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Half Year Financial Statement And Dividend Announcement 2021

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UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021

Income Statement

(1) FVOCI refers to “fair value through other comprehensive income”.

Balance Sheet

(1) FVPL refers to “fair value through profit or loss”.

Review of Performance

(a) Review of the condensed consolidated statement of comprehensive income of the Group for 1H2021 (relative to that for 1H2020)

Revenue

The overall turnover of the Group, generated mainly from the sales of developed properties, decreased from RMB1.3 million in 1H2020 to RMB3,000 in 1H2021. The decrease was principally attributed to lesser completed units being handed over to buyers in FY2020 for the Xinxiang Sunny Town Project (新乡阳光新城项目) (the “Project”).

During 2019, with a view to clear the balanced units of the Project, which are located at corners or relatively not so ideal sites of the Project and/or are relatively not so ideal in their laid out (the “Balanced Units”), the Group entered into a bought deal arrangement with an independent third party to sell these Balanced Units at a mutually agreed reduced total price, derived based on the reduced sale price of each of the Balanced Units, relative to the prevailing market prices. Sales would be recognised by the Group as and when any of these Balanced Units is sold to an end buyer through the independent third party or the Company’s wholly-owned subsidiary Xinxiang Huilong Real Estate Co Ltd (新乡辉龙置业 有限公司) (the “Bought Deal Arrangement”).

Gross profit

The gross profit of the Group reduced in tandem with lesser Balanced Units sold in 1H2021 as a consequence to the Bought Deal Arrangement.

General and administrative expenses

In line with reduced business activities and principally as a result of lower headcount, the general and administration expenses of the Group decreased from RMB6.7 million in 1H2020 to RMB5.9 million in 1H2021.

Written-back of impairment of financial assets, net

Write-backs of certain impaired financial assets were made following the recovery of part of the bad debts previously provided for.

Other Expenses

The other expenses incurred in 1H2020 relate mainly to an exchange loss of RMB0.5 million while those incurred in 1H2021 relate mainly to a net loss of RMB1.6 million on investments in quoted securities.

Finance expense

The decrease in finance expense was attributed mainly to the accounting treatment of the finance lease following the adoption of accounting standard IFRS 16 in respect of the rented premises of the Group in the PRC (which saw a decrease in interest expense as the liability amortization amount increases over time).

Total comprehensive loss attributable to shareholders of the Group

Consequence to the above, the net loss attributable to the shareholders of the Company (the “Shareholders”) improved to RMB5.5 million in 1H2021 from RMB7.2 million in 1H2020.

(b) Review of the condensed statements of financial position of the Group as at 30 June 2021 (relative to that as at 31 December 2020)

Non-current assets

The decrease in property, plant and equipment of RMB0.1 million was attributed mainly to depreciation.

Current assets

The decrease in other receivables, deposits and prepayments was due mainly to bad debts of RMB1.0 million written back in FY2020.

The decrease in financial assets (at FVPL – quoted securities) was due to the liquidation of investment in quoted securities in 1H2021.

The decrease in financial assets (at FVPL – structured deposit) was due to the redemption of short-term investment deposits placed with the local PRC banks in 1H2021.

The decrease in pledged bank deposits by RMB0.5 million was mainly attributed to a decrease in deposits placed with local banks to facilitate the procurement of housing loans by buyers of the Group’s properties. The Company had pledged these deposits during FY2020 for the sales of developed properties and these pledged bank deposits were released to the Group during 1H2021 upon the issuance of the relevant property ownership certificates to the buyers concerned.

Taken as a whole, the current assets of the Group decreased by RMB8.6 million from RMB44.0 million as at 31 December 2020 to RMB35.4 million as at 30 June 2021.

Current liabilities

The decrease in accruals and other payables by RMB0.8 million from RMB17.0 million in 31 December 2020 to RMB16.3 million in 30 June 2021 was principally due to payments made.

The share-margin financing facility decreased by RMB1.9 million subsequent to the repayment of the Share financing Loan in 1H2021.

The lease liabilities decreased by RMB0.5 million subsequent to the full payment of the balanced lease liabilities in 1H2021.

Taken as a whole, the current liabilities of the Group decreased by RMB3.2 million from RMB25.2 million as at 31 December 2020 to RMB22.0 million as at 30 June 2021.

Consequence to the above:

  1. the working capital position of the Group decreased from RMB18.8 million as at 31 December 2020 to RMB13.4 million as at 30 June 2021;

  2. the net asset value of the Group decreased from RMB81.6 million as at 31 December 2020 to RMB76.0 million as at 30 June 2021, with the net asset value per ordinary share of the Company decreased from 9.4 Singapore cents per share as at 31 December 2020 to 9.0 Singapore cents per share as at 30 June 2021.

(c) Review of the condensed consolidated cashflow statement of the Group for 1H2021 (relative to that for 1H2020)

Net cash used in operating activities

The decrease in net cash used in operating activities was mainly due to the refund in FY2020 of a security deposit of RMB17 million placed under an escrow account with a third party for the joint bidding (which was subsequently called off) of a piece of land in Xin Xiang Municipality, Henan Province, for development.

Net cash generated from investing activities

The increase in net cash generated from investing activities was attributed to receipts generated mainly from the redemption of short-term investment deposits placed with the local PRC banks and the disposal of quoted securities in 1H2021.

Net cash used in financing activities

The increase in net cash used in financing activities was mainly attributed to the repayment of the Share Financing Loan of RMB1.9 million in 1H2021.

Commentary

The Company refers to the previous announcement dated 21 January 2021 (the “Previous Announcement”) in relation to the binding term sheet entered into by the Company with China Focus International Limited (中置国际有限公司) (“China Focus”) and Profit Run Developments Limited (润辉发展有限公司) (“Profit Run” and together with China Focus, the “Vendors”) for the proposed acquisition (the “Proposed Acquisition”) of 100% of the issued and paid-up share capital (the “Sale Shares”) of Fully Rich International Investment Limited (广富国际投资有限公司) (the “HoldCo”), which in turn owns 63.11% of the registered capital of Henan Zhongnong Huasheng Agricultural Science and Technology Co., Ltd. (河南中农华盛农业科技有限公司) (the “Target”).

On 31 March 2021, the Company announced that it has entered into a sale and purchase agreement dated 31 March 2021 with the Vendors in connection with the Proposed Acquisition (the “SPA”). Under the terms and conditions of the SPA, the aggregate consideration payable for the Sale Shares shall be S$6.966 million (the “Consideration”). On completion of the Proposed Acquisition (the “Completion”), the Consideration shall be satisfied in the form of 162,000,000 new Shares (the “Consideration Shares”) to be issued at an issue price of S$0.043 per Consideration Share (the “Issue Price”) to the Vendors or their nominees in the relevant proportions.

China Focus is wholly-owned by Mr Guo Yinghui. Profit Run is wholly-owned by a British national in trust for the benefit of Mr Guo Yinghui. Mr Guo Yinghui, the Chairman of the Board and an Executive Director of the Company, is also a controlling Shareholder of the Company. The Consideration represents approximately 41.84% of the Group’s latest audited net tangible assets (“NTA”) as at 31 December 2020. In addition, the relative figures of the Proposed Acquisition computed on the bases set out in Rule 1006 of the Listing Manual of the SGX-ST exceed 20.00%. Accordingly, the Proposed Acquisition constitutes an interested person transaction under Chapter 9, and a major transaction under Chapter 10, of the Listing Manual of the SGX-ST for which approval from the independent Shareholders of the Company (the “Independent Shareholders”) is required.

As the issue and allotment of the Consideration Shares to the Vendors or their nominees at Completion will result in Mr Guo Yinghui and his concert parties (the “Concert Party Group”) holding approximately 62.79% of the enlarged voting rights in the Company, an application will be made to the Securities Industry Council for a waiver to be granted to the Concert Party Group which would (but for such waiver) incur an obligation to make a mandatory general offer for the Shares not already owned or controlled by them under, and/or to comply with the requirements of, Rule 14 of the Singapore Code on Take-overs and Mergers (the “Code”). The Independent Shareholders will therefore be asked to vote, by way of a poll, to waive their rights to receive a mandatory general offer from the Concert Party Group in accordance with Rule 14 of the Code (the “Proposed Whitewash Resolution”).

The Company intend to convene an extraordinary general meeting to be held in due course to, among others, seek approval from the Independent Shareholders for the Proposed Acquisition and the Whitewash Resolution. Further details of these matters will be set out in the circular to be issued to the Shareholders (the “Circular”) in due course.