growth in our business, which is incredibly strong.

So on the right-hand side, you will see the full impact. This is the apple-to-orange comparison because we have 4 months of consolidation. What's interesting is if you look at the apple-to-apple comparison of just HKBN ex WTT, and you will see these are runaway the best numbers in the industry. So that's something that we are incredibly proud of the core team.

As you know, there are very, very strong economic headwinds today and upcoming. We are very comfortable in the sense that we believe we have something to offer. We offer the best-value services in town. When you want to save money, you want better services, we are the go-to carrier.

We are firing on all cylinders literally on all metrics. Enterprise with WTT, it's on a tear. It's on turbocharge, as you can see from these numbers. If you look at our Residential business, which is also in an incredibly competitive stage, they're still firing on all cylinders, the residential side. So not only are we driving up the underlying subscribers, the average revenue per user is also increasing. And we're doing it by increasing the composition of multiservice takeout.

We no longer serve single-service product. We are the leading integrated multiservice play in Hong Kong. In fact, we've grown beyond just quad-play. In a couple of slides, I can -- I will explain to you our strategy to become the multiservice provider to the household.

Dividends. To us, this is incredibly important. For 340 co-owners, this is our bank account. This is our actual bank account. This is what pays for our mortgage. This is what pays for our children's education as co-owners of the company. So it's nice to have P&L. It's nice to have nice noncash numbers. But at the end of the day, this is what goes into our bank account. And we are very happy to see a 25% increase in the dividend per share, which will be enjoyed by all shareholders beyond just co-owners.

How did we pay for it? It's a combination. I'd just like to remind the audience that when we bought WTT, it was on a lockbox process. What that means is although the transaction took 9 months to close, the concept was from day one, as soon as we announced the deal, all the cash that accumulated at WTT belonged to the combined entity. So we built out a source of cash in anticipation of paying it out after we acquired it. So we had accumulated $285 million of cash during that 9-month period, which we are using to fund -- partly fund the dividend per share.

This is actually quite an odd chart. Think about it: not a lot of corporate presentations do you see the management team present the long-term share price. This is because there's normally a large agency gap between the management team and shareholders. In our case, there is no such gap. It's one. We are co-owners. This is our -- once again, our bank account. This represents for many of the co-owners the majority or at least a significant portion of our personal family net worth. This is how we are compensated beyond our basic pay. Very much aligned with shareholders, far beyond most standard companies. And of course, we are proud of the almost 70% outperformance relative to Hang Seng since our IPO about 5 years ago.

This gives you a snapshot of the financials. Once again, firing on all cylinders, going from revenue, EBITDA to adjusted free cash flow. What I would like to emphasize is that in any major transformative combination such as ours with WTT, the first few months, the first 6 months involve a lot of start-up integration costs, such as redundancy costs, which are borne upfront. But the benefits of the refined combination of head count will accrue to the company over the next year, the next 2 years. But there's a lot of upfront costs incurred. There's relocation costs of the offices. There's -- and there's also a stalemate situation where we have to reallocate the sales accounts. So there's a lot of things that happen in the first 6 months of the company. And these numbers include those, you can say, dis-synergies that are recognized upfront.

So we're quite pleased with what we achieved in the first year, in the first 4 months of integration with WTT. The good stuff is on its way. We paid for the cost upfront, and the good stuff is on its way.

This is across -- the business across. It gives you a snapshot. And once again, this is only 4 months. So there's a lot of upside coming in, in the coming year or 2.

Our company has grown through a combination of industry-leading organic growth. So if you strip away all the acquisitions that we've done, the 4 or 5 acquisitions in the last 5 years, we are still by far the fastest-growing organic growth company in our industry by taking market share, by being transformative organically, by moving from double play to quadruple play in our business offerings.

On top of that, we have done 1, 2, 3, 4, 5, if you count JOS, upcoming JOS, 5 acquisitions since '14. And each one is a roll-on. Each one makes immediate strategic sense. Each one is in an adjacent segment either for scale -- or in terms of the horizontal scale or for vertical service enhancement.

This is our Residential business. You can see both the ARPU and the subscribers are showing positive trend despite some tough market conditions that we are in today.

Our debt is manageable. We combined WTT. That had a higher debt profile than we did, and we ended up at 4.2x. We expect to bring this down through natural growth. Our EBITDA outlook is quite strong. And we expect that as EBITDA grows, the multiple will continue -- would naturally continue. Another point I would emphasize is our funding costs, our combined funding costs is far, far, far lower than the stand-alone WTT bond cost. So there's huge headroom for us in terms of interest savings in the midterm.

This is something that we are incredibly proud of. You may have heard in our company talk about best-of-breed a number of times over a number of acquisitions over the last 5 years. We would like to share with you the actual evidence. If you look at our composition, if you take our associate directors and above, the most senior executives in our company, the top 64 executives in a company of about 4,000 plus colleagues, 4,000 talents. We don't have any staff in our company, only talents. So if you take the top 64, this is the composition. And it's a beautiful diversity of the best of -- the very best of breed from all our acquisitions plus complemented by new hires. So that's why we broke out the 5 years or less because these are the new people that we have brought into the company in addition to keeping the best of breed from different acquisitions. No other company in our sector has this kind of combination, this kind of best-of-breed combination.

On that note, I would like to invite all my fellow managers and above to please join me, co-owners and coming co-owners, to please come join me on the stage.

Someone can take a quick photo. So each person you see standing on the stage has invested our family life savings into the Co-Ownership Plan. None of us are here on a free-ride basis. We do not give any stock options. There are no free riders. Everyone has skin in the game.

In particular, I would like to introduce Billy, who runs -- who is the CEO of our Enterprise Solutions and who's been driving these acquisitions over the last few years. But you don't have a mic. Here, talk.

--------------------------------------------------------------------------------

Tak Wa Yeung, HKBN Ltd. - CEO of Enterprise Solutions [2]

--------------------------------------------------------------------------------

Hi. Just saying thanks for coming. In my humble side of my -- of me, we have a proven track record of how we have been addressing -- thank you. In my -- on the humble side of me, we have a proven track record of how we have been addressing the market and helping our customers.

I think now with WTT fully integrated and with the coming JOS, we have 2 message: One, to our customers, we will continue to serve them, help them through these tough times; to my competitors, yes, we will continue to challenge you, and you have to fight to get your customers and not just sit there and just get the money coming in. Thank you.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [3]

--------------------------------------------------------------------------------

Thank you, Billy. Thank you. Thank you, everyone. William, would you stay on? Okay, William.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [4]

--------------------------------------------------------------------------------

Okay. Talking about business outlook. This table, many of you will be familiar because we have been sharing with you about the journey of invest and harvest road map for the past couple of years.

So now we are in the beginning of financial year '20. We believe we have entered into the stage of a harvest. For the first half of our financial year '20, it is a light green. Why light green? Because nowadays, enterprise market's revenue, including the JOS revenue if completed by end of this year, will be 80% of the whole HKBN's revenue. That's why Enterprise Solutions is so, so, so important for us. That's why today we are dressing like enterprise look.

So this light green implies that we are investing money, manpower, CapEx and OpEx, to make sure that all the different systems, customer interfacing systems, banking systems, billing systems or even CRM systems for the enterprise market, for the customer base of HKBN, WTT or upcoming JOS will be -- all show that we are stronger as one. So that is why we need to invest for future sustainable growth and operation efficiency.

I want to highlight that now we have this Co-Ownership III crossing 3 financial year, financial year '19, '20 and '21, 3 years aspirational dividend of $3 per share over these 3 years. I believe we are both committed and confident in delivering this target. Why? Because we are really a stronger one HKBN with completed puzzled.

Horizontally, we now have 3 networks: WTT's network, HKBN's network, New World's network. So it is talking about tri-versity. Our network will have [BD] and support to our corporate customers.

Vertically, Y5ZONE's WiFi, ICG's cloud and so -- and also JOS' IT solutions or the expertise for the corporate customers. Just for your information, Jardine, or JOS, under the ex-Jardine Group, they have in Hong Kong having their [4 pin] well known for 60 years. Now we believe this vertical and horizontal match will help us to deliver all kinds of ICT services such that we can share a higher portion of wallet from customers' ICT spend to us.

And if you look at all those acquisitions, WTT, New World or coming JOS, we are always talking about AFF accretive. That is why we say we are quite confident on the aspirational target of DPS.

Second point is that although the deal will be -- for JOS will be completed by end of this year, but we already have the top 3 executives. Mark, the Group MD, Mark, can you stand up and say hi?

--------------------------------------------------------------------------------

Mark Lunt;Group Managing Director, [5]

--------------------------------------------------------------------------------

Hi.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [6]

--------------------------------------------------------------------------------

Thank you. Thank you. When Mark say hi, or together with Eric, the MD, and also Stanley, the Financial Controller, they need to say hi with their money. They are investing 18 months' salary into the Co-Ownership III Plus. So the completion has yet to be done by end of this year, but they are already prepared to write a check. So that's JOS.

Talking about WTT. It's already 6 months after the completion. We have about 20 senior WTT executives. They do have something we call completion bonus in the deal. All of them have already confirmed to have their completion bonus rolling over into the Co-Ownership III Plus. So we have another 20 top executive from WTT having skin in the game.

And of course, the culture of higher pain, higher gain, performance driven will be implemented for all the other talents in WTT and JOS Group. That's why we are now 99.99% confident that we will be able to deliver the $300 million revenue and cost synergies by merging for WTT by financial year '21.

May I have the PowerPoint about the [LMC]? Yes, this one. Very important. My -- this is something about the residential market. But before I conclude, I want to share with you that, if you can remember, the Page 6 of the PowerPoint presented by NiQ is talking about 2% growth in residential subscribers and 5% growth in ARPU. It is a very good achievement in a very tough market when all the other competitors are selling on average $98 to $108 for 1-gig fixed broadband-only services.

Now we have been very successful in selling bundle, quad-play, double-play or triple-play. You look at all these banners, can you identify the difference? It is a $1 million question. Look at all the competitors. They are showing their price. We are showing the value because we do have a different package value for money, our triple-play or above. We will start with the least of HKD 148, broadband plus OTT, or sometimes, plus voice. No matter you -- how you bundle, the minimum entry point is $148. We focus on highest value to the customers. Our competitors focus on the lowest entry price for fixed broadband only. That's why today, HKBN stand here as a leader for the performance. We have skin in the game packed to deliver the coming performance.

What I want to conclude is that today, HKBN really is stronger as one because we already have all the pieces of our services or products, and we have co-ownership skin in the game. In the upcoming economy in Hong Kong, everybody noticed that the economy will go down. But when the economy will go down, people will really treasure more on value for money, be it enterprise market or residential market. And if you have done your homework, your analysis, you should notice that the incumbents on every pieces of products or services, they have the higher number of subscribers and higher ARPU. So I would say in the tough time ahead, there will be more corporates and also residential customers switching from the incumbents to us.

For the distant #3 and #4 competitors, they basically don't have scale to offer what we can. Because in the residential markets, we are migrating from quad-play to multi-play. Our CMO of residential market is seeing many, many partners to enrich the total offerings for the households, such that we no longer focus on the ARPU, although our ARPU increased by 5%. But we hope to show now or later, we can share with you the ARPH, average revenue per household's performance because we want to do measurement the income of revenue from each household by cross-selling or bundling or all other things that are adding value to the households.

For the end device, together with JOS, we are really a strong IT -- ICT provider who can help people to reduce their ICT costs. We do have a number of big partners or -- and customers talking to us that they will be outsourcing their IT to us to save their costs but still maintain their efficiency or effectiveness because we have a strong QS team that we can use our expertise and deliver service on scale efficiently and effectively. So we are here to win.

Last but not the least, you may ask, so what is the guidance for DPS next year? Although we are seeing headwind ahead, we still expect a high single-digit growth in DPS in next financial year, high single-digit growth, okay?

NiQ, you want to join together for Q&A? Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Unidentified Company Representative, [1]

--------------------------------------------------------------------------------

Okay. So we now have the Q&A session. So please raise your hand if you have a question, and our facilitators will pass you the mic. We also have the online platform so you can post your questions. We will read out the questions.

--------------------------------------------------------------------------------

James Wang, UBS Investment Bank, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

This is James Wang from UBS. My first question just on the impact of the recent economic conditions. So we hear in news about sort of, increasingly, store closures. So I just wanted to get some insights from you on what sort of conversations you've been having with your SME customers? Are you seeing pressure on the tariff rates? Or are you seeing more inquiries from customers wanting to reduce their telecommunication costs?

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [3]

--------------------------------------------------------------------------------

We do have quite a number of small firms, that is really S, who are engaging in the retail industry that they are facing difficulties. That's why we are offering flexibility. We either allow them to defer the payment to us or, if they are retailers that having services or products, that our Residential Market CMO will accept as one of the services or products for us to bundle into a multi-play to offer to the market, then our small customers, particularly on the retail side, they can barter, pay us their product coupons instead of cash. That is the small companies or small enterprise customers.

But for the medium-sized or even the big corp, we do see much bigger upside. Particularly, those big customers, nowadays, they really have a choice. Because nowadays, they are having another stronger and bigger one HKBN that can help them instead of really relying on only one key incumbent like before. Now they have a choice.

After acquiring now WTT, I already launched so many business about the enterprise. Just one example. There's a bank, already committed a, I would say, huge dollar amount for us to set up BCP for them, business continuity planning backup center for them. So this is -- but there are so many banks. But we just have 1 or 2 at the beginning. We will have more to come. So this is one of the examples. And there are also some other retailers we are talking to some bigger one, [instant mail] retail chain branded. We are bartering each other's services. So we see upside in medium and big.

There are some challenges for the small one. But upside is far, far better and, again, just overshadow the negative one for those small ones.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [4]

--------------------------------------------------------------------------------

Actually, in troubling times, people look for value. And we are the best-value provider in town. So if you look at what happened in 2003 during SARS, if you look at what happened in 2008, global financial crisis, value seekers came to us, and we actually had record growth in those periods.

Another point, today, we have accumulated scale. One in 3 households are our monthly billing relationship. One in 2 active companies are our monthly billing relationship. And I'm talking about a monthly live billing relationship. I'm not talking about a registered user. So anyone looking for mass distribution in Hong Kong, we are a great partner to consider, whether it's barter, whether it's through operational partnership. So we see phenomenal upside given that reach.

--------------------------------------------------------------------------------

James Wang, UBS Investment Bank, Research Division - Research Analyst [5]

--------------------------------------------------------------------------------

Sorry, just the second question, it's on just the progress of the WTT acquisition. So if I look at the first 4 months and our annualized revenue from WTT, it looks like it was flat versus when you first announced the deal. So could you provide us -- I know William talked about you're very confident of achieving the synergy. Just the near-term execution on the integration and, longer term, how -- the other thing I would add is it looks like your number of customers from WTT adds about 80% to your number of Enterprise customers. But the footprint of commercial building is up actually triple versus where you were. So also talking about the longer-term opportunity to improve revenue penetration there.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [6]

--------------------------------------------------------------------------------

Sure, let me take that. So for -- I mentioned that the regulatory approval process took 9 months. So if you imagine you have 2 deer stuck in headlights, we didn't -- you can -- there's a lot of things you can do when you know there's going to be a major combination, but you don't know when it's going to be done. So everything was on hold for 9 months. So that leads to a very slow 4 months' kickoff. So that's the key point.

Now during that 4 months, we have done some incredible things. We are a very dynamic culture. In our company, it's low basic, high commission. The best performers earn more, the low performers leave. We switched the whole culture of WTT to that base. So you can expect the machine to start rolling in the coming months. Does that answer your question in terms of the momentum? Thank you.

--------------------------------------------------------------------------------

Unidentified Analyst, [7]

--------------------------------------------------------------------------------

My name is [Alex]. I'm from Macquarie. One of your long-term co-owners, I think we can call it. I think you've already answered this, but I might as well ask it anyway. Going through the result earlier, I noticed the market share in Residential slipped a little bit, just a little bit. I was wondering if you had any comments about that.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [8]

--------------------------------------------------------------------------------

Actually, you're talking about subscriber market share. I think if you look at revenue market share, it's clearly up because the market is not growing at 9%. So we're not so focused on subscriber market share.

As you can see, we're not into those kind of $88 1-gig plans. So we're happy to give up those low-hanging users. We focus on the revenue per household. Up 9%, I think that's an increase in market share.

Chris?

--------------------------------------------------------------------------------

Chris Ko, DBS Vickers Research - Analyst [9]

--------------------------------------------------------------------------------

Yes, this is Chris from DBS. I got 2 questions. First is just now, William gave a guidance of around high single-digit growth for DPS, and that implies around 40% growth for FY '21 if we are to achieve the lower band of our AFF target. So what will be the biggest driver for this growth in DPS in FY '21?

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [10]

--------------------------------------------------------------------------------

William said high single-digit DPS growth.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [11]

--------------------------------------------------------------------------------

High single-digit DPS growth, DPS.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [12]

--------------------------------------------------------------------------------

So that would be operational leverage. You can expect the DPS to grow faster than the revenue line because of the operational leverage we have in the business.

--------------------------------------------------------------------------------

Chris Ko, DBS Vickers Research - Analyst [13]

--------------------------------------------------------------------------------

And what about in FY '21? FY '21, what would be the biggest growth driver?

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [14]

--------------------------------------------------------------------------------

I think if you look at our aspirational range for our co-ownership, this is what we put our family life savings in for, to have a chance at hitting this target, right? It's the $2.50 to $3 kind of range. The specific numbers are on the deck. But that's the kind of ballpark that we are aspiring towards.

We hit $0.70 in the first year. Looking for $2.50 to $3 kind of range over the remaining 2 years cumulative.

--------------------------------------------------------------------------------

Chris Ko, DBS Vickers Research - Analyst [15]

--------------------------------------------------------------------------------

Okay. And my second question is that in the last result briefing, we in -- for the residential broadband market, we were a little bit focusing on the subscriber growth again, because we see those low-hanging fruits from our WTT network extension. And so what's our focus on the residential broadband business going forward, on ARPU or subscriber?

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [16]

--------------------------------------------------------------------------------

Yes. Correct. 6 months ago, in fact, we are expecting more residential subscribers because of the extension of residential coverage after acquiring the WTT network. But in the actual implementation, in the discussion between us and i-CABLE, it takes some more time.

So we think if the discussion is smooth, it will be happening in next like 6 to 12 months for those area that we didn't have coverage before, but then we have coverage. But this didn't happen in the first 5 or 6 months. And we expect the incoming 12 months, there should be something happening.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [17]

--------------------------------------------------------------------------------

And Chris, remember, the regulatory approval for WTT took longer than expected. I think 9 months is really at the far end of our expectation.

Any other questions? Anyone from -- yes?

--------------------------------------------------------------------------------

Unidentified Analyst, [18]

--------------------------------------------------------------------------------

It's [Andy] from BPI. I've got 2 questions. A quick one. The first question is, so are there -- what are the biggest obstacles in terms of how you are looking at your goals and your targets? What are the biggest risk to that?

And secondly, how should we look at valuation?

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [19]

--------------------------------------------------------------------------------

I think we both can look at the second question. I think for the first question on how to deliver like the CO3 KPI, basically, we have much work to do, but that also imply we will have much upside to be delivered through both revenue and cost synergies on WTT and also the upcoming JOS. We believe the revenue and cost synergies will be on [like that]. When I talk about the $300 million synergy on WTT, I already say that is 99.99% confidence level. So that means the number will be bigger than that. But we still need to take some time to look at JOS.

But HKBN, we don't want to be too proud, but we are very good at execution. And execution, that means not executing alone but having skin in the game with all the others. So we are quite upbeat.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [20]

--------------------------------------------------------------------------------

I would like to share with you a couple of statistics. So all 7 executive, what we call the Management Committee, the CxO, the 7 most senior people in the company have committed to investing at least 1 year of salary into the CO3 plan. Now 1 year of salary is about 5 years' savings. Billy, who runs Enterprise, minimum 2 years that he will invest. That's not voluntary, so he told me -- voluntary.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [21]

--------------------------------------------------------------------------------

He won't escape.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [22]

--------------------------------------------------------------------------------

So -- and then we mentioned the top remaining 20 executives from WTT will also be rolling over their investment. In addition, the top 3 -- and I think the take-up rate will be substantially deeper than that, but at least starting with the top 3 in JOS will be investing 18 months as well.

Now think about this. It's a really odd situation. I think people have initially a bit of a shock. When we buy a company, the executives get to put more money in. They don't take money out. When we acquire a company, they get to put more money in because that's a vote of confidence, because you can look at them, the executives, the insiders of the company doing their due diligence and then voting with their family savings. That's how we run the business.

Now if the insiders don't buy in, we shouldn't be buying your company is our view.

[Claude]?

--------------------------------------------------------------------------------

Unidentified Analyst, [23]

--------------------------------------------------------------------------------

Congratulations for another very good solid growth year to you and to all the co-owners and employees of HKBN. My question is you've laid out all the invest that you've done over the years, from Y5ZONE to JOS, the last one into WiFi, into the Residential business, the Enterprise, the MVNO, the cloud, the SI, et cetera. So where -- is there any more inorganic growth coming ahead if you're looking ahead for HKBN? And if so, is it going to be more into adjacent businesses within Hong Kong, such as full MNO rather than virtual or into new geography?

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [24]

--------------------------------------------------------------------------------

We're open to ideas. Now 12 months ago, we had no idea that the JOS opportunity will come around. 3 years ago -- 3 or 4 years ago, we had no idea that the WTT opportunity will come around. So we are open to ideas, but it has to be highly accretive and the insiders need to buy in. So if you know of anyone that meets those criteria, please let me know.

--------------------------------------------------------------------------------

Unidentified Analyst, [25]

--------------------------------------------------------------------------------

Just in business within Hong Kong and geography?

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [26]

--------------------------------------------------------------------------------

Mainly Hong Kong.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [27]

--------------------------------------------------------------------------------

And must be AFF accretive.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [28]

--------------------------------------------------------------------------------

Yes. Because the CO3 numbers don't change, right? The AFF, the $2.50 to $3, that doesn't change. So if anything that we can buy that can help us be AFF accretive per share, then that's something that we're very keen on.

Actually, if I can go off on a tangent a little bit, I would like to share with you our Co-Ownership III program. About 15% of the program will -- actually, the largest Co-Owner III participant is actually going to be our CSI fund. 15% of our Co-Owner III program will actually be a single holder, and that would be a trust, the CSI social -- the Corporate Social Investment trust that we would set up that will hold shares. We have a seed capital of 4 million shares or about HKD 60 million, and it would have all the same attributes as a normal co-owner.

If we hit our KPIs, we will get 1.33 shares on top of every share that has been put in there. So that's 15%. The aspiration is to grow that $60 million seed capital through contributions by other co-owners to about $300 million. It will be a perpetual trust in parallel to the company. And then a 5% dividend yield on that will go back into the community.

We will have a board structure, a combination of co-owners and independents that will allocate the Corporate Social Investment. That is incredibly important to us. That is why we're so excited to come into the office from 9 and then leave at 5. Because we have life/work priority in our company, we finish at 5. But that is what keeps us motivated.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [29]

--------------------------------------------------------------------------------

We have...

--------------------------------------------------------------------------------

Chi Ho Wong;Dymon Asia Capital;Analyst, [30]

--------------------------------------------------------------------------------

Can I? I'm Chi Ho Wong from Dymon Asia Capital. So I'm asking a bit difficult question. So operating business in Hong Kong these days is kind of difficult because of the political sensitivity. So some business got intentionally or unintentionally fall into the blue or yellow camp on their own or by some of their employees. So I want to hear as risk management operationally at HKBN, how do you prevent your company from being fall into that category? Because apparently, several months ago, one of your employees also got into some social media forum by -- some popular online forum, right? So I guess you are aware of that incident. So as a shareholder, this is a tail risk for me. So I want to hear how you as a management team address that concern.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [31]

--------------------------------------------------------------------------------

I think we basically operate the company with 2P, purpose and profit. So we pursue profits to maximize the return to our co-owners and shareholders. But at the same time, we also must deliver our core purpose of making Hong Kong a better place to live.

So in delivering this core purpose, we as a business entity, we are politically neutral. And we always act and think according to law. And we put our customers' interests at the highest rank, such that, for example, we will try our best to protect customer data. We will make sure that people will notice that independent talents' views, if shown externally, that is individual personal view, not related to the company as what we shared before. So that is the way. And we -- I think all of us want Hong Kong to be better. So with this in mind, we know what we should do and what we should not do.

--------------------------------------------------------------------------------

Unidentified Company Representative, [32]

--------------------------------------------------------------------------------

Okay. We have 1 question posted online. That is, do we have any intention to refinance the 5.5% coupon bond that we assumed upon the completion of WTT?

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [33]

--------------------------------------------------------------------------------

Definitely, yes. Thank you.

--------------------------------------------------------------------------------

Unidentified Company Representative, [34]

--------------------------------------------------------------------------------

Great. So that concludes the event for today. Thanks, William and NiQ, for the insightful sharings.

So we have some light refreshment at the back of the venue. Please enjoy. Have a nice evening.

--------------------------------------------------------------------------------

Ni Quiaque Lai, HKBN Ltd. - Group CEO, COO & Executive Director [35]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Chu Kwong Yeung, HKBN Ltd. - Executive Vice-Chairman [36]

--------------------------------------------------------------------------------

Thank you.