ORIX Corporation (IX) Q4 2018 Earnings Report, Transcript and Summary

Thank you very much for taking time out of your busy schedules to attend ORIX financial results briefing. Let me begin my presentation on consolidated results for fiscal year March 2018. Please refer to Page 2 of the handout. I'd like to start with the trends in net income and ROE. For fiscal year March 2018, net income was ¥313.1 billion, up 15% year-on-year. This represents a record high net income for 4 years in a row, and year-on-year net income growth for 9 years in a row. ROE was 12.1%, which was the medium-term target of 11%. So we had another strong year for fiscal year March 2018. Next page, please. Segment profits and assets trend. Total segment profits reached ¥429.1 billion. Total segment assets reached ¥9.0173 trillion, which is ¥60.4 billion higher than the previous year. On Page 25 onwards, you can see more details about each segment, but I will add just a brief comment on each segment starting Corporate Financial Services. Segment profit was ¥49.3 billion, up 30% year-on-year. There was an increase in gain on sale of investment securities and the service fee revenue continue to increase. Those are the reasons for the increase in profit. The service fee revenue increased 5% year-on-year. Segment assets, because of the low interest rate situation in Japan, we cannot expect the kind of profitability we want. So there was a decrease in outstanding balance of installment loan, so the segment asset is down 7% year-on-year. For Maintenance Leasing, segment profit, it is up 1% year-on-year to ¥40.2 billion. There was an increase in the assets of automobile business and Rentec. There was an acquisition of Yodogawa Transformer, which is a renter of power receiving and transforming facilities and equipment. And thanks to that, there was an increase by 9% in segment asset. However, unfortunately, the gain from the sale of used cars is down, therefore, the profit is up only 1% year-on-year. Going to Real Estate, segment profit is down 14% year-on-year to ¥62.4 billion. In the previous year, there was a large gain on asset sales recorded, therefore, there was a negative repercussion. That is the main reason that segment asset is down ¥37.5 billion year-on-year. However, the latest figure in the fourth quarter is up, because of the promotion of the investment into hotels and inns. So there was an increase of ¥14.9 billion compared with the previous term. Investment and Operation, segment profit is up 13% to ¥96.1 billion. The Environment and Energy business and Concession business, their profit increase contributed. Segment asset was up as well in the Environment and Energy. There was an investment into Ormat Technologies, the geothermal energy producer in the United States, so segment asset is up 10% year-on-year. Going to Retail, the segment profit is up 2% year-on-year to ¥74.5 billion. At the bank business, there was a growth in the installation loan balance and there is a steady progress in the in-force policy of the Life Insurance business. At ORIX Life Insurance, in the fourth quarter, there was an accelerated spending of advertising expenses. That led to an increase in cost, therefore, the profit is up only by 3% year-on-year. On the other hand, on the segment asset side, there was the run-off in the Hartford Life Insurance portfolio, except for that, however, the segment asset is up year-on-year. Going to Overseas Business. The segment profit is down 5% year-on-year to ¥106.6 billion. The asset management business and the aircraft and ship business generated stable expansion of profits. On the other hand, during the fourth quarter, there was a loss on sale of investment securities at an overseas subsidiary and an impairment recorded at an affiliated company overseas. For the full year, therefore, there was a reduction of 5% year-on-year in the segment profit. The segment asset is up 6% year-on-year. Please go to next page. This slide is the usual slide showing changes in pretax profits and segment assets. On the left-hand side, pretax profit is shown. As I mentioned earlier, pretax profit is up ¥10.5 billion year-on-year. In the middle, there is the gains on sale of investments and others and the gains on sale of real estate for fiscal year March 2018. That was ¥142.2 billion, and one year ago, it was ¥164.1 billion. Therefore, there was an increase of ¥21.9 billion -- decrease. But there was ¥25.1 billion increase in the existing business profit, and also ¥7.4 billion in the increase of foreign exchange rate gain. So in total, there was an increase of ¥10.5 billion year-on-year in pretax profit. Just for your information, in December 2017 third quarter, the existing business profit growth was ¥35.1 billion, so ¥10 billion less than that during the four quarters. This is because of the Overseas segment, there was impairment and that is the reason for the decline. On the other hand, on the asset side, in total, there was 6.4 -- ¥60.4 billion increase. For the existing business, there was more than ¥500 billion increase in assets. The factors behind the decrease, major factor is Hartford Life Insurance decline when the market situation is favorable, because Hartford Insurance company is focused on variable annuity products and then there is profits. So there is more redemption, that's why ¥240 billion decrease in profit was recorded because of this major factor. And as of the end of March, Hartford Life Insurance assets have declined below ¥500 billion. So that's the current balance. So going forward, there is not going to be a major impact in the matter -- in the period with just 1 year going forward. Other than that, there was a issue of CLO in the United States and the securitization and also private equity exits, there were 2, and there were some sale of equities and shares and also there was some sale of real estate. And there was ¥50 billion impact from the foreign exchange rates. For the existing business ¥500 billion, I will give you -- Mr. Inoue will give you more details, the breakdown. Basically, in the aircraft and ships, tangible asset investment as well as the growth in the installation loans at the bank business and acquisition of the Environment business, those are the major reasons. Please go to next page. Here is the profit and ROA performance in the 3 business categories. You can see the trends in those 3 categories, profit and ROA for 3 years. This graph is the same as the last time. The graph shows segment profits, excluding capital gain from Houlihan Lokey and profit and loss of Hartford Life Insurance. This excludes those one-off factors. On the left-hand side, you can see the Finance category results. The dark blue is domestic business. As I said, in Japan, profit from the banking business and the gain on sale of investment securities contributed to the increase in profit. So there was a steady growth here. On the other hand, in overseas countries, 1 year ago, in fiscal year March 2017, in the United States, there was a gain of top company generating ¥20 billion as well as in the previous year, there was the subsidiary asset sale, and therefore, this year there was a loss on sale of shares in affiliates and a decrease in profits of the equity method companies. Those are the detracting factors. So the profit is down 1.6%. In the middle, you can see the Operations category. For the Operations category, in the Finance service business, there were contributions from overseas asset management business and also there was an asset management fee business from the domestic real estate. And also, in the Environment and Infrastructure business, there was positive contribution from the Environment and Energy business as well as the Concession business. So in each of these areas, we were able to grow the profits. So there was a level exceeding ¥200 billion, 50% of the total profits is coming from this category. So that's the extent of the growth of this category and ROA increased as a result from 4.9% a year ago to 5.3%. The Investment category saw a decline in profits year-on-year. The aircraft and real estate and the tangible assets as well as fixed income investment, they were increasing profits. However, in the equity investment, in the Japanese private equity business, there were the same number of transactions. But in terms of the amounts, we had less contribution compared with one year ago, and also there was an impairment in an overseas subsidiary. Therefore, in the private equity, we were not able to exceed the level recorded in the previous year. This concludes my explanation on the fiscal year March 2018 financial results.

Good afternoon. I am Inoue from ORIX. Thank you very much. Deputy President Kojima, has already mentioned some of the things that I was going to say, but I hope you will bear with me. For March 2018, there was a growth of existing business, additional profits from new businesses and large gains on asset sales and also reversal of DTA following U.S. tax reform. Thanks to those factors, we were able to achieve a net income target of ¥300 billion for the medium term. The net income was ¥313.1 billion. The annualized net income growth for the last 3 years was 10% and we achieved a record high net income for four years in a row. ROE at the end of the fiscal year was 12.1%, representing a double-digit ROE for five years in a row. For credit rating, in January 2018, there was an upgrading by S&P of outlook from A- negative to A- stable. Moody's as well on the 16th of April upgraded our credit rating from Baa1 positive to A3 stable. For the first time in six years, we've got the single A rating. For the new investments for fiscal year March 2018, in the U.S., we had invested into Ormat Technologies, which is a geothermal energy company listed in the United States. In the United States, there was senior citizens Lancaster Pollard mortgage lender, loan servicer in the United States. We acquired this company. In the Concession business, we acquired a concession for the operation of the Kobe Airport. Starting in April, we started an integrated operation of three airports. In the aircraft and ships, we increased the size of investments in aircrafts. We also executed an investment in ship mortgage loans. In the area of PE investment, we promoted the FinTech-related investments in China as well as some of the multiple investments in Japan. On top of that, we had a fixed income Investment in the United States. All in all, we had a total new investments for the fiscal year March 2018 of ¥740 billion. We also promoted portfolio rebalancing. On top of the large real estate property sale, we also sold the bulk electric purchasing service business for condominiums to Kansai Electric. Two PE investments in Japan were also sold out. In Sri Lanka and Oman, we had local leasing companies, we sold both of them. For the one in Sri Lanka, back in 1980, this leasing company was established. So there was a history of nearly 40 years. However, given the future prospective of Sri Lanka as well as for the company, we have decided to sell off this company. Just for your information, for March 2018, there was some impairment recorded for this. However, given the investment that we made and the return we have got from -- since 1980, it was IRR 14.4% on the yen basis. We will continue to assess market conditions and growth potentials of other investments. So without hesitation, if the value is already peak -- at the peak, so that we can enhance the value of ORIX shares. Now in the beginning of the year, we saw extreme fluctuation in equity prices, stock prices. We saw an increase in U.S. interest rates as well as a stronger yen. Since then, we have seen trade frictions between the U.S. and China, the issues of North Korea and the conflict between Russia and western countries, Syria attacks, and so there are many new anxieties that have accumulated. On the contrary, recently we are seeing a recurrent trend, and yes, there are some political performances surrounding the denuclearization of North Korea, and things are quite flexible at the moment. However, we believe that it is crucial that we make our own proper judgment to come through the situation. Now in the midterm, we will continue to focus on profit growth, capital efficiency as well as financial soundness. And our intent is to create balance amongst these 3 pillars. Now starting from March 2019 year midterm plan, our net income is 4% to 8% growth, and ROE exceeding 11% and maintaining single A credit rating has been stated as our goals. Now many a times we are criticized that we do not state exact numbers. But let us say in 3 years’ time, 4% growth. If we stopped there at 4% growth then 3 years, ¥350 billion will be the goal. Now if we were to sustain 8% growth and if we sustain this for a period of 3 years, and in 3 years’ time, we can exceed the JPY 400 billion net income mark. Now on top of organic growth, we will further cultivate new areas. And inclusive of M&A, we will continue with new investments. And needless to say, these initiatives will be important to our growth strategy. However, we will not make overzealous investments where risk returns cannot be justified. We will continue to make sure that we have our antennas up and ready to analyze what is happening in the global markets and make good project selections. For the past three years, Finance category, Operation category and Investment categories have shown strong growth. And in both profit and assets, we do have a very good balanced portfolio. However, under the current circumstances, we do believe that a dramatic growth in the Finance category will be unlikely. We will continue to focus on Operation category and Investment category as our growth driver. Now for the past three years, in the area of Operation category, our existing businesses have grown steadily, and Concession business has contributed to the elevation of our profit line as well. Now for the time being, our focus will be Environment and Energy, Asset Management, Concession business and Life Insurance. Mega-solar plants are incrementally being put into operation, and we do forecast a strong expansion in both profit and assets. And we have a site in the UK and we have commenced our Environment and Energy business in European countries as well. So our intent is to proactively search for investment opportunities aside from Ormat. Now for Asset Management on top of Robeco, we do have acquired many AM companies and this will allow us to further diversify our business line and expand our geographical footprint. Now here in Japan, our real estate asset management business is growing steadily as well. So we will further explore the opportunities of expanding our AUM. As for Concession business, on top of our airport facility operations, starting this April through the joint venture with Veolia Japan, we have begun in Hamamatsu City of Shizuoka prefecture, a sewage facility. Our next theme this arena will be focusing on overseas concession projects. So we will be willing to promote a wide variety of opportunities in this regard. Now for Life Insurance, the premiums in-force have grown 1.5 times in the past three years. We will, in the future, expand our sales channels and our product lines and approach this business into the next level. Again, through new investments and M&A, we will expand our portfolio. However, there are not that many projects that will immediately reap results. This does mean that to expand and enhance the corporate value of each of our investees, we do need a specific amount of time. Now in the Investment category, we will, again, focus on domestic and overseas key investments as well as aircrafts and ships. So we will continue to enhance the value of our investees, but at the same time, we will diversify the way we invest as well as we will be selective in how we target the areas that we promote new projects. Now for Overseas Business. In the previous year, in China and the U.S., we have made investments in FinTech related activities as well as public infrastructure. In the future, we will further be proactive in investing in the U.S. and in Asia as well. As for aircrafts, again, in the previous year, mostly narrow-bodies, but we have procured 68 and we have sold 21 to domestic and overseas investors. We will increase profit as well as asset increase and expand our service income fee through asset management. And again, this will be an area where we'll be proactive. Now for the asset scale, we will be exceeding some of our existing projects, but all in all, our intent is to grow. Project by project, optimal procurement measures as well as financing and also by applying specific schemes, we would like to secure liquidity as well as maintain health as well as expand on our asset. It is true that our main goal is to grow our profit line, but at the same time, proceedings from sales as well is a factor. So how do we extend and continue such initiatives will be critical as well. Now for proceedings from sales. They are somewhat impacted by the market. However, through the involvement of ORIX, we maximized the corporate value of assets and investments. And as a result of such activities, we have realized such profits. We need to deem where the market is going, and at the same time, deem the optimal timing of making a sell. And we believe that the ORIX know-how, experience and high expertise will prove to be beneficial in this regard. Now for capital -- our policy of shareholder return. Versus the previous term, we have expanded this by 2% to 27%. This is the dividend payout ratio, and if we combine that with interim dividend, full year dividend is ¥66 per share. Now the March 2017 year ending with ¥52.25, so this is a 26% increase. Now as of March 2015, the full year dividend was ¥36 per share and we have realized since then high profitability as well as enhanced and increased our payout ratio, and hence, in the past 3 years, we have increased this by 1.8x. Now for the year ending March 2019, our interim dividend is forecast to be ¥30 per share. And for payout ratio, we will sustain 27% and depending on the progression of our profitability, we will further enhance this number. Now from 2 previous years to the beginning of the previous year, we initiated share buybacks of approximately ¥50 billion. Again, we will keep in mind the fulfillment of ROE of 11% full year and depending on the investment pipeline as well as capital sufficiency, we will take proactive measures in this regard as well. Now our immediate pipeline is abundant, Environment and Energy related, aircraft related as well as domestic and overseas PE investment. We do have many projects in the works as we speak. We need to make sure that we do not make any mistakes on entry pricing of specific projects and we will allocate our capital to projects that will give us mid- to long-term growth. ORIX strength is in its rich knowledge of finance, accounting, tax and legal aspects. And these experiences have been accumulated as know-how regardless of whether they be a success project or a failed project. Now ORIX is not just limited to banking, we do have a talent that can handle end-to-end from operations to sales and we know how to execute and maximize our know-how in this regard. So again, regardless of domestic or overseas, we also have many partners that we can share risks as well and that is another strength of ORIX Group. Now we have achieved a net income of ¥300 billion, and as a Japanese company, we can now position ourselves as a top class profit generating company. Our next goal is to transform ourselves into truly global company and extend our business foundation to a more mature foundation. We have established ERM structure and we are strengthening governance, but we do realize that there is much more room for improvement. We do need to further solidify our business foundation continuously and polishing the business model, ORIX is my task. So as a Multinational Boutique Enterprise, under the umbrella of ORIX, we will establish and involve various expert boutiques around the world and the augmentation of such boutiques comprise ORIX Group. And again, we would like to position ourselves as a unique company. Many people position this company as a lease company, but for my eyes, we are no longer just a lease company. We have extended our foothold. We handle finance as well as investments, and so we are a Multinational Boutique Enterprise and we have no intent in changing this direction for ORIX. So on that note, I would like to conclude and we do look forward to the continued support from the investor community. Thank you very much.

Now we would like to open the floor for questions. [Operator Instructions]

From SMBC Nikko Securities, my name is Nakamura. I have two questions. You are aiming at 4% to 8% annual growth. In terms of the base profit and capital gain for the year just ended, excluding the impairment, it is already double digit, and the capital gain is 10% or so reduced. So what is the image for this year and next year in terms of the growth rate? Could you give us some ideas about this? That's the first question. The second question is about market communication regarding the growth of 4% to 8% and 11% in ROE. This is something I'm very aware. But the PBR is still limited to 0.9 times. There seems to be some problem going on in the company, thus the assessment of the company, the market communication in terms of distribution of free cash flow is being changed by the company intentionally, so that you can gain more understanding from market. But looking at market communication of other companies, are you trying to modify or improve the market communication further? That's the second question.

Regarding the proceeds from the sale of assets and the base profits, over and over again, we explained this. We consider the gain from sale of assets as part of the base profit, because sale of assets is a simple business strategy. We buy low and sell high. And now the real estate properties are expensive. So now is the time to sell. So that's how we do business looking at the situations in the market. Unfortunately, we can't tell you what percentage capital gain we're going to achieve and so forth, because it is all dependent on the market situation. We have to always look at the market situation whenever there is a peak, we will sell and otherwise we won't sell. That's the basic principle we are managing -- with which we are managing the business. And the growth of between 4% and 8%, it is okay for us to come with a specific goal. But the range of 4% to 8% is already specific. In the case of the 4% growth, probably next year, we will have 320 billion to 330 billion. If 4% is to be maintained, or if we can only achieve 4% growth, that means ROE will be less than 11%. In that case, we will be thinking about share buyback. If we can maintain 8% growth, ROE will be more than 11%, and in that case, the cash will be devoted to investment. And if the ROE is less than 11%, of course, we will think about share buyback in a flexible manner. In terms of communication, I think that we are doing a good job in market communication already. But if you are not happy with what we have today and this is all my responsibility. But basically, if you compare with the trading houses, why is PBR so low, if that's a question, from my perspective, I would say that ORIX is positioned as other financial companies or leasing company. So other -- those companies' PBR is still low, probably we are affected by this. But from my perspective, ORIX is no longer a leasing company. I kept saying this, probably, I haven't said that enough yet. That's why it is still regarded as the other finance company. And in the newspaper, you will see mega-bank, life insurance and securities firms first, and we will be -- the article about ORIX tends to be much smaller than those companies. But I kept saying that ORIX is no longer a leasing company. I will keep saying this. Just for your information, 3 years ago S&P New York analyst interviewed us. And at that time, because Sumitomo company recorded an impairment of 200 billion, despite that, there was no downgrading to negative outlook. And I was complaining to the S&P, why do you keep this stable rating for the company, which is having a impairment of 200 billion and ORIX was downgraded in the meantime. And I thought that it was because of our positioning, and these banks and securities firms are with the mega-banks, so they are stable. That's the perception of the people and the rating agencies. And I told S&P to change ORIX category and they asked me, which category we should be in? That was a question from them. And I said ORIX category. Because if you look anywhere in the world, there are no similar company as to ORIX. That's why the category we should belong to is ORIX category. And this person was seemed to be appalled, maybe didn't understand what I was talking about. But our stance is that ORIX has a unique business and there is no comparable company anywhere in the world. That's why, because of the lack of comparable companies, we are tend to be compared with other financial service companies. That's the problem. I want to change this perception. I want to be seen as a unique company, which does not belong to any other category. Did I answer your question?

Yes. Regarding market communication?

I suppose you are getting closer and closer. You can ask me any question, I can answer any question you may have. But 90% of our business is insider trading information, so I can't tell you those information. So I can't tell you any information about specific transactions. There are a lot of backlog transactions, but I can't tell you about these. But I can say that we will make further efforts for corporate communication. Thank you.

So I see a hand next to the previous gentleman.

This is Muraki from Deutsche Securities. I do have two questions. The first question on Page 6, a midterm plan related question, if I may. So in three years, you have three KPIs that you have fulfilled, and I do believe that was mentioned in the presentation. So aside from these areas, perhaps if you can mention initiatives that you did want to undertake, but you could not for some given reason or you could not realize a specific activity? So if you can mention them. And the second question is the shareholder payback on Page 11. On the bottom right, you see, I do believe that we have the overall number for the total return ratio and I believe that this is on the rise year-after-year. So why are you showing this, because are you planning to exceed the 40% mark, is that the reason why? So again, the total return ratio, what is the positioning of these numbers for you and your company? Now for currently, I think you've exceeded the 80% or 85% target for the capital employed, and so your ratings are increasing, so I think, this leverage is in good balance. And on Page 7, you invested ¥740 billion last year, I believe it was. So if this is the investment scale, then 60%, for instance, retained earnings and 40% return balance would be optimal. So is that the thinking behind these numbers?

So let me respond to the first question. For year ending March 2018, we have cleared the three KPIs and there were the other initiatives that we did not undertake. One is the asset size, I believe. Our goal was ¥10 trillion or over, but we stopped at ¥9 trillion. So ROA 3%. So 10 trillion, ROA 3%, ¥300 billion was the goal. So we have been very selective with our projects that we undertook. And especially, here in Japan, our finance, leasing, lending are very low in profitability, so we did not intentionally pursue these, and hence we did not reached the ¥10 trillion mark. Having said that, for ROA, 3.5% approximately, so our capital efficiency has enhanced and we were able to exceed ¥300 billion for net income. So excluding cash and cash equivalent, the debt-to-equity ratio is 1.5x for March 2018 ending year. So for us, we would have not damaged our ratings if we extended to two-fold. But this is a major shift from our plan from 3 years ago. There are more individual circumstances. But all in all, this is the state. Now aside from the 3 KPIs, were there any other KPIs that we could not achieve, ERM is one. So we are expanding in new arenas, meaning that risk management is critical. And from the viewpoint of enterprise risk management, we are still vulnerable, we are weak. And if we are weak in ERM activities, then if it is an overseas deal or overseas project that we pursue, we may impede antitrust laws or in the U.S. CIFS, we may violate CIFS, for instance. So we have to be much more proactive and we have yet to establish a strong structure that can be flexible enough to accommodate these changes. Now Japanese companies, obviously, in terms of demand for a global risk management, we lack talents here in Japan. So what we're doing is we inject or we are planning to inject professionals from overseas in this field. Very costly, but this must be done. And again, this is an area that we are still midway. But sometime by the end of the year, we want to finalize the structure, meaning as a result, we can be more proactive in pursuing other projects. So for myself, I believe that aside from the numbers, establishing proper ERM is critical and that would be my personal KPI.

Now for total return ratio, there was no meaning. People often point out that it's low, so just wanted to show that we have exceeded 30%, and I believe that it's the intent of the Secretary when they put this material together. So there is no deep meaning in showing these numbers year-after-year. But the essence here is that we have stably grown our payout ratio and so that is the main message. And as Mr. Inoue, how we employ our capital, if there is no investment in the horizon, it's not that we are going to raise it to 40%, 50% or 60%, we will be proactive in engaging in our investment activities.

From Daiwa Securities, my name is Watanabe. I have 2 questions. The first question is regard the segment growth for the medium term. In the medium-term plan, 4% to 8% profit target for the entire company was announced, but if you break down for each segment, what percentage of growth is expected for each segment for the medium term, and what will be the growth driver for each of the segments? That's the first question. The second question is about FinTech. In the China region, you are investing into FinTech area, but other than equity investment, is there any business that -- where you will be making a direct investment? Those are the two questions.

Regarding the segment-by-segment growth strategy, simply put, solar power energy or renewable energy business in Japan, this is almost over, it is coming to a maturity. That means new items, even if you invest in the solar energy, the FIT is poor, probably it's difficult to maintain ROE of 3% -- ROA of 3%. Therefore, the renewable energy, although, we are still investing into the geothermal and wind power generation, since there are so many restrictions in Japan, the regulated business -- there are some transactions, but we are not a making positive proactive investment. Other than that, we will make investment in Europe, India, the wind power and solar energy. Investment will be made in these areas, India and Europe. So 10%, 20% may be difficult, but we expect 5% to 10% return. Wherever there is 5% to 10%, we want to invest. Another is Life Insurance business, that is we are expecting more than 10% growth. Banking is not working so well anymore. They are working hard, but in terms of ROA, that is out of question. But compared with other banks, our ROA is still higher, therefore, maybe we can maintain. And in order to increase ROA even by 1%, we will take many initiatives. For Corporate Financial Services in Japan, this is not working, at most ROA of 2%, that's how much they can go. Probably, however, because of the maturity or saturated loan market or lending market in Japan, I suppose there's a great difficulty. For example, if you look at loans to Takeda Pharmaceutical of ¥3 trillion, there will be secondary opportunities. If there is a such opportunity, we might accept it. But we can't expect so much from this business. But in terms of the cross-selling, in terms of the fee business, it is gradually increasing. Therefore, in terms of exposure, we are not expanding. However, for the fee business, it is gradually expanding. This is something we can count on. Again, Overseas Business is promising. Concession business, to be honest, Kansai Airport probably would be the last -- first and the last, there are other concession opportunities like water-related opportunities, the competition is very intense. There are projects like Chitose and others. Probably, we can't get it. Therefore, we are happy with Kansai. By having this experience at Kansai, we can get the recognition that ORIX is -- has a track record in concession. This was already recognized. Therefore, in Asia, Latin America, there are many inquiries for Concession business. Of course, we have to think about the sovereign risk and other risks. However, probably, we can count on this Concession business as the next stage. As for the Asset Management business, because of the rising interest rates to a certain extent, AUM began to expand. So this is another interesting business. But commissions and fees are still continuously under pressure. It is getting lower. Therefore, do we really need to expand the Asset Management business is the question? For the equity, we are not investing so much. Therefore, ROE is still high, but can we sustain this? In the United States, we are purchasing different asset management companies. But as a fee business, for the while, it is, okay. But can we continue to operate Asset Management business as a growth driver? I don't -- I'm not expecting so much. So like Houlihan Lokey, we like to think about exit and IP as well. Next is FinTech. In China, we are investing into FinTech companies, P2P, FinTech, crowd funding -- crowdlending business, we invested. Also, in Japan, as reported by the newspaper, there was ROE arm-based crowdlending business towards the IOE customers. This is still a start-up company. We don't know how much money we can make, but so far so good. It is running well. Regarding the FinTech business in China, this is simple. Because in China, there's no restriction on personal information. It's not like in Japan, there is very severe restrictions. Therefore, in China, for FinTech and the personalized business and the personal information related AI business, we like to start those businesses in China first. So that the business model should be developed and applied to other Asian companies and countries. In Asia, we have leasing companies. Some countries have lending and banking licenses. Utilizing those licenses, we like to conduct AI or FinTech businesses based on the China model. It might take some more time, probably it won't be another 2 or 3 years, but this is where we are not expecting so much profit contribution in the short time -- short term. Next question, please.

My name is Niwa from Citi Global Markets, Japan. So for mid -- for short-term and long-term growth, I'm looking at Page 7, so for March 2018, 23% increase in new investments, but what is the level that you envisage? And in terms of investment, 3 versus 7 was the past ratio, but for this term, if you could give us a flavor of what do you expect or anticipate? The second question. This is quite a lengthy theme, but do you have enough to stimulate growth? So for -- starting from May 2017, you have overlooked the open innovation initiative and then you are also overlooking the group strategy division as well recently. So when you look at these new divisions, do you see a momentum gathering in terms of new innovations, and do you feel that there will be something stemming from these activities?

So how do we establish a source for growth is the question. And if we look at our pipeline only ¥1 trillion worth of projects are in the pipeline. However, depending on the project, the price tag might be extremely costly and expensive. So we will be selective and we have a ratings as well. So S&P, the RAC ratio, we are keeping a close eye on RAC. And in terms of investments, investment immediately generated 3% to 4% profit increase for us, but nowadays such projects of this nature are very limited. So after we make the purchase, we intervene and we involve ourselves to enhance the value as well as ROE. So there will be a certain amount of time needed to generate the value of the investee. So that is why we are coming up with the 4% to 8% growth strategy. We do have other source for growth. And again, as I mentioned, if it's peak, we sell; and if not, then we will inject our endless efforts. And when it peaks, we sell. And that repetition is our business model. So the fact that we do not have a core business is our core business. I know this is contradicting, but that is the nature of our business approach. Now open innovation, yes. And I also overlook IoT business as well as AI business. So I directly overlook these functions. It has been 18 months since we launched these initiatives. There are projects in the works, however, it is not at a level that we boast to the outside public. So it is like agriculture. We actually do agriculture business as well, but it has yet to contribute to our profit line, one point X billion yen barely. But my viewpoint is very simple, 10 billion or more in one segment, it has to earn on its own standalone to become a standalone segment. So IoT, open innovation, it will take maybe two, three years to fully grow. Again, the company ORIX, projects involving IoT or intelligence, most of our talent and employees are not all that good. We are more strong in making sure that we cover all grounds. And we have also established a president's office as well. And for investments in equity, we had a specific division that overlook this, but it turned out that we lack speed as a result, and we had to go through a lot of bureaucratic-like approval procedures. So that is why it is directly beneath the president. In other words, the president office handles these equities and that is why we have established the president's office and I directly overlook this division. Have I responded to all of your questions?

We like to entertain one more question.

From Merrill Lynch, I am Sasaki. I have just one question regarding the Concession business. In Osaka, the IR program is going to be starting. It is highly likely that in Osaka, this program will start and is there any opportunity for ORIX? What do you think?

For IR, we are very much interested in this, negotiation with the operator, we have to have them. But we don't know whether the bill will pass the day or not. So we don't have any concrete discussions at the moment yet. But for IR, project themselves, we want to be involved. And also, when IR becomes materialized, what we are thinking about right now is first of all, from Kansai Airport, we can have a connection by high-speed ferry boat. And from Kobe Airport, we can fly a private jet with the hub in the Kobe Airport to go to IR site. So this is something we have already started discussions on. But the IR project is not starting yet. So these are still idea-based stages. So for the 3 airports in Kansai, with the existence of IR, we can get the positive profit contributions. My concern is that 50% of the profits of Kansai Airport is based on the in-bound tourism from China. If Xi Jinping hates Abe-san and he closes the door to Japan, that will be a problem for us. But for IR, anyways, in the Kansai Airport, we are getting good profits there. Therefore, for the meantime, we can enjoy the high profit at Kansai Airport.

There is one question. By having an equity in IR, is it possible for your company to do so?

It is possible. However, on newspapers, there are some negative campaigns going on regarding the gamblers. So that's one factor. And also 30% commission or admission fee of ¥6,000 or admission control and practices and so forth. There are many different aspects we have to think about. Among all the 8 companies or operators, so far, many of -- they are saying that they want to do it because there is no impact. Probably, Osaka will go first. And if that's the case, ORIX has to decide which operator to work with in participating in the bidding process. So we won't want to make a decision from now.