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Third Quarter Financial Statement And Dividend Announcement 2016

Financials Archive

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UNAUDITED FINANCIAL STATEMENTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2016 ("Q3 2016") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2016 ("FY2016")

Income Statement

*The restatement for Q3 2015 and 9M 2015 arose due to the need for comparative figures to Q3 2016 and 9M 2016, which, in compliance with IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, necessitates the discontinued operations (as previously classified) to be reclassified as continuing operations as the reverse takeover transaction as announced by the Company on 11 July 2013 and 1 April 2014 and 31 December 2014 (the "Proposed RTO") has yet to be completed within the contemplated time frame.

"Q3 2015" and "Q3 2016" denotes the third quarter or the three-month period ended 30 September 2015 and 30 September 2016 respectively

"9M 2015" and "9M 2016" denotes the nine-month period ended 30 September 2015 and 30 September 2016 respectively

"% Change" denotes increase/(decrease) in the relevant profit or loss item as compared with the comparative figure

"N/M" denotes "Not meaningful"

Balance Sheet

Review of Performance

(a) Review of consolidated statement of comprehensive income of the Group for Q3 2016 (relative to that for Q3 2015)

Turnover

The overall turnover of the Group, generated mainly from the sales of developed properties, increased by RMB6.6 million from RMB2.8 million in Q3 2015 to RMB9.3 million in Q3 2016. The increase was principally attributed to more completed units being delivered to the buyers in Q3 2016 relative to Q3 2015 in respect of the Xinxiang Sunny Town Project (新乡阳 光新城项目).

Gross profit

As a result of increased turnover, the Group registered a higher gross profit of RMB2.1 million in Q3 2016 compared to that of RMB358,000 in Q3 2015 and at a higher gross profit margin of about 22% in Q3 2016 compared to that of about 13% in Q3 2015 due principally to its costs control efforts in curtailing costs of labour and construction materials.

Other income, net

Our other income decreased by RMB4.1 million from RMB5.3 million in Q3 2015 to RMB1.1 million in Q3 2016.

Our other income attained in Q3 2015 was due principally to the favorable foreign exchange difference of RMB against US dollars.

Our other income attained in Q3 2016 relates principally to: (i) a foreign exchange gain of RMB138,000 resulting from the currency fluctuation of RMB against Singapore dollar; and (ii) the fair value gain of RMB966,000 on derivative financial instruments in respect of an investment of RMB65.0 million made during FY2015 in an integrated property project, Yi Feng Holiday Plaza Project (懿丰假日广场项目) (the "Yi Feng Project"), located at Henan Province Zhu Ma Dian City Zhu Ping County (河南省驻马店逐平县), for a share of profit of 10% thereof (the "Fair Value Gain"); the Fair Value Gain was derived based on the discounted cash flow stream of the Yi Feng Project.

Share of losses of joint ventures

The Group’s share of loss of joint ventures decreased by RMB110,000 or 83% from RMB132,000 in Q3 2015 to RMB22,000 in Q3 2016. The decrease was attributed mainly to decreased operating expenses incurred by Tian Cheng Holdings Limited ("天晟控股有限公司"), particularly in respect of the two iron ore mines it owned which have yet to commence production (the "Joint Venture").

General and administrative expenses

In line with our decreased business activities and coupled with our concerted cost-control efforts, our general and administrative expenses decreased by RMB3.2 million or 36% from RMB8.9 million in Q3 2015 to RMB5.7 million in Q3 2016.

Selling and distribution expenses

Our selling and distribution expenses increased by RMB1.1 million from RMB177,000 in Q3 2015 to RMB1.2 million in Q3 2016 due principally to stepped-up marketing efforts in selling the remaining completed property units for the Xinxiang Sunny Town Project (新乡阳光新城项目).

Finance income

Our finance income attained in Q3 2016 was attributed to the amortization of unwinding discount of the long-term other investment in respect of the Yi Feng Project.

Loss before tax

Consequence to the above, the Group recognised a loss before tax of RMB2.0 million in Q3 2016 vis-à-vis a profit before tax of RMB1.4 million attained in Q3 2015.

Income tax (expense)/credit

We registered an income tax expense of RMB174,000 in Q3 2016 vis-à-vis an income tax credit of RMB178,000 in Q3 2015.

The income tax credit recorded in Q3 2015 was principally attributed to an one-off write-back of over-accrued taxation in one of our wholly-owned subsidiaries.

The income tax expenses recorded in Q3 2016 was principally attributed to the operating income in one of our wholly-owned subsidiaries for Q3 2016.

Net loss attributable to owners of the Company

Accordingly, the Group recognized a net loss attributable to the owners of the Company of RMB2.2 million in Q3 2016 vis-à-vis a net gain attributable to the owners of the Company of RMB1.6 million attained in Q3 2015.

(b) Review of statements of financial position of the Group as at 30 September 2016 (relative to that as at 31 December 2015)

Non-Current assets

Our non-current assets increased by RMB6.2 million from RMB76.1 million as at 31 December 2015 to RMB82.3 million as at 30 September 2016. The increase was due principally to the investment (including the Fair Value Gain) in the Yi Feng Project. In compliance with IAS 39 – Financial Instruments: Recognition and Measurement, the investment in the Yi Feng Project was recognized as other investments and derivative financial instruments.

Current assets

The decrease in completed properties for sale by RMB12.0 million or 16% was due principally to the delivery of completed units to buyers concerned.

The decrease in prepayments and other receivables by RMB3.3 million or 39% were due principally to collections received.

The decrease in pledged bank deposits by RMB1.1 million or 15% was mainly attributed to the decrease in deposits placed with local banks to facilitate the procurement of housing loans by buyers of the Group’s properties; pledged bank deposits will be released to the Group upon the issuance of the relevant property ownership certificates to the buyers concerned.

The decrease in cash and bank balances by RMB6.6 million or 13% was principally attributed to payments made in connection with daily operational expenses.

The increase in amounts due from joint ventures by RMB592,000 or 20% was due principally to advances made to the mining joint ventures in support of their operational needs.

Taken as a whole, our current assets decreased by RMB22.4 million or 16% from RMB142.4 million as at 31 December 2015 to RMB120.0 million as at 30 September 2016.

Current liabilities

The decrease in the trade payables by RMB2.1 million or 25% from RMB8.6 million as at 31 December 2015 to RMB6.5 million as at 30 September 2016 and the decreases in accruals and other payables by RMB2.0 million or 18% from RMB10.9 million as at 31 December 2015 to RMB8.9 million as at 30 September 2016 were due principally to repayments made by the Group.

Taken as a whole, our current liabilities were decreased by RMB7.1 million or 7.0% from RMB102.2 million as at 31 December 2015 to RMB95.1 million as at 30 September 2016.

Consequence to the above, our cash generated from operating activities was reduced from RMB4.0 million in Q3 2015 to RMB981,000 in Q3 2016.

Commentary

With regard to the reverse takeover transaction as first announced by the Company on 11 July 2013 and periodically thereafter on its progress, the latest being on 30 June 2016 (the "Proposed RTO"), the relevant parties to the amended and restated conditional sale and purchase agreement entered into on 31 December 2014 in respect of the Proposed RTO (the "Amended and Restated SPA") have entered into a supplementary agreement in extending the long-stop date for the completion of the Proposed RTO from 30 June 2016 to 30 June 2017. The relevant parties currently still await for certain technical reports to be completed in order that they may work out possible revised terms to the Amended and Restated SPA, which may include, but not limited to, the portfolio of the exploration and mining projects that will form part of the group of companies to be acquired by the Company pursuant to the Proposed RTO. Appropriate announcement concerning the Proposed RTO will be made as and when there is any significant development.

As regards the proposed acquisition of the Thabazimbi Project as announced by the Company on 25 April 2016 (the "Proposed Acquisition"), we still await the appointed professionals to complete their respective works so as to make available the necessary independent qualified persons’ technical reports and valuation report. Given the substantial field work that need to be carried out, verified and analyzed, the technical due diligence process is expected to take a while to complete, and the Company will keep the shareholders of the Company updated progressively of any material development.

Some of the statements in this release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, undue reliance must not be placed on these statements.