Noah Holdings Limited (NOAH) Q4 2019 Earnings Report, Transcript and Summary

Hello and Welcome to Noah Holdings Limited announces Unaudited Financial Results for the Fourth Quarter of 2019 Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation there will be opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I'd now like to turn the conference over to your host today Jingbo Wang, Please go ahead ma'am.

[Foreign Language] For today's agenda, I will first share my views on the microeconomy and then briefly summarize Noah's overall performance for the full year 2019. The developments of our business segments and the gains and challenges during our transformation. Our CFO, Grant Pan will follow with a detailed discussion of Noah's full year and quarterly financial performance. We will conclude the call with question-and-answer session. The past 2019 was a tough year for Noah where the Camsing incident has tested the bottom line of our business ethics and operations. We didn’t expect that 2020 poses an even bigger challenge or more ultimate challenge, which tests our attitude as humanity when facing a crises that's threatening our lives. At this point I am very grateful for having experienced the Camsing incident in 2019, which has become a gift with the profound influence on Noah's strategic decisions. Because of the Camsing incident our management team reflected on how we started to listening to the voices of our employees and clients to understand their real demand. We're thinking more about company's vision and business plan for the next 5 to 10 years. Therefore we're able to reach a clearer consensus on what we should persist in our core strategy for the long run and will show what we should abandon immediately. Starting from the second half of 2019 we determined to terminate single counterparty non-standardized private credit assets and fully entered the field of standardized products. Concurrently, we shifted our operations from off-line to online. Such initiatives and efforts have fully prepared us to confront the difficult situation in 2020 when containment measures such as mandate travel restrictions and longtime deployed to combat the sudden breakout of the global COVID-19 epidemic. Next, I will go over Noah's 2019 performance. In 2019, ad revenues for the full year reached RMB3.39 billion up 3.1% year-over-year. Non-GAAP net income attributable to shareholders reach RMB1.04 billion up 2.7% year-over-year. In terms of core operational results, the transaction value of financial products for the wealth management segment was RMB78.5 billion. The AUM of our asset management segment continued to grow reaching RMB170.2 billion among which private equity investments reached RMB104.9 billion. We distributed RMB26.4 billion of standardized products for the full year up 93.9% year-over-year. After we stopped offering single counterparty non-standardized private credit products the transaction value of standardized product in the fourth quarter was close to RMB10 billion,, representing a significant increase of 580.8% year-over-year and 30.4% quarter-over-quarter. We continue to optimize and upgrade Noah's mutual funds App Fund Smile. In 2019 the transaction value of mutual funds increased by RMB16.4 setting a new distribution record for single year and a single quarter. Considering the internal and external challenges we faced we're satisfied about such achievements in 2019. [Foreign Language] During the COVID-19 epidemic this year, transaction value of standardized products maintained an encouraging growth momentum. It demonstrates the initial success of Noah's paradigm shift on the product front. We will scale up investment to consistently refine IT systems and operational processes so as to continuously optimized client's experience. Meanwhile we have launched a new relationship manager compensation scheme that emphasizes on AUM-based compensation with an adjusted incentive plan to align the interests of relationship managers Noah and clients. We believe such assessment forms a win-win situation enhancing client stickiness and relationship manager's loyalty to the company. In 2019 Noah's high net worth client base continued to expand with over 35,000 active clients for the year up 27.7% year-over-year, which included mutual fund clients. The number of outer [indiscernible] worth clients are card members with per capita assets under our management of over RMB90 million also continued to increase up 14.7% year-over-year for 2019. On the wealth management segment we have established a VIP center to serve super clients and continuously improve the conversion rate of hard clients. Thanks to the strategic transition to standardized products almost all of our business has shifted from off-line to online. During the COVID-19 epidemic a 100% of orders placement by our clients are made online. With the development of our online business in addition to AUM we have also studied Noah's clients by their behavior patterns and divided them into three categories; discretionary portfolio management, specific product driven and self-service transactions. We can see that the numbers of all three types of clients has increased. Through our overseas segment, net revenues increased by 25.4% to nearly RMB1 billion accounting for 27.9% of the group's total revenue as compared with 22.9% in 2018. AUM reached RMB24.8 million -- sorry billion in 2019 accounting for 14.6% of the group's total AUM remaining flat compared with 2019 sorry 2018. With Noah's increasingly comprehensive service offerings we are strengthening connections with our clients globally with an in-depth understanding of their intrinsic and long-term wealth management demands. [Foreign Language] At the end of 2019 Noah's AUM reached RMB170.2 billion among which our voluntary divisions offering single counterparty non-standardized private credit products cost a net decrease of RMB10 billion in AUM. Our actively managed funds have achieved different levels of growth in AUM. Specifically AUM of standardized product represented by the public securities products increased by 50.3% year-over-year and AUM of our multi-strategy funds increased by 31% year-over-year. We also achieved solid AUM growth in our conventional products really based on private equity. For public securities products Noah posted this on large asset allocation and perceives no volatility and absolute return which our high net worth clients rigid demand. In 2019 the investments return of Gopher’s public security flagship FOF and MoM fund was up by over 15%. Our quantitative FOF realized a 34.8% returns with a low volatility of 3.8%. Among Gopher’s multi-strategy fund the smart better index enhanced strategy quantitative strategy fund has generated a return of 30.1% in 2019 since its launch. This product has generated excess returns for 82% of its clients. All these performances reflect Gopher’s continuously strengthened investment and management capabilities in the field of public securities products. At the same time, I would like to clarify that our high net worth clients still have strong demand for our vCPE and real estate products, which are also our featured product that traditionally had strong performances. We have built a stellar brand image in the market. Our product strategy shift to standardized product does not represent gaining up on our advantages in these product type categories. We will continue to optimize and deepen our operation in this area to enhance our advantages. Specifically, we will keep enhancing our brand and influence through collaboration with the best alternative investment managers and working with the best alternative investment team in the United States to strengthen our globalization approach. In terms of operational efficiency total operating expenses in 2019 were RMB2.48 billion up 4.3% year-over-year. Non-GAAP net profit margin was 30.6%, which included one-off expenses of the RMB163 million as a result of Camsing related legal expenses. Excluding these one-off expenses the net profit margin would have been 35.4% showcasing great improvement in management efficiency. It reflects the efforts made by the management in streamlining our operations. Noah always believes that talents and possession are the most precious wealth of the company and has been screening elite relationship managers. Our elite relationship managers contributed to most of our revenue generation capacity while their turnover rates was only 4.1% in 2019 down 0.5 percentage points compared with 2018. We will continue to strengthen the professional capacities of our relationship management team and provide excellent investment advisory services to clients. The goal of our transformation and new positioning is to be a platform company that provides comprehensive financial services to clients. With our advantage of serving high net worth clients we're expanding our reach to a broader client base through the Internet. Both our products and channels are open to our partners. Apart from Noah's direct sales team opening channels is one of our core future strategies. We're continuously enhancing our internal resources through optimizing and recruiting relationship managers and construction our VIP center which serves super client. Simultaneously we're cooperating with banks distribution channels and serving more independent financial advisors. As part of its overall transformation strategy, the company has decided to further increase its investment in IT infrastructure and online platform development. This will primarily consists of the major upgrades of Fund Smile app, the construction of the global version of Fund Smile app and the creation of a new soft system for institution channels. In 2019 the paradigm shift in China's wealth management space was well on the way. Noah was determined to lead the old check and entered a worldwide recognized new arena. We believe that a wealth management market in China is full of new opportunities. We're facing new environment, new market and new clients as well as a refreshed market landscape and an upgraded mechanism of operation. Most importantly through crises Noah's core team has gained a more profound insight into the industry. We spent a lot of time and efforts in aligning interest of our employees and clients. We have repositioned the core management capacity of Gopher asset management to focus on comprehensive asset allocation, pursuing products with low volatility and absolute return that are welcomed by high net worth clients. We expect huge market potential in this area. At the same time we are delighted to see that with the illusion of implicit guarantees being broken and the reform on the financial supply side, the market has rapidly presented new clients demand, which is even exceeding our expectations. On the wealth management product and client front, previously we have completely stopped offering private credit products. Our transformation has just matched client's new demand. Therefore, our products received welcome reception and recognition. The transaction value of standardized products driven by client's strong demand demonstrates promising momentum and the trend of our transformation, which further proves our strong pressure resilience and resistance. We believe that a successful wealth management and asset management company shows full-features, excellent performance, diversified products, broad distribution channels and significant AUM scale. Not a single feature can be omitted. Noah has made many achievements in the past 15 years and most important of which was the establishment of the product platform and direct sales channels that opened the globe. In the coming decade, Noah will continue to understand client's evolving needs, pivot around client interests and improved stability of our performance. In the meantime, we're opening up our channels to promote our product from direct sales to selling on the commission basis and to serving independent financial advisors with a goal of constantly extending our AUM. The COVID-19 epidemic has pressed the pause button on normal daily operations. Saved with this unexpected situation, we are deeply aware of the importance of online operations and the role of digital capacities in Noah's future development. Online transaction capabilities of standardized products will be the key area of our strategic investments going forward. During the epidemic with divers and sufficient leading product supplies, we have to field demands of our clients. In addition, we also introduced a variety of online investor education activities to enhance client stickiness. Such online activities have covered 560,000 people and helped us enhance interactions and relationships with our clients during the epidemic. These practices during the COVID-19 outbreak also demonstrated the resilience of our business on the southern crisis. We also remain committed to our social responsibility and have donated cash and valuable medical equipment to Hubei province through Shanghai Noah Foundation at the beginning of the epidemic outbreak. Finally, I believe the COVID-19 epidemic will eventually be contained and life will continue. We were glad living as the minimum yet optional strategy for our service families and businesses. The epidemic is likely to accelerate economic recession but Noah has already set the bottom line. We have a strong sense of crisis and we are also firm optimists. To Camsing incident and the COVID-19 epidemic have served as a wake-up call. We cherish the opportunities to implement fundamental changes to our work, life and spirit. Our perception of the financial industry, our families and our core values, will all be recalibrated based on common sense and intrinsic quality. We will emphasize a family and community oriented diligent and healthy that hot lifestyle instead of glorifying lavish entertainment. We also aim to become real situation entrepreneurs to accumulate to save costs and to contribute as much as we can with honesty, dignity, discipline, self alert, fortitude and extraordinary perseverance as our core values. These values will allow us to overcome future challenges rise above corruption and tasteless indulgence driven by basic instinct and restore order, reason, simplicity and space in our way of work and style of life. We're confident that such changes will enable us to remain focused on our long-term goals instead of opportunistic tunnel visioning and short term results. Having experienced this unprecedented epidemic, we are confidence to become a better firm. We will reserve strength in the downtown for future development just as we need to score before leap forward. We are extending our mission, vision, values and our organization as well as a human resources KPIs through the crisis. We're determined to realize that overall enhancement in our operating concept and mechanic, human resources, technology, product and market. In 2019 Noah entered the vast and competitive landscape of standardized products from a small market venturing around alternative investments. Our rich experience in the industry, mature market relationship managers and clients and the management's in depth understanding and knowledge of the wealth management industry and client needs only enable us to provide superior services to high net worth clients. 2020 will be a new starting point for Noah and we are confident in our development going forward. In the meantime, we firmly believe that no Noah's transformation is in line with the development trend of wealth management and asset management industry in China. With a gradual containment of the COVID-19 epidemic in China we can say that we have not wasted this crisis.

Thank you, Chairlady for sharing her thoughts and ground. The investors and analysts good morning. Today we're certainly witnessing lots of turbulences in recent world economy as well as the coronavirus pandemic but when we do look back the year of 2019 already showed signs of changing and challenging business environment. They are ranged from the friction, the Hong Kong situation and other geopolitical issues. On top of external tailwind we underwent a major transformation in our product and service strategy. This last quarter which is quarter three we received offering of a major product category the single counterparty nonstandardized private credit. It's a really long name so I am going to refer that as SD credit going forward products. That once accounted for as high as over two thirds of the transaction value in last year. Our Chairlady Wang has already mentioned, we managed to deliver solid financial results for the full year and achieved our guidance for 2019 reporting a non-GAAP net income of RMB1.04 billion up 2.7% and net revenues reached RMB3.4 billion up 3.1% year-over-year. When this growth may appear modest comparing to our previous years, but considering the obstacles and changes we have to go through and overcome to get here, management is very happy with the firm's resilience and determination. Now let me take you through quickly further details of financial results as well performances for the fourth quarter. Revenue management fees and performance-based income, which reflects our asset management and investment capabilities reached nearly RMB2 billion for the year up 2.1%., Specifically management fees increased by 3.9%. While on the other hand we experienced pressure on the one-time commission revenue due to the discontinuation of the offering of SD products, transaction value decreased by 28% year-over-year to RMB78.5 billion which led to RMB924 million commission revenue or 9.4 lower than last year. The transaction values for the fourth quarter however stabilized at RMB13.2 billion following RMB13 billion last quarter I mean quarter three in 2019. And I am also happy to share that the upward trend in the transaction value is much more obvious in the first three months of 2020. Speaking of transformation to standardized products, the amount of standardized product distributed increased by 94% year-over-year to RMB26.4 million showing a very positive sign for the client acceptance towards the new asset class. If we do an apple-to-apple comparison excluding SD products for both years, the transaction values for Noah's other products reached RMB44.2 billion in 2019 increased by 28% from RMB34.5 in 2018. In terms of earnings, for the full year 2019 we realized non-GAAP net income to Noah shareholders of RMB1.04 billion up 2.7%. Net margin remained flat compared to the previous year at 30.6%, but this number probably doesn't reflect complete or real picture of the efforts and the result we had achieved in increasing our operational efficiency this year. We did incur one-off expenses of RMB163 million or 4.8% of the total operating margin can be attributed to the legal expenses that incurred on Camsing case as well as allowances made on accounts receivable in association with Camsing. To elaborate on the real OpEx stringent policy of modern traveling has cut our traveling conference calls by 15% year-over-year and as some of you may be aware, we commenced the consolidation and simplification of internal organizational structure that brought down our total headcount by 13% from year of 2018. When it comes to the balance sheet as a result of continuous effort to increase the turnover of our assets, the balance of accounts receivable decreased by 11% year-over-year. To remind you that's on the back of increasing revenue. Our current ratio stood at 4.5 with a debt to asset ratio of just shy of 20% and our net assets reached RMB7.87 billion up 27.4% year-over-year and we don't have any interest-bearing debt. I think it's fair to say that management's consistent effort in preserving capital is one of the reasons that we're able to afford a major transformation in the middle of the year as well to withstand rainy or even stormy days if you will as witnessed by today's backdrop of a worldwide uncertain economy as well coronavirus pandemic. For this quarter like I mentioned before, the transaction value has stabilized at RMB13.2 billion. The management also acknowledges the recovery to full capacity would take some time, besides the share amount we're more delighted to see the initial sign of a success and the standardized products reached just shy of RMB10 billion up 580% year-over-year and 30% growth quarter-over-quarter, which sets a record in its product category for single quarter transactions. So after the transformation took place in the third quarter 2019, we had raised a total of RMB17.2 billion worth of standardized products for the two quarters in the second half of 2019. Affected by temporary decrease in the total transaction values the revenues for this quarter were RMB781 and down 5% year-over-year. But our revenues from one-time commissions continue to face the most pressure during the quarter four of 2019 recorded a 33% decrease year-over-year, but if you compare it to the last quarter which is quarter three, it had recovered to RMB160 million actually a 6% increase from the third quarter of 2019. This quarter's revenue from recurring service fees or management fees if you will and performance-based income increased by 14.6% year-over-year to RMB530 million driven by our long-term dedication to strengthening our asset management and investment capability. Recurring service fees increased by 4.5% year-over-year as a result of the continuous growth of AUM. It's also worth mentioning that out of the RMB58 million performance-based income this quarter about RMB16 million of that comes from standardized products managed by external managers and reflects our ability to select outstanding products and create value in return for clients as well an asset manager. And in compliance with regulatory guidance we actively reduced the lending business volume this quarter resulting in a 16.3% year-over-year decline in other service fees. Operating profit for the quarter was RMB120 million comparing to RMB160 million same period last year but again I'd like to remind you that one-off expenses as I mentioned before fell recording this quarter was about RMB80 million. So actually excluding that we would have had operating profit of RMB200. The after-tax net income for this quarter was RMB118 million, non-GAAP net income was about the same number RMB117 representing a decrease of RMB107 million year-over-year in addition to the changes in net income itself, the difference also comes from non-GAAP reconciliations for the two periods that includes their relative changes in equity investments as well as share-based compensation. That two amounts contributed around RMB40 million to the different. Our Chairlady has taken us through quite a great details in business segments. So I would go light of segment-based analysis on this call, but just to highlight a few points, for the wealth mentioned segment, revenues arising from the value adding service that's classified as other revenues for the year were RMB220 million up 96% year-over-year, demonstrating our ability to satisfy our client's comprehensive need for service other than surely financial products. In our asset management segment continued its trend of high net profit margin that was recorded at 50% for the year 3% higher. For the oversea business net revenues increased by 25.4% to nearly RMB1 billion for the year accounting for about 28% of group's total revenue. So it really reflects the progress and execution of our global live vision strategy. Lastly, about the guidance, I'd like to remind you that the guidance we put forward in the 6K reflects our best estimate as of now of how the coronavirus pandemic would impact our business, but uncertainty remains depending on when the travel bans and normal social order will be restored as some of the oversea area because some of the oversea value agent services we offer to our clients for instance insurance services actually do require physical visits to the oversea area. But from what we have seen so far in the first three months this year, we expect the impact on conventional financial products sales to be limited and we're reasonably confident on the recovery or even moderate growth in total transaction values in 2020. In the meantime we're determined to make our transformation a long-lasting success and will further increase our investment in building IT infrastructure, system, platform as well investments in tenants. Our management has laid out very comprehensive plan on these initiative and we estimate that investment will account for between 3% to 5% of the total net revenues. And last but not least responsible investment has become a global trend. In China, regulators and institutions are also actively encouraging and adopting such approach. Noah has completed a series of ESG [ph] initiatives since 2014 and it was included in the MSCI China index and MSCI oversee China index in 2018 and in 2019 we have implemented ESG into our group's strategy development and corporate governance. We will continue pursuing sustainable growth in ESG in 2020. Operator that's the prepared speech part.

[Operator instructions] And the first question comes from Ethan Wang with CLSA.

Hi management. May be I will ask the questions in Chinese first and I will translate into English. [Foreign Language] Okay. So I have three questions. The first one is on wealth management segment. So on a Q-on-Q basis we're seeing that the transaction volume per active client has been under declining trend. So there may be two reasons, the first maybe because of the increasing SaaS increase of active clients and the second reason maybe from our strategy refocus on the standardized products. I want to hear more from the management on these issues that would help the investors. My second question is on the Gopher asset management side. On Q-on-Q basis in the fourth quarter, the total AUM has declined. So with one of their degrees behind so except for the credit products the other also declined. So is there any special reason behind this? And my third question is on the COVID-19 impact, the management had shared that you already spoke but I want to understand more about wealth management side because Noah has been focusing on their standardized products and we understand that in the first quarter this year, the domestication market has been very strong. So have you seen any strong growth in Noah standard product sales in the first quarter? Thank you.

Thank you, Ethan and thanks for translating on own questions as well. I'm going to take the first two questions and Chairlady Wang will be adding a little bit more thoughts on the COVID-19 part. So I think you actually pointed out pretty accurately in terms of average transaction value change in the fourth quarter. Yeah we do have more active orders if you will on standardized products in this quarter. So you're right it can actually see that our active clients for the quarter reached 15,000, but as the feature of the standardized product the average purchases probably not as high as the conventional for example the PE orders or some of the credit products. So that was one of the reasons, but the active, the level of activeness that we would like to see is definitely showing the sign. So that's a very encouraging sign as well. In terms of the shift in Gopher's AUM, you're right, the majority of the shift actually contributes to our voluntary and actually accelerated repayments of the credit products and the two decreases in actually very slight decrease in PE and IE products are normal aspirations. As we have recorded carry our performance-based income for this quarter. So one for the real estate piece and the other one is for the private equity piece. So I don't if I answered that your first two persons. If it does I can probably start on the third question in terms of the pandemic situation.

[Foreign Language]

Yeah because we actually -- because the impact of the traveling so we didn't hold the Diamond Conference that was originally scheduled but I guess we got lucky that the real strong performance in share market as well as the equity market really stimulates the passion of client's investment needs or demand during that period. So we actually prepared to move lots of the conferences as well as knowledge sharing online that maintains the level of activity especially interactions with our clients during that period. So it doesn't seem that the virus situation that impacted the level of activities between especially arms interactions with the clients so much and we're actually very happy to see the distribution or transaction value enrolment exceeding our expectations originally.

Thank you. And the next question comes from [indiscernible] CICC.

[Foreign Language]

Let me translate your question first. The first question from CICC Mr. Shre [ph] is that for the wealth management segment, which you have probably higher received operating profit than the deterioration on the net total revenue. So the reason is really because of the one-off expenses that really was mainly attributed to the wealth management segment. So based to the Camsing related legal fees as well as some of the accounts receivables allowance was recorded in that particular segment. If we do exclude those amounts the actual operating profit margin was slightly higher than the same period in 2018. So there was basically to be concise there was a one-off expense recorded in the particular segment. And in terms of the investments in IT infrastructure, so we have a pretty long stretch of discussions amongst the management. I guess also thanks to the pandemic situation, that people cannot travel. So were able to log everybody the board room to have extensive discussions on the strategic transformation and lots of time actually attributed to the strategy on how to enhance our client's experience, user experience as well as the RM's user experience on the online platforms and our main platform for the standardized products is called Smiling Fund app as well as the continuing investments to enhance that as well as once you deal with the standardized products, the transaction volume probably goes from 200, 300 orders a day to now 20,000, 15,000 a day. So we actually wanted to make sure that infrastructure from the capacity standpoint as well as the security standpoint can handle that kind of transaction volume. We're also actually being investing in the global version if you will Smiling Fund app in Hong Kong and we've already started a team of 30 people and started the initial launch of that particular product.

And the next question comes from Katherine Lei with JPMorgan.

So I have two questions. The first question is due on products, on your standardized products can you give us more details on say for example how is it different from the standardized products offered by like say China merchant bank or other like product manufacturers like the banks. Then you expect in terms of like the subscription fee and then the management fee of the standardized product, how is it like can you give us more details on that and how does it differentiate from like say the no such product that you offered before. So this is the first question. Second question is still on the Camsing case. Can you give us some update on like say what is the progress with the legal procedure and then what should we expect that there will be like some kind of verdict from the court and also that on client activities like can you give us some color on say for capital what's the percentage of clients affected by the Camsing case it has already placed new others their sentiment and then also the RM reactions to this case so far, thank you.

Thank you, Katherine. Give me a couple of minutes to translate that question for everyone. Sorry for this just the ones that. So for your first question Catherine, let me correct, the first one is in terms of subscription fee rate the revenue structure from the standardized bond we have mentioned before I guess to give everybody on the back one is when we first started the transformation to standardized products in the third quarter of 2019. The main product referred to a standardized bond funds and for the standardized bond funds typically you would only charge management fee without subscription fees. So I guess the total revenue side was slightly lower than the SD credit product, but right now we're actually developing quite a few products that will provide people with more a little bit more balanced portfolio. So basically we have 50-50 or 20-28 you have a little bit of stock saver flavor in that particular product. So we're able to charge a distribution fee up to classic 1% distribution fee and depending on the manager we actually are typically able to share about 50 basis points to 80 basis points with the managers. So basically entire product will have increased sort of fee rate from 60 basis points to actually 150 basis points or 170 basis points. So I guess from that standpoint the transformation in products will provide more growth profit to us on that particular category. So in terms of the difference how it competes with our counterparty, PMBs market, standard products I invite Chairlady to give us a little more insight on that.

[Foreign Language]

So the main difference between our standardized products offered to clients and also the CMB also some the band standardized products, one of the biggest difference in holding period or holding duration. So average holding period for the bank's product is probably between 54 days. So basically less than two months and for Noah's products that we offer to the clients usually have a three-year lock in period, three year lock down period. So for one year's hard lock and two year soft lock. So with that longer holding period the clients actually are able to benefit from most people that most of the investors having difficulty making money even with the acumen fund is the wrong timing of entering that exit. Because of ability to actually provide that kind of longer holding period the good managers, the top managers in the market are willing to work with us and because of that they are also willing to have a pretty good sharing portion of the management fee with us. And if you look at the Gopher's AUM breakdown about pretty good majority of that is actually assets with longer durations for them the PE has a 10-year holding period as well as the multiple strategy assets that actually doesn't have a defined period of holding. So usually between 5 to 7 years on average. Also we're changing the relation managers compensation scheme to be from one-time commission transaction-based to have more flavor on the AUM based compensation scheme. So from the RM standpoint they're more incentivized to sell longer period of private so that we actually have a cumulative effect on the AUM that they actually serve their clients with.

[Foreign Language]

So in terms of the Camsing update because of the coronavirus impact the pace of the investigation actually slows down a bit like I've mentioned before, it has basically completed the stage of police investigation and the impact to the district attorney, but I guess the processing time will be lengthened a little bit because of the recent pandemic impact, but Chairlady also wanted to share two very encouraging data point. One is for the Camsing clients about 30% of the client have made separate new orders with Noah and that total amount is about RMB3 billion. So close to the entire principal for the Camsing products. And one other one is [indiscernible] diary clients that the entire original principal for that investment is about RMB500 million and also 30% of that group of clients have made separate new orders with Noah and the amount actually is also close to RMB3 billion but if you look at that, that's like six times of what they had in [indiscernible] product. So that really provides us with pretty encouraged sign of client's continuous trust and satisfaction with Noah. Katherine, does that answer your question?

Yes. Can I start off with two more questions? On the [indiscernible] product, what is your ticket price of the standardized products because our concern is that would that be substantially, would that have a different like say the other standardized product ticket size that are available in the market. So this is one. Second one is that I'm not so sure if I have missed it in the announcement, what is probably guidance for 2020? Thank you.

Yes we do have the guidance in the 6K in the last paragraph forecast. That number is between RMB800 million to RMB900 million non-GAAP net income and in terms of the average transaction value in ticket size and your concerns on standardized products Chairlady will give you a little bit more insight on that.

[Foreign Language]

When our clients actually make purchases online they will go through the relationship managers and so some self service directive transaction on the standardized products. We're actually seeing that trend to continue in the future. In terms of average ticket size of standardized, obviously comparing to probably private equity or real estate in the past the one-off other will problem will appear lower but in terms of frequency as well as the actual transactions that will occur, the total amount we expect that to be higher. I think that's pretty evident -- will be pretty evident when we have to quarter one results come in.

Thank you and the next question comes from Stephanie Pun [ph] with City.

So the first question just want to understand what is the driver for your 2020 guidance. So wanted to see on the transaction value outlook for this year, so you expect that to actually drop year-over-year and in terms of the mix I guess standard products we have seen increased momentum but why don’t you also talk more about the other products for example the PD product. What are we seeing on the momentum here? I guess that over the past two years the PE has been gradually muted because of the whole industry slowdown, I was just wondering whether you expect any recovery or pick up in the volume for 2020 and also what would be the overall AUM growth for this year. So you still expect positive AUM growth? And also the next is about the operating margin outlook. as you mentioned you expect to spend more on the IT, does that mean that operating margin we should see a decline in this year or there is additional room for you to maybe cut the cost or for headcount reduction etcetera? And lastly want to check on the management fee that we'll see in the fourth quarter the management fee is still pretty high. Just wondering what the drivers here or rather that is also because of some early redemption of your private credit card?

So, in terms of the guidance, the total transaction value to not only referring to standardized products, but the entire transaction value and we actually are reasonably confident or expect a recovery or even moderate growth than the total transaction value 2019. So obviously the main drivers come from standardized products, but that's not to say that we're going to like we have mentioned before in the speech that we're going to give up or move away or disregards clients demand on private equity products as well as real estate products and other traditional popular product. So as a matter of fact we actually have already put out a schedule top private equity managers as well as continue with some efforts to find excellent projects real estates and other alternative investments if you will. So I guess transformation I want to clarify again is moving away only from the single counterparty credit product, but we're still continue to offer actually find good products for our clients to have especially private equities. We actually will have a pretty good distribution of a particular beginning in the first quarter of this year already and also in terms of total AUM for Gopher because of the continual redemption as we planned to basically to refuse the balance on SE credit products for the year, so it will continue to come down. It will partly offset the growth in the total AUM in Gopher in 2020. So we expect that the AUM for Gopher to be flat with 2019. In terms of operating margin like I mentioned before, we're actually quite did quite a little bit of work this year especially after the second quarter. We would have had operating profit margin of around 35% to 36% if we didn't have the one-off expenses as well as write off of accounts receivable which we don't expect to have very unusual one-off expenses relating to this particular matter in 2020. So I guess in terms of operating profit margin I'm pretty comfortable to predict should still be pivot around 30% like we have done in the past. Obviously, if there is room for further improvement, we'll continue to do that. I think one of the things I like to mention is once the pandemic started after new year festival, Noah was the first one who comes out and say okay we would probably want to plan for emergency. When we do have their healthy cash flows and profit, both amongst the first one to actually exercise the non-paid leaves as well as the senior management waiver or even very significant reduction on their salary for the two months. So we're very cautious on the cost. I want to assure you of that. In terms of the operating fee, management fee for the fourth quarter we did have a little bit of the management fee sort of similar to third quarter in the backend but the number is not very significant in the fourth quarter. So still it's a continuous growth in AUM especially the growth in standardized products. So the management fee rate might be low for this type of products, but the actual growth in volume for the standardized products is actually pretty significant as we have mentioned in the speech.

Can I just quickly follow-up on the PE side. So we just say that actually in a post parenting month and the supply is improving 2020 and that will drive the recovery in the volume or AUM.

Right. Was that a question or a comment?

Question. Just wanted to confirm.

You wanted to confirm the PE will also grow. We have…

Is there still recovery on both the demand and the product supply side for PE? So just want to see we have some other constraint on the supply.

Yeah. I think we'll basically see the recovery on both supply and demand side. Where the sky never went away like I've mentioned or shared earlier that there's some seasonality in terms of PE's offering or doing their fundraising. So little bit of randomness in that timing if you will but this year the actual stronger performance in secondary market do quiet the need for good PE products but only associated with the top names. We see that actually very apparent. Our clients actually it's a probably general market condition the clients concentrate capital their investment in the top names but for the smaller and less known names they will have little bit challenge. So we do see a recovery in the PE fundraising in both supply and demand side if you will.

Thank you. And as there are no more questions at present time, I would like to return the floor to management for any closing comments.

Okay. If we don't have any further questions, that will be all. We also scheduled some conference calls after what you have questions that went unanswered, feel free to contact me or the IR team directly.

Thank you for attending today's presentation. You may now disconnect your lines.