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Third Quarter Financial Statement And Dividend Announcement 2017

Financials Archive

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UNAUDITED FINANCIAL STATEMENTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2017 ("Q3 2017") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2017 ("FY2017")

Income Statement

"Q3 2016" and "Q3 2017" denotes the third quarter or the three-month period ended 30 September 2016 and 30 September 2017 respectively

"9M 2016" and "9M 2017" denotes the nine-month period ended 30 September 2016 and 30 September 2017 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 Q2 2017 (relative to that for Q2 2016)

Turnover

Generated mainly from the sales of developed properties in respect of the Xinxiang Sunny Town Project (新乡阳光新城项目), the Group attained comparable revenues of RMB9.3 million in both Q3 2017 and Q3 2016.

Gross profit

The Group registered a higher gross profit of RMB4.0 million in Q3 2017 compared to that of RMB2.1 million in Q3 2016 and at a higher gross profit margin of 43% in Q3 2017 compared to that of 22% in Q3 2016 chiefly as a result of its cost containment efforts.

Other income, net

Our other income decreased by RMB1.1 million or 92% from RMB1.1 million in Q3 2016 to RMB98,000 in Q3 2017.

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, which had since 17 April 2017 been disposed as part of the Group's purchase consideration for an effective equity interest of 16.06% in an iron ore mine project situated in Thabazimbi, Limpopo Province, South Africa (the "Thabazimbi Project") (the "Yi Feng Disposal").

Our other income attained in Q3 2017 relates principally to bank interest earned on cash deposit and an one-off gain on disposal of certain property, plant and equipment.

General and administrative expenses

Our general and administrative expenses increased by RMB831,000 or 15% from RMB5.7 million in Q3 2016 to RMB6.5 million in Q3 2017. The increase was attributed mainly to rental expense recognised in Q3 2017 in respect of a new office rented in Zhengzhou.

Selling and distribution expenses

In line with our decreased business activities, our selling and distribution expenses decreased by RMB1.1 million from RMB1.2 million in Q3 2016 to RMB81,000 in Q3 2017.

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, loss before tax increased from RMB2.0 million in Q3 2016 to RMB2.6 million in Q3 2017.

Income tax expense

Our income tax expense increased by RMB973,000 or over 5-fold from RMB174,000 in Q3 2016 to RMB1.1 million in Q3 2017, due principally to the higher taxable income attained by one of our subsidiaries in Q3 2017.

Net loss attributable to owners of the Company

Accordingly, the Group recognized a net loss attributable to the owners of the Company increased from RMB2.2 million in Q3 2016 to RMB3.7 million in Q3 2017.

(b) Review of statements of financial position of the Group as at 30 September 2017 (relative to that as at 31 December 2016)

Non-current assets

Our non-current assets increased by RMB67.9 million from RMB6.3 million as at 31 December 2016 to RMB74.2 million as at 30 September 2017. The increase was principally attributed to a new investment in the Thabazimbi Project during Q2 2017. In compliance with IAS 39 - Financial Instruments: Recognition and Measurement, the investment in the Thabazimbi Project was recognized as an "other investment" under the "non-current assets" category.

Current assets

The decrease in other investment and the financial assets at fair value through profit or loss by RMB56.9 million and RMB11.6 million respectively were mainly attributed to the Yi Feng Disposal.

The decrease in completed properties for sale by RMB9.5 million or 14% was due principally to the delivery of completed units to buyers concerned.

The decrease in prepayments and other receivables by RMB2.5 million or 31% were due principally to collections received.

The decrease in cash and bank balances by RMB4.7 million or 14% was principally attributed to payments made in connection with daily operational expenses and the renovation expenses incurred on the new Zhengzhou office.

Taken as a whole, our current assets decreased by RMB85.4 million or 45% from RMB188.1 million as at 31 December 2016 to RMB102.8 million as at 30 September 2017.

Current liabilities

The decrease in the trade payables by RMB3.3 million or 50% from RMB6.5 million as at 31 December 2016 to RMB3.2 million as at 30 September 2017 and the decreases in accruals and other payables by RMB1.1 million or 12% from RMB9.1 million as at 31 December 2016 to RMB8.0 million as at 30 September 2017 were due principally to repayments made by the Group.

Amount due to joint ventures increased by RMB793,000 or 42% from RMB1.9 million as at 31 December 2016 to RMB2.7 million as at 30 September 2017, due mainly to the advances made by the joint ventures on behalf for the Company.

Taken as a whole, our current liabilities were decreased by RMB2.4 million or 3% from RMB89.1 million as at 31 December 2016 to RMB86.7 million as at 30 September 2017.

Consequence to the above, our cash used for operating activities was RMB RMB981,000 in Q3 2016 in contrast to our cash generated from operating activities of RMB3.9 million in Q3 2017.

Commentary

With regard to the reverse takeover transaction as first announced by the Company on 11 July 2013 and periodically hereafter of its progress, the latest being on 30 June 2017 (the "Proposed RTO"), the relevant parties (to the amended and restated conditional sale and purchase agreement entered into on 31 December 2014 and supplemented on 30 June 2017 in extending the long-stop date for the completion of the Proposed RTO from 30 June 2017 to 30 June 2018 (the "Supplemented SPA")). The relevant parties still awaiting for certain technical reports to be completed in order that they may work out possible revised terms to the Supplemented 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.

While the relevant parties to the Proposed RTO are committed to use best commercial efforts to reach final agreement and in seeing the transaction through, Shareholders are to note that the Proposed RTO is not to be taken as a done deal or that parties will eventually come to an agreement to proceed with the Proposed RTO.

As the completion of the Proposed RTO is still subject to the fulfilment of many conditions precedent, there can be no assurance of the completion of the Proposed RTO or, if it were to be eventually completed, as to the length of time required to do so. Hence, Shareholders are advised to exercise caution when dealing in the securities of the Company. Shareholders are further advised to refrain from taking any action in relation to their securities which may be prejudicial to their interests, and to seek appropriate advice from their brokers, bankers, lawyers and other professional advisers.