Xinyuan Real Estate Co., Ltd. (XIN) Q2 2020 Earnings Call Transcript

Xinyuan Real Estate Co., Ltd. (NYSE: XIN) Q2 2020 earnings call dated Sep. 02, 2020

Corporate Participants:

Julia Qian — Investor Relations, Managing Director, The Blueshirt Group Asia

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

Yu Chen — Chief Financial Officer

Analysts:

Alex Mack — Private Investor — Analyst

Steven Ralston — Zacks — Analyst

Sean Shaw — Private Investor — Analyst

George Guo — Private Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Xinyuan Real Estate Company Second Quarter 2020 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 Julia Qian, Managing Director of The Blueshirt Group Asia. Ms. Qian, please proceed.

Julia Qian — Investor Relations, Managing Director, The Blueshirt Group Asia

[Technical Issues]

Operator

Julia, pardon the interruption. We are having trouble, hearing your line.

Julia Qian — Investor Relations, Managing Director, The Blueshirt Group Asia

With me today are Mr. Yong Zhang, Chairman and Chief Executive Officer; Mr. Brian Chen, Chief Financial Officer; Mr. Hongwu Zhang, Vice President. Mr. Yong Zhang will deliver opening remarks and Mr. Brian Chen will provide additional details on the company’s financial results and outlook.

Before we continue, please note that today’s discussion will contain forward-looking statements made on the Safe Harbor provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involves inherent risks and uncertainties. As such, the company’s actual results may be materially different from expectations expressed today. Further information regarding these and other risks and uncertainties, is included in company’s public filing with the SEC. The company does not assume any obligations to update any forward-looking statements, except as required under applicable law.

With that, let me now turn the call over to our Chairman and CEO, Mr. Yong Zhang. Please go ahead, Mr. Zhang.

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

Thank you, Julia and hello everyone. Thank you for joining our second quarter of 2020 earnings conference call. Our second quarter results reflected consumer housing consumption, [Indecipherable] and economic challenges. We are on the path to catch up with the full year sales guidance. With the total contract sales of the first half reaching around $1.18 billion, and total revenue of second quarter increasing about 126% from the first quarter. Recently in quarter three [Phonetic], certain major projects such as Qingdao Lingshan and Chengdu Xinyuan have successfully launched. So we now are holding a more optimistic will [Phonetic] towards the full year sales results. This is [Indecipherable] of sales and cash collection.

We are leveraging [Phonetic] to further optimize our debt cost structure, and an improved [Indecipherable] position, total debt and net debt cash flow [Indecipherable]. While the cash balance increased at the end of quarter two, [Indecipherable] work over, the percentage of short debt reached record low level since 2017. We are also managing to further expand our funding channel. Recently, we have issued offshore USD [Phonetic] bond. The property management company also successfully completed its follow-up offering, because we are committed in our long-term outlook, as well as near-term recovery. We will keep paying dividends again this quarter. It will be as same as the previous quarter. We are proud of our persistence of paying dividends for the past several years.

With that, I will now turn the call over to our CFO, Brian Chen, who will offer more details on the financial performance. Brian, please go ahead.

Yu Chen — Chief Financial Officer

Thank you, Chairman, and good morning everyone and thank you all for attending today’s call. We hope that all of you and your families are safe and healthy during these tough times.

Before I go through the detailed information, we acknowledge that this is a difficult quarter and some hard [Indecipherable] number in the quarterly revenue release. I do want to talk about at least three key points behind this number. One, Xinyuan’s revenue thus had a strong recovery. Although the revenue recognition is a little bit left behind, our contract sales had already [Indecipherable] a double-digit increase compared to the same time last year. Secondly, our cash position and our liquidity has solidly improved [Phonetic].

Now let me go into the detail. As Mr. Zhang just mentioned, we are on the path to recovery, with sales growth year-over-year. However, the pandemic still caused a significant impact on the construction progress and revenue recognition in Q2. This caused a top line decline on a year-over-year basis. In order to catch up, we made good progress in major projects opening in Q3 and expanding in Q4. For example, Lingshan Bay and Zhengzhou Xinyuan project had pre-sales [Phonetic] in July and August and the Beijing Tongzhou project was expected to launch in September. The construction has already begun actually.

We will continue to accelerate our progress in project opening, construction, and will further improve our sales efforts. [Indecipherable] the top line decrease only a temporary effect and expect revenue recognition coming back to a normal level on a full year basis. In this quarter, we have further optimized debt structure. Our total debt was $3 billion as of June 30, 2020, which is $0.6 billion lower year-over-year. Short term debt was $1.2 billion, which is 41% of total debt. This has been a decrease on about 37% compared to the last quarter end. Compared to June, we have reduced our short-term debt by about $197 million, and the total debt reduced by $32 million. Moreover, our funding channel has been further broadened and diversified.

Recently, we successfully issued offshore RMB notes, or what we call, the [Indecipherable] notes, of total size around RMB520 million. Our property management sector, which just leased [Phonetic] in Hong Kong last year, under the code of the 1895, also made its follow-on share offering, with about HKD127.2 million of net proceeds. We also have applied a RMB3 billion on short bondholder and has been proceeded by Shanghai Stock Exchange. The application of the creative funding vehicles, have demonstrated capabilities of our capital market operations, and provide more flexibility on cash flow management.

From a broader view, the industry remains promising. We are seeing rather encouraging signs on the residential business in China. According to the National Bureau of Statistics of China, the total real estate investment reached about RMB4.3 trillion for the first half of the year, and the urbanization rate reached to 60.6% in 2020 and expected to further increase in the year. We are very optimistic about the long term growth potential of China’s real estate industry and we believe, Xinyuan is one of the leading real estate developers in China, [Indecipherable] from this period of crisis, in our differentiated model, and strong execution capability.

Now let me go through some key financials in the quarter. The contract sales as mentioned earlier for the first half of the year was about $1.18 billion, which is about 15% increase compared to same time last year. Total revenue recognition a little bit high, but still reached about $284 million this quarter, quarter-on-quarter, increasing a 126% from the first quarter this year.

Gross profit for the second quarter of 2020 was $19.2 million or 6.8% of total revenue. The gross margin has since increased immensely from the previous quarter, but this is mainly because we made some proven adjustments, in considering in the current market price affected by the epidemic, and we view the expected selling price already of several projects and these one-time adjustments resulted in a significant reduction of the gross margin of about $45 million. Without these adjustments, gross margin or normalized gross margin for this quarter, would be 22.5%.

The SG&A expense was $51.4 million compared to $44 million for the first quarter. We strive to managing our costs prudently, in order to improve our operating efficiencies. Net loss for the second quarter of 2020 was $30.1 million, comparing to a net income of $18.8 million in the same quarter last year. And once again, the normalized adjust — the one-time adjustment of gross margin back, we are actually breakeven and even have, I feel, a $2 million to $3 million profit, if you normalize that adjustment.

Now let me discuss the balance sheet; our cash position and liquidity are solid. At quarter end, we had cash and restricted cash of about $1 billion compared to $933 million at last quarter end. As Mr. Zhang mentioned, we will again pay dividends this quarter.

Moving to our project update; our overall asset position remains strong well, where listed properties under development was $3 billion, and where [Indecipherable] property development compared was $450 million. Total sellable GFA was approximately 4.3 million square meters, which would translate into around RMB50 billion sellable land. Most of our projects are located in the Tier 1 and Tier 2 cities, in our market, our project [Indecipherable]. So we expect to generate meaningful cash flow from these quality projects.

We remain confident in the outlook. At this point, we still expect contract sales of RMB20 billion to RMB22 billion this year. Notably, as Mr. Zhang mentioned, our Hong Kong lease and property management company continues to perform really well. In July, we concluded this follow-on offering and showed an aggregate of 50 million new shares of its common stock. The successful capital raise has provided us with additional resource, and capital to pursue our future goals.

In the second half of 2020, we will continue to focus on improving our operating efficiencies, optimizing our debt structure and further improving the liquidity level for the company. Meanwhile, we will further strengthen our capital operation and explore more opportunities in the capital market, in order to generate greater value for our shareholders and bond investors.

With that, let’s open the call for questions. Operator, please go ahead.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. All right. And we will take our first question from Alex Mack, a private investor.

Alex Mack — Private Investor — Analyst

Hello. My name is Alex Mack, can you hear me?

Yu Chen — Chief Financial Officer

Yes, Alex. We can hear you well, clearly.

Alex Mack — Private Investor — Analyst

Okay, good. Because I was late to the conference call, I just joined about five minutes ago, I missed the beginning. I’ve been a long-term investor, for over 10 years for the company. And I participated in the conference call in your Q4 of the last fiscal year, about six months ago. And I don’t know whether you recall at the time, I was the one who asked for a reduction of the company dividend, so that you have enough money to buyback more shares. So anyway, you did reduce the dividend in the last quarter, Q1. But as you know, the share price still has remained so low, and hasn’t gone up at all. Obviously, it is a disappointment for me, and I’m sure for a lot of investors as well. Especially when you look at the company’s financial statistics, the company’s value, the book value is about more than $10 — I believe it is about $12 per share. But yet it is trading at $2. And as investors — I mean as a developer like you, your focus is on the operation, to make sure that the development is going on smoothly and making money. But as an investor — we are mostly focused on making sure that we are getting a proper return for our money invested in the company.

But anyway, just quickly and directly, I don’t want to take much of your time, because your company has invested for more than 10 years now in the New York Stock Exchange, and in fact, I feel the company was probably more than $10, and today its sitting at about $2. So this looks to me, that there is either a lack of interest, or that U.S. investors have no appreciations of the valuation of your company. Also in light of — for various reasons, maybe because the company’s too small, real estate development is still far away in China, they cannot really see — feel it. Or maybe they have concern about corporate governance and perhaps maybe of course, the U.S.-China trade tensions. I feel that the company will be delisted from the U.S. So my question now is, have you thought of maybe also listing — a good dual listing of your real estate development in Hong Kong Stock Exchange, just like what you had done for your real estate development company. I guess, over in [Indecipherable] here, as you have seen, your real estate management company has performed quite well in the market, showing that the investors in Asia can give more recognitions of your — of the valuation of the company compared with the U.S. And based on recent example also, not just your real estate company, but companies like Alibaba, JD.com, they also have recently added their company listing to the Hong Kong Stock Exchange, and the stock prices has performed very well ever since then.

So as an investor myself, I mean, I’m pretty miserable to see the stock price moving $2, because obviously something should be done.

Operator

Sorry for the interruption, caller. If you would please ask a question to the speakers.

Alex Mack — Private Investor — Analyst

Okay. Sure my question is to you, Brian [Phonetic] would you consider adding the listing of your company to the Hong Kong Stock Exchange? And number two, how much of stock buyback has been done in the last quarter? Thank you so much.

Yu Chen — Chief Financial Officer

Okay. Thank you, Alex. Appreciate all these inputs. So quick answer — first of all, I would also want to acknowledge that, with the — we don’t think the current share price of the shared [Phonetic] company is of true value. The total amount per ADS, you mentioned earlier, had the whole [Indecipherable] as our internal calculation. And we even mentioned that for the property management company, got listed in the Hong Kong alone, already had the market value of [Indecipherable] share, which is 55%, already able to turn into about $1,000 million [Phonetic], while our total company only adds about $100 million — $105 million or $106 million. So I really feel that a lot needs to be done.

So coming back to your question, the first question is that, whether we are considering coming back or dual list in Hong Kong Stock Exchange. We are currently exploring all kinds of alternatives. We think this is one of them. We will provide an update and any time when it comes to like certain points and then when it is in compliance, with the regulatory requirement, we will share this progress with our shareholder. Yes, but this is actually one of the alternatives that we are exploring for the moment.

But to increase the level, we are not [Indecipherable] — we keep up the U.S. shareholder end market. We will continue to improve, for one thing, our communication, since the [Indecipherable] shareholder. But also we are going to reach out to the other institutional and bigger investor, to make better communication and show a better quality and tell who we are and what is the true value of this company, to reach to the New York or U.S. shareholder, to improve the liquidity and confidence on the company. So there’s a lot that needs to be done.

On your second question about the share buyback, we had sufficient [Indecipherable] got approved from the Board of Directors. We are actually looking at the opportunity in this area. For the last quarter, so where were we — we actually did buy back, a lot of significant amount. When we come to this point, we will look at this area more actively and looking for opportunity when time is right for the share buyback. With that, I hope I answered your question?

Alex Mack — Private Investor — Analyst

Hello. Thank you. I’m glad you are exploring the listing option in Hong Kong as well, because all I can say is that, I am a Chinese myself, for your company to attract the U.S. investors, as financial institution has no interest in a small company and a company so far away in China, because they cannot see it. And they also are being attracted to other companies, like high techs, technologies companies. Your company is a real estate company. So I would urge you to take serious consideration to do the same thing as what you have done for your property management operations. Because you have been 10 years in the U.S. exchange. Why would you want to continue along with the — and not doing anything about it? If I sell a product in New York and nobody wants to buy it, obviously I will take that product somewhere else itself, right? You promise that?

Operator

Pardon the interruption, Alex, we need to move on the Q&A session.

Alex Mack — Private Investor — Analyst

Okay.

Operator

Thank you very much. And next, we will take a question from Steven Ralston with Zacks.

Steven Ralston — Zacks — Analyst

Hello and thank you for taking by question. Could you help me understand the impact of COVID-19 on Xinyuan? And could you narrow your scope of the question to the primary area where you’re developing in Zhengzhou? It seems that 40% to 50% of your construction projects are and have been? And so I think probably have the better feel of what’s happening there and be less impacted by other regionalities? What is the emphasis for the slowdown in sales? Is it because of potential customers are delaying their purchasing decisions or is it because of the delay in the completion of the projects, or if there is some sort of impact to the disposable income of the potential buyers? Could you just help me understand that?

Yu Chen — Chief Financial Officer

Sure. Thank you Steven, for your call. First of all, the impact of the COVID-19 is really coming from all of those areas that you were talking about earlier, so let me start one by one. First of all, when did COVID-19 happen, in pretty much all months in the Q1 and the this is not really coming back until the second half or by the end of Q2. These things happen. Few things, the sales office was closed for months. So our customer and potential customers, they pretty much stayed home, without able to go into the sales office, and understand the property, let along to finish those procurement activities and mortgage activity with the banker. So that’s one.

Second is, because of the — all the construction activity was forced to [Indecipherable]. The subcontractor cannot start the work. In China, without the construction coming to certain place, we are not allowed to or you won’t be able to apply for the permit to do the pre-sales. So literally we are not allowed to sell.

Last but not least, because when people just [Indecipherable], they are still not sure whether we fully work out of this. People will know about the picky item acquisition. So overall, although we see the sales recovery happen, but this is really happen at the very end of the Q2 — middle or the end of Q2. So, although we recognize a lot of sales, contract sales, but the revenue recognition normally has some time lag [Indecipherable], which caused the revenue recognition and the gross margin and profit on the growth, that looks — kind of looks [Indecipherable]. But the good thing is that, we said big sales from 2Q, and this activity coming back, with the pending demand going to release in the next few months and quarters. We have the confidence that the company, as well as our peer can walk out of this epidemic, and achieve the annual goal, by picking up the loss for the first half of the year in the second half.

Steven Ralston — Zacks — Analyst

Thank you. Let me just try to rephrase that and see if I understand it correctly. Now recessions really don’t happen in China that often. You’ve been on a good growth path for years. But it seems like you’re saying there is a pent-up demand, and it’s not like a recession, it’s just that the sales have been delayed and you expect this pent-up demand to return, once the restrictions of COVID-19 are reduced and then you expect to come back to your growth path?

Yu Chen — Chief Financial Officer

Yes, that’s what we are talking about. We see urbanization and middle class growth, as well as the growth of Xinyuan focus on competent market. In the Tier 1 and Tier 2 cities in China, typically, we are not [Indecipherable] that demand. The demand is always there. What we are worried about is that, we don’t have sufficient property that come to that critical point, then you can obtain a pre-sales permit. Normally then you are paying the pre-sales permit, we can achieve the sales goal, within the times that we need [Indecipherable].

So with all the land in hand and that we sold and these are partner-ready to make sure that we have sufficient inventory to sell to our high demand property sales to our customers, we believe that we will have a loss in the first half of the year, but demand is always there, its just a timing that usual sales got postponed for the second half of the year, on top of what is a reasonable normal demand there, naturally in the second half.

Steven Ralston — Zacks — Analyst

Thank you very much.

Operator

And next, we’ll take a question from Sean Shaw, a Private Investor.

Sean Shaw — Private Investor — Analyst

Hello, can you hear me?

Yu Chen — Chief Financial Officer

Yeah, Sean. Thank you.

Sean Shaw — Private Investor — Analyst

Hey, Brian. Yeah.

Yu Chen — Chief Financial Officer

Go ahead Sean.

Sean Shaw — Private Investor — Analyst

First of all I want to begin — yeah, okay. So first of all, I want to begin by thanking your Chairman and Board members and as well as all the employees of Xinyuan for the hard work during this pandemic. So I have three questions. My first question is, I saw Xinyuan file to issue RMB3 billion bound in Shanghai Stock Exchange, about $450 million equivalent. The bond got a credit rating of AA. So what would be the expected interest rate on those bonds, and is Xinyuan going to use more domestic financing going forward?

Yu Chen — Chief Financial Officer

Thank you, Sean. For the first question, typically our — I would say that the rate will be around 8%, depending on the costs — depends on the investor, and depending on the specific timing. So I would say that around 8% would be a reasonable range. Talking about the — whether we will have more financing from the domestic. I would like to emphasize that first of all, the economy is on [Indecipherable]. I mean, we would like to leverage it. We want to control the overall debt. So we would like to look into more opportunity to unlock underlying value for the land, on land bank that we already have. Together for the last few year, we erased a lot of debt and in exchange, we had a lot of high-quality land bank at hand.

So for the next 12 to 18 months, I would say that we are more focused on the operating activity to have more positive cash flow from the operating. As a matter of fact, for the last three to four quarters, we have achieved really positive cash flow from operating. We will continue this path. In terms of the financing, you know, we don’t really have a strong preference, don’t matter it is overseas or domestic. We will look at the specific timing. We look at the potential lender. We will look at the opportunities, and decide which still is fitting the best [Indecipherable] and provide the best benefit to the company. We will look at these two market, onshore and offshore at the same time.

Sean Shaw — Private Investor — Analyst

Okay. Okay, great. My second question is, it’s more about your individual projects. So previously I recall you mentioned in one of the investors’ conference call, that some projects are delayed — some project in the north are delayed, especially Qingdao project and Beijing project, and those who has very high average selling price, and was delayed for a long time. So what’s the — you said the Qingdao project is already open, and is faring well, right. And so what’s the current status of the Beijing project and how is the Beijing and Qingdao project going to affect your yearly guidance? And is the company on track to meet your sales goal this year?

Yu Chen — Chief Financial Officer

Yeah, thank you for that. Beijing and Qingdao are one of the few key project or major project that we are on the right track to launch, and we realize the value also. For Beijing — just to give you some context, every year the price — sales price per square foot for our properties is RMB113,000 per square meter. For Beijing project, the sales price is expected to about RMB60,000 Chinese yen per square meter. So you can imagine, it is quite profitable and can bring in sizable proceeds — cash proceeds for the second half of the year. For that project, we are already starting construction in the earlier this month, and we expect to achieve [Indecipherable] pre-sales next month, middle or late of of the September. And not all the projects are going to be launched, but at least a portion of it will be go phase-by-phase.

To achieve our project, we have already started pre-sales for the first batch in July. Sales have come up pretty good and sales price are averaging about RMB20,000 per square meter and some of the attraction, some of the [Indecipherable] even higher go as high as RMB30,000 per square meter. So yes these two projects is on the right track, [Indecipherable] in sizable cash proceed and high profit margins to the company.

Sean Shaw — Private Investor — Analyst

That’s great. So the company as of now is still relatively confident, that if project goes well that you’re — that you should meet your sales target in your guidance this year. Am I understanding this correctly?

Yu Chen — Chief Financial Officer

Yes, that’s correct. We have a sizable land bank and about RMB22 billion worth of land bank available for sale for the second half of the year. And as mentioned in the release, first half of the year, we have already achieved about RMB8.3 billion, to maybe RMB20 billion to RMB22 billion target. We think we have — we are pretty confident that we can achieve this goal from the contract sales part of it.

Sean Shaw — Private Investor — Analyst

Yeah, that’s great. Look forward to it. My third question is actually about your book value. So Xingyang holds a lot of assets, mainly as you said, a Land Bank properties and also your projects under development, and obviously as well as your subsidiaries, one of them is your Hong Kong listed property management. But — so obviously, Xingyang record all your land and properties and assets on your book based on the historic prices or the cost when Xingyang acquired them. So in the last few years, the real estate market in China is generally — I mean, the land, both the land prices and home prices are on the rise. So based on the market condition is it fair to say that the fair market value of Xingyang’s assets should be higher than what is showing on your book based on the accounting principles? I mean, based on my guess is — maybe after the home price increase after a few years, my guess is Xingyang’s assets should be high — should be worth higher than book value. Do you think that’s the right assessment?

Yu Chen — Chief Financial Officer

On the increase, yes it is. And you know that Xingyang is one of the very few Chinese real estate developer that’s reporting under U.S. GAAP. So our inventory and the property in [Indecipherable] they are all reporting on the book value digits based on the historic historical cost basis. You look at our balance sheet, we had $3.6 billion raise of the construction — building construction and the building available for sale. They all stay at the book value — in the least, the fair market value if you look at it, it can add another 25% to 30% more value on those book value.

Another thing is that we also had some sizable properties there, some plaza, some commercial properties or other peer developer company they would actually already fair value there and changed the game in their financial statement. Xingyang is only one that never build there. If we do the fair value on those properties, easily you can see RMB2 billion to RMB3 billion more on fair value. Therefore, we are [Indecipherable] and the commercial product help on these alone. So yes, you are right, it increases.

Sean Shaw — Private Investor — Analyst

Yeah. When you say commercial property, you mean office buildings, shopping malls or parking lot or all of them?

Yu Chen — Chief Financial Officer

More like shopping mall. More like plaza and shopping mall.

Sean Shaw — Private Investor — Analyst

Shopping mall. Okay. Okay, shopping mall. Are they mainly located in Zhengzhou or just where Xingyang’s past projects located like Chengdu, Beijing, Zhengzhou, Xi’an?

Yu Chen — Chief Financial Officer

As you mentioned, mainly in Zhengzhou, Chengdu, Xi’an in these areas. You know in China in local communities, you typically need to build a small to medium to large size of the commercial product to be — to provide more value and put value to the venture. Yes, correct.

Sean Shaw — Private Investor — Analyst

Yeah. And then after you sell the commercial ones and you hold — sorry after you sell the residential ones, you hold the commercial ones, right, as well as like the parking lot and something like that, right?

Yu Chen — Chief Financial Officer

That’s correct. Yeah, yeah.

Sean Shaw — Private Investor — Analyst

Okay, understood. Yeah, that’s my question. And also I want to appreciate all the employees for their hard work during this pandemic. And I look forward to the future quarters. Thank you.

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

Thank you, sir.

Operator

And up next, we’ll take a question from George Guo, a Private Investor.

George Guo — Private Investor — Analyst

Hi, Brian. I’m very surprised to see you have such large increase in contract sales. Can you break down the quarter two? How much is sales and what the average price increase will be from the last year?

Yu Chen — Chief Financial Officer

So [Indecipherable] all the detail here, but I can give you some high level. So the contract sales recognized in the quarter-on-quarter, most of them is coming from the Henan, Chengdu and the Shandong and Guangdong area. The average selling price for these new contract sales is at about RMB30,000 per square meter.

George Guo — Private Investor — Analyst

Okay. But what is the large demand? What is the total contract sales on quarter two, because if you didn’t break up it’s in the quarter one or quarter two?

Yu Chen — Chief Financial Officer

Overall, we had about RMB3 billion contract sales for the first half of the year. First quarter is about RMB1 billion and about RMB6 billion — RMB6 billion to RMB7 billion happened in the second, although majority of them happened in the last, I would say, the last [Indecipherable] on the quarter.

George Guo — Private Investor — Analyst

Okay. Well, thanks. So that — you’re predicting the year-to-quarter profit will be similar to last year. So do you expect lot of sales and increase of the construction — more construction in the second half?

Yu Chen — Chief Financial Officer

Yes. George, we — at this part, we still maintained the outlook there. We cannot share the — it is $60 million to $80 million project either in line with what we’ve had last year. Economically, this is a very challenging goal, although not totally impossible. Economy lies up the management team pretty much working 24 hour trying to achieve this goal for the last three quarters. So as you can — as you see that in the last month of Q2, we had a sizable contract sales. And we are going to increase the investment and funding in a lot of key construction to make sure that more and more of this project can meet the pre-sales threshold and available to deliver to the sales — to the customer.

At the same time, as mentioned earlier that we had to sell key project like Beijing, like Qingdao, like in Henan, like in Xi’an. We have taken down the sales target month-by-month, week-by-week and have specific people and team on top of those target. This is really a huge challenging, aggressive goal [indecipherable], but economy — overall, the whole company is trying and commit to stay twice and make this happen.

That being said, I have to put in a caveat that this is a challenging environment. The company still need to strike the balance between the liquidity and profitability, which means that we have no proceeds coming back from operating activities to meet and improve our liquidity. Some time we have to make this decision to adjust the profitability. So we will see as we go further along this path whether the net profit can still be met. At this point, we had a goal — we had an inner goal that we want to make it — try to make it happen.

George Guo — Private Investor — Analyst

Okay. Thank you. That’s very good. Last question from me is that, you mentioned something about the new funding for stock purchase from board of directors, I didn’t catch it. Can you repeat that again? Are you running low on the repurchase fund? Are you getting more funds?

Yu Chen — Chief Financial Officer

No, at the beginning of the year, we got a big backhaul — a blanket approval from the board of directors that authorized the management team to do the share buyback when it is appropriate, when it is the best timing. And management team are actively looking at the market condition everyday. And we also need to strike a balance between our brand investor and the share investor. So we have this at the management team’s discretion, when the timing is right, we can do it, and the time I think is right.

George Guo — Private Investor — Analyst

Okay. Thank you.

Yu Chen — Chief Financial Officer

Thank you very much.

Julia Qian — Investor Relations, Managing Director, The Blueshirt Group Asia

Thank you. And we are at the top of the hour for this call. If you have more questions please reach out to the company directly by email. Let me turn the call back to Brian for closing remarks.

Yu Chen — Chief Financial Officer

Okay. Thank you, operator. And thank you all for participating on today’s call, and thank you for all your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Operator, now I’ll hand it back to you.

Operator

[Operator Closing Remarks]