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Noah Holdings Limited (NYSE:NOAH)
Q4 2019 Earnings Call
Mar 25, 2020, 8:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and Welcome to Noah Holdings Limited announces Unaudited Financial Results for the Fourth Quarter of 2019 Conference Call. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator instructions].

I'd now like to turn the conference over to your host today Jingbo Wang. Please go ahead ma'am.

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

[Foreign Speech] 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 of 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 a more ultimate challenge, which tests our attitude as humanity when facing a crises that's threatening our life.

At this point, I'm 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, Noah'a 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 five to 10 years.

Therefore we're able to reach a clearer consensus on where we should persist in our core strategy for the long run and 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 mandates cancel, travel restrictions and longtime telecommuting deployed to combat the sudden breakout of the global COVID-19 epidemic.

Next, I will go over Noah's 2019 performance. In 2019, net revenues for the full year reached RMB3.39 billion, up 3.1% year-over-year. Non-GAAP net income attributable to shareholders reached RMB1.04 billion, up 2.7 year-over-year -- 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 products 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 continued 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 Speech] 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 ultra-high net worth clients, Black 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 Black Card 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.

For 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 Speech] By the end of 2019 Gopher's AUM reached RMB170.2 billion, among which our voluntary division to cease offering single counterparty non-standardized private credit product caused 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 the AUM of our multi-strategy funds increased by 31% year-over-year. We also achieved solid AUM growth in our conventional products, real estate and private equity.

For public securities products, Gopher focuses on large asset allocation and pursues low volatility and absolute return, which are high net worth clients rigid demand. In 2019 the investments return of Gopher 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 funds, the Smart Better Index Enhanced Strategy Reliant 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 giving up on other 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 collaborations with the best alternative investment managers and working with the best alternative investment team in the United States to strengthen our globalization approach.

[Foreign Speech] 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 RMB163 million as a result of Camsing related legal expenses. If 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 professionals 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 infrastructures 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 SaaS system for institution channels.

[Foreign Speech] In 2019, the paradigm shift in China's wealth management space was well on the way. Noah was determined to leave the old track 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 four 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, the most important of which was the establishment of the product platform and direct sales channels that are open to the globe. In the coming decade, Noah will continue to understand client's evolving needs, pivot around clients interests and improved stability of our performance. In the meantime, we're opening up our channels to promote our products from direct sales to selling on a commission basis and to serving independent financial advisors with a goal of constantly extending our AUM.

[Foreign Speech] The COVID-19 epidemic has pressed the pause button on normal daily operations. Faced 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 investment 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 has covered 560,000 people and help 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 under 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 regard 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. The 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 lifestyle instead of glorifying lavish entertainment.

We also aim to become real person 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 examining our mission, vision, values and our organizational as well as 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 centering 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, all 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.

Qing Pan -- Chief Financial Officer

Thank you, Sonia, and thank you, Chairlady for sharing her thoughts. And this is Grant. Dear investors and analysts, good morning. Today we're certainly witnessing lots of turbulence's 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 that ranged from the Sino-U.S. trade friction, the Hong Kong situation and other geopolitical issues.

On top of external headwind, we underwent a major transformation in our product and service strategy. This last quarter, which is quarter three, we seized the offering of a major product category, the single counterparty nonstandardized private credit. It's really long name, so I'm going to refer that as SD credit going forward products. That once accounted for as high as over two-thirds of the transaction values in last year.

However, as Chairlady Wang has already mentioned, we manages 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. For revenues, 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 values 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'm 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 toward 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 associating with Camsing. To elaborate on the real opex, stringent policy and smarter traveling has cut our traveling conference cost by 15% year-over-year. And as some of you may be aware, we commenced the consolidation and simplification of the internal organizational structure that brought down our total headcounts from -- 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've mentioned before, the transaction value has stabilized at RMB13.2 billion.

But management also acknowledges that recovery to full capacity would take some time. Besides the share amount, we're more delighted to see the initial sign of success in 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 million, down 5% year-over-year. But our revenues from one-time commissions continue to face the most pressure during the quarter four of 2019, recording a 33% decrease year-over-year, but if you compare it to the last quarter, which is the 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 and return for clients, as a wealth and 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, our 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 fair value changes in equity investments, as well as share-based compensation. That two amounts contributed around RMB40 million to the different.

As 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 purely financial products.

And 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. The uncertainty remains depending on when the travel bans and normal social order will be restored at some of the oversea area, because some of the overseas value-adding 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 I 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 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.

Questions and Answers:

Operator

Yes. Thank you. And we'll now begin the question-and-answer session. [Operator Instructions] And the first question comes from Ethan Wang with CLSA.

Ethan Wang -- CLSA Limited -- Analyst

[Foreign Speech] 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. And so we think there may be two reasons, the first maybe because of the increasing -- the relative fast increase of active clients. And second reason maybe from our strategy, we focus on the standardized products. But we want to hear more from the management on these issues, that will help the investors.

And 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 we wonder the reason behind. So except for the credit products, the ARPU has also declined. So is there any special reason behind this? And my third question is on the COVID-19 impact, the management had shared their view on this, but we 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 domestic Asia market has been very strong. So have we seen any strong growth in Noah standard product sales in the first quarter? Thank you.

Qing Pan -- Chief Financial Officer

Thank you, Ethan. And thanks for translating your 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, you can actually see that, our active clients for the quarter reached 15,000, but as the feature of the standardized product, the average purchases are probably not as high as the conventional, for example, the PE orders or some of the credit products. So that's 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 RE 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 know if it answered that, your first two persons. If it does, I can probably start on the third question in terms of the pandemic situation.

Ethan Wang -- CLSA Limited -- Analyst

Yes. That's perfect. Thank you, Qing.

Qing Pan -- Chief Financial Officer

Okay.

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

[Foreign Speech]

Qing Pan -- Chief Financial Officer

Yeah. Because we actually -- because the impact on the traveling, so we didn't hold the Diamond [Phonetic] Conference that -- as originally scheduled, but I guess we got lucky that the real strong performance in a shared market, as well as the equity market really stimulates the passion of client's investment needs or demand during that period. So we are 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 RMs interactions with the clients so much. And we're actually very happy to see the distribution or transaction value [Indecipherable] quite exceeding our expectations originally. Ethan?

Ethan Wang -- CLSA Limited -- Analyst

Okay. Thank you.

Operator

Yes. Thank you. And the next question comes from Yuan Xue with CICC.

Yuan Xue -- CICC -- Analyst

[Foreign Speech]

Qing Pan -- Chief Financial Officer

Okay. Thanks Mr. Xue. And let me translate your question first. The first question from CICC Mr. Xue is that, for the wealth management segment, would you have probably higher decreased feed on 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 basically 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 among the management. I guess also thanks to the pandemic situation, that people cannot travel. So we're able to log everybody in 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 or 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.

Yuan Xue -- CICC -- Analyst

[Foreign Speech]

Qing Pan -- Chief Financial Officer

[Foreign Speech]

Operator

Thank you. And the next question comes from Katherine Lei with JP Morgan.

Qing Pan -- Chief Financial Officer

Hi, Katherine.

Katherine Lei -- JP Morgan -- Analyst

Hi. Good morning. So I have two questions. The first question is to do 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. The second thing is that, in terms of like say, the subscription fee and then the management fee of this standardized product, how is it like -- can you give us more details on that? And how does it differentiate from like, say, the non-standardized 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 example, what's the percentage of clients affected by the Camsing case have already placed new orders or their sentiment? And then also the RM reactions to this case so far? Thank you.

Qing Pan -- Chief Financial Officer

Thank you, Katherine. Give me a couple of minutes to translate that question for everyone. Sorry for this side. just one second. So for your first question Katherine, let me address the first one, in terms of subscription fee rate, the revenue structure from the standardized bond we have mentioned before. I guess to give everybody on the call a background, is when we first started the transformation to standardized products in the third quarter of 2019, the main product we refer to is the 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 20-80, we have a little bit of stock favor -- 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, CMBs, market standard products I invite Chairlady to give us a little more insight on that.

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

[Foreign Speech]

Qing Pan -- Chief Financial Officer

Okay. So, thanks, Chairlady. So the main difference between our standardized product offered to clients and also the CMB, also some the banks standardized products, one of the biggest difference is the 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 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 investors having difficulty in making money even with the excellent fund is the wrong timing of entering and exit. Because of the 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 example, 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 it's between five to seven 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.

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

[Foreign Speech]

Qing Pan -- Chief Financial Officer

So in terms of the Camsing update, because of the coronavirus impact the pace of the investigation actually slows down a little bit. But like I've mentioned before, it has basically completed the stage of police investigation and have been passed to district attorney, but I guess the processing time will be lengthened a little bit because of the recent pandemic impact. But Chairlady also wants 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, I guess, principal for the Camsing products.

And one other one is the Huishan Dairy client. 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 Huishan product. So that really provides us with pretty encouraged sign of client's continuous trust and satisfaction with Noah's services. Katherine, does that answer your question?

Katherine Lei -- JP Morgan -- Analyst

Yes. Can I start off with two more questions? Sorry. On the standardized product, what is your average ticket price of the standardized products? Because our concern is that, would that be substantially -- would that have a difference, like say, the other standardized product ticket size that are available in the market. So this is for one.

Second one is that. I'm not so sure if I have missed it in the announcement, what is your guide -- profit guidance for the -- for 2020? Thank you.

Qing Pan -- Chief Financial Officer

Okay. Katherine, let me answer the guidance. Yes, we do have the guidance in the 6K in the last paragraph, forecasts. That number is between RMB800 million to RMB900 million non-GAAP net income. Okay? In terms of the average transaction value, ticket size and your concerns on standardized products. I'll ask Chairlady to give you a little bit more insight on that.

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

[Foreign Speech]

Qing Pan -- Chief Financial Officer

When our clients actually make purchases online they will go through the relationship managers and do 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 order probably 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 the quarter one results come in. Katherine?

Katherine Lei -- JP Morgan -- Analyst

Yeah. I think that's good. Thank you.

Qing Pan -- Chief Financial Officer

Okay. Thank you very much.

Operator

Thank you. And the next question comes from Stephanie Poon with Citi.

Qing Pan -- Chief Financial Officer

Hi, Daphne.

Daphne Poon -- Citigroup -- Anayst

Hi, Grant. Thanks for taking my questions. So the first question is, just want to understand more about the driver for your 2020 guidance. So more specifically on the transaction value outlook for this year, do you expect that to actually drop year-over-year? And in terms of the product mix, I guess, standard product, we are seeing pretty good momentum, but I want you also to talk more about the other products, for example, the PE 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? Do 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 build out, does that mean that operating margin should see a decline in this year or there is actually additional room for you to maybe cut the cost for headcount reduction, etc?

And lastly, I also want to check on the management fee that we see in the fourth quarter, the management fee is still pretty high. Just wondering what the drivers here? Wheather that is also because of the -- some early redemption of your private credit partners? Thank you.

Qing Pan -- Chief Financial Officer

Okay. Thank you, Daphne. Give me a sec. Okay. So in terms of the guidance, the total transaction value to -- not only referring to standardized products, but the entire transaction value, we actually are reasonably confident or expect a recovery or even moderate growth than the total transaction value of 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 disregard the 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 of 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 for transformation, I want to clarify again is, moving away only from the single counterparty credit product, we'll 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 the operating margin, like I mentioned before, we're actually quite -- did quite a little bit of that 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, OK, we probably want to plan for emergency. While we do have very healthy cash flows and profit, but we were among 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 that.

And 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 it still is 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. Thank you, Daphne. If that...

Daphne Poon -- Citigroup -- Anayst

Yeah. Can I just quickly follow-up on the PE side. So we just say that actually in both client demand and supply is improving in 2020 and that will drive the recovery in the volume or AUM?

Qing Pan -- Chief Financial Officer

Right. Is that your question or a comment?

Daphne Poon -- Citigroup -- Anayst

It's a question. Just wanted to confirm.

Qing Pan -- Chief Financial Officer

You wanted to confirm the PE will also grow. We have -- can you repeat that last part?

Daphne Poon -- Citigroup -- Anayst

Yes. So, there is still recovery on -- still do you see recovery on both the demand and the product supply side for PE? So [Speech Overlap] see there were some other constraint on the supply.

Qing Pan -- Chief Financial Officer

Yeah. I think we'll basically see the recovery on both supply and demand side. Well, 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 of clients -- actually it's a probably general market condition the clients concentrate the capital or 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.

Daphne Poon -- Citigroup -- Anayst

Okay. That's very helpful. Thank you.

Qing Pan -- Chief Financial Officer

Okay. Thanks, Daphne.

Operator

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.

Qing Pan -- Chief Financial Officer

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

Operator

[Operator Closing Remarks]

Duration: 69 minutes

Call participants:

Jingbo Wang -- Co-founder, Chairman and Chief Executive Officer

Qing Pan -- Chief Financial Officer

Ethan Wang -- CLSA Limited -- Analyst

Yuan Xue -- CICC -- Analyst

Katherine Lei -- JP Morgan -- Analyst

Daphne Poon -- Citigroup -- Anayst

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