财务报表

Financial Statement Announcement for the 4th Quarter and Full Year Results ended 31 December 2016

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Profit & Loss

profit and loss

Balance Sheet

Balance Sheet

Review of Performance
Statement of Comprehensive Income

Due to the nature of the industry that the Company operates in, recognition of revenue from the sale of properties is driven by project hand-over. Consequently, quarterly results may not be a good indication of profitability trend.

For the three months and quarter ended 31 March 2016

Revenue

Revenue

Revenue of the Group for 1QFY2016 decreased by RMB8.9 million (8.9%) to RMB91.3 million as compared with that of 1QFY2015. The decrease was mainly due to lower revenue being recognized from the Sale of Properties. In 1QFY2016, revenue from the Sale of Properties were driven by the handover of units at Sa Yan Wan Phase 2 and the value of these residential units are lower than those of Ying Li International Plaza office units handed over in the same period last year.

Rental income increased by RMB3.5 million (6.8%) in 1QFY2015 to RMB54.6 million as compared to the same period last year. The increase is mainly due to increased rental contribution from both Ying Li IMIX Park - Jiefangbei and Ying Li IMIX Park - Daping due to higher occupancy rate.

Gross profit

Revenue

Gross profit of the Group for 1QFY2015 increased by RMB8.1 million (14.7%) to RMB63.3 million as compared to the same period last year. Both Sale of properties and Rental Income had increased in Gross profit, with higher increase came from Sale of properties.

Gross profit margin

Revenue

The Group's gross profit margin for 1QFY2016 increased by 14.3 percentage points to 69.3%. Gross profit margin from Sale of Properties rose as the units that were handed over in 1QFY2015 comprised some retail units at San Ya Wan Phase 2 that tend to have a higher gross profit margin as compared to that of Ying Li International Plaza office units that were handed over in 1QFY2015.

Other income

Revenue

The year-on-year decrease in Other Income was mainly due to lower interest income received from deposits placed with financial institutions as collaterals for loans taken out by the Group. A portion of the loans were repaid during the quarter and the corresponding deposits that were placed as collaterals were released.

Selling expenses

Selling expenses decreased marginally by RMB0.4 million in 1QFY2016 to RMB13.7 million (3.3%) as compared to 1QFY2015 mainly due to a decline in advertising and promotion activities during the quarter under review.

Administrative expenses

During the quarter under review, Administrative expenses were RMB13.7 million (45.1%) lower compared to 1QFY2015. The significant decrease in Administrative Expenses was mainly due to:

  1. a decrease in wages and salaries amounting to RMB2.1million due to a reduction in the amount of bonuses paid to employees.
  2. a decrease of RMB8.4 million on upfront fees paid to financial institutions due to a lower quantum of new loans drawn down in 1QFY2016 compare to 1QFY15; and
  3. an increase in foreign exchange gain amounting to RMB3.6 million arising from Group's USD denominated loans as a result of SGD strengthening against the USD.

Administrative expenses - Share based payment expense decreased by RMB2.9 million Y-o-Y due to the revocation of Performance Shares and Share Options to be vested.

Finance costs

For the quarter under review, finance costs were RMB0.5 million lower as compared to 1QFY2015. Interest expense directly attributable to projects would generally be capitalised as part of the project costs.

Taxation

Revenue

During the quarter under review, tax expense increased by RMB4.7 million as compared with 1QFY2015 mainly due to higher taxable profits generated from the sale of properties in 1QFY2016.

Profit attributable to ordinary shareholders of the Company

Revenue

Overall, net profit attributable to the ordinary shareholders of the Company for the quarter under review increased by RMB17.2 million from a net loss of RMB455k in 1QFY2015 to a net profit of RMB16.8million in 1QFY2016.

Statement of Financial Position

Total Assets of the Group increased by RMB60.7 million to RMB11,984.2 million during the period under review. The increase in assets was mainly attributable to i) an increase in development properties amounting to RMB295.6 million as progress is being made on both the Ying Li International Commercial Centre, Ying Li International Electrical and Hardware Centre and San Ya Wan Phase 2 projects ii) an increase in deposits placed with government agencies for land tenders amounting to RMB37.1 million. This was off-set by a decrease in cash and cash equivalents of RMB260.3 million mainly due to the repayment of borrowings.

The Group's total liabilities increased by RMB84.0 million to RMB6,924.7 million during the period under review. The increase in liabilities was mainly due to i) an increase in trade and other payables of RMB436.9 million arising from projects under development and pre-sales proceeds received. This was off-set by a reduction in borrowings amounting to RMB349.8 million due to repayment of loans.

The Group's total equity decreased by RMB23.3 million to RMB5,059.5 million during the period under review, due to a reduction in Exchange fluctuation reserve.

Statement of Cash Flow

The increase in cash and cash equivalent of RMB32.6 million for the quarter under review was mainly due to:

  1. net cash inflow of RMB109.8 million from operating activities;
  2. net cash outflow of RMB0.4 million from investing activities; and
  3. net cash outflow of RMB76.8 million from financing activities.

The net cash generated from operating activities of RMB109.8 million include cash generated from the operating profit of RMB35.8 million and an increase in payables of RMB478.1 million mainly arising from projects under development and pre-sale proceeds received. This was off-set by i) a decrease in receivables of RMB32.1 million due to deposits paid for land tender; ii) increase in development costs amounting to RMB295.6 million incurred mainly on the ongoing construction of San Ya Wan Phase 2, the Ying Li Financial Street project and the Ying Li International Electrical and Hardware Centre; and iii) net interest and income tax payment of RMB76.4 million.

Net cash used in financing activities of RMB76.8 million includes: (i) increase in borrowing by RMB105 million to fund the construction of the Group's ongoing projects; ii) release of cash collaterals that were previously pledged upon loan repayment amounting to RMB272.3 million; and iii) repayment of borrowings amounting to RMB454.2 million.

Commentary On Current Year Prospects

As recorded by Chongqing Statistics Bureau, Chongqing achieved a robust start to the year with a GDP growth of 10.7% Y-o-Y to RMB377.3 billion in 1Q2016. Aided by the city's thriving economy, disposal income per capital rose by 8.7% Y-o-Y to RMB8,651 while total retail sales of consumer goods expanded by 13.0% Y-o-Y to RMB176.5 billion in 1Q2016.

Chongqing Office Market

With the first quarter being a historically off-peak period, the net absorption for Grade A offices decreased 33.6% Q-o-Q and 71.1% Y-o-Y to 19,373 sqm in 1Q2016. With the ongoing short-term weakness in the leasing market, the average rental for offices decreased 1.1% Q-o-Q to RMB83.8 sqm per month. However, Jiefangbei, being the Chongqing's traditional CBD, continues to be the leading option for MNCs to establish their presence in Chongqing. As such, demand in the area remains healthier and rentals stood firmer with average rental at RMB 96.2 per sqm per month.

(Sources: JLL Research, 1Q16 Chongqing Property Market Overview; CBRE Research, Chongqing Property Market Overview Q1 2016)

Chongqing Retail Market

Only one prime retail mall, located in Daping with a GFA of 50,000 sqm, was completed in 1Q2016. This resulted in a decrease of 83.1% Q-o-Q and 42.3% Y-o-Y on the new retail areas available. Overall vacancy rate increased 3.4 percentage points (ppts) Q-o-Q and 4.8 ppts Y-o-Y to 16.1% in 1Q2016. This was mainly attributable to the closure of two departmental stores as well as the ongoing tenant adjustment for some of the retails malls.

In 1Q2016, F&B and fashion sectors topped the demand for retail spaces in Chongqing. F&B brands such as Costa Coffee expanded with more outlets, while fashion brands such as Calvin Klein Jeans and Guess opened new stores in IMIX Park at Guanyinqiao.

(Sources: JLL Research, 1Q16 Chongqing Property Market Overview; CBRE Research, Chongqing Property Market Overview Q1 2016)

Chongqing Residential Market

The short-term oversupply in the residential market prompted developers to focus on destocking their inventory with only 600 new units launched in 1Q2016, a decrease of 83.3% Q-o-Q and 78.6% Y-o-Y. These new units are located in Jiangbei, Yuzhong and Nan'an. On the other hand, prevailing favourable policies continue to spur demand with 2,500 units sold in 1Q2016. Aided by the improved market sentiment, prices for majority of the high-end residential projects started to show gradual increase in 1Q2016.

(Source: JLL Research, 1Q16 Chongqing Property Market Overview)

Beijing Market

Beijing's vacancy rate for Grade A offices decreased 0.04% Q-o-Q and 1.1% Y-o-Y to 2.6% in 1Q2016 while average rental increased 0.9% Q-o-Q and 4.8% Y-o-Y to RMB373.0 psm per month.

The capital's retail market remained stable with no new supply added in 1Q2016 and vacancy rate remained at a low level of 4.8%.

In the same quarter, with the strengthening activity in the residential market bolstered by incentives policies to support owneroccupation and upgrading demand, the average selling price rose by 3.0% Q-o-Q and 16.0% Y-o-Y according to National Bureau of Statistics of China. In addition, the leasing demand for serviced apartments was stable on a Q-o-Q basis and average rental remained flat at RMB223.3 psm per month.

According to data from PRC real estate agency Homelink Real Estate Co., the average price of resale housing in the Beijing Tongzhou district had jumped by more 50% on a Y-o-Y basis in April 2016 to over RMB34,200 psm.

(Sources: JLL Research, Beijing Grade A Office Market; CBRE Research, Beijing Property Market Overview Q1 2016; CBRE Marketview North China, Beijing; National Bureau of Statistics of China, Sales Prices of Residential Buildings in 70 Medium and Large-sized Cities in March 2016)

Outlook

According to CBRE Research, majority of the new office supply will concentrate in Jiangbeizui, Chongqing. As such, the average rental in non-prime locations may be negatively affected. For Chongqing's retail market, the new supply will mostly be situated in non-core, yet-to-mature districts, such as Zhaomushan and Xinpaifang. In addition, CBRE Research anticipates mid-range fashion and lifestyle consumption to regain popularity and the high-end market to cool down. For Chongqing's residential market in 2016, developers will continue to destock their inventory, supported by favourable policies which are expected to continue uplift the market sentiment.

In view of the above market outlook, the Group continues to implement formulated strategies that mitigate against the headwinds in the different markets. The Group has a diversified portfolio of properties in prime locations in Chongqing. The Group's ongoing projects include Lion City Garden, Ying Li International Hardware and Electrical Centre, Ying Li International Commercial Centre and Future Beijing. These projects are all located in prime locations with clear target customers. They have either started pre-sales or are on track for pre-sales in phases throughout FY2016 and FY2017. The Group is also currently in the midst of repositioning two of its malls to better target the audiences it wants to bring into the malls.

On a positive note, the One Belt, One Road initiative and China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity project could spur further economic growth, property demand (both office and residential) and retail consumption, even though these policy initiatives are at a nascent stage.

Barring any unforeseen circumstances, the Directors expect the Group to remain profitable in FY2016.