Financials

Third Quarter Financial Statement And Dividend Announcement 2011

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UNAUDITED FINANCIAL STATEMENTS FOR THE THIRD FINANCIAL QUARTER ENDED 30 SEPTEMBER 2011 ("Q3 2011") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2011 ("FY2011") 

"Q3 2010" and "Q3 2011" denotes the third quarter or the three-month period ended 30 September 2010 and 30 September 2011 respectively

"9M 2010" and "9M 2011" denotes the nine- month period ended 30 September 2010 and 30 September 2011 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 2011 (relative to that for Q3 2010)

Turnover

The Group's turnovers (net of sales tax) generated in Q3 2011 and Q3 2010 were as follow:

Our overall turnover decreased by RMB48.0 million or 49% from RMB97.2 million in Q3 2010 to RMB49.2 million in Q3 2011 principally as a result of reduced sales revenue and rental income.

The decrease in sales revenue was attributed principally to the disposal in Q3 2011 by the Group of its entire equity interest in Zhoukou Xin Shi Jia Real Estate Co., Ltd (周口新世家置业有限公司) (the "Zhoukou Company") to two unrelated third parties for a cash consideration of RMB21.6 million (the "Zhoukou Disposal") (the "Disposal Consideration") with a view to fund prospective investment opportunities which the Group may undertake.

The decrease in rental income was attributed mainly to the disposal of Beijing Sunshine Elegant Jade Real Estate Co., Ltd (北京阳光美基置业有限公司) and Beijing Feng Bao Heng Investments Co., Ltd (北京丰宝恒投资有限公司) (collectively the "Beijing Subsidiaries") in Q2 2011. The Beijing Subsidiaries were mainly engaged in sub-leasing of two Beijing hotels to third party.

Gross profit

In line with the lower turnover registered, our gross profit decreased by RMB13.9 million or 68% from RMB20.5 million in Q3 2010 to RMB6.6 million in Q3 2011. The Group also recorded a lower gross profit margin of 14% in Q3 2011 compared to that of 21% in Q3 2010 due to the fact that units sold in Q3 2010 comprised more commercial properties and high-rise residential units that commands higher gross profit margins relative to that in Q3 2011, which comprised mainly lower-rise residential properties and few commercial properties.

Other operating expense

Our other operating expense decreased by RMB0.8 million or 65% from RMB1.3 million in Q3 2010 to RMB0.4 million in Q3 2011. The other operating expense incurred in Q3 2011 were attributed principally to the payment of revenue related business taxes and other surcharges while that incurred in Q3 2010 were attributed mainly to an one-off construction cost incurred by a former subsidiary, Beijing Feng Bao Heng Investments Co., Ltd (北京丰宝恒投资有限公司).

Share of loss of associates

There was no share of loss of associates in Q3 2010 as Climbing Ace Limited (攀峰有限公司), together with its subsidiaries comprising Xinxiang Gaojie Technology Development Co., Ltd (新乡高捷科技发展有限公司), Xinxiang Shiantai Commerce Co., Ltd (新乡市安泰商贸有限公司) and Hainan Sunshine Elegant Jade Investment & Development Co., Ltd (海南阳光美基投资开发有限公司) (collectively, the "Climbing Ace Group"), only ceased to be the subsidiaries and became the associated companies of the Group in October 2010 following the Group's reduction in its equity interest in the Climbing Ace Group from 51% to 40%.

Other losses

The other losses of RMB20.9 million incurred in Q3 2011 was attributed mainly to a disposal loss in connection with the disposal of the Zhengzhou Eastern District Project (郑州新区项目) by the Group to an unrelated third party (the "Zhengzhou Disposal") netted off against the disposal gain in connection with the Zhoukou Disposal.

General and administrative expenses/Selling and distribution expenses

Following the disposal of the Beijing Subsidiaries in Q2 2011 and the Zhoukou Disposal in Q3 2011, our general and administrative expenses decreased by RMB1.2 million or 17% from RMB6.8 million in Q3 2010 to RMB5.7 million in Q3 2011 and our selling expenses decreased by RMB2.5 million or 63% from RMB4.0 million in Q3 2010 to RMB1.5 million in Q3 2011.

Finance (income)/expense

We registered a finance income of RMB2.7 million in Q3 2011, principally as a result of the amortization of the present values of receivables due beyond 31 December 2011, as contrasted against a finance expense of RMB1.3 million incurred in Q3 2010.

(Loss)/Profit before tax

Following from the above, we registered a loss before tax of RMB19.9 million in Q3 2011 compared to a profit before tax of RMB7.0 million attained in Q3 2010.

Income tax expense

Our income tax expenses decreased by RMB3.5 million or 73% from RMB4.8 in Q3 2010 to RMB1.3 million in Q3 2011 due principally to the lower net profits attained by the subsidiaries.

Net (loss)/profit attributable to owners of the Company

Accordingly, the amount attributable to the owners of the Company was a loss of RMB21.2 million in Q3 2011 compared to a profit of RMB2.5 million in Q3 2010.

Minority Interests

Following the disposal of the Beijing Subsidiaries in Q2 2011, the remaining minority interests of the Group bore a lower share of loss of RMB186 in Q3 2011 compared to that of RMB0.3 million in Q3 2010.

(b) Review of statements of financial position of the Group as at 30 September 2011 (relative to that as at 31 December 2010)

Non-current assets

Our non-current assets decreased by RMB73.3 million or 17% from RMB439.9 million as at 31 December 2010 to RMB366.7 million as at 30 September 2011. The reduction was due mainly to decreases in property, plant and equipment by RMB72.2 million or 94% as well as decreases in prepayments and other receivables by RMB5.0 million or 20% mainly as a result of disposal of the Beijing Subsidiaries, which collectively were partially off-set by increases in the amounts due from a related party and amounts due from associates of RMB2.5 million and RMB4.0 million respectively, primarily as a result of the amortisation on the present values of the receivables due beyond 31 December 2011 which are to be recognized progressively over the remaining tenure of the receivables beyond 31 December 2011.

Current assets

Our completed properties for sale decreased by RMB130.5 million or 35% due mainly to (i) the continuing sales of units at such properties; (ii) the Zhoukou Disposal; and (iii) the en-bloc disposal of the 50 completed commercial units located at Yuhua Wenguiyuan in Zhengzhou City (the "Wenguiyuan Project").

Our properties under development for sale decreased by by RMB510.5 million or 80% due principally to (i) the Zhoukou Disposal; and (ii) the Zhengzhou Disposal.

The decreases in trade receivables by RMB4.1 million or 83% and the decreases in amounts due from associates by RMB25.0 million or 46% were attributed mainly to improved cash collections.

The decreases in pledged bank deposits by RMB3.1 million or 27% was mainly attributed to the release of the relevant pledged bank deposit following the completion of the Zhoukou Disposal in Q3 2011.

The increases in cash and bank balances by RMB222.5 million or more than 4-fold were due mainly to (i) receipt of the Disposal Consideration; (ii) full settlement of the outstanding obligations due by Zhoukou Company to the Group following the completion of the Zhoukou Disposal; and (iii) partial repayment of an outstanding obligation due from an associated company.

Taken as a whole, our current assets decreased by RMB454.5 million or 37% from RMB1,238.9 million as at 31 December 2010 to RMB784.5 million as at 30 September 2011.

Current liabilities

In view of the Zhoukou Disposal, our sales and rental deposits collectively decreased by RMB103.0 million or 42% and our trade payables decreased by RMB39.3 million or 46%.

The decreases in accruals and other payables by RMB318.2 million or 91% were due mainly to (i) a prior deposit of RMB229 million, which the Group collected in advance from the relevant buyers in conncetion witht the Zhengzhou Disposal, being fully settled following the completion of the said disposal in Q3 2011; and (ii) the Zhoukou Disposal, which relieved the Group from assuming the accruals and other payables of Zhoukou Company subsequent to the completion of the said disposal.

The decrease in amounts due to related parties of RMB3.9 million was attributed mainly to repayments made by the Group in Q3 2011.

The decrease in other borrowing of RMB29.0 million was in line with settlements made by the Group in Q3 2011.

Taken as a whole, our current liabilities decreased by RMB489.4 million or more than half from RMB785.8 million as at 31 December 2010 to RMB296.4 million as at 30 September 2011.

Following from the above, we improved our working capital position by RMB34.9 million or 8% from RMB453.2 million as at 31 December 2010 to RMB488.1 million as at 30 September 2011.

As regards our net cash generated from operations, we registered a net cash generated from operating activities of RMB83.3 million in Q3 2011 as contrasted against a net cash used in operating activities of RMB26.9 million in Q3 2010.

Non-controlling interests

Following the disposal of the non-wholly owned subsidiairies in Q2 2011, our non-controlling interests decreased by RMB9.4 million or 79% from RMB11.8 million as at 31 December 2010 to RMB2.4 million as at 30 September 2011.

Commentary

As highlighted in the Company's Circular dated 13 October 2011, the series of austerity measures introduced by the Chinese government to check soaring property prices and to curb excessive lending has prompted the Group, against the approval procured from the Shareholders on 26 October 2011, to diversity its real estate core business to include the business relating to the management, exploration, exploitation, production, processing, sourcing and distribution of Ferrous Metal (being iron, manganese or chromium) and Non-Ferrours Metal (being any metal other than a Ferrours Metal) and the ownership, development and operation of related mines (the "Mining Business"). In this regard, the Group has been exploring opportunities and assessing proposals in relation to several Ferrous Metal or Non-Ferrour Metal related projects in the Henan, Yunnan, Shanxi, Guizhou provinces as well as the Xinjian and Inner Mongolia Autonomous Regions of China.

Two senior mining engineers, each possesses about 20 years of mining experience and expertise, have recently been recruited by the Group and have been appointed as members of the newly set up Investment Committee to look into possible investments in the Mining Business. They have been (prior to their formal appointment with the Group) and will continue to be assisting the Group with the identification and evaluation of viable joint venture investments in relation to the Mining Business. The Group is presently in advanced negotiations for possible investment with the owners of some of the mines mentioned above. The Company will keep the Shareholders updated once any such investment opportunity has been firmed up.

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.