SALE OF THE ENTIRE SHAREHOLDING INTEREST IN HAFARY CHINA PTE. LTD. FOR RMB 5 MILLION
Hafary China Pte. Ltd. was incorporated in Singapore on 2 September 2011 with an issued and paidup capital of S$10 consisting 10 ordinary shares, as a special purpose vehicle for the investments and acquisition of assets by the Group in China, and is wholly-owned by Hafary Pte Ltd, which is in turn a wholly-owned subsidiary of Hafary Holdings Limited. Hafary China Pte. Ltd. holds a 45% equity interest in Hunan Cappuccino Construction Materials Co., Limited ("HCCM"), a tile manufacturing facility in China.
Since the commencement of HCCM's business, HCCM has been loss-making and the projected rate of returns of investment in HCCM has not materialised. This has arisen due to factors such as unfavourable market conditions in China as well as difficulty by HCCM in obtaining sufficient financing for its operations. As such, it is believed that it would be in the interest of Hafary Holdings Limited's shareholders that the Group proceeds with the Proposed Disposal.
The Proposed Disposal will allow Hafary Holdings Limited to realise some returns from its investment in HCCM at this time, rather than letting HCCM’s business gradually wind-down and likely result in zero returns.
Hafary recently took a full impairment of S$4m on its investment in associate, HCCM. No further loss is expected from HCCM going forward. While management is optimistic that operations will gradually stablise, they are also open to cashing out of HCCM if a good opportunity arises. As the investment has been fully impaired, any proceeds from the possible sale will be recognised as a gain on disposal for Hafary.
Maintain "BUY" call and target price of 33 cents.
Ok.. at least this is done. Next is hopefully another interim dividend in Feb when they announce their 2Q FY14 results.
Profit Before Income Tax
Profit before income tax decreased by S$23.3 million from S$29.0 million during HY2013 to S$5.7 million during HY2014. The high profit before income tax for HY2013 was contributed largely by recognition of a one-time gain on sale of development property (net of impact on directors' performance bonus) amounting to S$22.7 million. During HY2014, the Group recognised share of profits from associates and joint venture amounting to S$0.6 million (HY2013: Net loss of S$0.5 million).
Excluding the effects of the above items, profit before income tax generated from recurring activities decreased by S$1.7 million or 25.0% from S$6.8 million during HY2013 to S$5.1 million during HY2014.
DISAPPOINTED!!! profit from core business dropped by 25%.. $5.1 million in HY14 compared to $6.8 million in HY13. never expected this. No wonder the son giving up his CEO position and let his father take over... very very disappointed
