China Yuchai International Ltd (CYD) 2012 Q1 法說會逐字稿

I would now like to turn the conference over to Kevin Theiss. Please go ahead, sir.

Thank you for joining us today and welcome to China Yuchai International Limited's first-quarter 2012 earnings webcast. My name is Kevin Theiss and I am with Grayling, China Yuchai's US Investor Relations advisor. Joining us today are Mr. Benny H. Goh, President and Mr. Kok Ho Leong, Chief Financial Officer, respectively.

Before we begin I will remind all listeners that throughout this call we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, optimistic, intend, aim, will or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that may be deemed forward-looking statements.

These forward-looking statements are based on current expectations or beliefs, including, but not limited to statements concerning the Company's operation, financial performance and conditions.

The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially, depending on a variety of important factors, including those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time. The Company specifically disclaims any obligation to maintain or update the forward-looking information, whether of the nature contained in the conference call, or otherwise, in the future.

Mr. Goh will provide a brief overview and summary and then Mr. Leong will review the financial results for the first quarter of 2012 ended March 31, 2012. Thereafter, we will conduct a question and answer session. For the purposes of today's call the financial results are unaudited and they will be presented in CNY and US dollars.

Mr. Goh, please start your presentation.

Thank you, Kevin. The first quarter of 2012 continued to experience weak commercial vehicle sales, with diesel-powered commercial vehicle segment dropping approximately 12.3% compared with the first quarter of 2011, according to the China Association of Automobile Manufacturers, CAAM. During this period overall sales of diesel-powered heavy-duty trucks in China, including both trucks and trailers, declined by 30% from the same quarter of 2011, despite lower inventories.

The construction industry in China continues to be sluggish, reducing demand for construction-related trucks. OEMs that mostly produce these construction-related vehicles reported sharper sales decline than other OEM truck producers. High fuel costs were also another factor contributing towards the decline in truck demand, as truck operators were not as profitable and it impacted investments into new trucks.

The bus segment performed better than the truck segment in the first quarter of 2012 compared with the same quarter a year ago. According to CAAM total bus sales were flat, however, with sales of diesel-powered buses increasing 6.6%. Medium-duty bus sales were up 6.5%.

China Yuchai remains one of the leading diesel engine manufacturers in the Chinese bus market. Bus sales continue to benefit from the ongoing expansion of the highway system and continued urbanization. In addition, following from a number of fatal accidents involving overloaded school buses and the use of sub-standard vehicles, the PRC government introduced new policies to improve the quality standards of school bus production and usage, which has contributed to the growth in bus sales.

While we are starting to see a gradual loosening of the Chinese government's monetary policy in an attempt to counter the effects of the deepening Eurozone crisis and uncertain economy, these actions will gradually result in increased investment, spending and demand. However, we remain guarded over the short-term prospects of the diesel engine market, especially in the heavy-duty segment.

During the first quarter of 2012 our diesel engine sales declined by 18.1% compared to the first quarter of 2011, as demand for commercial vehicles remained weak. Net revenue for the first quarter of 2012 declined by 13% to CNY3.7b, $585m, compared with CNY4.2b in the first quarter of 2011.

Our balanced product portfolio helped in this environment of falling demand. We sold more four-cylinder engines to compensate for the drop in six-cylinder engines. We also utilized all efforts to defend our gross margin. Our actions helped to stabilize all margins and offset the increase in the cost of goods sold and depreciation. Both increased during the first quarter of 2012 versus the same quarter last year. The adoption of cost control measures also started to yield positive results. SG&A expenses were CNY376.4m, $59.8m, down 17.7% from the first quarter of 2011.

We continue to invest in research and development. Our R&D expenses were CNY81.9m, $13m, during the first quarter of 2012, a year-over-year increase of about 5%. Our new R&D Institute in Nanning is expected to begin operations at the end of the year to develop new engine components and engines to meet improved emissions standards and also provide products for new markets and enhance engine performance.

We continue to focus on the development of new engines for marine and industrial applications, as well as the project for natural gas engines. The construction of a dedicated production facility for our high horse power marine diesel engines and power generator engines at our main plant in Yulin City are progressing well. These off-road markets are important growth areas for our future and we will introduce new high horse power diesel engines with eight and 12 cylinders at the end of this year in 2012 and also in early 2013 to capture market share in these segments.

The engine models 12VC, 12VT and 8C marine and power gen engines integrate advanced technologies to enhance energy conservation, to gain higher efficiency and achieve greater reliability and durability, all with reduced emissions in a more compact engine design. GYMCL maintains the proprietary intellectual property rights to these new engines.

Under the government's direction China will use more natural gas to gradually offset oil imports and to improve the environment. We are committed to developing a full portfolio of natural gas-powered engines to complement our existing suite of diesel engines. Our customers will have a more complete choice of GYMCL's engines to satisfy their requirements, especially for large buses, mid- to heavy-duty trucks, power generators and the marine engine markets.

I will now provide a brief update on our joint ventures.

We still believe factors are in place that will favor the heavy-duty diesel engines over the longer term. The growing demand -- sorry, the growing urban population requires an increasing volume of goods to be shipped and the Chinese construction and manufacturing industries will require materials to be moved efficiently even as the Chinese economy grows at single-digit rates compared to previous years. Heavier loads will need to be moved further and faster.

From our Chery-CIMC truck joint venture we remain committed to capturing market share in the profitable heavy-duty diesel engine sector with our YC6K engines, which are compliant up to National VI emission standards.

Our Caterpillar remanufacturing joint venture is progressing well and the permanent factory located in the Suzhou Industrial Park is nearing completion. We expect this new facility to be fully functioning by the end of 2012. Our joint venture operations received positive remarks at a recent assessment conducted by Guangxi Development and Reform Commission.

We remain committed to our strategy of offering a diversified portfolio of advanced engines to meet the requirements of customers in a number of markets. In addition to expanding our line of engines to meet the stricter emission standards we are focusing on expanding our suite of engines for off-road applications. We will continue to leverage our 2,800 service stations across China to provide our customers with the best-in-class service.

Now let me now turn the call over to Mr. Kok Ho Leong, our Chief Financial Officer, to provide more details on our financial results.

Thank you, Benny. Let me first walk you through our first-quarter 2012 financial results.

Our net revenue for the first quarter of 2012 was CNY3.7b, $585m, compared with CNY4.2b in the first quarter of 2011. The total number of diesel engines sold by our GYMCL subsidiary during the first quarter of 2012 was 131,697 units, compared with 160,831 units in the first quarter of 2011, a decrease of 29,134 units, or 18.1%. This was mainly due to weaker demand in the commercial vehicle markets. The decline in net sales was CNY550.4m, or 13% as compared to the same period in 2011.

Our gross profit was CNY779.4m, $123.8m, compared with CNY944.1m in the first quarter of 2011. Gross margin decreased to 21.2% in the first quarter of 2012 as compared with 22.3% a year ago. In the first quarter of 2012 the lower gross margin was attributable to both higher depreciation expenses and a shift in the sales mix to more light-duty engines.

Other income was CNY26m, $4.1m, an increase of CNY6.6m from CNY19.4m in the first quarter of 2011. This increase was mainly due to higher interest earned on bank deposits and a mark-to-market gain in our shareholding in Thakral Corporation Limited, versus a loss in the first quarter of 2011. This increase was partially offset by a loss on the sale of property, plant and equipment.

Research and development R&D expenses were CNY81.9m, $13m, compared with CNY78m in the first quarter of 2011, an increase of 5%. As a percentage of net revenue R&D spending rose to 2.2% compared with 1.8% in the first quarter of 2011.

Selling, general and admin SG&A expenses were CNY376.4m, $59.8m, down from CNY457m in the first quarter of 2011, a decrease of 17.7%. Our SG&A expenses represented 10.2% of the first-quarter 2012 net revenue, compared with 10.8% in the same quarter a year ago. The decrease in our SG&A expenses was due mainly to lower freight costs as fewer units were shipped and lower allowances for doubtful account receivables.

Operating profit declined to CNY347.2m, $55.2m, from CNY428.5m in the first quarter of 2011, mainly due to lower gross profit partially offset by reduced SG&A expenses. Our operating margin was 9.4% compared with 10.1% in the first quarter of 2011. Finance costs rose to CNY75.4m, $12m, from CNY47.4m in the first quarter of 2011.

As previously announced, GYMCL issued short-term financing bonds, STFB, of CNY1b on March 9, 2011. Prior to the issuance of the STFBs the Company used bills discounting and accounts receivable factoring to meet its working capital requirements.

The share of joint ventures was a loss of CNY16.7m, $2.7m, compared with a loss of CNY17.8m in the first quarter of 2011.

In the first quarter of 2012 our total net profit attributable to China Yuchai's shareholders was CNY167.9m, $26.7m, or earnings per share of CNY4.50, $0.72, compared with CNY230.5m, or CNY6.18 per share in the same period in 2011.

Now let's take a look at our balance sheet highlights.

As of March 31, 2012 our cash and cash equivalents were CNY4.10b, $650.6m, compared with CNY4.12b at December 31, 2011. Short- and long-term borrowings decreased to CNY2.3b, $363.1m, from CNY3.7b at the end of December 2011.

On March 9, 2012, upon the maturity of the first tranche of the short-term financing bonds amounting to CNY1b, and bearing a fixed interest rate of 4.59%, GYMCL repaid the full amount due. The Company used bills discounting and accounts receivable factoring to meet its working capital requirements.

As of March 31, 2012 trade and bills receivable were CNY5.9b, $934.8m, compared with CNY6.7b at the end of 2011. As of March 31, 2012 our net inventory increased to CNY2.6b, $407.7m, from CNY2.4b at the end of 2011, as we built up our supply of raw materials in preparation for production in subsequent quarters.

With that, operator, we are ready to begin the Q&A session.

(Operator Instructions). Your first question comes from the line of Alex Potter with Piper Jaffray.

Hi, guys. I was wondering, first, if you could comment on your capacity utilization -- your overall capacity utilization.

And then, related to that, what your CapEx requirements are for the rest of the year and what you intend to be spending the CapEx on.

Okay, Alex. By and large we do not reveal our utilization. But what we want to say is that, obviously, the pressure of the demand -- the level of demand for engines has impacted us somewhat. Having said that, we are still looking good in terms of our production. Our guys are still fully engaged and we are not laying off any people for that matter.

And in terms of CapEx requirements we are looking at our CapEx firstly to support the long-term goal, which is the natural gas and high horse power engines, but we are also looking at some of the CapEx to be apportioned for upgrade of existing lines and equipment. But definitely we are not going to put CapEx for an increase in capacity at this point in time.

Okay, yes, that makes sense. What -- just, I guess, in general, or a ballpark figure, how much do you expect to spend in CapEx for 2012? Do you have an estimate?

Our estimate is still the same as [the] previous year. It's around about CNY700m.

Okay. And then I was wondering if you could comment a bit on the mix between heavy- and medium- and light-duty engines in the quarter. It sounds like things obviously have been shifting a little bit toward light and medium and away from heavy. I was just wondering if you could give a little bit more detail around the specific mix in the quarter.

For China Yuchai that's really the case. Our mix is shifting the other way around. Last year our mix of four to six cylinders was -- in [2010] almost 60/40 and then last year it was close to 50/50. And now we're coming back to about the other way around. It's almost 55/45, where 55 is more in the four cylinders and 45 on six cylinders.

This is the natural way it's going because we can see that heavy-duty engines are definitely going through a very bad patch right now. Having said that, our heavy-duty numbers are much smaller in comparison to our total numbers, so we're a lot less impacted by that. However, the medium duty is also looking at some pressure and so that's why we are shifting more towards the light-duty engines.

Okay. And then, two, I was -- by end market or end application I know that you can -- clearly, you can divide it up between medium, heavy and light. I was wondering if you have a little bit more color on, I guess, the heavy duty, medium and light duty for construction application versus for logistics or hauling applications. It sounds like the construction end markets are doing worse, I guess, or faring less well, I guess, than the logistics or hauling segments. Is that accurate?

That's absolutely right, because we are seeing a lot of pressures on our construction side. So the application for engines in the area of wheel loaders, bulldozers, excavators are going through a lot of pressure right now. Having said that, again, we do not have such a big portion of that engine from our total volume that we sell, so we are still not as badly affected.

Okay. And then in terms of recent order volume and visibility, does that -- have things improved at all to give you some confidence that, here, over the next quarter or two things could potentially be turning around? Or is it just still too difficult to say?

Okay, let me just rephrase that sentence somewhat, because I know that you guys have spoken to me in March when we were in New York. We are saying that things will brighten up for two quarters [and half]. But I still stand by the fact that the first two quarters are going to be tough.

In fact, I expect here (inaudible) report. And the last two quarters we are hoping for things to improve, because a lot of things [running] on the government -- change in government and so forth. But this could be stretched out somewhat at the rate it's going.

Okay, so in general you still think the second half is going to be better than the first half, but still a lot of uncertainties? Is that (multiple speakers)?

Yes, I would say it's a cautious optimism, but we're still thinking about headwind right now. And I think there -- some of the segments have got some bright spots [actually] bus market. The bus market is continuing to look very promising. The increase in the [potential] transportation segment looks good and we're capturing some growth over there.

Okay, and then my last question, is pricing getting impacted at all through the weakness in the markets? Are you getting downward pricing pressure, or is most of the pressure on margin coming from depreciation and increased cost of goods sold?

It is both. In fact, this is a buyer's market right now; everyone is chasing for the same order. So the environment is especially harsh, but we are also looking at how we can expand our productivity and offset some of this pricing pressure.

Okay, thank you very much, guys.

Thanks, Alex.

Your next question comes from the line of Sandy Mehta with Value Investments.

Yes, thank you very much. I notice that your receivables were down 12% March versus December, which is a good trend and -- but they are still high, at $934m. And normally, historically, it's been at about $350m to $500m range, and I understand because interest rates are high then it makes the factoring less attractive.

But now that rates are coming down in China should we see receivables continue to come down going forward? And will it be back to your normal level of $350m to $500m? And then will that release cash, so your cash balances would increase on your balance sheet? Thank you.

Yes, okay, this is Leong here. Yes, you are right to say that our accounts receivables and the (inaudible) receivables are coming down, but you also have to see in the total totality in terms of our borrowing as well.

If you look at our borrowing, it also comes down. The borrowing has come down. If you look at our presentation just now, this will show that this is largely as a result of the repayment of the first tranche of short-term financing bond. As traditionally we have a full variety of funding instruments that includes [the] account receivables, factoring, bills payables and [all discounting], yes.

And that is the reason why, upon the repayment of this short-term financing bond we have -- it went into the accounts receivables factoring. That's why you see the corresponding drop. And you are right to say that in the first quarter there's a very slight softening in the bills discounting -- accounts receivables factoring rate, although we've got a lot, but it's some encouraging sign for us. Although in other part of the loan interest rate we have not seen a major shift. Yes, that accounts for it.

As your question about the future, it is still not easy for us to predict, although we have seen some news about the change in reserve ratios. But if you look at some of the official China websites you can see that if that does lead to a major shift in the interest rate of change, or even a jump in the loan in that sense, this [one] might be [addressed].

This news has just come out only just a couple of days ago, you have to be -- the new refurbished changes to be implemented on the eighteenth of this month [just mixed]. So that's how we see -- there's no clear (inaudible), although there are some signs, but it is not easy to see how it is still unfolded.

So right now your net cash on the balance sheet, for your cash minus your short- and long-term debt, is about $290m. And if -- so if interest rates in China were to come down, say, 100 or 200 basis points, then we would see your receivables balance to gradually come down, right?

Well, if the interest rate is favorable we will sure go for the factoring as well as the bills receivables discounting, but that also depending on our funding. If there's no funding need the best way to do is to -- not to incur additional finance cost.

(Operator Instructions). Your next question comes from the line of Gerwin Ho with Citigroup.

Hi, good morning. Thank you very much for your time. I just have three questions. First of all, what is -- given we are now five months into the year, what's your latest view on the heavy-duty truck market in terms of growth for this year? And when does we expect positive year-over-year growth to come back, because I think in the first four months we're still negative year-over-year growth?

The second question is have we gained market share in the heavy-duty truck engine market this year? And, if so, could we gain market share and how is that being achieved?

And the third question, lastly, is in terms of the key driver behind the truck market weakness what do you think needs to change for the truck market to be stronger? Thank you very much.

Okay, Gerwin, thanks for our questions. The first question is regarding the forecast of the heavy-duty trucks. Now, the heavy-duty truck is very much correlated to the infrastructure and real estate development in China. And, as you can see, I think are now on -- very much on brakes right now. So at this point the visibility is pretty low because we do not see any impetus for this segment to be back on track.

And in general the consensus on the heavy-duty is that it's going to be flat for the whole of this year, compared -- the same as last year, 2011. And I think the change of government towards the end of the year may have some impact, but that will be a bit -- much later in the year.

And your second question, let me just look at it. So you're basically asking wherever we have gained any market share. Our numbers for the heavy-duty trucks remain somewhat the same so, indeed, we have gained some share because the whole pie has actually come down. And so we have remained the same, so we have gained some share. But again, as I state as well to Alex, our heavy-duty portion is also not very large, so we do not actually benefit by (inaudible) from there as well.

And, lastly, what needs to change? Well, very much it's in line with the fact that the new government is to put in place more policies on (inaudible) projects, and also to [pump prime] the economy. Otherwise things will look very bleak and desolate.

Your next question is a follow-up question from Sandy Mehta with Value Investments.

Yes, can you comment generally what is the state of inventories in the channels in terms of engines as well as end products, such as trucks and boxes? Has there been reduction of inventory? Thank you.

Yes, I think if you look at the inventory status compared to the last quarter of 2011, the inventories have come down indeed. In fact, we are speculating around two months of inventories in the system. But it's because the end customers are not making any more purchases, so that has not pulled through the sales that we see. And that's the situation as we envisage.

Okay, we've got some questions coming online here; a couple of questions. The goal for our school bus engines for 6,000 for 2012; where do we stand in regard to that goal? What is the outlook on the school bus segment for this and future years?

Yes, very much so, the school bus segment continues to be a bright spark in the whole horizon for diesel engines and Yuchai stands in a very good position because of our capability, both in terms of the emission standards. We have National IV standard which meets their requirements. And also we are also putting in place our natural gas [RV] bus engines as well. So the outlook for us is actually very favorable in this segment.

There's another question from the webcast is when will the dividend be announced? This is because GYMCL has announced [in their] China announcement.

As far as CYI, or China Yuchai International is concerned, we have not made any announcement. We will make the announcement in due course when the Board has approved the plan. As for our past trend you can look at our website; you can see how we have been paying that dividend year on year in the previous years.

Any more questions, operator?

You have a follow-up question from Gerwin Ho with Citigroup.

Thanks again for your time; just a follow up. In terms of -- obviously the visibility right now is not high, but if we were to hazard a guess for when the truck market could go back to positive year-over-year growth, what's our best guess?

Would it be some time in third quarter, or would it be as late as fourth quarter?

And the second question is in terms of the market share, we did gain some market share; congratulations. And why do we see that? Is it because of our customer exposure, or is it because on pricing-wise we are more competitive than our competitors? Thank you.

Okay, so [we] hazard a guess. I think the whole heavy-duty truck market is really going through a very tough time and headwinds are still very strong. And to hazard a guess I wouldn't at this stage any growth until towards the very last part of the year, if any at all.

Again, as I say, it's correlated to the farming and policies of the government. If that happens sooner we can see some silver lining in the cloud. Market share, what have we done? Actually, again our -- because our numbers are very small, so we've managed to maintain our units sold, so that help us in terms of market share. And in general that's because of a good relationship that we have with our top customers and that has preserved the situation that we have created.

Maybe let's take some more Web questions. We have a question here, which is, the goal for the CNG/LPG engines in 2012 was about 26,000 units. Where do we stand in regard to that goal for this year and what's our outlook for future years?

Again, this is something which we are also quite excited about because the CNG/LPG market and segment is one area that we are [getting] into. And our goal, actually, has been quite aggressive and we are looking at our growth in this area to be almost double of what we had last year, albeit it's a very small number right now.

Outlook for future years, I think the outlook it looks very good, because the natural gas segment is one area which the government is promoting. There is also contention for the fact that diesel is [clear] expensive and not as environmentally friendly.

So the only key to this whole thing is to make sure that the infrastructure are in place that will fill in (inaudible) between cities, but otherwise this is going to be a major area of growth.

Operator, any more follow-up questions?

We have a follow-up question from Alex Potter with Piper Jaffray.

Hi, guys, I just wanted to follow up on that natural gas point there. I was wondering if you have a full portfolio of your own self-produced engines in that segment, what the source of the technology was. Is that all internally developed?

And then if you can also give a little bit more detail around how specifically the government is supporting growth in the natural gas space. I'd be interested to hear that as well. Thank you.

Yes, we are going to have a full portfolio. In fact, right now we have a couple of platform engines that already running on natural gas and that supports a lot of the municipal buses projects that we have won, particularly in Beijing, in Shanghai, also in Guangzhou during the major events like the Olympics, the Asian Games and also the Shanghai Expo.

We will continue to produce engines using our own proprietary technology. We all [have IP] for that. And this will lead us to have a full range of products, and that actually [steps] the capability to really engage in all segments when the regulations are in place.

Okay, great, and then also one last question just on housekeeping here. What sort of tax rate expectations do you have for the rest of the year? That's it, thanks.

Relating to the tax, if you -- our main operating unit is actually GYMCL. It is operating from this western zone of Guangxi of China. If you look at the -- how he has performed in the past, if you look at (inaudible) also have elaborated on that.

Guangxi -- GYMCL has able to obtain this reduced tax rate of 15% under different policy -- incentive policy, both under the western development incentive as well as the high-technology incentive.

If you look at the announcement that we made in the 20-F in 2011, we have obtained a hi-tech certificate for the year 2011 to 2013. So that will secure us up to at least 2013 to have a 15% tax rate. Moving forward the Company can continue to apply, if successful, to be applicable for this 15% reduced tax rate.

Just for our own [edification], the western development incentive, according to the government policy, will last up to 2020, and this on the approval basis. That much I can share with you.

Okay, operator, any other questions from the audience?

You do. You have a follow-up question from Sandy Mehta of Value Investment.

You had a slight loss from the joint ventures. When do you expect that to break even? And also could you give us a -- in terms of the end markets where you are selling, such as marine power generation, do you have a break up of your sales by end markets, please? Thank you.

Sandy, our joint ventures, when we conceived them a couple of years back, in our plans actually, they are very much in fruition -- in our original plan. We look at it as a five-year timeframe before things are starting to reap the fruits of our labor. So right now we are still in debt more and, actually, if you look at it, because of the whole market, that it also dampen up things somewhat.

So if we look at it, our joint ventures, we've got a couple there. One is actually the [CIFC], the Caterpillar, for example. The Caterpillar right now we are actually going through some [cash] changes at the Moscow operations. And in the end -- beginning -- at end of the year we are going to have the full facility in place and this is where we start marketing and actually getting the remanufacturing done in a fruitful manner.

In terms of [Chile], the [JV] prototype, the project was somewhat delayed in the first-generation engine. That will crank in the second. And third generation prototype will be by the end of the year, early part of next year. So we expect full production again towards the middle of next year. So these are all, I think, moving on track as what we have planned. So we do not at this stage have much profit and return at this point in time.

Your next question comes from the line of Gerwin Ho with Citigroup.

Hi, gentlemen, just one last question. We did keep our market share -- gain market share because of our relationship with our customers are good. Who are our top-three customers in the heavy-duty truck engine side at the moment? Thank you.

The customers are very much the same guys. We have [Fung Fung], which is one of our main customers. [Yutung] is also our customer as well and also [Wutien] as well.

Okay, maybe we can take one last question or one webcast question. What are major projects for 2012?

Well, actually, as I mentioned earlier on before, our major projects for 2012 really are those that we have planned to capture the markets in the future. These will be the high horse power projects that we have and also the natural gas engine projects.

And how do the government subsidies play into this? Well, naturally, the gas projects will be very (inaudible) and officially the government top-up subsidies continue to kick in. As of now we are putting our plans in place to capture these market and we see the market developing.

Okay, operator, perhaps we can take one last question from the audience.

Your next question comes from the line of [Ben Wong] with Bank of America.

Hello, actually, I have more market questions. Do you plan to increase the investment in [southeast] Asia by HK listing? This will be not only increasing the liquidity, but also will be increase more local investors. That's my first questions.

I'm sorry, Ben, can you please repeat that question?

Sure. Did you intend to go listed in Hong Kong again, which, in that sense, you can not only increase your liquidity but also can [shoulder] interest of low -- more Chinese local investors? That's the first question.

Okay.

Okay, the second question then is on your strategic alliance. Are you planning to build up more JV with the truck makers? In that sense you can provide more long-term growth (inaudible) China. Thank you.

Right, I think the first question about listing in Hong Kong, the answer is right now we are listed in US and we are -- in fact, I'm proud to say that we are one of the longest Chinese companies to be listed there, and we continue to want to remain so, although we cannot promise anything right now.

And to your second question, strategic partner alliances, no, there are also drawbacks if we want to partner with truck makers. So the reason is that then our other competitors of trucks -- manufacturers of trucks will [see] the competition. So that may also have some sort of dampening effect. Having said that, I think we are open to all kinds of initiatives that will actually lead our business to grow.

Okay?

We have now reached the end of our Q&A session and now we'll turn the call back over to Mr. Goh.

Okay, thank you all for participating in our first-quarter 2012 webcast and we look forward to speaking to you again. Goodbye.

This does conclude today's conference call. You may now disconnect.