Unidentified Analyst: Yes. This is Otsuka. I hope you can hear me?
Makoto Inoue: Yes, we can hear you.
Unidentified Analyst: I want to go back to what you said, maybe I have missed something, so I just want to confirm something. USA, when you explained about ORIX USA, JPY200 million under achievement, I think that’s what you said?
Makoto Inoue: Is this about the profit being underachieved by $200 million?
Unidentified Analyst: Yes.
Makoto Inoue: Post-tax profit target, ORIX USA, in 2010, had JPY750 million pretax profit. And that pushed up the target profit internally and the JPY500 million, just under JPY500 million pretax profit was a target for this fiscal year. And against the target of just below JPY500 million, they will be underachieving by about JPY200 million. That’s what I meant.
Unidentified Analyst: I see. So according to your document, well, on Page 10, for example, you are showing ORIX USA profit being JPY55 billion. This is pretax target. So there is a possibility that you will not be achieving this and that is why you are trying to offset this by profit from other segments, is that correct?
Makoto Inoue: Well, JPY55 billion, this is in Yen.
Unidentified Analyst: So in terms of U.S. dollars, that would be about 350 million, would that be correct?
Makoto Inoue: Well. We are actually charging a lot of different costs for this segment. That is why we have this number. Yes. So JPY55 billion is actually a quite tough target. And how can we can somehow supplement support that will be the key of achieving the JPY330 billion target overall.
Unidentified Analyst: I see. Thank you very much.
Operator: Next, Sasaki-san [ph] from Nomura Securities.
Unidentified Analyst: Sasaki of Nomura Securities. Can you hear me?
Makoto Inoue: Yes.
Unidentified Analyst: On Page 8, I have a question. First of all, this type of disclosure, I have been covering you for a long time. This is the first time that I see this. So why did you decide to disclose this time? Could you explain the reason? And also capital gain forecast were mentioned and when and which number were used to come up with this calculation? Could you talk about the assumptions and also, if possible, the commitment of JPY330 billion and also JPY400 billion for the next year? I would like to hear your view on your commitment to achieve that?
Makoto Inoue: But as for the Page 8, for a long time, the disclosure of ORIX were criticized from investors. There were some dissatisfaction, so we wanted to improve that. So different way of disclosures are being done. So this is part of this our efforts. So in order for you to understand what would be the best disclosure and how should we disclose the numbers? We are always thinking about it. And this time we decided to provide this capital recycling table so that you can understand this better. So we are always trying to make improvements. And as a result of that, we are disclosing this page. Also, JPY330 billion commitment as I said earlier, the capital gain in the past, the annual capital gain was from JPY80 billion to JPY100 billion and those numbers, so JPY80 billion to JPY100 billion.
And this is based on the book value of our assets and with the gain on sale. So that means that the capital gain in addition to the book value. And based on that assumption we always make a calculation. So JPY100 billion or JPY80 billion capital gain. So this is the net profit on sale or gain on sale. So about the JPY400 billion. Similarly, there are multiple projects going on and some of them are in development. And so in the second half this year and early next year gradually they will start to start up. And then we will consider to sell them and which project can be sold and what would be the level of the capital. Those are the validation verification we go through. And then as a result we think that we can achieve JPY100 [ph] billion. And toward that target, we would like to proceed with the capital recycling or setting of those six.
I hope that answers your question.
Unidentified Analyst: So if that is the case, Page 8, going back to those numbers, so you are negotiating with counterparties and based on those numbers, say that the JPY20 billion to JPY40 billion and JPY60 billion and so forth mentioned and if it’s possible, when you sell which assets, what kind of numbers that you come up with. If you can – so for example, you have so many private assets. So overall balance sheet unrealized gain is very difficult for us to calculate. So this time you are disclosing Page 8. So if you can show us the denominator of those numbers, what would be the size of it if possible?
Makoto Inoue: First of all, those numbers right now from the front line, those are the numbers that they’re using as expected capital gain when they negotiate. So it’s not just something that we calculate. So as for the denominators, Yano-san, [ph] depending in the case of real estate, it’s 1.5 times to 2 times, if it’s old and as for the PE 1.5 times to 2 times at the time of sales. So the book value, 1.5 times of the capital gain. I think in many cases, it’s at that level. So that’s the kind of image that will be coming down. So about the real estate, development NOI, that is the cost and exit NOI, the development NOI is 5.2%, for old one it’s 6% or so and the new ones are 5%. And the NOI is 3% or a little more. So based on those assumptions, I think that you’ll be able to match with those numbers.
