Chinlink also builds and operates large-scale logistics parks, trade and wholesale centers, and shopping malls. The Group services an extensive client base through its integrated property, financial services and logistics services businesses, creating a unique “finance-ecosystem@, with operations in Hong Kong, Shaanxi Province and Shenzhen, China.
The Group's loss attributable to shareholders for the 6 months ended 30-09-2019 amounted to HKD 52.17 million. Basic loss per share was HKD 0.0357. No dividend declared. Turnover amounted to HKD 357.2 million, a decrease of 57.4% over the same period last year, gross profit margin up 17.4% to 29.8%. (Announcement Date: 29 Nov 2019)
Business Review - For the six months ended September 30, 2019
International Trading Business
For the Period, the Group’s international trading business recorded a 66.5% drop in revenue to HK$247.1 million, mainly due to the shrinking demand from our regular buyers of electronic components. Gross profit was proportionally reduced to HK$7.6 million, representing a drop of 67.4% in value compared with the same period of the previous year (“Previous Period”). Early this year, the US government has indicated the possibility of imposing duties on Chinese electronic products. It further threatened to restrict many US components manufacturers in supplying critical electronic parts to the Chinese factories. Coupled with the less than expected growth in worldwide demand for smartphones and other similar gadgets, the entire electronics industry, in general, is very pessimistic about the industry outlook. The Group is, therefore, taking a conservative approach to curtain the exposure to this trading business, resulted in a substantial drop in turnover and profit. The Group does not expect any significant improvement in the condition in the near term.
Financial Guarantee Services Business
For the Period, the Group generated HK$10.2 million in revenue from its financial guarantee services, a modest increase of 12.1% over the Previous Period of HK$9.1 million, while maintaining a stable high profit margin. The total outstanding guarantee amount was RMB430.5 million as of 30 September 2019 (Previous Period: RMB387.5 million). The business still faced difficulty in further expanding the portfolio as Chinese domestic banks continued to apply tight credit policy towards small and medium-sized enterprises even with the support of financial guarantees.
Finance Lease Services Business
Finance lease services business recorded an impressive 27.3% increase in revenue to HK$19.3 million compared with the Previous Period of HK$15.1 million. The higher efficient use of capital and the expanded customer base both contributed to the increase during the Period. The total finance lease receivables as of 30 September 2019 was HK$315.0 million (Previous Period: HK$232.5 million).
Property Investment Business
The property investment business reported a slight increase of 7.9% in revenue to HK$57.2 million, as compared with HK$53.0 million in the Previous Period. The income solely derived from the Commercial Complex. The average occupancy rate of the Commercial Complex remained consistently high and recorded around 96.0% in the Period.
Financial Advisory Services Business
For the Period, MCM Holdings Limited and its subsidiaries (collectively “MCM Group”) generated HK$13.0 million revenue in the forms of commission and management fees, a decrease of HK$1.9 million from the Previous Period. MCM Group’s core businesses include financial advisory and asset management licensed under types 1, 2, 4 and 9, and regulated by the Securities and Futures Commission of Hong Kong. During the Period, MCM Group has continued to cement its strong reputation of success in its financial advisory business, along with launching new funds and products under its asset management arm, MCM Investment Partners Limited (“MCMIP”). Finally, it cemented important partnerships and expanded its business and client global footprint.
In the financial advisory business, MCM Group, through its subsidiary, MCM Asia Limited (“MCM Partners”) raised over US$10 million primary capital for one of its important clients in the region and launched significant mandates for the next six months. In addition, it closed a secondary transaction with a Hong Kong based family office into an established Singaporedomiciled unicorn technology firm. MCM Partners managed to raise capital in Latin America through its new joint venture, MCM Latam Limited, as well as in Korea and China working closely with strategic partners in each location.
In the asset management business, MCMIP launched the first managed account vehicles on behalf of investors, implementing its quantitative strategies to generate alternative beta exposure for the US markets. Additionally, MCM Group has established a series of partnerships to expand its opportunity set in China, working with some of the most exclusive asset managers in the country.
Logistics Services Business
For the Period, the logistics services segment generated the revenue of HK$5,000. This segment is ancillary to the Group’s international trading and financial services businesses. Therefore, it was only operating in a minimal scale and did not constitute as a material profit centre.
Business Outlook - For the six months ended September 30, 2019
China is now entering into a new phase of high-quality economic development and industry transformation power by technology, innovation and entrepreneurial enterprises. Under this ever-changing environment, the Group continually explores new business strategies and opportunities by utilising our core competence in financial services and our connection to global resources.
As discussed in the last annual report, the Group’s business positioning is to build an ecosystem that could provide comprehensive financial services and innovative solutions to our clients in their different development stages. Driven by our international reach, we integrate strategic resources from across the globe, including financial partners, education academic and scientific research institutions, world-class incubators and accelerators, industry and technology leaders, and entrepreneurs, as well as many local municipal authorities and government bodies in China. For our Chinese clients, we can offer them not only traditional non-banking financing products, but also the connection to international investors and industry partners, and access to the global capital market. Our deep-rooted relationship network in China can also benefit our overseas business partners in their expansion in this lucrative market. We also assist the local municipal governments in carrying out industry transformation by bringing in foreign enterprises and innovation resources, as well as providing capital raising and financial assistance.
Since April 2019, GSVlabs becomes Chinlink and MCM Group’s strategic partner. Founded in Silicon Valley, US, GSVlabs has a strong background in incubator and accelerator operations for startup technology companies, and solid connection with large corporations with disruptive technologies, business models, and ideas. Under this partnership, Chinlink will support GSVlabs’ global expansion plans and the rollout of GSVlabs’ innovation centres across China. A pioneer innovation centre will be set up in Xi’an by early 2020. This new innovation centre will offer accelerator programmes for companies specialised in artificial intelligence (“AI”) industry. GSVlabs will operate the innovation centre in alliance with its two other AI centres opening respectively in Pittsburg, US (partner with Carnegie Mellon University) and London, United Kingdom (partner with University College London) by mid- 2020.
In this late September, Chinlink, in partnership with MCM Group and GSVlabs, successfully held the 3rd Shaanxi-Hong Kong Finance and Innovation Conference (the “Conference”), jointly organised by the Shaanxi Provincial Department of Commerce, Shaanxi Provincial Department of Science and Technology and Shaanxi Liaison Unit of the Government of Hong Kong Special Administrative Region. Together with a startup pitch competition, the Conference on the theme “Innovation Meets Opportunity” was extended to one and a halfday. It was a groundbreaking occasion for showcasing our ability to connect government supports, international finance and technology resources in one single event. Worldclass speakers were invited and attended the Conference to address the global trends in innovation and finance, the Conference attracted over 350 attendees, most of them were Shaanxi technology companies and startups. The Conference has built a solid base for the Group to further pursue its new business positioning in building an innovation and finance ecosystem to accelerate startup growth.
As set out in our last annual report, MCM Group has refocused much of its efforts towards exploring and capturing opportunities in China, where we have now signed several partnerships with local enterprises that look to find investment opportunities globally, leveraging our diverse network. These initiatives will serve as the foundation of our asset management efforts into 2020. In our financial advisory services business, we continue to find success in our corporate partnerships, not only with Asian enterprises expanding overseas, but also as well as international innovative companies seeking the right partners to help them grow in Asia.
The challenging macroeconomic environment created by current US-China trade tensions, along with corporate events such as the failed listing of large unicorns, have levied short term challenges for our placement business, but is equally generating greater appetite for established and reputable advisors that can help clients navigate these challenging times. Finally, innovation continues to be the core of many industries, and through our GSVlabs partnership we believe 2020 will create amazing opportunities for the MCM Group to participate and grow in this arena.
Chinlink also made a significant progress in the Chinlink•Worldport project. The Hanzhong Municipal Government had formed a joint venture with Chinlink in September 2019. The joint venture company’s primary objective is to upgrade the Hanzhong traditional Chinese herbal medicine industry’s farming and manufacturing techniques to world-class standard qualifying for China and worldwide markets. Hanzhong is one of China’s legacy herbal medicine farming base but for all these years, it is still in progress to build a modern industry infrastructure and supply chain. Chinlink as a 66.0% controlling shareholder in the joint venture, initiates an ecosystem to integrate global industry partnerships in production and sales, research, quality assurance and certification, branding and marketing of Chinese herbal medicine of Hanzhong origin. Working closely with municipal government, the Group will connect global capital to provide financial assistance and advisory in all stages of the industry-transforming process. Chinlink • Worldport is the designated location for this joint venture project. An exhibition and conference centre already opened in this October and will take up more facility space as the project progresses.
In addition, in this September, the Group celebrated the inauguration of our Xi’an new office building, the CIC. The Group’s China Regional Headquarters will move into this landmark building by the end of the year. CIC provides 34,000 square metres office space, and 13,000 square metres commercial space of unique design and intelligent facilities. It will serve as the next generation home base for Xi’an’s innovative financial and technology enterprises. CIC will be the second property to generate stable rental incomes to the Group from 2020 onwards.
The phase two development of the Commercial Complex (the “Phase Two Development”) is finally on track. In this early November, the Group engaged a subsidiary of Landsea Green Properties Co., Ltd. as the project development manager and sales and marketing agent for the Phase Two Development. A listed company in Hong Kong, Landsea Green Properties Co., Ltd. (HKSE Stock Code: 106) is a famous real estate developer in China and well-known for its green building technologies and vertically integrated business capabilities. The Phase Two Development will have a total of 128,000 square metres gross area, 80.0% of which will be service and loft apartments and the rest will be commercial facilities. The Phase Two Development targets to complete by 2022.
Chinlink’s core advantage lies in our global vision and the ability to integrate international resources. Chinlink’s innovation and finance ecosystem, integrating resources such as international capital, academic and scientific research institutes, incubators and accelerators, and local government incentive policies, is capable of supporting the sustainable growth of entrepreneurship and technology-rich enterprises. This ecosystem will also assist the government advancement of its industry transformations and transition to an innovationdriven economy.
The Conference reinforced our belief that Xi’an is a robust technology base full of amazing opportunities for startups and entrepreneurs. We will expedite the setup of the first GSVlabs innovation centre in Xi’an to capture this unrivaled opportunity. By bringing in the Silicon Valley model of incubator and accelerator to Chinlink’s innovation and finance ecosystem, we will be able to build a replicable model and scale-up across China. Apart from the Chinlink•Worldport project, the Group is currently proceeding with other promising prospects within the Shaanxi Province as well as other province in the PRC where Chinlink is not only an integrator but also can benefit from the operation, whilst retaining a captive base for our financial and investment services. A sustainable model built on innovative business synergy, is what Chinlink’s future vision lies.
Source: Chinlink Int'l (00997) Interim Results Announcement