Eason Technology Ltd (DXF) 2010 Q4 法說會逐字稿

Hello and welcome to the China Xiniya Fashion Limited financial results for the fourth-quarter and full-year 2010 ended December 31, 2010. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the US Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates, targets, going forward, outlook and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the US Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law.

I would now like to turn the conference over to CJ Ng, CFO of Xiniya. Please go ahead.

Thank you. Good morning and good evening to all of our participants. Welcome to the Xiniya year-end 2010 earnings call. You may find a copy of our earnings press release that we issued earlier today in the IR section of our website, ir.xiniya.com or through the newswire.

Joining me on the call is our Chairman and CEO, Mr. Qiming Xu. [With that], we will be making a number of forward-looking statements today, and all such statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the Company, including the risks [certified] in the most recently filed prospectus.

Let me turn the call over to the Chairman Chief, who would like to make some introductory comments.

(Spoken in Chinese). (Interpreted) Ladies and gentlemen, thank you for taking the conference call today. First of all, I would like to summarize the strong operating performance of 2010. After our successful listing on the New York Stock Exchange last November, Xiniya brand's forecast has increased significantly in China. We are very confident of the growth momentum. Our fundamentals remain very strong. Our distributors are also very confident of the growth momentum.

Our authorized network of retailers opened 223 223 new stores, which exceeded our initial guidance of 180 to 200 stores. In January we announced that we extended our sponsorship with Jacky Cheung through 2012. He is one of the leading pop stars in China, and this year he is holding his half-century tour throughout the country. This is Jacky's first tour in more than two years, so he has a lot of excitement surrounding his concerts.

Xiniya is pleased to be sponsoring several concerts in selected cities. In fact, some of you have noticed the beneficial publicity and have seen concert promotion on billboards and on buses all the way from Harbin to Hong Kong. Xiniya will be sponsoring 15 concerts in Hong Kong, which will take place from mid-April to mid-May. This timing could not be better for us, as our sales [rate] begins in mid April. We hope to benefit from additional advertising around the concerts.

(Spoken in Chinese). (Interpreted) Now I would like to share with you our planning in 2011. A few weeks ago we announced Xiniya's first TV advertising campaign as a public company on CCTV-12, one of the largest channels -- one of the China's largest channels. CCTV is China's largest television network. Through the end of the year, Xiniya will be the main sponsor of a TV news program similar to the "60 Minutes" in the United States. They air nightly during prime time, and it's repeated three times during the day. Our ads are currently running in segments up to 15 seconds and prominently features the Xiniya logo.

Jacky Cheung is also featured wearing Xiniya clothing. We plan to increase our marketing and promotional spending in 2011 to further [debut] the Xiniya brand. We will announce the details in the near future.

Regarding the establishment of sales and marketing and research and development centers, we are making significant progress and will share the details with the investment community in the near future. For the new manufacturing plant, we are in this discussion with the government officials in securing the land in [Makin] of Fujian Province. We expect to share more details with the investment community in the near future.

On the ERP initiative, we have established a [NRPT] team to oversee the negotiation with an ERP service provider. We are in negotiations with two ERP service providers, and hopefully we can commence the ERP project soon.

(Spoken in Chinese). (Interpreted) We expect continued growth in 2011 as the men's apparel market in China is growing rapidly due to enhanced living standards, increased disposable income, a rising level of style and brand consciousness. Spending power, including spending on men's apparel products in second and lower-tier cities, is also rising faster than in the first-tier cities. Being a leading provider of men's business casual apparel in China, Xiniya is well positioned to capitalize on the favorable economic, demographic and industrial trends of these sectors.

Now I would like to review some of the highlights in 2010 that Xiniya had achieved, as well as correct some greater details on our full-year results. Afterwards, I will review some exciting developments in 2011 that will position for long-term future growth, and then we will take your questions.

We are pleased to report/record revenue of CNY899 million or $136 million, which was at a 33.8% year-on-year growth rate and at the high end of our guidance of CNY880 million to CNY900 million. Gross profit margin was at 74.5% in 2010, which was at the similar level in 2009. A 21.6% in ASP helped to offset the increase in material and labor costs.

Net profit increased 39.8% year-on-year to CNY252 million compared with CNY194 million in 2009. Earnings per ADS were $0.75 per ADS, an increase of 27.1% over the prior year. Non-IFRS earnings per ADS, that is excluding share-based compensation expenses, increased by 28.8% year-over-year to $0.76 per ADS in 2010.

Our authorized network of retailers opened 223 new outlets, which exceeded our initial guidance of 180 to 200. In November 2010 we successfully raised $79 million net in our IPO, which provides the Company with sufficient liquidity to strengthen our infrastructures and our brand. We are excited about the momentum in our business at the end of the year, and we have several initiatives in 2011, which should yield measurable benefits in the current fiscal year and beyond.

Thus, let me review our 2010 financial results. Revenue for the year ended December 31, 2010, was CNY899 million compared with other revenue of CNY672 million for the year ended December 31, 2009. Revenue was driven by volume growth of 10%. The number of units sold increased from 5.1 million units in 2009 to 5.6 million units in 2010. An ASP increase of 21.6% from CNY131.7 in 2009 to CNY160 -- or $160 in 2010 due to approximately 30% increase from a change in product mix and approximately an 8% increase in material and labor costs contributed to the increase.

During 2010 we completed the restructuring of department stores operated by department store operators, placing them under the supervision of our distributors. This initiative increased our sales rebates given to our distributors by approximately CNY9 million and negatively impacted sales growth by 1% for the year. We expect to realize the full effect of an increase in sales rebates granted to the distributors from 2011 onwards, but we believe this is a necessary measure to streamline our distribution network and strengthen our control over our regional channels. We believe it will contribute to better operation efficiency over the long-term.

During 2010 our authorized network of retailers opened 223 new retail outlets, which was higher than our original guidance of 180 to 200 new stores. The total store count as of December 31, 2010 was 1404.

Gross profit increased 32.9% to CNY310 million in 2010 from CNY233 million in 2009. Gross margin was 34.5% compared with 34.7% achieved in 2009. The 20 basis point decline in gross margin was mainly attributable to the increase in outsource production and the increase in the sales rebates, but a 21.6% increase in ASP mitigated the higher costs. Importantly, our underlying gross margin is healthy, and we anticipate an expansion in 2011.

In an effort to support our future gross margin level, we are planning to increase our manufacturing channel greatly. Currently, we are in the process of securing a piece of land at Makin in the Fujian Province for a new manufacturing facility, which we believe will support our gross margin improvement in the future. So, although higher sales, [we think], will offset our underlying gross margin expansion, we expect product mix and operational efficiency will enable an overall expansion in our gross profit margins.

Selling and distribution expenses increased by 38% year-over-year due to increase in freight, sales rates and packaging expenses. The increase was mainly attributable to go to the increase in sales. Advertising and promotional expenses accounted for CNY3.9 million or 0.4% of the revenue in 2010, compared with CNY4.5 million or 0.7% of the sales in 2009. This expense was mainly related to the Company's sponsorship agreement with Jacky Cheung, one of the leading pop stars in China.

Administrative expenses were significantly higher, rising to CNY10.1 million in 2010 from CNY2.9 million in 2009, due to the increase in personnel, public company listing expense fees and expenses of approximately CNY2.2 million and share-based compensations of approximately CNY2.2 million. Furthermore, the administrative and sales staff increased to 85 in 2010 compared with 62 in 2009.

Operating income increased 30% to CNY288 million in 2010 compared with CNY235 million in 2009. Operating income margin was 32%, down from 33% in the prior year. On a non-IFRS basis, operating income totaled CNY291 million compared with CNY222.5 million in 2009, an increase of 31%. Non-IFRS operating margin was 32.4% compared with 33.1% in 2009.

Income tax expense was CNY36.4 million compared with a tax expense of CNY38.1 million in 2009. The effective tax rate remained stable at 12.6%; however, the tax benefit that we had realized over the past few years expired at the end of 2010, and our tax rate will increase in 2011 and beyond to a rate of 35%.

Net income was CNY252 million in 2010, representing a 30% increase from CNY194 million in 2009. Our net margin was 28.1% in 2010 compared with 28.9% in 2009. On a non-IFRS basis, net income totaled CNY254.5 million compared with CNY194.3 million in 2009, an increase of 31%. Non-IFRS net profit margin was 38.3% in 2010 compared with 28.9% last year.

Earnings per ADS were $0.75 per ADS, an increase of 27.8% over earnings of per ADS in 2009. On a non-IFRS basis, earnings per ADS was $0.76, a 29% year-over-year increase.

Looking at our balance sheet, as of (technical difficulty) --

You have been reconnected.

(Interpreted) Okay. Looking at the balance sheet as of December 31, 2010, we had cash and cash equivalents of CNY862.8 million, which includes approximately $79 million net from our IPO last November. At the end of the year, we have a notable increase in accounts receivable that I would like to explain.

Our sales are highly seasonal, which peaked in Q4. As at December 31, 2010, the Company had trade receivables of CNY221 million [arising] 100% from sales recognized during fourth quarter of 2010. The trade receivable at December 31, 2010 was down from CNY276 million as of September 30, 2010. The trade receivables as of September 30, 2010, were 100% related to sales recognized during the third quarter of 2010. This trade receivable outstanding as of December 31, 2010, was 100% collected by March 28, 2011, in accordance with the Company's standard credit terms, with a maximum of 90 days credit.

The three months moving average trade receivable turnover days was 67 days and 64 days as of December 31, 2010, and March 28, 2011, respectively. Here I would like to highlight that three-month moving average trade receivable turnover days is a more meaningful measurement of senior accounts receivable trends.

Now let me turn to guidance for the first quarter and first half of 2011. Following a successful bi-annual sales fair last September, we expect first quarter's revenue to increase by 29% to 30% in CNY. We are seeing growth in unit volume of about 8% to 9% and an increase in ASP of about 18% to 19%. Gross margin is expected to be in the range of 34% to 35% compared with 32.5% rate that was reported in the first quarter of 2010.

We expect earnings per ADS to be in the range of $0.08 to $0.09, as we will be impacted by a higher tax rate of 35% beginning in 2011 as compared to 12.6% effective tax rate in 2010, due to the expiration of the preferential tax treatment that occurred at the end of 2010.

Momentums of new store openings remain strong as of the end of February 2011. China Xiniya network of authorized retail stores opened 28 new stores as compared to 24 during the same period of 2010. As of March 28, 2011, a total of 41 new retail stores have been added, comparing to 35 new stores added in the first three months of 2010. Based on the trends in 2010, 39% of the new stores will open in the first half of the year, while 61% of the new stores will open in the second half of the year. For the full year, Xiniya targets the opening of 180 to 200 additional stores by its authorized retailer network.

For the first half of 2011, revenue is expected to increase by 37% to 30% in CNY. We forecast gross margin to be in the range of 32% to 33%. This compares to a rate of 31.9% during the first half of 2010. We expect an increase of 10% to 11% in ASP to fully offset the increase in material and labor costs, as well as the impact of the higher sales rebates. The decline in ASP growth in the first half as compared to the first quarter of 2011 is mainly due to product mix.

We are pleased with the reception of Xiniya brand at last September's sales fair. We improved our product mix by introducing more design and better quality product. We also held the Day a month earlier, which allowed our audience to purchase their raw materials earlier in an effort to manage rising material costs. We believe that our price is competitive at the retail level as they were generally 10% to 15% lower than our major competitors in 2010. Our price increase thus far in 2011 has matched our competitor increase of 8% to 10%, so the price gap between Xiniya and our competitors has remained stable, if not widened. Our distributors appreciate our support. In fact, all of our distributors renewed their agreement with Xiniya for 2011. We have maintained a zero distributor turnover rate since 2006.

The next sales fair will occur in mid-April, and thereafter, we will be issuing additional guidance for the second half of the year when we have greater sales and gross margin visibility in the back half of the year.

As I mentioned earlier, the higher tax rate will dilute our reported earnings, but we expect to show strong operating profit growth. If we assume that Xiniya's tax rate was 35% in 2010, earnings per ADS would have been around $0.65 per ADS. That should be the basis for earnings per ADS comparison between 2010 and 2011.

In summary, we are proud of our fiscal year 2010 results and are excited about the upcoming initiative to strengthen the Xiniya brand for future growth. We plan to add several distributors to our distribution network in several provinces. We look forward to the construction of our new manufacturing plant, which will increase the efficiency of our business over the long-term. We intend to select an ERP vendor to increase our visibility into our distribution channel and to be able to report substantial sales growth so Xiniya can be compared to the peers more equally on this metric.

This concludes our prepared remarks. We are now ready to take your questions.

(Operator instructions) Adrienne Tennant, Janney Capital Markets.

Good morning and congratulations, Chairman Xu and CJ. My first question is -- I might have missed this. But your CCTV, the television advertising, has that already been ongoing, and if so, what have you seen at the retail? What has been the retail store impact when that advertisement has been ongoing, if anything?

And then for CJ, a few questions. Can you give us the fully diluted weighted average share count that we should be using for Q1 of 2011? And also, for the 2011 ASP growth, thank you for giving us that in the first half. But what is the average unit cost increases that you are now seeing for -- or what are you projecting for the back half of the year?

If you could address those, that would be great. Thank you.

Why don't I translate your questions to Mr. Xu, and I will answer your questions two and three.

(Spoken in Chinese)

(Interpreted) Based on feedback from our retail stores, we've seen that the sales have been growing very strong. We have initiated our CCTV advertising in the month of March. And also after the advertising goes out to the markets, we have received many phone calls regarding joining in our retail network. So that has been encouraging.

In terms of the fully diluted Q1 2011 share count, I'm using 58 million ADSs to compute my share count. In terms of the first half, the back half of the average unit cost, we expect to add the GP margins on top of the costs, [administrative] cost, and also on top of what we -- on top of the GP margin, we add on the additional spending on the advertising we are going to allocate to each unit of product. So, if the inflation is about 10%, then I will add on to the 10% increase to our ASP, and our GP margin will be an improvement.

Okay. And the ASP, which incorporates for the first half, is 10% to 11%. So you are using that same assumption, it seems, for the back half as well?

We believe that the trend will be trending towards the historical trend.

Of 10% to 11% ASP growth? In other words, are you expecting ASP growth in the back half to be higher than ASP growth that you just guided to of 10% to 11%?

We expect our ASP growth will be in line with the inflation. And it will be better than the inflation because the inflation has not had an impact to us whatsoever, and we tack it onto the --.

Okay. And just to clarify, you had said that you are raising your prices, have raised your prices, 8% to 10%, and your competitors have also raised their prices similarly. So the price differential where you are less expensive than your competitors, that still is the same amount of price gap?

I'm going to translate that to Mr. Xu to answer that.

(Spoken in Chinese)

(Interpreted) Historically, our price is 10% to lower than our competitors, and we are seeing some of our competitors increase about 8% to 10%. And with the -- having our sales fair earlier, in mid-April, we can sort of manage our increase. So we believe that the price gap between Xiniya and our competitors has remained stable if not widened.

Okay. Wonderful. And then my last question for CJ, the gross margin guidance for the second-quarter gross margin is lower than Q2 as are the sales growth. Is that just due to seasonality on the top line? And then why would gross margin -- are you increasing -- is it the increased advertising spend that is occurring in the second quarter? I'm not sure that would be, I guess, in the SG&A. So explain why the gross margin guidance in Q2 is lower.

Because of the product mix in the first quarter, we are shipping a higher product mix, products to the market, and those products are mixed with lower profit margins is shipped in the second quarter. So, on the overall basis, the gross margin has increased.

[Benjamin Blumenschein], BofA Merrill Lynch.

First of all, congratulations for your good set of results. My question -- I have a couple questions. The first one would be, can you confirm that the lockup period is in effect until May 21, so the tradable amount of shares as is current is actually 8 million ADRs?

And then my second question would be --

Sorry.

So my first question would be the currently tradable amount of ADRs is 8 million until the lockup period expires. Is that correct?

I don't quite understand your question. What are in the market now is 8 million ADSs.

Okay. Well, there are 58 million ADSs. You say you expect Q1 weighted average, and that's the current actual. But the amount of ADS that are free to trade in the market is lower because the lockup is in place. So, as I read, only 8 million ADS are actually free to trade in the market until the lockup expires, i.e., before you, management, can also sell shares. Is that correct?

In theory, yes. In reality, maybe not.

Okay, okay. And then my second question would be, I mean given stock price performance -- and if I look, yesterday your stock closed like [180] as $4.45, and you show cash balances of December of like roughly $2.27. At what price would it be interesting for you to buy back stock? Have you thought about buying back stocks from the Company's perspective?

Why don't I direct the questions to Mr. Xu.

(Spoken in Chinese)

(Interpreted) At this stage, we do not have any share buyback plans. If we have, we will make an announcement to the market.

Okay. And my last question would be, when do you expect to be paying your first dividend? Do you have any plans for that, any outlook?

(Interpreted) We are in a growing stage, so we have not had this [written] plan in place yet.

[Marcus Pierre], BofA Merrill Lynch.

There are several reasons that are trying to explain a drop in the share price, and one of those that has been mentioned around other holders of the stock or investors who have looked to buy the stock is along the lines of fraud that has explained the dramatic price fall. What can you say to these investors or to the market to help calm these fears?

(Interpreted) We don't believe that this is -- we don't believe our Company is a fraud company, and this is a false allegation.

Matt Marsden, Samsung Securities.

Can I be one of the first to congratulate you on a very satisfying set of results, and just to let you know, the stock looks like it's opening up today. So that's jolly good.

I'd just like to follow on from the previous question. Would it be true to say that after the due diligence process and this audited set of results, that any allegations of fraud are preposterous? That's my first part of the question. These -- let me just doublecheck. These numbers have been audited or approved by an international firm of accountants?

And can I just ask you to briefly describe the due diligence process that the Company has just been through prior to listing? Just briefly describe that for us, please. That would be very helpful. That's my first question.

(Interpreted) We have engaged a world-class professional party to perform the due diligence on us. We went through the vigorous IPO process, and during the IPO process, the professional parties have interviewed with our distributors and do their own due diligence on our network.

And we have very experienced independent directors. One of the independent directors is [Kim]. She is with (inaudible), over 30 years of working experience, and in some of the [copper covenants] is driving that copper covenant at the port level. And Peter McGrath is a very experienced international company, and we have another independent auditor called [Mr. Youn]. He is a professor in [Shamans] University, and he is the principal of that University. And we have strong independent auditors to oversee our corporate governance. And our numbers are audited by the top 10 international firms, and we believe the allegations of the fraud is a false allegation.

Certainly. Thank you very much. I, too, think it's a preposterous idea. And there is plenty of detail in the prospectus to back that up. But can I just move on? And talking about the lockup of management shares, when that expires in May, for the record, could you please tell us, as far as you know, what are your intentions and Mr. Xu's intentions towards your shareholdings in the Company? Would you be selling at this price?

(Interpreted) Mr. Xu says that he has no intention to sell for his personal shares. And also for the existing shareholders, based on the information available to him, he has no information that each existing shareholders has the intention to sell. And for him, he believes that our share price now is very low, and he is working very hard to achieve the fundamentals and show that the strong fundamentals -- with the strong fundamentals, the share price will recover to a level -- to a higher level.

Thank you. I certainly think you've made a good start towards that with a solid set of 2010 numbers and very reassuring and detailed guidance for the first part of 2011. Can I ask you just a couple more questions, please?

First of all, on the dividend payout policy, will you be paying out a dividend? Can you just confirm your intentions towards that? I understand it might be too early to give a firm guidance on the percentage of your dividend payout ratio; that's understandable. But you would being pay out, say, 20%, or would you be paying out a dividend at all? What's your feeling of that? I know you are a fast growth company, but some more color there would be appreciated, please.

(Interpreted) At this stage, we need to have -- we have an initiative. We need to have several initiatives. We are going to upgrade them in synchronizations. We are a high-growth company, and we have no plans to pay out dividends. And if we have, you will make announcement to the community.

And one more point, one additional point, is that we have -- plan to use the -- our funds for the next two to three years, and we don't have any plans at this stage to pay out dividends.

Thank you very much. That's clear. My last question -- I'm sorry for hogging, I'm sorry for hogging the call, everybody. But my last question would be thinking about the evolution of GP margins a little bit more long-term. Could you give us your opinion on cotton prices? Do you think cotton prices have peaked? Certainly, cotton futures are dipping sharply, indicating a fall in cotton prices by the end of this year. Do you think that's going to happen? What are you seeing in the market with your suppliers, and will that benefit gross profit margins further going forward?

And finally, when will your new manufacturing capability come online, and can you give us more color on that, and when would that positively impact gross profit margins next year?

(Interpreted) The cost inflations in the markets, this is the global trend. And we believe that this is -- we do not know what is the trend now.

And for the manufacturing facilities, we plan to have it begin, commence productions in 2012. In the next three years, we hope to increase the manufacturing capability to around 30% of our in-house production, which will help us to bring in the GP margin increase. And we can -- with the advanced logistics capability after finished -- after building this plant, we can take on the [credation] orders. We can quickly deliver the hotselling product to market.

John Kernan, Cowen & Co.

How have your channel checks into inventory levels in the distributor channel gone as we head into the April sales fair? I'm just trying to get a sense as to where you guys think inventory levels are in the channel and what types of checks you have done to confirm that?

(Interpreted) We monitor our sales inventory data feedback from our distributors and retailers. And based on the feedback, the inventory is similar to the market trend. And we -- based on the feedback, the signs are encouraging. And after we spend on advertising and promotions this year, in the CCTV advertising, we are confident that the the sales phase and (inaudible) will be encouraging. And also that we -- I would like to add on a comment that, based on the feedback from the distributors, the inventory turnover base is for 50 days, which is very encouraging.

Okay. In terms of working capital, your receivables obviously decreased significantly sequentially in Q4 from Q3. What is your outlook for fiscal year 2011 terms of receivable DSOs, and should we expect DSOs to stay around this level, or do we expect further improvement? But what's your outlook in terms of working capital in 2011?

In terms of account receivables, we do not expect any bad debt. And we expect -- every three months we collect 100% of the receivables. And going forward, the trend will be on the three-months we average, turnover days will be trending towards 60-ish days. And that's the trend that we are expecting, and the trend also that on the three months rollover basis, we will collect every single cent from the last quarter.

Okay. Great. And I guess my final question, your cash balance right now is pretty huge. At what point do we start to see the CapEx get flexed related to the manufacturing facility, and what's your total outlook for a dollar increase in advertising expenses in fiscal year 2011? I know those were two of the main proceeds or use of proceeds from the IPO. Just the timing of the CapEx and then the total increase in advertising expenses this year?

For the CapEx, the plan is pending. If we can secure the land this year, we plan to spend about CNY100 million to CNY150 million this year. In terms of the advertising promotions, the budget is CNY35 million.

Okay. And what was it last -- it was CNY35 million. It's going to be CNY35 million this year in CNY. Was it last year?

Last year it was about CNY3.9 million.

[Duke Lo], Macquarie.

I'll probably ask my questions in Chinese, and then I'll translate in English. (Spoken in Chinese)

My first question has to do -- (multiple speakers spoken in Chinese). My first question is about the GP margins. If I look at historically, first-half GP margins is always lower than the second-half GP margins. Should we be expecting the same trend to persist in 2011? So would second-half GP margins be higher than the first-half GP margins?

(Interpreted) The trends of the GP margin will be higher in the back half of the year. And based on the feedback from our distributors and our retailers on the product samplings and product previews at fair, the signs have been encouraging. And we believe the GP margins will be trending historically.

(Spoken in Chinese). So my second question is about the same-store sales numbers. I understand probably same-store sales by itself is probably not a useful number. But perhaps management can give us some color in terms of what the same-store sales growth was for 2010 and what they've seen for 2011 in the first quarter?

(Interpreted) We obtain sales data from our distributors and retailers for each store on a monthly basis, and we -- based on our feedback, we cannot 100% verify the accuracy of the feedback data, and because this information is not generated by us or through the ERP system, we currently have a team managing our ERP project, and they have narrowed down to a few service providers. And we are making progress with this ERP plan, and before implementation of ERP, we will bolster our marketing department staff to enhance the rigors of the search collection of data. And then we will verify the data accordingly and will share this information with the market.

Okay. Great. I've got no further questions, so thank you very much. Congratulations on a set of fine results. It's actually superb. You've delivered on everything you said in the prospectus and all the conference calls you held for the investment community. So congratulations and I look forward to seeing you again. (Spoken in Chinese)

Samuel Le Cornu, Macquarie.

Thank you very much for your comments tonight. I'm a little bit perplexed by some questions in regards to the fraudulent accounting because it's absolutely absurd that Xiniya, which has a history dating back to 1993 and I mean an incredible amount of results in terms of the prospectus and continued growth, that what we are seeing here is obviously the shorts have influenced the share price, whilst the fundamentals have been left aside. With this result, I truly believe that the negative sentiment that has surrounded the stock has proven all the shorts wrong.

This stock, coming in -- and I'm making this call from Hong Kong, China, as we speak. This Company is very, very well known throughout China. It has the highest degree of respect throughout both the community, and the numbers, which have been audited, really prove to us what we're seeing here is a result that enforces that the fundamentals rule supreme over the underlying truth that the Company has delivered on its operation results. So I really do echo the comments of support from the other questioner where the Company has delivered everything that they've said upon the prospectus, and everything which has come through, the Company has absolutely delivered. So (spoken in Chinese) for that.

My question really just leads toward the second half and the trade fair figures. Given that with a Company like this and we own substantial shares in the likes of [xtEB, ANTA and Antiqa], and those companies generally have quarterly trade fair figures, and you have, yourself, semi-annual trade fair figures.

And with that, we give a line of sight to this year's numbers, the 2011 numbers. So we see already that the first half has had 30% growth in terms of the trade fair figures.

Coming up to the late April, probably early May in terms of your second-half and your second-half weighted towards the earnings, my question really surrounds that of what your line of sight and confidence towards the trade fair figures? Given that you have increased price and increased the number of stores, how confident are you with the second-half trade fair figures, which would give us the confidence and the line of sight for the full-year 2011 numbers?

(spoken in Chinese) I have translated your comments on the fly, and I appreciate your comments on our Company. We believe the fraudulence comment is a false claim.

(Interpreted) From the feedback from the markets and from the product review sessions, we have [reached] our distributors. We have full confidence of their support in the upcoming sales fair, and we also have obtained the sales packet to [achieve]. And also with the advertising and promotions in the televisions, we are 100% confident of the second-half growth.

And every -- at our sales fair, we have about 1000 SKU that will satisfy different retail store needs, and they will pick and choose what they need for their own stores. And once we have the information, we will share with you guys, our investment community, and in terms of the sales fair results in the upcoming (inaudible) sales fair.

I'm sure the sales fair result will be satisfactory and will please everybody. And generally speaking, when a stock has fallen 60% from its IPO price, the negative sentiment can grow whilst the fundamentals are left aside.

But fundamentals now are in place. This is an audited account. These are the numbers. The numbers do not lie. We are sitting here now with a Company with around $130 million net cash on the balance sheet, growing at 20% to 25% to 30% this year and perhaps the same next year. Back out the cash, we're on about two times P/E 2012.

I'm just saying it's time for calm and collective analysis on the numbers, and rest assured that the fundamentals on any analysis do not lie. And now it's the time for shareholders to take the ability to have some confidence, to reap rewards, and I thank management very much on delivering on their promises and delivering on everything which they have said to me and delivering on everything in the prospectus.

So thank you very much to management.

(Interpreted) Mr. Xu has summarized, put everything in summary that he has very full confidence of the Company's -- in the futures. And based on the advertising that we have, advertising on CCTV, the feedback has been very encouraging, and so many distributors and retailers want to join us. And this year, we want to open stores with quality and with [seen] in better locations, as well as we want to expand at a faster rate.

And also China, with the very good China -- with the favorable macro environment in China economy and our target geographies of second- and third-tier cities, we still have a lot of room to grow. And he did mention that our price point of our products are 10% to 15% lower than our competitors, and he will deliver what he had promised during the roadshow, during the -- in the IPO. And he believes that, once he delivers what he had promised to the market and the fundamental will deliver the good results of the Company's share price.

And thank you to all of our shareholders for your support, and thank you for the participants of this call. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.