Sinjia Land Limited

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Half Year Financial Statement And Dividend Announcement 2018

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HALF YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

Income Statement

Review of Performance

Income Statement

"Discontinued operations" relate to the Company's investments in HLN Rubber Products Pte. Ltd. and its subsidiaries (the "Disposal Group"). The Company completed the disposal of the Disposal Group on 15 December 2017. Accordingly, the results of the Disposal Group have been presented separately as "Discontinued Operations".

"Continuing Operations" relate to the Company's remaining businesses in (i) hostel management (operating under G4 Station Pte. Ltd. ("G4")); and (ii) investment in fund management.

Revenue increased by 21.7% from S$212,000 in 1H2017 to S$258,000 in 1H2018. The increase was primarily due to the growth in visitor arrivals in 1H2018. Despite the increase in revenue, the Group reported a gross loss of S$9,000 in 1H2018 whereas a gross profit of S$19,000 was reported in 1H2017. This was mainly due to the increase in labour cost as the Ministry of Manpower of Singapore increased the qualifying salary criteria for work pass holders to qualify for dependant privileges from 1 January 2018.

Other income relates to interest income from bank deposits which increased by S$15,000, from S$2,000 in 1H2017 to S$17,000 in 1H2018, mainly due to placement of fixed deposit in 1H2018.

Other credits decreased from S$218,000 in 1H2017 to S$65,000 in 1H2018, mainly due to decrease in foreign exchange gain of S$132,000, as a result of the appreciation of Ringgit Malaysia and Renmibi against Singapore Dollars, and the Group recorded a fair value gain on financial assets (at fair value through profit or loss) of S$87,000 in 1H2017, and there was no such gain recorded in 1H2018.

Administrative expenses decreased by S$0.10 million, from S$1.21 million in 1H2017 to S$1.11 million in 1H2018, mainly due to the decrease in legal fee of S$0.16 million, office rental of S$0.05 million and depreciation of plant and equipment of S$$0.03 million, and partly offset by increase of staff costs in 1H2018 as a result of increment to the annual salary of the existing staffs. Decrease in depreciation of plant and equipment in 1H2018 was mainly due to the full depreciation of certain plant and equipment in FY2017.

Finance costs decreased from S$14,000 in 1H2017 to S$4,000 in 1H2018, mainly due to the settlement of the borrowings in 1H2018, which resulted in lower interest expense payable in 1H2018 as compared to 1H2017.

Other charges of S$167,000 in 1H2018 relate to the fair value loss on financial assets (at fair value through profit or loss) in the Company’s investment fund (namely, Fortune Asia Long Short Fund). Other charges of S$758,000 in 1H2017 relate mainly to the allowance for impairment on goodwill of S$760,000 arising from the acquisition of G4.

As a result of the above, the Group registered a net loss before tax of S$1.21 million in 1H2018, as compared to S$1.75 million in 1H2017. The Group posted a loss attributable to equity holders of the Company of S$1.22 million in 1H2018, as compared to S$1.76 million in 1H2017.

Financial Position

Current Assets

The Group’s current assets decreased by S$1.45 million to S$7.90 million as at 30 June 2018, from S$9.35 million as at 31 December 2017. The Group’s current assets as at 30 June 2018 comprised trade and other receivables of S$0.58 million, other current assets of S$0.15 milliion, financial assets (at fair value through profit or loss) of S$1.61 million, cash and cash equivalents of S$4.75 million and assets of the disposal group classified as held-for-sale of S$0.81 million.

Trade and other receivables decreased by S$0.10 million to S$0.58 million as at 30 June 2018, from S$0.68 million, mainly due to lower GST input tax to be claimed from Government in 2018.

Financial assets, at fair value through profit or loss decreased by S$0.17 million, from S$1.78 million as at 31 December 2017 to S$1.61 million as at 30 June 2018, due to a decrease in the fair value of the Company’s investment fund (namely, Fortune Asia Long Short Fund).

Cash and cash equivalents decreased by S$1.19 million, from S$5.94 million as at 31 December 2017 to S$4.75 million as at 30 June 2018. Please refer to the section on “Consolidated Statement on Cash Flows” below for the reasons on the decrease in cash and cash equivalents.

Assets of the disposal group classified as held-for-sale, which relate to the carrying amount of investment in associated company, Ace Empire Capital Sdn. Bhd., increased from S$0.79 million as at 31 December 2017 to S$0.81 million as at 30 June 2018, due to the appreciation of Ringgit Malaysia against Singapore Dollars.

Non-current Assets

The Group’s non-current assets decreased by S$0.28 million to S$16.16 million as at 30 June 2018, from S$16.44 million as at 31 December 2017. The Group’s non-current assets as at 30 June 2018 comprised financial assets at fair value through other comprehensive income of S$11.24 million, other receivables of S$2.36 million, investment property of S$2.54 million and plant and equipment of S$20,000.

Financial assets at fair value through other comprehensive income decreased by S$0.27 million, from S$11.51 million as at 31 December 2017 to S$11.24 million as at 30 June 2018. The financial assets at fair value through other comprehensive income relate to the Company’s investment in Tianjin Swan Lake Real Estate Development Co., Ltd. ("TJSL"). Partial consideration for the disposal of TSJL was received by the Company from the prospective buyer in the form of shares in Abterra Ltd, a listed company on the SGX-ST. The decrease was mainly due to a decrease in fair value of these quoted securities in Abterra Ltd of S$0.26 million in 1H2018.

Other receivables of S$2.36 million as at 30 June 2018 and 31 December 2017 relate to the proceeds receivable from the sale of the Disposal Group.

Plant and equipment decreased by S$19,000 from S$39,000 as at 31 December 2017 to S$20,000 as at 30 June 2018, mainly due to the depreciation charges recognised in 1H2018.

Investment property of S$2.54 million as at 30 June 2018 and 31 December 2017 relates to the settlement of convertible loan note issued by Barons Vista LLC pursuant to which certain properties were transferred to the Company.

Current Liabilities

The Group’s current liabilities decreased by S$22,000, from S$12.38 million as at 31 December 2017 to S$12.16 million as at 30 June 2018. The Group’s current liabilities as at 30 June 2018 comprised mainly trade and other payables of S$12.11 million and borrowings of S$0.04 million.

Trade and other payables decreased by S$0.17 million, from S$12.28 million as at 31 December 2017 to S$12.11 million as at 30 June 2018, mainly due to the payment of amount due to suppliers of G4 in 1H2018. Trade and other payables comprised mainly an amount of S$10.49 million which relates to partial consideration received from the prospective buyer in connection with the disposal of financial assets at fair value through other comprehensive income of investment in equity security of TJSL.

Borrowings decreased from S$0.10 million as at 31 December 2017 to S$0.04 million as at 30 June 2018, due to the repayment of finance lease liabilities of S$19,000 and borrowings of S$60,000 in 1H2018, partly offset by a reclassification of borrowings from “Non-current Liabilities” to “Current Liabilities”.

The Group reported a negative working capital of S$4.26 million as at 30 June 2018, as compared to a negative working capital of S$3.03 million as at 31 December 2017. The Group’s negative working capital as at 30 June 2018 and 31 December 2017 were largely due to the partial consideration of S$10.49 million and S$10.47 million respectively received from the prospective buyer of TJSL which was recorded as a “Current liability – Other Payables”, whereas the value of the equity security in TJSL was recorded as a “Non-current asset – Financial assets at fair value through other comprehensive income”. In addition, the partial proceeds receivable from the Disposal Group of S$2.36 million as at 30 June 2018 and 31 December 2018 was recorded as a “Non-current asset – Other Receivables” due to the agreed manner of payment with the vendor pursuant to the sale and purchase agreement.

Non-current Liabilities

The Group’s non-current liabilities comprised borrowings, which decreased by S$0.02 million, from S$0.18 million as at 31 December 2017 to S$0.16 million as at 30 June 2018. The decrease was due to the reclassification of borrowings from “Non-current Liabilities” to “Current Liabilities”.

Equity

Total equity decreased by S$1.48 million, from S$13.23 million as at 31 December 2017 to S$11.75 million as at 30 June 2018, mainly due to (i) an increase in accumulated losses of S$1.22 million as at 30 June 2018, as a result of net loss incurred in 1H2018; and (ii) decrease in other reserves of S$0.26 million as at 30 June 2018, as a result of changes in the financial assets at fair value through other comprehensive income in 1H2018.

Consolidated Statement of Cash Flows

Net cash outflow for operating activities for 1H2018 amounted to S$1.13 million, mainly due to cash used in operations of S$1.21 million and working capital changes of S$83,000. Cash from working capital in 1H2018 amounted to S$83,000, mainly due to decrease in (i) trade and other receivables of S$86,000; (ii) financial assets, at fair value through profit or loss of S$166,000; and partially offset by decrease in trade and other payables of S$170,000.

Net cash inflow from investing activities of S$16,000 in 1H2018 was mainly due interest received of S$17,000, partially offset by purchase of plant and equipment of S$2,000.

Net cash outflow from financing activities of S$83,000 in 1H2018 was mainly due to the repayment of borrowings and lease liabilities of S$79,000 and interest paid of S$4,000.

As a result of the above, the Group had cash and cash equivalents of S$4.75 million as at 30 June 2018, representing a decrease of S$1.19 million as at 31 December 2017.

Commentary

Notwithstanding a loss attributable to shareholders, the Group is financially strong with cash at bank of $4.75 million as at 30 June 2018.

As the global economy is on steady growth track, South-east Asia’s hostel market experienced growth in year 2017. The Singapore Tourism Board has forecasted the growth in tourism receipts to be in the range of 1% to 3% and growth in international visitor arrivals to be in the range of 1% to 4% in year 2018(1). The Group is generally optimistic about tourism prospects for the year ahead.

The Company will focus its resources on property related business which include property development, property investment and property management.

The Group continues to face challenges arising from uncertain economic conditions and financial environment. The Group remains focused on streamlining its business structure and maintaining disciplined cost management. The Group has implemented various measures to stay lean and cash flow positive in order to stay competitive in the challenging business environment.

Nevertheless, the Company has, and will continue to explore new business opportunities which can enhance long term shareholder value. These include geographical expansion, mergers and acquisitions, divestment and partnering with long term strategic investor(s) who can add depth and breadth to the Group’s existing business portfolio.

Note:
(1) Please refer to the website of Singapore Tourism Board:
https://www.stb.gov.sg/news-and-publications/lists/newsroom/dispform.aspx?ID=744

Balance Sheet

balance sheet