Completes Business Transformation; Pursues The Strategy of Diversifying Business and Developing Value-added Businesses At Full Strength
HONG KONG — China Goldjoy Group Limited (“China Goldjoy” or the “Group”; HKEX: 1282) has announced its interim results for the six months ended 30 June 2017. The Group has transformed and diversified its business to include high-value service operations that promise abundant business opportunities and continued to perform well in the first half of 2017. China Goldjoy has officially been included as a constituent stock of the MSCI Hong Kong Small Cap Index since 1 June 2017, which reflected its market recognition.
During the period, the Group’s revenue increased 2.8% to approximately HK$337.6 million (corresponding period in 2016: HK$328.5 million). The increase in revenue was mainly attributable to the increased revenue from the newly added Financial Services segment, partially offset by the decrease in revenue from the Securities Investment segment. Gross profit was approximately HK$80.0 million (corresponding period in 2016: HK$93.2 million) with gross profit margin at 23.7% (corresponding period in 2016: 28.4%), mainly in relation to increase in commission in the Financial Services segment and decrease in fair value of securities investment. However, profit for the period increased significantly by six times to approximately HK$105.2 million (corresponding period in 2016: HK$15.0 million). The increase was primarily attributed to (i) an increase in fair value gain of the investment properties, (ii) an increase in dividend income from investments, (iii) the gain in the disposal of an associated entity, (iv) an increase in profit generated from the Financial Services segment, (v) reduced loss incurred by Manufacturing segment, and partially offset by the decrease in profit generated from the Securities Investment segment and increase in the net finance costs.
Automation
The automation segment saw a stable increase in revenue of 4.2% to HK$275.1 million (corresponding period in 2016: HK$264.1 million), accounting for 81.5% of the Group’s total revenue (corresponding period in 2016: 80.4%). The increase was mainly attributable to the robust development of the smart phone and semiconductor industry in the PRC.
Financial Services
Revenue from the Financial Services segment soared to HK$65.0 million (corresponding period in 2016: HK$1.2 million), contributing to 19.3% of the Group’s total revenue (corresponding period in 2016: 0.4%). The notable increase was due to consolidation of the financial statements of the 80%-owned Goldjoy Holding Limited (“Goldjoy Holding”) into the Group, after the completion of the acquisition and two rounds of financing in the second half of 2016.
Goldjoy Holding offers comprehensive financial services to its clients and creates better synergies from cross-selling and having an all engaging platform that gives clients convenient access to different financial services. During the period under review, the income from the commission and handling fees of brokerage service of the Group was steady. As the increase in capital had enhanced the lending capacity of the Group, coupled with the active development of customers, revenues of the lending and financing business of the Group grew rapidly.
China Goldjoy Asset Management Limited set up three private funds during the period. Apart from promoting product diversification, the Group’s asset management arm has also actively looked for local and overseas partners in developing the fund management business.
Apart from the Hong Kong financial market, the Group also strives to capture the enormous growth potential in the foreign and domestic financial market. China Goldjoy Investment Limited, which wholly owns Shanghai Hunlicar Investment Management Company Limited (“Hunlicar Capital”), set up four private equity investment (“PE”) funds during the period. Currently operating five equity investment funds, Hunlicar Capital is one of the few equity investment fund management enterprises in Mainland China active in different asset categories including bonds, currencies, shares, commodities and derivatives.
As at the end of June 2017, the Group managed a total of 11 funds in Hong Kong and Mainland China. In addition, Goldjoy Holding also obtained the Qualified Foreign Limited Partner (“QFLP”) license in the Qianhai free trade zone in Shenzhen during the period and thus extended assets management business to equity investment management. Since obtaining the Type 6 License in January 2017, China Goldjoy Securities Limited has completed a number of transactions in the field of equities and debt capital markets, investment and provision of equity loans, becoming the new profit growth driver for the Group.
Manufacturing
After exiting all of its low-margin and low value-adding electronic manufacturing business, the Group has developed high-end manufacturing business. Thus, revenue from the segment inevitably decreased by 27.2% to HK$15.8 million (corresponding period in 2016: HK$21.7 million), accounting for 4.7% of the Group’s total revenue (corresponding period in 2016: 6.6%). However, the management believes the transformation was necessary and is conducive to the Group’s long-term sustainable development, as evidenced by the narrowing segment loss.
At the same time, the Group is also actively seeking opportunities in manufacturing transformations and upgrading, as well as supply-side reform to step into the high-end manufacturing industry with high added value. Currently, the manufacturing business comprises light-emitting diode (“LED”) manufacturing, research & development, and installation. Though the revenue from this business which is at its early stage of development is not significant at the moment, the management sees huge growth potential in it.
Properties Investment and Development
In recent years, the Group has been active in identifying suitable property investment and development opportunities in Hong Kong and Mainland China. In 2016, the Group acquired 75.5% equity interests of (for identification only, Shenzhen B&K New Energy Co., Ltd.) (“Shenzhen B&K”). Apart from providing the Group with additional resources to develop LED lighting business, and strengthened its research and development (“R&D”) capacity, Shenzhen B&K also provides the Group with an opportunity to involve in the property investment business in Mainland China. Shenzhen B&K holds a piece of land with area of approximately 120,000 square meters in the core area of Guangming New District in Shenzhen. Construction of properties of approximately 100,000 square meters on the land was completed and the remaining undeveloped land is reserved for the development of a science and technology industrial park.
The Group acquired several properties in Admiralty, Hong Kong at the end of 2016. Part of the acquired spaces are being used as the head office of the Group and offices of its subsidiaries, and the rest are for investment purpose. In view of the prime location and continuous market demand in Grade A office buildings in Hong Kong, the investment properties are expected to bring impressive return on investment to the Group. With property investment added as a principal business activity, the Group will look for appropriate properties around the world for investment purpose.
Securities Investment
Consisting of investment in listed shares at both Hong Kong and Mainland China, the Securities Investment segment recorded a loss of HK$27.5 million (corresponding period in 2016: gain of HK$41.4 million). Despite the decrease of investment revenues, the dividend income increased by HK$52.2 million as compared with the same period of last year.
Business Outlook
Based on the macroeconomic figures of the first half of 2017, the economy of China and the world continued to grow. The Group remains positive about the capital market in the second half year. With the business transformation completed, the Group will pursue the strategy of diversifying its business and developing value-added businesses at full strength.
In terms of financial services, to capture the enormous growth potential in the financial services market in the Greater China region, efforts will be committed to expanding the number of high-end customers, enriching and optimizing business portfolio, enhancing sales and trading capacity, and providing customers with more comprehensive financial services. With an experienced management team, the Group will actively develop asset management and wealth management business in Hong Kong and Mainland China.
The Group will put more efforts in the operation of fund products, enhancing the investment and R&D capabilities of financial products, continue to diversify its products portfolio and expand local and overseas cooperation opportunities. As Goldjoy Holding has obtained the QFLP license, the Group plans to set up its first equity investment fund in Shenzhen in the second half of 2017 which will invest in intelligent manufacturing, biomedicine and other emerging industries for providing overseas investors with a channel to participate in equity investment in Mainland China.
The Group’s wealth management arm will enhance its service quality, and product development and risk management ability. It will provide extensive training to both frontline and back office staff, introduce MPF, insurance service and immigration consulting service. It will also recruit more senior compliance personnel to enhance its internal risk surveillance and monitoring system to ensure the Group can meet the standards prescribed by regulatory authorities in Hong Kong.
Meanwhile, as the management sees potential of the bond market, the Group will put more resources in financing services business of institutional clients to better serve its corporate and government clients in Mainland China and Hong Kong. The Group has built a team of professionals in the debt capital market. The Group is committed to building a competitive investment banking team and will cater closely for customers’ needs by providing services in equity and debt financing, and mergers & acquisitions transactions.
Regarding the Automation segment, the Group actively explored the new business direction of combining the leasing industry and financial market, and providing the financial leasing services of high-end manufacturing and large-scale equipment to continue speeding up developing the equipment finance leasing business to diversity its revenue stream. In addition, the Group will monitor investment opportunities in smart manufacturing and smart production system, with the aim of enhancing its competitiveness.
Since 2016, the Group has been directing efforts into establishing the new energy including the LED lighting business. Apart from the LED lights installation works at the private sector that it is currently engaging in, the Group has been actively seeking opportunities in the LED lighting projects at the public sector of Mainland China. Boasting leading-edge R&D and manufacturing capabilities, the Group plans to expand this business to overseas market and is studying the feasibility of setting up a factory in India.
With the implementation of a diversified development strategy in recent years, the Group has been looking for property investment opportunities in major cities and regions with development potential, so as to seize the business opportunities in the booming real estate market. With the properties of Phase I in operating leasing and Phase II of construction in progress, the entire science and technology industrial park on the land owned by Shenzhen B&K is expected to be completed by the end of 2018.
The Group is optimistic about the real estate market prospects in Hong Kong and Mainland China. The Group acquired a number of properties since 2016, and adopted property investment and development as one of its principal business activities. On 4 August 2017, the Group entered into an agreement to acquire LaiHua TaiSheng Limited (“LaiHua TaiSheng”) at a consideration of RMB1,720,000,000. Laihua Taisheng is a company that is principally engaged in real estate property sale and development, and holds a property development project Century Plaza, which is located at Zhangjiang New District, Ganzhou City, Jiangxi Province, the PRC with a total gross area of 128,461.20 sq.m. and saleable area of 635,071.78 sq.m. It is believed that the Group will benefit from the sale and leasing of the properties and the anticipated growth in the value of the project. In the future, the Group will continue to seek investment and development opportunities in the property markets in the PRC and Hong Kong.
China Goldjoy will continue to look for investment opportunities in financial services, properties investment and development, the high-end manufacturing industry, as well as new energy and new technologies so as to generate optimum returns for shareholders.