ORIX Corporation
Q4 2017 Earnings Call Transcript

Published: 30 Jan 2018

[Operator:]

Good evening, ladies and gentlemen. Thank you for joining this Telephone Conference of ORIX Corporation for the Third Quarter Consolidated Financial Results for the Nine Month Period Ended December 31, 2017. The attendees at today's conference are; Deputy President and CFO, Mr. Kojima; Executive Officer and Head of Treasury and Accounting Headquarters, Mr. Yano. Mr. Kojima will give you a presentation on the third quarter financial results for about 20 minutes, and we will move to a Q&A session. The whole conference will take about one hour. At this time, I would like to turn this call over to Mr. Kojima. Please go ahead.

[Kazuo Kojima:]

So this is Kojima, Group CFO. Thank you all very much for taking the time and travel and participating in this session. Thank you very much. So without further ado, let us get started with the presentation of the third quarter consolidated results for FY2018. Please turn to Page 2 of the handout material where it says overview of the performance. Now the first page shows you the net income as well as ROE. Net profit for the third quarter of FY18 was ¥256.4 billion, which is an increase by 18% year-over-year. Annualized ROE is 13.2%, maintaining the mid-term target of about 11% and indicating a positive performance strength continuing from the second quarter. As you all know, a tax reform was conducted in the United States in December of last year. Now as a result of this, deferred tax liability was used at the U.S. subsidiary resulting in a positive profit impact in the third quarter. So, on after-tax profit basis, there was a positive impact by ¥20 billion. Now, including the impact from the tax reform, the progress made in achieving the net profit target of ¥300 billion is now at 85%. Although, the probability for the overshoot for the full year result going above -- well above ¥300 billion may have risen, considering a certain amount of risk, we have made no changes to the full year net profit target. As to the forecast of the payout ratio for the full year, it remains unchanged at 27% and announced the guidance at the time of second quarter results. The next page please. The page shows you the segment profit trend. Total segment profit is now at ¥356.2 billion which is an 8% increase year-on-year. So, this ¥356.2 billion of our total segment profit does not include the tax reform impact. Now, excluding Investment and Operation segment, five divisions increased their profit year-over-year. Profit goes down in investment and operation segment due to the absence of large amount of capital gain, which is unlike the prior year; however, profit contribution from energy and environment as well as concession is increasing. Details would be explained at the time of segment explanation. Please turn to the next page. Now, this page shows the changes of other segment asset as well as ROA. The segment asset is now at ¥9.1927 trillion which is as compared to the prior year is an increase by 3%. Segment asset ROA rose from 3% in the prior year to 3.8%, contributing segment to asset growth of overseas investment and operation, maintenance and leasing segments, those three segments. As for the overseas, in the overseas segment, the major contributor to the asset growth was aircraft and ship-related and environment and energy investment and operational segment, and in the maintenance and leasing segment, auto-related has been the contributing factor for the growth of the asset. On the other hand, asset balance declined in the regional segment by 2% year-over-year, which is ¥78.9 billion in amount. This was mainly course by shift to the decline in line of asset at former Hartford Life Insurance. So, the life insurance business overall impacted on the increase still. So, the banking which is included in the retail segment, the asset is on increase. Now please turn to the next page. This page shows the waterfall chart for pretax profit as well as segment assets. Please refer the chart on the left hand side, the waterfall chart that shows you the change of the pretax profit. In the third quarter, pretax profit was up by ¥26.4 billion year-over-year. And as being shown on the waterfall chart, gain of sales and capital gain on this position of real estate approximately was ¥115.3 billion down by ¥13.8 billion as compared to ¥129.1 billion in the last year. On the other hand, positive contribution from the existing operations, were aircraft, ship-related and so on and so forth. So therefore, the existing operation impact has been the positive contributor to the pretax profit. And also as a result of depreciation of the yen, there is positive contribution but all in all the existing business growth have been the major contributor to the pretax profit. So, the major -- the positive contributors from the existing operations were aircraft, ship-related, asset management businesses in United States and Europe. And in Japan, concession business and life insurance business, the premium income increase and also the profit increase at our banking business. But all six segments in fact have benefited from the growth that was enjoyed at the existing businesses. Now please refer to the waterfall chart on the right hand side that shows segment asset change. Segment assets were up by ¥235.9 billion, which is increase by 3% year-on-year. Assets of existing operations increased by ¥400.7 billion year-on-year, as for the asset as has been explained previously. Overseas businesses, in fact has been the major contributor. But here in the domestic market too, the banking loan growth, as well as environment and energy businesses, domestic private equity investment continued to grow steadily. Please turn to the next page. And from this page onward, we will be presenting a little more details for the performance by segment. First of all let me start by Corporate Financial Services segment. Segment profit was up by 43% year-on-year at ¥37.6 billion. Due to decline in the balance of leasing and loan, due to this zero percent interest rate environment, unfortunately, it is pretty tough for us to maintain the profitability. We have just exerted our effort in maintaining the overall profitability, and therefore, the financial income unfortunately has declined by ¥1.2 billion, while the service income increased year-on-year. Furthermore, in the Corporate Financial Services, sales of multiple names of shares held at the segment was all -- was divested, which had also contributed to the profit increase. Total segment asset to the farthest right, the bar chart that is shown on slide number 6, it was slightly down by 6% year-on-year at ¥966.9 billion. Please turn to the next page. Now, this page shows the Maintenance and Leasing segment. Segment profits increased by 9% year-on-year to ¥31.1 billion, this is due to gain on sales of -- the gain on the new auto lease-related businesses which had increased by 6%, new auto lease, and that has resulted in growth of financial income and operating lease income. With major contribution coming from near auto leases, segment assets grew by 4% year-over-year to ¥780.5 billion. Next, we would like to move on to next page. This next segment is Real Estate. Year-on-year, we saw an increase of 5%. We now stand at ¥52.1 billion. As the Real Estate market here in Japan is on a positive trend and the capital gain through our sales has been recorded as well. Hotels, Japan Inns operating profit is included in service income and this has traded a very positively as well. For the segment assets, year-over-year, an 8% decrease standing at 605.8 billion and annualized ROA stand at 7.5%. For the Real Estate segment, we do have stable facility operation business that we're emphasizing and starting this January. We’ve opened here the first brand here in Japan, the Hyatt Centric Ginza Tokyo. In light of 2020, we're planning to open 1,200 rooms in five facilities. Let us move on to the next page. The next page depicts investment in operation segment. For the segment profit, we year-over-year have a minus 9% standing at ¥62.6 billion. Year-over-year, private equity exist to deals to the exact were performed, and we also digested existing investments as well, and as result, we were able to enjoy large capital gains however for this term, the private equity exit was only one deal remitted to one deal and as if contributing to the negative impact, however concession business as well as energy business profits are steadily growing their numbers. Now, since January this year, one company PE equity ARKK, Mitsui Chemicals did a ToB and on that occasion a large majority of our stock was sold in light of this ToB. So, this capital gain will be recorded in quarter for. So in total, for investment and operation, we plan to exceed year-over-year as a result. Now by at the end of December, our domestic PE business have secured a total of 990 megawatts and utilized power stood at 680 megawatts. Kansai airport, Itami airport, the concession business that operates these two airports again for the past nine months contributed to an ¥8.7 billion profit gain. Year-on-year, this is an increase of ¥4.9 billion. Now for the segment assets, we did have some new businesses and investments with Environment Energy and this is an increase year-on-year by 13% and we stand at ¥870.3 billion. Let us now move on to the next page. Now the next segment is the Retail segment. Segment profit year-on-year stands at 5% ¥63.3 billion. We are seeing a rise contracts with ORIX insurance as well as an increase in life insurance premium. At the same time, ORIX bank finance revenue is on the rise as well contributing to this profit gain. The segment asset year-on-year, minus 2% at ¥3.2127 trillion, the reasons being the previous run-off in Hartford Life Insurance KK which is approximately ¥157.7 billion, so with existing life insurance business and banking, we are seeing in rise in assets if we exclude this run-off. Moving on to the next page please, this next page depicts our overseas businesses. Segment profit year-on-year 15% increase at ¥109.6 billion. We did have some a key investment exits in Asia. We also had partial sales of Houlihan Lokey stocks as well as growth in aircraft, ship-related operations and asset management business, again contributing to the growth. As for the segment assets, year-on-year, an increase of 12% standing at ¥2.7565 trillion, and the ForEx impact is positive at ¥81.1 billion. But even if we eliminate the ForEx impact, we are seeing a dramatic rise in the segment assets. As for the actual assets, we have aircraft shipping as well as in the U.S. we have our financing growth. So that was a quick summary of our segment breakdown. Let us move on to the next page. So, this is the breakdown of three categories focusing on the profit and ROA. Now, this graph does not include the Hartford Life losses as well as gain through sale of Houlihan Lokey stocks. Now for the Finance category first, here domestically, investment securities sales as well as banking profit gains have been enjoyed. So, you are seeing increase. On a contrary, the overseas in finance business year-on-year on previous year, we had a capital gain of 20 billion from a company called Cap in the U.S. so there we are not enjoying this tentative gain, and so we are seeing a decline as a result. However, all in all there is only a slight decrease. So ROA 2% to 1.8% decline. For operation category, environment energy is enjoying growth in profit and financial services, Intel’s asset management. So, again this is on the rise and within asset management Boston Financial and Lancaster have come on board and as a result we are enjoying strong growth. Concession business is also included and again as I mentioned earlier this is also contributing to a profit growth. So for the past few years we have put emphasis on specific businesses in categories and as a result they are growing steadily and the business ROA has grown from 4.9% to 5.8%. So operation category profitability is on the rise and then the investment category. Aircraft in other words the tangible assets and this does entail aircraft and we also have real estate and again they are on a positive track. In the U.S., we have also are seeing an increase in the various fixed income gains. You know private equity investments as I mentioned in Q4 or up to Q3. We are not enjoying a large gain, so we are seeing a decrease that is so more or less flat, but ROA 5.3% down to 4.8%. Now, let‘s move onto the next page. So, this depicts the actual from our nine-month track of new investments into new businesses. So, we have highlighted some of the major new investments. The operation category, investment category, the new investment scanned at ¥600 billion for the past nine months, and in comparison the previous fiscal year, new investments we are already on par with the new investment level. Now in operation category, environment infrastructure, 110 billion, financial services 90 billion year investments were executed. Now, in the area of investment category, fixed income, we scanned at approximately 110 billion. So, these are basically CNBS into the U.S. and for tangible investments, we scanned at 26 billion in equity investments 20 billion. Now for these new businesses, we will be proactive in expanding our investment pipeline. If you may turn to the last page, this is a quick summary. For the third quarter for the year ending March 2018, net income stands at ¥256.4 billion year-over-year 18% increase. ROE annualized 13.2%. Our full-year target is 300 billion, we stand at 85% fulfillment rate at the moment, and so we do believe that it is highly probable that we will achieve the goal of ¥300 billion. We do have three months remaining for this fiscal term, but in preparation for growth next fiscal year and onwards, we will continue to sustain our proactive activities in cultivating new businesses. On that note, I would like to conclude. Thank you very much. I will now like to open the floor to questions.

[Operator:]

Thank you, Ms. Kojima. We are now ready for the Q&A session. [Operator Instructions] So, Mr. Muraki from the Deutsche Bank with the first question.

[Masao Muraki:]

So with regard to the changes to the corporate income tax in the United States, ¥20 billion of a positive impact was made. From the next quarter onwards, have there been any changes made to the investment policy due to change or that tax reform? It is not just because of this corporate debt income tax, but also REIT and the -- such as renewable energy investments, they could be some preferred achievements that will be named. If you again foresee any changes that will be made to your investments policy due to the changes happening in United States?

[Kazuo Kojima:]

So, first of all in the United States, the impact from the tax reform, if I could explain in due to more details, first of all -- so the deferred tax asset, no rather deferred tax liability, the usage of the liability in fact is just the one-time event, and this amounts to ¥17.5 billion of the usage of this tax liability. And this is at ORIX USA or you see the subsidiaries in United States as well as Robeco, the Company that operates under Robeco, the asset manager in United States. So this deferred tax liability was reserved at these entities and also at Ormat, there is this deferred tax liability as well sitting at. So, this would not be posted in the third quarter, but in the fourth quarter about 3.4 billion in amount. The deferred tax liability will be mainly used as a result of this tax reform in the fourth quarter as well. Other than that -- so during this term, after the PL in the fourth quarter or from fourth quarter onwards from January the 13th onwards, the new tax rate is applied for which impacts results in the decline in the tax payment on our part, which would be a positive impact to our profit and this is of course likely to continue or will be continuing. So from the business performance perspective, these are the impacts that would be given to us. But from here down the road, any other implications from the tax reform especially in light of our operations, if there were to be any changes made overall, we can foresee positive impact that would be given to our U.S. businesses, U.S. operations. But there are some negative aspect to this though, such as -- so the deal that makes use of the tax effect, so the tax deal made by us has experienced some deterioration in the -- in its attractiveness of the appeal especially in the renewal energy deal, they tend to have this tax effect usage at the time of the deal. So, we may have to review these future possible deals to the renewal energy, but overall I would say I would conclude that there's a positive impact coming from this tax reform. Thank you very much indeed.

[Masao Muraki:]

And the second question does not directly relate to the announcement. Housing loans, real estate loans I believe is your center piece, but apartments, condominiums, specific level of utilization and occupancy. Where do you foresee this? Are there any M&A eminent changes in the ratio?

[Kazuo Kojima:]

For our bank portfolio, apartment loans are quite minimum approximately balance wise a 100 billion give or take, so as for studio type of apartments for investment purposes and loans on for individual consumers approximately ¥1 trillion is the balance at the moment. Now, in terms of occupancy, it will depend on the real estate location, some are in Tokyo some are in the Kanagawa Prefecture, but they are limited to specific areas. So at this point in time, we do not foresee decline in the ratio and at the same time default rates as well. Again based on past history extremely low at the moment, so at this point in time, we do not foresee any negative challenges in this regard. However, we will obviously monitor carefully the situation and the system by the banking arm, and at the member that managed our risks as well they are focusing on this. Thank you.

[Operator:]

Next question is from Mr. Watanabe from Daiwa Securities.

[Kazuki Watanabe:]

Watanabe from Daiwa Securities, I have two questions. First of all, in the fourth quarter, is there any possibility of impairment in the fourth quarter because you have been proceeding with the profit generation, so Sheraton Grande and ARRK, there are some announced divestment. And also at the same time in the fiscal year '18, I'm sure you will be generating quite a bit of profit. So, there were some operations that had impairments in the past. Will there be any in this year, if you could kind enough to share us any possibility of impairment?

[Unidentified Company Representative:]

So, you see it is not the matter for choice for us in impairing any of our assets. In our case, it will be KPMG AZSA, our auditing firms instruction or they would have to approve us the impairment, should we wish to impair some of our assets, so it not out of our intent. So from that prospective, we cannot -- I think we’re almost over and done with or impairment that was necessary. So we could not foresee any major asset being impaired sometime in the immediate future however. Of course, at this point in time, very difficult juncture, we would very much like to lighten our balance sheet, if that all possible. And this is our hopeful wishes, but although I do not foresee any kind of major impairment taking place. Does that answer to your question? Thank you very much.

[Kazuki Watanabe:]

Second question, guidance for next term. For 2018, your profit plan and in light of the Tanshin. I think you've reported 4% to 8% growth in the mid-term plan. So, to the extent you can disclose, can you share some of your approaches?

[Unidentified Company Representative:]

So, for the next fiscal year performance, profit, sales, revenue, I believe the question implies that will you be generating sales profit at the current moment. If when we look at the past three year's track record and when you look at how we have disclosed or how we have disclosed, I believe that we will follow suit. So, interim dividend, payouts will be perhaps announced and sales profit in that record we're not considering.

[Operator:]

Next is from the Nomura Securities, Mr. Otsuka.

[Wataru Otsuka:]

Hello, Otsuka from the Nomura Securities. Can you hear me? Thank you for this opportunity. I have two questions. The first question, on page 5, and the document which was explained by Mr. Kojima, ¥35.1 billion of an increase in the pre-tax level. Any takeaway by the management of this amount? So due to the profit loss of the gain -- a loss from the sales of asset increases, if you could maintain that ¥35.1 billion. I think this trend can be continued which means that it would be 10% of an increase at the pre-tax level, which means that 4% to 8% of an increase in fact seems to be quite conservative because 10% exceeds this level. So, are these factors in fact included in your expectations and also if it’s sustainable?

[Kazuo Kojima:]

So, this ¥35.1 billion that you have mentioned, so the gain on sales in fact is excluded as a matter of fact in the ¥35.1 billion, so there are no kind of extraordinary factors that are accounted for. So, this ¥35.1 billion what is included, if I may dare to say so in fact you see, we have -- there's a decline in the loan installment business. But each of the segments may have some fluctuations, ups and downs. But we feel -- we do not feel faring from the guidance that we have so far foresee being achieved at the end of fiscal period. I don’t know whether this answer to your question.

[Wataru Otsuka:]

But if you could be so kind enough to go into a little more details, out of the 35.1 billion, Hartford Life Insurance in fact does contribute to the 35.1 billion, how much is that?

[Kazuo Kojima:]

2 billion.

[Wataru Otsuka:]

2 billion. So out of 35.1 billion, 2 billion comes from Hartford for the nine months year-to-date?

[Kazuo Kojima:]

Yes.

[Wataru Otsuka:]

Which means so the existing business on the right hand, the increase in the asset, the services and the product sales which do not contribute to the asset, in fact had contributed greatly to the pre-tax increase?

[Kazuo Kojima:]

Yes.

[Wataru Otsuka:]

So the second question. This is a very basic question, if you have the numbers I would like to know. The tax ratio for next fiscal year onwards, the U.S. will drop their rates. So for you it’s approximately 30% is the consolidated I believe number that has been quoted. So for next year, what will be the forecast for tax ratio?

[Kazuo Kojima:]

Hold on please. Unfortunately, we do not have the document in front of us. At this point in time, we cannot answer specifically. So what shall we do? If we can confirm by the end of this call we will.

[Wataru Otsuka:]

So 30% or perhaps a little north of 30%, is that the forecast or perhaps 30% a very rough number if you will. Thank you.

[Operator:]

From Tsujino from JP Morgan.

[Natsumu Tsujino:]

The first question. So you have made use of deferred tax liability, DTL, and which is above 200 million and you have talked about sub-impairment although there is no expectation of impairment of the asset, but there is a possibility of exceeding ¥300 billion at the top for the profit generation, 27% in fact is a payout ratio that you’re foreseeing. But by making use of further DTL and even if there was some additional profit in calculating their payout. I don’t think this is included in the first place. So, if we go now for the usage of DTL. If you were to pick 27% of payout ratio this time around then of course you would be pushing up the payout ratio in the next year. But I think you have made an indication of the payout ratio remaining at 25% in the next fiscal period as well, which means that the dividend may not grow in the next year or may imply. From the next year onward, imply as such from the next yr onwards are you going to be fixing the payout ratio in other words for the time being is the first question. And even if you were to achieve Y300 billion over profit were exceeding Y300 billion which is still be picking at 27% of the payout ratio. This is going to be my question.

[Kazuo Kojima:]

As of now we have not concluded our discussion over the topic that you have just asked the question for. So therefore I will not be able to give you the final answer from the company but as of now we would like to keep the 25% of the POR. That’s how we are going to calculating the dividend from. But on the other hand talking at our DTL, you may fix it that this is a non-cash calculation which is to and this to have the one of the comments that was made at the time of our internal discussion, so we may perhaps be excluding this and calculating the 27% this time. And then talking about the next fiscal period, we are setting the target of 27% for POR still, but it doesn’t need to say that we are persistent on this figure of 27%. I already mean that we do not deny the possibility of banking changes to this payout ratio. Therefore for the time being we will like to keep the POR at 27% for the coming two years. So that was the message I was conveyed. So that’s the answer to your question. Thank you very much.

[Natsumu Tsujino:]

I do have a second question, now this is in your investment security sell off?

[Kazuo Kojima:]

I believe that by the gains are on the rise and they are under the umbrella of corporate finance. Now for unrealized profits are declining 8.2 billion in December investment. Mark-to-market was approximately 69 billion I believe it was at 8.6 billion.

[Natsumu Tsujino:]

And so obviously, if I look at the attachment, I’m looking at Page 18. I believe that you will not be enjoying this upward trend, but you do have some leeway for this term; however, if I were to read between the lines, perhaps you can -- you could have perhaps hedged to an extent. So, I was wondering what the backdrop to this was. And if you push it too far at this point in time what will you do next, so if you could comment on this point?

[Kazuo Kojima:]

So, this does not relate back to tax ratio, but for next fiscal term, we have to use U.S. GAAP for the mark-to-market. And so, depending on the fluctuation of the stock price to P&L will be impacted, so what corporate finance based on the equity method, they have been very conventional cross hold or cross held equities. So, there were no longer transaction-able in the sense. So, we request can we not sell off and ever since to the beginning of this fiscal year this has been a standing policy so it is not because we wanted to acquire or obtain profits that is not why we did this and then it’s not because of specific accounting purposes that we did this. So whether it would be operational investments, this is where the focus is for our investments. So we do not want to have or we do not have the corporate finance services manage this. I do hope that this answers your question. So, for January 1, 2018 onwards so for you, you close the books in March, and so this is how you have slated this. So, the fluctuation we wanted to mitigate and that is why we took this measure. Thank you.

[Operator:]

So from Mizuho Securities, we have Koki Sato.

[Koki Sato:]

This is Koki from Mizuho Securities. I have two questions. The first, on referring to Page 5 of your presentation material, and recently you have been showing us, there is the breakdown on the waterfall chart, the changes and the capital gain versus the pretax profits. If we were to compare the sets of the two, I think we have a pretty graph of the two rather than why you are won changes, the quarter-on-quarter changes? If we were to exclude the capital gain at the pretax table, I think it is on the slight decline is of compared to the second quarter I supposed? This is my question. Is there any specific backdrop to this? This is the second piece.

[Kazuo Kojima:]

So for the existing businesses, deposit that comes from existing businesses, in the first quarter 13.2 billion, 25.9 billion in the second quarter and the 26.4 billion in the third quarter. So from my perspective, the third quarter may have not grown very much, but we don’t have recognition that it has the declined either.

[Koki Sato:]

Okay, understood. Well, it is going much into the detail, so I may follow up later on and I have one more question. And that is to do with your real estate businesses and that is to do with the disposition, in the third quarter, I think the disposition was about ¥200 billion or so, ¥20 billion sorry, and you have only generated ¥700 million or so. But again on sales, which means that you may have disposed of your real estate asset at almost at book value. So what kind of -- so, if you could be so kind enough to explain the background to this?

[Kazuo Kojima:]

Well, mostly this is an asset in the regional cities, we have sold in about the retail properties and there are some assets that we have gained some profits, whereas there was some realized loss on the other hand as well. So, it was not the kind of an asset that we could enjoy a large amount of capital gain from, the proceed from. So, it was pluses and minuses, so it was a lot of liquid assets in the third quarter and the list was subject to disposition. Which means, so rather than pursuing capital gain or deposited proceed from the disposition of the real estate asset that you still have those assets remaining in your portfolio, we have not gotten rid of all the assets, but I think we're almost done with, this is my understanding. In other words there is no other major asset that may give a significant impact to the overall performance, such as roadside stores, for example, outlets, retail outlets for example, the cluster for example if you could interpret it that way. Thank you very much. Thank you. Otsuka san raised a question, the tax rate, question, for this fiscal year term, 31.5% -- 31.5%, it will depend on the profit in the U.S. business, but it will not drop dramatically perhaps a decrease of 1%, so that is the forecast that we have at the moment.

[Operator:]

From Macquarie Capital Securities, Moriyama San.

[Keisuke Moriyama:]

I do have one question, this relates to the real estate question that was just raised, the segment profit for October, December approximately a ¥100 million -- I am sorry ¥8.1 billion, 8.1 billion, but in preparation for the end of the year, perhaps you're undergoing a managed down so to speak policy. In other words you're not persistent on generating profit, so you're putting in on the backburner so to speak. So, is that the intent? Is that the sentiment?

[Kazuo Kojima:]

For real estate itself, it is more or less manageable and we do believe that by the end of the fiscal year, our performance will supersede our expectations so we do not have to force ourselves to sell off real estate. Thank you.

[Keisuke Moriyama:]

So, for you, it is quite easy because the market is quite abundant at the moment. There is strong demand and so it is easier for you to enjoy gains?

[Kazuo Kojima:]

I do not believe that the market sentiment will change drastically in the upcoming few months. Thank you.

[Operator:]

Next question comes from [indiscernible] from JP Morgan Asset Management. Please go ahead.

[Unidentified Analyst:]

First question is in regards to your plans for asset growth. I believe you have grown your overseas assets by quite a bit, 12% year-over-year, and you also made a comment earlier that you would like to lighten up on your assets. So, in light of this comment and what is your expectation in terms of asset growth for overseas? And also which areas of the business will you focus on the growth?

[Kazuo Kojima:]

So with regard to the growth of the asset, roughly speaking ¥500 billion or so by an increase every year is our plan. And as a matter of fact, the new investment has been in the range of ¥600 billion to ¥700 billion, which means it doesn’t need to say that we’re trying our utmost place in order to lighten our assets. But thinking about the current environment rather in the overseas, the increase in your asset, in the overseas locations, they could perhaps be double-digit growth in the next two to three years in the overseas locations. And have been said that, talking about the geographical locations, United States is one candidate, and China is another engine for the growth of the asset that we foresee. And looking at the trend for the past one year, the leasing company in Asia once again, we can expect for 10% or so of growth in the asset as well. In terms of the sector, the business sector, asset management business inclusive of M&A investment globally environment and energy investment are the areas we think that we will be focusing very much on and in China I would say not the 100% investment but the growing segments that are seen in China, minority investment could be a possibility as well. So this is our idea of the possible investment. So does that answer to your question?

[Unidentified Analyst:]

Yes, thank you.

[Operator:]

This will be the last question in interest of time from Citi Group Securities, Niwa san please.

[Koichi Niwa:]

I would like to ask about new investments and it does overlap with some of your responses, but for Q3, the 600 billion new investments that you made versus the full year forecast. How are you progressing? And if you can perhaps quantify this number for us, second question the year ending March 2019, you want to move forward in new initiatives and you did mention that you abounded investment portfolio for new businesses. So, is it as described on Page 13 or are there any other new businesses that you are eyeing? So if you could give us some sort of guidance? Thank you.

[Kazuo Kojima:]

So the 600 billion new business investments that we highlighted, this is more or less the level that we had anticipated. Slightly perhaps lower was the equity investment in the U.S. We are on par with the expected plan. One or two deals can be executed for the full year, but here domestically only one, the Primagest was the only project that we underwent. And the variation as the high EBITDA multiple 10 or more, so this is where we stand. Now for environmental infrastructure, finance services as well as fixed income, aircrafts are again pretty much in line with what we had anticipated at the beginning of the year. Now for the overall assets, approximately we are less by ¥200 billion. This again is reflected on the fact that leasing here domestically was not growing, the loaning was not growing as we expected but 9%. I think we had fulfilled in terms of anticipated new business investments. Now for future guidance you’ve asked, as listed here environment infrastructure, financial services will be our focus. But needless to say this will not be a driver for high growth. So this does mean that we will need some type of new business investments to uplift this. So inclusive of detailed deals, we are in the midst of discussions and negotiations. Does that answer suffice?

[Koichi Niwa:]

I look forward to that. Thank you very much. Now, it’s time for us to conclude this information meeting. So Mr. Kojima, if you would like to give us a concluding remark.

[Kazuo Kojima:]

Thank you very much. So I would like to thank all the participants to have taken the time and traveled in participating in this teleconference session. I would like to seek for your continued support and because we would be working hard at achieving our initial guidance and as to the growth going forward, it will not be just on the expansion of where we are. This is our attitude and approach. So, I would like to as I say, continue to seek for your support in that regard. Thank you very much.

[Operator:]

That concludes today’s conference. Thank you for your participation.