Sunwah International Reports Financial Results for Fiscal Year Ended June 30, 2011

TORONTO, Sept. 26, 2011 /CNW/ - Sunwah International Limited (TSX: SWH), ("Sunwah International" or the "Company"), an Asian based financial services firm, today announced its financial results for the fourth quarter and the 2011 fiscal year ended June 30, 2011.  All figures are in U.S. dollars unless otherwise specified.

For the fiscal year ended June 30, 2011, Sunwah International and its subsidiaries (collectively the "Group") achieved improved performance from its operations, but recorded a year over year lower net income due to a previous one time net gain in net income recorded in fiscal year ended June 30, 2010.  The improved operating performance is mainly attributable to an increased focus by management on revenue from services, combined with the recovery of the financial market and the ample liquidity in the Hong Kong market, especially in the first half of FY2011.

Financial highlights for the fiscal year include:

  • Total revenue from continuing operations increased to $27.5 million, compared with $19.7 million for the previous fiscal year;

  • Revenue from services and other income increased to $16.3 million, compared with $12.4 million for the previous fiscal year;

  • Trading income from financial assets held for trading increased to $11.2 million, compared with trading income of $7.3 million for the previous fiscal year;

  • Income before income taxes, non-controlling interests and discontinued operations increased to $2.5 million, compared with a loss of $0.7 million for the previous fiscal year; and

  • Net income was $0.9 million, or $0.0098 basic earnings per share, compared with a net income of $4.1 million, or $0.0500 per share, for the previous fiscal year.

Financial Results for the Fiscal Year

Total revenue from continuing operations for FY2011 increased to $27.5 million from $19.7 million in FY2010, as a result of an increase in advisory fee income from initial public offerings ("IPO") and the related preparatory work. In addition, there was increase in margin financing and IPO financing interest income.  Revenue from services and other income from continuing operations increased 32% to $16.3 million from $12.4 million last year. Trading income, both realized and unrealized, from financial assets held for trading was $11.2 million for FY2011 compared to $7.3 million for FY2010.

Selling and administrative expenses increased 30% to $23.9 million for FY2011 from $18.3 million for FY2010.  The increase was mainly due to (i) the increase in staff costs (including basic salary, commission and variable staff costs) which was in line with the increase in operating income; (ii) the non-cash transactions in relation to the recognition of $2.2 million compensation costs for the stock options granted by the Company and its subsidiary to several directors, officers and employees of the Group; and (iii) the related costs for the set-up of the operations for Sunwah International Asset Management ("SIAM") in the Company's Asset Management division.

A $2.1 million non-cash charge in relation to the fair value changes on financial derivative liabilities and net loss on repurchase, amendment of terms and conversion of the Company's issued unsecured convertible debentures was recorded in FY2011.  The fair value loss was $0.2 million in FY2010.

In aggregate, the Group recorded non-cash charges against income arising out of accounting treatment in respect of the issue of options and amendment to the Company's convertible debentures of $4.3 million.

The Group recorded an income before income taxes, non-controlling interests and discontinued operations of $2.5 million in FY2011, compared to a loss of $0.7 million in FY2010.

During FY2011, the Company incurred a non-recurring gain on deemed partial disposal of a subsidiary, Sunwah Kingsway Capital Holdings Limited (formerly known as SW Kingsway Capital Holdings Limited) ("SWK"), of $2.6 million.  In FY2010, the Group recorded a non-recurring gain of $5.7 million on disposal of shares of jointly controlled entities classified as discontinued operations.

Overall, consolidated group net income for the year was $0.9 million, or $0.0098 basic earnings per share and $0.0096 diluted earnings per share, compared to a net income of $4.1 million, or $0.0500 basic earnings per share last year.

Segmented Results of Continuing Operations for the Fiscal Year

                             
    Brokerage
$'000
  Corporate
Finance &
Capital Markets
$'000
  Asset
Management
$'000
  Investment in Securities
$'000
  Structured
Investment
$'000
  Corporate and Other Activities
$'000
  Total
$'000
Commission & fee income   8,326   4,746   -   -   2   1,058   14,132
Dividend income   -   -   -   682   186   -   868
Interest and other income   749   88   -   108   -   325   1,270
Trading (loss)/income   (36)   (2)   -   8,805   2,447   -   11,214
    9,039   4,832   -   9,595   2,635   1,383   27,484
Inter-segment revenue   325   245   -   -   -   3,290   3,860
Selling and administrative expenses   (10,570)   (5,593)   (1,041)   (1,434)   (1,162)   (7,957)   (27,757)
Share of loss of investments subject to significant influence   (24)   -   -   -   (340)   -   (364)
Other (expenses)/income   (153)   (27)   (2)   (2)   (2,983)   2,420   (747)
(Loss)/income before income taxes and non-controlling interests   (1,383)   (543)   (1,043)   8,159   (1,850)   (864)   2,476
  • Brokerage

    Kingsway Financial Services Group Limited, the Group's subsidiary in Hong Kong, was again ranked in the top-three in the category of Best Local Brokerage in Hong Kong as determined by the Asiamoney Brokers Poll in November 2010, a category in which it has enjoyed top-three honors for the last six consecutive years.

    The Group's research department hosted an Investors Conference in September 2010 and arranged meetings with 20 Hong Kong listed companies and several institutional investors to: (i) share the business strategies and latest information of our small to medium sized enterprise clients; and (ii) strengthen our client relationships.

    Revenue increased to $9.0 million for FY2011, compared with $8.5 million for FY2010.  The commission and fee income increased to $8.3 million in the current year from $8.1 million in last year as a result of increased turnover on both equities and derivative warrants trading.  Interest and other income increased to $0.7 million for FY2011 from $0.4 million in FY2010, as a result in the increase in interest income from the growth of the margin lending book, which in turn was driven by the demand from the Group's corporate clients and high net worth clients.

    The division's overall loss decreased 25% to $1.4 million in the current year, compared to $1.8 million for last year.

  • Corporate Finance & Capital Markets

    Total revenue almost doubled to $4.8 million for FY2011, compared with $2.5 million for FY2010.  The significant increase in the corporate finance, underwriting and placing fee revenue was attributable to the revival of the equity capital markets in FY2011 and an increased focus by management on this segment of the market.

    The division's overall loss decreased to $0.5 million for the current year, compared to $0.7 million for last year.

    The division participated in several underwriting and placing activities, including 3 IPO transactions and 12 shares placing transactions. The Group acted as the sponsor for the listing of Modern Education Group Limited ("MEGL"), an education firm providing after-school tutoring services, on the Main Board of the Stock Exchange of Hong Kong.  MEGL is the first education firm listed in Hong Kong.

  • Asset Management

    The division recorded an overall loss of $1.0 million for FY2011, compared to $0.2 million in FY2010.  The loss was mainly attributable to the expenses incurred for the set-up of the operations of SIAM and the due diligence costs for SIAM's proposed acquisition of a UK-based fund management company and the novation of investment management agreements for two UK-based oil and gas energy funds.  The proposed transactions were subsequently terminated in August 2011.

    The division continues to develop the asset management business by concentrating on arranging new private equity funds in the natural resource sector, particularly mining and energy.

  • Investment In Securities

    Total revenue increased to $9.6 million for FY2011 from $6.9 million in FY2010.  The division captured the upward movement of the market, especially in the second quarter of the current fiscal year, and realized several investments in FY2011. In FY2011, the division invested in several investment products and is diversifying its investment portfolio in order to move away from holding large positions in individual stocks.

    Overall, the division recorded income of $8.2 million in the current year, compared to $6.0 million for FY2010.

  • Structured Investment

    Total revenue of $2.6 million from continuing operations was recognised in the division in FY2011, compared to $0.8 million for FY2010.  In FY2011, the division invested in unlisted equity securities engaged in provision of education services and unlisted private investment funds. The Group also acquired an approximate 30% interest in Salmon River Resources Ltd. (TSXV: SAL), which is engaged in the evaluation, acquisition, exploration and development of gold and base metal mineral properties in Australia.  The investment in SAL was treated on an equity accounting basis and have not been marked to market.

    Other expenses from continuing operations increased to $3.0 million in FY2011, compared to $1.2 million in FY2010, attributable to the increase in fair value loss on the convertible option derivative component of the convertible debentures and the net loss on repurchase, amendment of terms and conversion of debentures of $2.1 million in total.

    The division recorded an overall loss from continuing operations of $1.9 million for FY2011, compared to a loss of $1.5 million for FY2010.

  • Corporate and Other Activities

    The overall loss for corporate and other activities decreased significantly with an overall loss of $0.9 million recognized for FY2011, compared to a loss of $2.5 million for FY2010, mainly attributable to the one-off gain on deemed partial disposal of a subsidiary of $2.6 million recognized in the current year.

Financial Results for the Fourth Quarter

The Group reported increased revenue for the fourth quarter of $1.9 million compared with negative total revenue of $3.8 million for the same quarter of FY2010.

Net loss for the quarter decreased to $4.7 million, or $0.0525 loss per share, compared with a net loss of $7.6 million, or $0.0843 loss per share for the same period last year.

Dividends

The Company proposed a final dividend for fiscal year 2011 of Canadian Dollar 0.01 per share to shareholders of record as at October 12, 2011.  The dividend will be paid out on or about December 19, 2011.

Outlook

The Company believes that China will continue to be a major factor of growth in the World's economy, not simply as an exporter of low cost goods, but increasingly as a consumer.  The Company believes that its focus on natural resources - in particular mining and energy - will help position it to be less susceptible to swings in the market and to benefit from China's continuing growth.  Accordingly, the Company expects China's continuing demand for resources to drive growth in the resource sectors, in particular mining and energy.  Increasingly, we expect the Chinese Renminbi to play a larger role in international currency transactions driven by China's increased global stature as an international investor and the growing weakness of the US Dollar.

We believe that the flow of investment capital from Europe (both Western and Eastern Europe), North America and the Middle East towards Asia will increase, particularly in China and South East Asia.  The Group continues to position itself as a financial services provider participating in these flows of capital.  As a consequence, we are increasingly focused on the development of our asset and fund management capabilities to enhance our participation in this flow. We believe that by adding fund and asset management capabilities, we will stabilize the revenue base for our Group, thereby enhancing shareholder value.

As a consequence of the underlying strength of the Chinese economy, we believe the Asian capital markets, particularly Hong Kong, will continue to outperform the North American and European capital markets not only in terms of capital markets performance but also in terms of the number of new financings.  We expect a substantial increase in Renminbi based debt financings and the Group is positioning itself to have the capacity to participate in this sector.  China's growth will continue to be tempered by policies of the Chinese authorities designed to moderate growth and to quell inflation, which will result in a more modest period of capital markets activities in both China and Hong Kong from that experienced in the last few years.  However FY2012 will be a difficult year for investors as capital markets worldwide (including Hong Kong) adjust to the issues arising from the ECM and the United States referred to above and to a slowing of the growth of the Chinese economy.

About Sunwah International Limited

Sunwah International is a strategically positioned asset-based financial services provider, linking the global investment community with the China's high growth economy. The Group is now positioned into three integrated divisions: Capital Markets Group, consisting of brokerage and financial services, including investment banking; Strategic Investment Group, a merchant bank focused on mining and natural resources; and an Asset Management Group specializing in private equity funds. The Group's primary subsidiary, Sunwah Kingsway Capital Holdings Limited ("SWK"), is based in Hong Kong and listed on The Stock Exchange of Hong Kong. The SWK group comprises the Group's primary operating subsidiaries and is licensed to provide a range of financial services. The Group operates from six offices located in Hong Kong, Beijing, Shanghai, Shenzhen, Macau and Toronto.

China is widely recognized as an increasingly important player on the world's financial stage. As the country continues to grow, its greatest needs will lie in energy and resources.  Following a recent restructuring, Sunwah International is positioned as a middle tier provider of financial services in these sectors and an opportunistic investor in these and related sectors.  The Group's strategy is to use investment activities strategically to generate advisory services revenue while creating value for its shareholders through asset accumulation.

Leveraging a 20-year track record and significant relationships throughout Asia, Sunwah International continues to operate as a China focused multi-discipline asset based financial services firm, with a focus on natural resources, infrastructure and real estate.

Founded in 1990, Sunwah International is listed on the main board of the Toronto Stock Exchange under the symbol SWH.

For more information on Sunwah International's core business and new strategic direction, please visit the Company's website at www.sunwahinternational.com.

FORWARD-LOOKING (SAFE HARBOUR) STATEMENTS

This press release contains forward-looking statements that are based on the beliefs of Management and reflect the Group's current expectations.  In certain cases, forward-looking information can be identified by the use of words such as "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "will", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information.  There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.  Accordingly, investors should not place undue reliance on forward-looking information.  Forward-looking information is provided as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.

 

 

SOURCE Sunwah International Limited

For further information:

Gary Quedado, Sunwah International Group, (416) 861-3099 Ext.0238, gquedado@sunwahtinernational.com


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