Nam Tai Property Inc. Reports Q2 2017 Results

SHENZHEN, China, July 31, 2017 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the second quarter ended June 30, 2017.

 

OPERATING RESULTS

Operation income for the second quarter of 2017 and the same quarter of last year were mainly derived from properties and lands located in Shenzhen. Operating loss for the second quarter of 2017 was $2.3 million, an increase of $0.8 million, compared to operating loss of $1.5 million in the second quarter of 2016.

Net income for the second quarter of 2017 was $2.1 million mainly represented exchange gain of $2.7 million as a result of the appreciation of Renminbi against US dollars in the second quarter of 2017, interest income of $1.8 million earned from time deposits and net operation income of $0.5 million, but partly offset by general and administrative expenses of $2.9 million, or income of $0.06 per diluted share. Compared to the financial results for the same period in 2016, the net loss then of $2.6 million mainly represented exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars in Q2 of 2016 and general and administrative expenses of $1.9 million, but partly offset by the interest income of $1.3 million earned from time deposits and net operation income of $0.3 million, or a loss of $0.07 per diluted share.

Net income for the six months ended June 30, 2017 was $3.9 million mainly represented interest income of $4.3 million earned from time deposits, exchange gain of $3.5 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017 and net operation income of $1.1 million, but partly offset by general and administrative expenses of $4.9 million, or income of $0.10 per diluted share. Compared to the financial results for the same period in 2016, the net loss then of $3.0 million mainly represented general and administrative expenses of $4.1 million and exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars during the six months ended June 30, 2016, but partly offset by the interest income of $2.9 million earned from time deposits and net operation income of $0.6 million, or a loss of $0.08 per diluted share.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi denominated assets to US dollars for reporting purposes has resulted in foreign exchange gain for the six months ended June 30, 2017. Due to the fluctuation of exchange rate for Renminbi against the US dollar, foreign exchange gain for the six months ended June 30, 2017 was $3.5 million, or approximately 91% of the amount of our net income for this period. However, since the majority of our payment obligations are also denominated in Renminbi, we do not expect the movement of Renminbi against the US dollar to materially and adversely impact our business. 

Capitalization on project investment was $3.5 million for Q2 2017, totaling $4.9 million for the first half of year 2017 and our accumulated project investment was $43.6 million up to June 30, 2017, which was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017.

Our business of land development is currently in the preparatory stage where it takes time to apply for the relevant licenses and permits from the PRC government. During this preparatory stage of the land development, our only sources of income are from limited deposit interest and rental income; therefore, we expect to continue to incur losses during this stage.

Please see page 7 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. This information has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of Q2 2017 on page 7, Condensed Consolidated Statements of Comprehensive Income.

COMPANY OUTLOOK

With respect to the development of "Inno Park" and "Inno City" in Shenzhen, the construction permit application processes have been proceeding smoothly and every related step is on schedule and within the Company's expectations.

As part of our preparation for the development of "Inno Park", the Company is pleased to report that after our internal team has been working closely with the external project management company (WSP), quantity surveyor (Currie & Brown) and architectural design firm (Ronald Lu and Partners) on the construction drawing design and the tender for the general construction contractor, the main construction contractor will be selected in the second half of this year and commence work in the beginning of 2018. Since the construction work for the basement area started ahead of schedule, we held a groundbreaking ceremony for the construction of the basement area on May 5, 2017.

As part of our preparation for the development of "Inno City", the PRC Government has verbally agreed and approved the construction of Phase I and II of "Inno City" to be combined together as one single project and the Company is currently waiting for the official approval from the PRC Government. This could significantly lower the costs and shorten the time of the construction. The Company is currently negotiating and finalizing its agreements with the selected architectural design firm, the project management company and quantity surveyor. They are expected to be engaged and commence work in the second half of this year. As the Inno City Project may commence ahead of schedule upon the receipt of the approval to combine the two phases, the Company plans to demolish all the old factory buildings between October to December 2017. The Company has also purchased new office premises for a total amount of $13.5 million in April 2017. The Company will move its headquarters to this new location and demolish the existing headquarters in the first half of 2018.

Our Chairman, Mr. M.K. Koo ("Mr. Koo"), announced on July 12, 2017 that he has entered into a share purchase agreement to dispose all of his shareholdings in the Company to Kaisa Group Holdings Ltd. (1638:Hong Kong) ("Kaisa"), a real estate developer listed on The Stock Exchange of Hong Kong Limited. The closing of which is scheduled no later than August 11, 2017, and subject to Kaisa's satisfaction of due diligence review and other customary closing conditions. Consistent with the Company's previously announced strategic plan to identify a strategic partner that can assist the Company in its various development projects, the Company is now pleased to introduce Kaisa, after a three year search, as the best candidate identified to become an investor and potential strategic partner.

Part I: Summary of gross floor areas for the two projects:

Part II: Timetable for the two projects:

Part III: Budgetary Estimate for the two projects:

As for our Wuxi plant, the factory building continues to be listed for sale and we still expect it to be sold sometime within 2017. An auction is under preparation and we are currently looking for potential buyers. This auction is scheduled to complete in September 2017.

Potential Risks in our business

We currently derive a majority of our income from rental and interest income but please note that our rental income will cease after October 2017. Since 2016, we have seen a stabilizing trend on the benchmark interest rates in China. However, due to the current economic conditions in China, we expect the People's Bank of China ("PBOC") to keep Renminbi-denominated official time deposit interest rates in China at a low level throughout 2017. With this lower interest rate and rental income, we expect to continue to incur operating losses in 2017 and beyond.

We have only become a real estate developer, after our electronic manufacturing businesses ceased in 2014. To ensure our successful transformation, we have engaged external advisors and sought potential strategic partners and investors to support our projects. We cannot assure you our efforts are sufficient in carrying out a transformation of this magnitude. Our Chairman, Mr. Koo, is 74 years old. Mr. Koo has begun his transition towards retirement in anticipation of age and health issues. We cannot assure you that our transition planning can be carried out smoothly, or that any successor will be able to manage our Company as effectively.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi-denominated assets to US dollars for our reporting purposes has resulted in foreign exchange gain in this quarter. As such, we do expect to see fluctuations in the reporting of foreign exchange loss/gain in the financial statements due to the movement of Renminbi against the US dollar. Nevertheless, as a majority of our payments are in Renminbi, we also do not expect the movement of Renminbi against the US dollar to adversely impact our business.

In order for the projects to proceed smoothly and start ahead of the schedule, it is necessary for the Company to negotiate with banks for the implementation of funds needed to assist in future development of the projects.

As of end of June, 2017, we have a total cash balance of $170.7 million and no debt. With our current cash position, we believe our finances remain healthy to fund the initial stages of these property development projects within the coming year and half. All of our land development related applications are subject to government policies and regulations in the real estate market. As this is our first venture into the land development projects after the cessation of our LCM business, we may encounter industry-specific difficulties that result in losses as we progress with our projects in Shenzhen. As we are currently in the planning stage of our property projects, and can only generate limited income from deposit interest income and rental income, we will continue to record operating losses. Cash on hand is expected to drop continuously, but most of the incurred expenses related to construction will be for project development, which will be capitalized as real estate properties under development (non-current asset) on our balance sheet. For more information on risks in our business, please refer to the Risk Factors section of our 2016 Annual Report on Form 20-F as filed with the SEC and on our website.

According to our project development plan, project investment for Q3 2017 is estimated to be $11.0 million, and project investment for the year of 2017 is estimated to be $60 million.

The information contained in or that can be accessed through the website mentioned in this announcement does not form part of this announcement.

PAYMENT OF QUARTERLY DIVIDENDS FOR 2016 AND 2017

As announced on December 12, 2016, the Company set the payment schedule of quarterly dividends for 2017. The dividend for Q3 2017 was paid on July 20, 2017.

The following table updates the previously announced schedule for declaration and payment of quarterly dividends in 2017.

The Company's decision to continue making dividend payments in 2017 as set out and confirmed in the above table does not necessarily mean that cash dividend payments will continue thereafter or at the same amount. Whether future dividends after 2017 are to be declared will depend upon Company's future growth and earnings at each relevant period, of which there can be no assurance, and the Company's cash flow needs for business operations and transformation. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2017, and we also cannot assure you what the amounts of such dividends will be or whether such dividends, once declared for a specific period, will continue for any future period, or at all.

PROPOSED SCHEDULE OF RELEASE OF QUARTERLY FINANCIAL RESULTS FOR 2017

To maintain the efficiency of delivering the Company's quarterly financial results to the market, the Company's management has decided to follow approximately the same schedule of 2016 to release the quarterly financial results for 2017. Details of the expected quarterly release dates are as follows:

Announcements of Financial Results

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE

Certain statements included in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "plan", "seek" or "believe". These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activities, performance, or achievements expressed or implied by the forward-looking statements, including, but not limited to, delay in the Company's ability to obtain all requisite permits and approvals from relevant government authorities in relation to the redevelopment of two parcels of properties in Guangming, Shenzhen, and Gushu, Shenzhen, respectively, and the successful redevelopment of the two parcels of properties into Nam Tai Inno Park and Nam Tai Inno City; the sufficiency of the Company's cash position and other sources of liquidity to fund its property developments; continued inflation and appreciation of the Renminbi against the US dollar; rising labor costs in China and changes in the labor supply and labor relations. In particular, you should consider the risks outlined under the heading "Risk Factors" in our most recent Annual Report on Form 20-F and in our Current Report filed from time to time on Form 6-K. The Company's decision to continue dividend payments in 2017 does not necessarily mean that dividend payments will continue thereafter. Whether future dividends will be declared depends upon the Company's future growth and earnings, of which there can be no assurance, as well as the Company's cash flow needs for further expansion. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2017, what amount those dividends may be or whether such dividends, once declared for a specific period, will continue for any future period, or at all; and whether we will purchase any of our shares in the open markets or otherwise. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements apply only as of the date of this press release; as such, they should not be unduly relied upon as circumstances change. Except as required by law, we are not obligated, and we undertake no obligation, to release publicly any revisions to these forward-looking statements that might reflect events or circumstance occurring after the date of this release or those that might reflect the occurrence of unanticipated events.

ABOUT NAM TAI PROPERTY INC.

We are a real estate developer. We hold two parcels of land located in Guangming and Gushu, Shenzhen, China. We are converting these two parcels of land that formerly housed the manufacturing facilities of our prior businesses into high-tech research and development centers, Nam Tai Inno Park and Nam Tai Inno City. We expect our principal income in the future will be derived from rental income from these research and development centers. Nam Tai Property Inc. is a corporation registered in the British Virgin Islands and listed on the New York Stock Exchange (Symbol: "NTP").

 

 

 

 

 

 

Please refer to the Nam Tai website (www.namtai.com) or the SEC website (www.sec.gov) for Nam Tai press releases and financial statements.

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SOURCE Nam Tai Property Inc.