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Xinyuan Real Estate Co., Ltd. (NYSE:XIN)
Q4 2019 Earnings Call
Apr 3, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, thank you for standing by and welcome to the Xinyuan Real Estate Company Limited Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time.

Now I'll turn the call over to Ms. Julia Qian, Managing Director of The Blueshirt Group Asia. Ms. Qian, please proceed.

Peter Chen -- Analyst

Hello, everyone. Thank you all for joining us on today's conference call to discuss Xinyuan Real Estate Company's financial results. For the fourth quarter and the full year of 2019, we released the results early today. The press release is available on the company's website as well as from Newswire services.

Before we continue, please note that today's discussion will contain forward-looking statements made under safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectation expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filing with the SEC.

The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. On the call with me are Mr. Yong Zhang, Chairman and Chief Executive Officer; Mr. Li Shangrong, President; [Indecipherable] Vice President; and Mr. Brian Chen, Chief Financial Officer. Mr. Zhang will make comments on business results and strategies; Brian Chen will provide additional detail on the company's financial results and outlook.

Mr. Zhang, please go ahead.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Thank you, Julia, and hello, everyone. Thank you for joining our fourth quarter and full year 2019 earnings conference call. In 2019, China's holding market [Indecipherable] value and sell price. This was due to consistent regulatory effort by the central authorities and the local government to curb property at [Indecipherable]. We view this as healthy development and accord the government effort. We believe both customers and developers are better off to have both prices and new construction with [Phonetic] underlying demand. In that regard, we are still bullish on the long-term growth prospect in China. We believe the economics will continue to grow robustly, moving more and more families into the middle class. Similarly, we see the best economic opportunities for people in the large cities. So, urbanization should continue.

This has a massive revolution over the past decade, less than 16% of the population being in the cities. We expect that proportion to grow up to 70% in the next five to 10 years. The mass cities like Beijing, Shanghai, Guangzhou and Shenzhen are already extremely expensive. So, we think urban iteration will shift to other large expensive cities. We have positioned both capitalize on this [Indecipherable] with our focus our high quality home in Tier 2 -- Tier 1 and Tier 2 cities. 2019 reflects environment of [Indecipherable] hampered by the efforts to reduce the [Indecipherable]. Our full year revenue reached to $2.5 billion, up 11.9% year-over-year. This was driven -- this was driven by higher GFA sales, which increased 7.1% to 1.14 million square meters from 1.07 million square meters in 2018.

In 2018, we also strengthened our infrastructure. In October, we listed our property management business on Hong Kong Exchange. In addition to monetizing that business and achieving our additional capital to elect retail investors to [Indecipherable].

Our confidence in our long-term outlook is reflected in our [Indecipherable]. We again declared a dividend in the fourth quarter of per ADS. The cash to them will be paid on May 8 to shareholders on record as on April 17, 2020. We have been paying dividend since 2011, and I'm very pleased that we were able to continue this in this year. We are proud that our operating team is excellent, and financial strength -- we're commonizing [Phonetic] our industry for the 15th straight year. We were ranked in the Top 100 Chinese Real Estate Developers. This is important because it reinforces our [Indecipherable] potential customers, investors and partners. Equally important is our -- claimed as top five Chinese real estate developers. Integrating technology to improve our propriety and the services is the key differentiator that may impact to drive good growth. So we are pleased that the industry recognize our this fiscal.

With that, please allow me to turn the call over to our CFO, Brian Chen. Brian, please go ahead.

Yu Chen -- Chief Financial Officer

Thank you, Mr. Zhang, and a good day, everyone. Thank you for joining us on the call today. I'm excited to be on this call. I have been on a recent trip to [Indecipherable] since early February. And New York has given me the opportunity to speak with many of our shareholders as well as [Indecipherable] investor. I want to say our shareholders for your support, your interest in our company and your constructive feedback and suggestions. Since we have been in public in 2007, we have been developing a holistic real estate ecosystem positioning to capitalize on invest returns. We are proud by the recognition we received for [Indecipherable] and are excited about our future.

As Mr. Zhang just mentioned, we finished 2019 with a solid results. This is not easy. Given our optimistic outlook, you should not be surprised that our level of development is still high and growing. At year-end, we actually had 1.9 million square meters of active projects and another 2.6 million square meter of project in planning. We are building the timeline with this project that will fuel our growth in 2020 and beyond.

So starting 2020 was challenging as all of you know. Our industry was already gapping [Phonetic] with a slowly economics and the regulatory efforts, and then of course the virus case. The Chinese government did an outstanding job in quickly bring it under tight control, saving hundreds of lives in China. We applaud and fully support that effort. Of course, that means we need to manage through a fixed lock down across our markets in China, like any of our peer developer in China. To fully support this virus effort, we closed all our sales office and construction site for the last one and half months. We have quickly and switched to virtual work, including promoting online sales. Nevertheless Q1 of 2020 result will impact to some extent by this national quarantine. But for that Q1 is typically our slow season. The impact of Q1 only comprise like 6% to 8% over the year budget. So at this moment, although we are not expecting a reality -- we are expecting a relative modest impact from a whole year [Indecipherable] net income in this year should be similar to 2019.

Weaken sales trends in China support our optimism. Even as the pandemic spreads globally, China actually appears now to have contained the spread. The new identified patients in China fell to double digit, so this 1.4 billion population country and we see this is [Indecipherable] and consumer confidence and spending a gradual recovery. We see ourselves recovering, however so virus now spreads globally sales in US and UK are being impacted to some, but to a lesser scale. Since our business comprise of only a small percentage of our overall budget. As we look forward, we remain confident and optimistic, we entered this challenging period, with a strong balance sheet and solid cash position. This enable us to weather a storm by reviewing in the last 20 years and 30 years. We will exit this period with equal financial strength and even stronger business operation. Our property development is provisioned to capitalize on the most compelling strength. We are augmenting our core development business, with the other auxiliary business such as the property management service, while revenue side is about [Indecipherable] we can achieve in 2020 and beyond.

Now let me go through the financial results. We are a long cycle business, this project event year. So, we measure our own progress on an annual basis. I will reveal our performance for the full year of 2019. And then later we'll touch on the Q4. Revenue of 2019 is $2.5 billion, growth by almost 12% compared to year before. Contract sales let us down, a mid-single digit, but the GFA sales actually were up 7%. As Mr. Zhang mentioned earlier, the government took action to reduce speculation in the real estate, softening the impact of pricing in China. We actually applaud these actions that will setup the industry for healthy and sustainable growth. We believe that the gross floor area, the GFA growth, actually demonstrated the underlying demand remain solid. We continue to attract customer based on the quality of our properties, caring [Phonetic] property demand and innovative use of the technology.

Gross margin for the year was 22.6%, about 5% lower than last year. We may [Indecipherable] but the decline actually was due to a one-off conservative adjustment due to the lower forecast of the future revenue of three of project and other adjustment a full course of two projects. Xinyuan took a very conservative approach and the profitability and the revenue on our project on the through cycle basics. We continue to do this for year. At least the external environment challenges we talking on even more conservative approach this quarter, which result in one-off adjustment. Net impact of this adjustment is about $62 million, [Indecipherable] you set out these one-off adjustment, our gross margin is actually about 25%, which is comparable with last three years average gross margin and impact our solid foundation.

As always we're closely managing the expense. We saw SG&A of 250 million. We actually reduced our SG&A as a percentage of the revenue, down 80 basis points to 10.8% -- 10.1%. We did [Indecipherable] to 2020. We remain especially vigilant on expense control. As a matter, two weeks ago, we made another cut on our SG&A in our 2020 budget. So we may decision operating to go with the challenges.

In the last month, I see a lot of concern and question about our higher tax rate, which kind of putting pressure on our net income levels. Our net income of the $83 million this year, which was down by 21%. Our timely yield to the tax rate, pretty high this year again. To explain that out for these overall income tax compared peer is we have some unique component for operating in China. After this is overall income tax, about 45% actually driven by some effects of rate [Indecipherable] impact, which is part of the cost of doing the real estate business in China. Only 55% are calculated actually based on the net income before tax. For the pure corporate income tax, the rate is -- the effective tax rate was well under control at about 26% in China. It looks higher, because we build up dividend cash provision for revenue was early in China as a conservative regimen, we set up a provision year-over-year of 10% of dividend withholding tax on top of our corporate income tax. There's no cash impact for this dividend withholding tax, allows them to do that. Of course another component driving our corporate income tax on a consolidated basis is because we have some overseas expense that cannot transfer back to China on the project. So, appreciate the tax deduction impact.

Now, let me quickly touch on the fourth quarter. Revenue was down due to a lower contract sales due to about four to five projects that did not launch for our original schedule. The sales was -- has been postponed and moved into 2020. We expect that sales can pickup in Q2 to Q3 in 2020. Gross margin decreased versus last year, again due to that Q4 one off conservative adjustment on the forecast on our project. If you factor out these adjustments, our gross margin for the quarter stayed at about 23%. As mentioned earlier this year, all the year is 25. They are pretty healthy number compared to the price for the year and compared with the peer company in China.

Now let's turn to the balance sheet. The hallmark of Xinyuan is our financial strength. Our strong balance sheet gives confidence for our customers, lenders, suppliers and shareholders. At year-end, our cash was over $1.1 billion. This was a significant increase during the course of the year. We generated cash flows from operating and the finances. For the whole year, we maintained a very positive cash inflow from the operating activity and actually used a majority of that net inflow to pay off our outstanding debt. So, on the liability side, debt was a little over $3 billion was balanced between long-term of about $1.7 billion and the current debt of about $1.5 billion. For this current portion of $1.5 billion, 25% of them are still in Q1. As at this point, we had already resettled those current debt in Q1, used the cash and on hand. Including in March, you saw that we being [Phonetic] $200 million coming due offshore senior notes is on schedule and in full.

We took pride -- great pride in meeting all of our financial obligations when they come due. Underlying our confidence is how real estate works in China. Well, if a property are often presold with cash, we can collect within three months from presales. We have over $3.3 billion of property under development and have $0.5 billion project available for sales. That provide a huge highlight of sales in cash collection. We have used the cash in part to reward our shareholders as announced by Chairman, Mr. Zhang earlier. We continue to pay a quarterly dividend. We pay this quarterly dividend since 2011. For the quarter, we continue to pay a cash dividend of $0.10 ADS, which means that our overall profit attributable to shareholders, the payout ratio is about 37%, which is a very healthy percentage. It's consistently comparable with other Chinese peer real estate developer.

Furthermore, as of Q4 2019, the company has cumulatively repurchase around 1.3 million ADS. At this point, we had already buy back about 14.5% on our ADS. We will continue to do so based on the solid cash position and the confidence of the underlying ground, the essential ground of company's operation. Additionally, I just mentioned, the listing of our property management company in Hong Kong that generate cash for us, but more importantly, enabled us to highlight the quality of that business. We hope the similar end of this call earlier this week. As of March 31st, the company had a market cap of HKD855 million or $110 million. The business goes well, and I would recommend you to look for the company trading code of 1895 and review the growth of the -- and the are in the Group's financial performance.

As you know, we are a global company with aspiration to accelerate development outside our core market in China. We also made great progress in efforts in 2019. In US, we absolutely say, we saw 82% of the units in the Oosten project in Brooklyn. In Hudson Garden project, we increased the number of units can sell from 82 to 92 and leave a majority of the retail space to Target for 20 years timeline. We are now marketing the project in China -- both in China to the Chinese buyer and in US to the local buyer. At the RKO project in Flushing, we received approval for our landmark preservation plan, a key milestone for project with important historical value. We have completed the design work and plan to start construction by the end of 2020 or early next year.

In UK, the Madison project is on track. With construction on plan in Baxter, we intended to complete work this year. We had sold about half of the units in Madison as at this point. Looking forward, [Indecipherable] challenge in this space as we started this year. The first quarter will impact to some extent but because it comprise of only about 7% on our full-year budget, we think we can recover very likely 2% to 3% shortfall in the quarters to come. At this point, assuming the virus is under control and the world, at least in China -- within Chinese borders, slowly returned to normal. We anticipate the full year 2020 contract sales of about RMB20 billion to RMB22 billion. Consolidated net income would be around $18 million US dollar, which is similar to current year.

With that, let's open the call for questions. Mr. Zhang and I are available, along with our President Mr. Li and VP Finance [Indecipherable]. Operator, please proceed.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we will take our first question from George Guo [Phonetic] who is a private investor.

George Guo -- Private Investor -- Analyst

Hi. The first question is how much impact from the leasing cost in Hong Kong to this quarter.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

The leasing cost, there are two components to it. One component is coming from the share-based compensation due [Phonetic] for this leasing process and the number is about, give me a sec -- the impact is about $1.7 million stock-based amortization -- compensation. And the other component obviously is about the leasing cost. The leasing cost is about -- is about $3 million.

George Guo -- Private Investor -- Analyst

Okay. Thank you. Second question is, I know it is a large increase in cash position. How did you achieve that?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

So the other increase of the position on one hand is coming from the positive cash flow we had in the Q4. For the -- to come to the exact amount, let me pull out the information, in Q4 our cash -- we had about $457 million coming in -- the positive cash coming in for the quarter. That is the main reason. And at the same time, some of the gross inflow also coming from the financing activity. We to meet the debt deal in the quarter we as a factory [Phonetic] raised about RMB4.4 billion of debt even though the net cash provided by the financing is actually negative $53 million debt financing held. Overall the cash increase in fourth quarter is $414 million.

George Guo -- Private Investor -- Analyst

Okay. Last question for me is can you clarify how it impacts the gross margin? You said that you took some charges. Can you explain that again?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Sure. In this quarter we used even more conservative approach to look at all of our projects, profitability and overall cost. Bear in mind that we used the POT method to recognize our revenue and cost. So the POT [Phonetic] recognition is pending on our estimate for the overall projects of our revenue and the costs. So this quarter we looked at maybe three of the projects that we significantly reduced our sales estimate and at the same time we had two projects that we increased the estimate of the overall target costs. And so because of this very conservative approach, the gross margin was reduced or adjusted by $62 million. So this one-off impact, the year-to-date gross margin was reduced by 25% on the underlying operation to about 23% and quarter to date, our gross margin ratio was reduced by 22% to 23% in the underlying operation to around 15% on the book.

George Guo -- Private Investor -- Analyst

Okay. Thank you very much.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Going onwards we will continue to use a very conservative approach to do this. I expect the impact won't be as big as this one because this adjustment [Indecipherable] in the historical accumulated adjustment for the last two to three years.

George Guo -- Private Investor -- Analyst

Okay. Thank you. Very good cash management. Thank you.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Thanks.

Operator

[Operator Instructions] And we will take our next question from Franklin Martin [Phonetic] who is a private investor.

Franklin Martin -- Private Investor -- Analyst

Good morning and congratulations on a good year. I have just a couple of questions. Can you give us or maybe put on our website how people can access the valuation, the price of your Hong Kong real estate property management business just so people can monitor that? And what is the value of that you owning a percentage of that company, what is the value to you of that listing, the value of your share?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Okay. First of all for the -- for that property service company we appreciate a pretty good growth and the investments from the Hong Kong investment community gives you a pretty good recognition of the revenue. For that business line, it's always part of our business but it only comprise of about 2% to 3% of our overall sales within our consolidated financial statement. So that 3% to 5% though is revenue growth for the year -- for the 2019. So revenue grows by 36% and the margin grows by 61% and the gross margin as high as 38%. The net profit grows by about 8%.

What that number showing in Xinyuan as part of the number listed in stock -- New York Stock Exchange the PE ratio would be about like less than 2 times, currently at about 1.2 times. I split it out and listed in the Hong Kong Stock Exchange currently a [Indecipherable] PE ratio of about 10%. Compared to our peer company in Hong Kong, a lot of them probably still come leased by about 25% to even 50%. So for one thing, we believe that being on Hong Kong, we will have the value unlock there and there will be more liquidity and more transaction.

As a shareholder, you won't be able to directly go to the Hong Kong to appreciate the -- to get this appreciation directly, but you do get indirectly Xinyuan's holding of 60% of that company. The other thing is that, bringing that office in Hong Kong, we held this office growth faster and better because we not only if you bring in refinancing and additional function, additional downgrades opportunity, but also we stand to [Indecipherable] separately in Hong Kong, it will give it a more important and [Indecipherable] and to the stakeholder and the community. And it will help this business grow more houses and managing better. I hope I answer your question that way.

Franklin Martin -- Private Investor -- Analyst

One other question, you talked in the last few conference calls about reducing your debt and making your balance sheet stronger. Where would you like your debt to be and how long do you think it will take to get there?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Okay.

Franklin Martin -- Private Investor -- Analyst

Reducing it or are you where you want to be?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Xinyuan are serious about control of bringing our stable ratio to a healthier position. As mentioned in the last three quarters we're committed to do that. By the end of the year, let me throw out the exact number in terms of the debt, our overall debt actually reduced -- our debt reduced from about $3.2 billion [Indecipherable] to about 3.5 and the liability ratio -- the overall debt ratio decreased from 91% to 89%, sorry it's opposite way. The totally debt reduced from $3.5 billion at the end of last year to $3.2 billion by the end of this year. The overall debt ratio decreased from 91% to 89% and the net gearing ratio decreased from 304% at last year-end to 256%, call 10 [Phonetic] defending we expect that the overall that will -- we're going to reduce by another 16% also. So the overall debt ratio will be continued to be deals by another 2% to 3% to around 86%, 87%. Our net gearing ratio will be further reduced to be around 250%. That is not enough and not good enough. Our two year to three year goal or I would say 18 months to 20 months goal is to bring our overall debt to around 65% [Phonetic] and net gearing ratio to around 150. That's a long way to go, but we are on the right track, we are moving to the direction.

Franklin Martin -- Private Investor -- Analyst

It sounds like you've made a lot of progress, but you still want to go a lot further, which I think gets the story more attractive. I would applaud you for continuing to improve the balance sheet. I think that's wise move.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] And we will take our next question is from Alex Mac [Phonetic], who is a Private Investor.

Alex Mac -- Private Investor -- Analyst

Hello. Hello, can you hear me?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Hi Mac, we can hear you.

Alex Mac -- Private Investor -- Analyst

Okay. I'm a shareholder, a long-term shareholder. The reason I want to call is, obviously like many shareholders disappointed with the share price, which is almost all-time low. And the market cap for the company right now is about on the $200 millions or $230 million. So as a shareholder I'm just wondering what the company is doing to improve the confidence of the investment community? I know that you had bought some shares back, but personally I as a shareholder I read about the comments I see in the websites about the company, there is a big concern with the level of debt the company has, in particular those debts are at high interest rate may be 9% to 10% almost. So because of those high debt and high interest, I think the investors are very, very worried that the company may not be able to manage and should a point of -- may not be able to survive. And for that reason I think a lot of investors are shying away from owning the shares of the company, even though the current price is so much lower than the book value of the company, which is in the neighborhood of about $10 a share, [Indecipherable] now creating $2 a shares. So I think -- I don't know the inside detail of the company, but it's just one of my view is that I know the company pays a very good dividend, about $0.40 per year, $0.10 per quarter. Why wouldn't the company, not to say reduce the amount of dividend or even remove it and use the funds from the payment of dividend, which roughly per year is about $25 million to buyback the company's shares. If you use that to do that for five years, you will completely buy back 100% of the shares. As you know, in the -- in the share market, the price of the share is dependent upon the supply and demand of the shares. If there is more buyback by the company, I'm sure the price of share will shoot back up, instead of using the money to pay the dividend, I think more money should be saved from the dividend payment and use it to buyback the shares or use some of it to pay down the debt. So I know the company has been growing very well, but all these growth at the expense of high debt and high leverage really is not serving the interests of the shareholders. And I do know that the Chairman of the company owns a significant chunk or percentage of the shares, but still a lot of the shareholders out there, like myself have been holding the company for the last almost 10 years, the share price has been going down, it is very disappointing.

So I'm just -- my question is, is the company doing something to help to reduce the debt or number one, number two, maybe reduce the payment of the size of the dividends and use the money -- and save the money to buyback more shares? Okay. Can I get some response back from the company, please?

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Okay. First of all Alex, I appreciate your long-term confident in the company and holding share. We share the same disappointment on the share price performance. Just a few things that we are working on. One thing is that we are endeavored to improve the communication to the outstanding shareholder as well as the potential investor. As you were talking about -- one story is that share price will be driven by the true value and the growth potential for the company that's [Indecipherable] like focus almost 100% focus on in the past 10 years. But on the other side, as you were talking about the supply and demand, we need to create the confidence and have information throw more clearly and more transparently and use a holistic approach to create understanding and confidence on the company. So, starting from early this year, we will deal with the PR strategy, the investor relations strategy. That's the reason we switched to a new PR firm, Blueshirt. We are -- in the last few months, we did all we could. We had an intense communication with our outstanding shareholder and a potential one. So, firstly we are doing is to improve the communication and Investor relationship and address the need to understanding and somewhat like an even totally baseless speculator or guess about the company's cash position and going concern. That is one thing we need to address.

Second thing, as you were talking about, we had to reduce the debt and bring it back to a healthier level. Let's make it clear. If the industry in China is a capital-intensive industry, and the profitability and turnover can sustain a high level of -- maybe high cost of the borrowing -- number of borrowing. We know that debt is not -- it's only due to make the settlement, if only you can generate more revenue higher than cost of the borrowing. So, we are not going to reduce things like 80% or 90% of that to zero level. But you worked gradually related to a more healthy percentage as I answered to the previous investor.

In terms of the dividend payout policy, we are simply looking at the policy for the last three year and compared to the other peer company. For Q4, we believe that the payout ratio is reasonable. We have sufficient fund to make for that $6.5 million dividend payout. For 2020, we review the external environment, and we will -- at the discretion of the Board to tell what is the fact to the shareholder for the company.

Last but not least, I would like to emphasize that, talking about the debt, talking about the concerns, don't forget that we had about 4.5 million square meter of land bank. On the board, it's filled by book value. But in fair market price or scalable [Phonetic] levels, we have 67.5 billion trying to [Indecipherable] on the land bank, and all this land are located -- well located in the Tier 1 and Tier 2 cities, and the liquidity is pretty well. if there is a need, we can convert this land into cash to make the myth [Phonetic] the debt settlement. But at this point, we did that through our budget, we should have a positive operating cash flow and healthy reasonable financing target to make the whole year debt obligation map.

Yu Chen -- Chief Financial Officer

[Indecipherable], the Chairman would like to make comments on the share repurchases. For the fourth quarter of 2019, we actually repurchased back around 1.3 million ADS. So -- and the Board already approved a certain amount of ADS we could buy back from the market. So, with that, Chairman would like to add on.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Thank you, gentlemen. So, we answered you, Alex?

Yu Chen -- Chief Financial Officer

I'm glad you addressed the issue I've raised. But I still feel that the company's debt is the main concern and debt is staying away from the company, because especially those debts are at very high interest rates, it's for 9% or 10% or 8%, that's very high. I know, there is the need for money as long as the cost as the revenue is higher than the cost of interest, but still the investors are very worried about the level of the debt. That's why they are staying away.

And the other point that we just talk about is the amount of dividend. I think, based on what I see in the stock market, the level of dividend, which is about $0.40 a year, is very good dividend. If gives you a yield of almost 20% right now with the share price of $2 a share. It's not helping the share price. So, in my view, if you're paying $0.10 per quarter, maybe reduce it to $0.05, use the money saved and to buy back the shares. Because annually at $0.40 a year, that amounts to, based on the outstanding shares of about 16 million shares or 50-something million shares, that will cost the company about $25 million a year. If you use half of that money, let's say you reduce the dividend from $0.10 per quarter to $0.05 a quarter, or annually $0.40 to $0.20, you use the extra fund saved and got to market and buy the shares, I think it'd be more helpful.

Would you agree -- I'm just wondering, because as you can see, in the last five years, the company has been paying this good dividend but it is not helping the share price. Because for a growth company, we don't need a lot of dividends to attract investors, just pay some dividend, reduce it from $0.40 to $0.20, just a suggestion, and use the extra fund saved, which is about $12 million to $15 million to go back to the market to buy this shares because your company shares are not of a high volume, average about 100,000. You can buy back quite a bit -- quite a few months here with that money saved. In some cases, we might even reduce the dividend from, say, $0.40 to $0.20 a year. So you have more money, go back to market to buy the shares. So I hope the company will think about my suggestion, use -- reduce the dividend in the future and use the money saved to go to the market to buy back the shares. Said one thing.

And the second thing is, like I said, it's good to grow the company with [Indecipherable], but if you have the debt at too high a level, investors will find it too risky to invest in the company.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

And thank you, Alex. As we're almost run out of time. But we...

Alex Mac -- Private Investor -- Analyst

Okay.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

...appreciate the solid input. We do take this into consideration in the next line of dividend policy reveal. Just to let you know that we really appreciate all shareholders candid and straightforward input, anything can help the long-term value of the company, we will see if we're considering that. During dividend payout in the last few quarters and this one is not our stock last to continue buyback our share as well as buy back our outstanding debt. We are actually continuing working on that -- on the weaker pound basis [Phonetic].

Alex Mac -- Private Investor -- Analyst

Thank you.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Yeah, please take that into account for your future opportunities and actions, especially the debt level. High interest rate...

Alex Mac -- Private Investor -- Analyst

Yeah.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

...was 10% at a time when the prime interest rate in the US is 2%.

Yu Chen -- Chief Financial Officer

Yeah. Thank you. Alex. Thank you.

Alex Mac -- Private Investor -- Analyst

Okay.

Operator

And we will move on to our next question. [Operator Instructions] And we will take a question from Peter Chen [Phonetic], who is a Private Investor.

Peter Chen -- Private Investor -- Analyst

Hello. [Technical Issues] So that is my opinion. Thank you.

Yu Chen -- Chief Financial Officer

Thank you, Peter. I appreciate your comment. As mentioned earlier, we are currently still at a comfortable position to do post the dividend payout and buy back our shares. [Indecipherable] according to the volume. But we are working on that. We pretty much kept the volume and we are trying to have -- looking for the other alternatives to improve and are pretty more confident back to the outstanding shareholder and the potential. Thank you for your comment.

Operator

Thank you. Seeing no more questions in the queue, let me [Indecipherable]

Yu Chen -- Chief Financial Officer

Chairman would like to comment on that. Hello. Chairman would like to comment on that question, please.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

[Foreign Speech]

Unidentified Speaker

Okay. Chairman quote -- Chairman commented, China has a very large real estate market overall with high speed increase over the past couple of years, and we need to leverage the high debt as well as the increase of the Company's growth with the profit as well.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

[Foreign Speech]

Unidentified Speaker

For the next three to five years, we like to keep the good balance between the good shareholders' return as well as the good increase for the Company's revenue and profit.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

[Foreign Speech]

Unidentified Speaker

We've been continuously repurchasing the Company's share as well as the debt.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

[Foreign Speech]

Unidentified Speaker

We will be continuing doing so. Okay, that's Chairman's comments on that. Thank you.

Operator

Thank you. And seeing no more questions in the queue, let me turn the call back to Brian for closing remarks.

Yu Chen -- Chief Financial Officer

Thank you, operator and thank you all for participating on today's call and thank you for your support. We are [Indecipherable] and look forward to reporting to you again next quarter on our progress. Thank you, operator.

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Yong Zhang -- Director, Chairman of the Board and Chief Executive Officer

Yu Chen -- Chief Financial Officer

Unidentified Speaker

Peter Chen -- Private Investor -- Analyst

George Guo -- Private Investor -- Analyst

Franklin Martin -- Private Investor -- Analyst

Alex Mac -- Private Investor -- Analyst

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