Sunwah International Reports Financial Results for the Third Quarter Ended March 31, 2011

TORONTO, May 13 /CNW/ - Sunwah International Limited (TSX: SWH), ("Sunwah" or the "Company"), an Asian-based financial services firm, is pleased to announce today its financial results for the third quarter ended March 31, 2011. All figures quoted are in U.S. dollars unless otherwise specified.

Background

The earthquake and tsunami in Japan in March 2011, followed by their nuclear emission crisis, only temporarily impacted the international financial markets. The effect on Hong Kong market was more pronounced due to its proximity to the PRC. The tightening monetary measures imposed by the PRC government, combined with the issues associated with Japan, resulted in the Hong Kong market trading in a narrow range in the current quarter.

Financial highlights for the third quarter

Financial results for Sunwah International Limited and its subsidiaries (collectively the "Group") for the third quarter ended March 3, 2011 declined as compared to that in the same quarter last year.

  • Net loss of $1.2 million, compared with a net income of $10.0 million for the same quarter last year. Basic and diluted loss per share were $0.0127 and $0.0111 respectively, compared to earnings per share of $0.1250 and $0.1238 for the same quarter last year. This net loss reflects a non-cash loss of $1.2 million fair value loss on financial derivative liabilities in relation to the Company's issued convertible debentures;

  • Trading income from financial assets held for trading decreased to $3.1 million, compared with trading income of $8.4 million for the same period last year; and

  • Revenue from services and other income was $3.5 million, compared with $2.7 million for the same period last year.

Financial Results for the Third Quarter

Total revenue decreased to $6.6 million in the current quarter, from $11.1 million in the same quarter last year. Trading income from financial assets held for trading of $3.1 million was recorded in the quarter, compared with $8.4 million for the same period last year, as a result of the decrease in unrealized gain on several securities in the Group's investment portfolio. Revenue from services and other income increased to $3.5 million in Q3 of FY2011 from $2.7 million in Q3 of FY2010, mainly due to the increase in market activities which led to the increase in advisory fee income for initial public offerings ("IPO") related preparatory work and increase in margin and IPO financing interest income in the current quarter.

Selling and administrative expenses decreased to $5.3 million in the current quarter from $5.7 million for the corresponding period last year, mainly due to the decrease in staff costs (including basic salary, commission and variable staff costs) which was in line with the decrease in operating income.

A non-recurring gain on disposal of shares of jointly controlled entities of $5.7 million was recorded in Q3 of FY2010.

Net loss of $1.2 million, or $0.0127 basic loss per share was recorded in the current quarter, compared with a net income of $10.0 million, or $0.1250 basic earnings per share for the same period last year.

Segmented Results of Operations for the Third Quarter

               
  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 1,717 1,126 - - 2 285 3,130
Interest and other income 269 (6) - 6 - 85 354
Trading (loss)/income (4) - - 3,037 64 - 3,097
  1,982 1,120 - 3,043 66 370 6,581
Inter-segment revenue 55 32 - - - 1,180 1,267
Selling and administrative expenses (2,244) (1,121) (195) (500) (705) (1,815) (6,580)
Share of loss on investments subject to significant influence (18) - - (204) - (222)
Other (expenses)/income (30) (5) - 1 (1,352) (49) (1,435)
(Loss)/income before income taxes and non-controlling interests (255) 26 (195) 2,544 (2,195) (314) (389)

 

  • Brokerage

    Revenue decreased marginally to $2.0 million for the third quarter, as compared with $2.1 million for the same period last year, mainly due to the change in client mix in the current quarter.

    Overall, the division recorded a loss of $0.3 million for the quarter, as compared with a loss of $0.5 million for the same period last year.

  • Corporate Finance & Capital Markets

    Total revenue of this division for the quarter increased to $1.1 million from $0.5 million for the corresponding quarter last year, mainly attributable to the division's participation in several underwriting and placing activities.

    Income for the quarter was $0.03 million, as compared with a loss of $0.3 million for the same period last year.

    There are several projects in the pipeline which include IPOs sponsorship. The listing of an IPO is expected totakeplaceinFY2011.

  • Asset Management

    Asset management recorded a loss of $0.2 million for the quarter, compared with $0.06 million for the same quarter last year.

    In December 2010, Sunwah International Asset Management ("SIAM") was formed to act as a global fund platform for a "family of funds". These funds will include a series of private equity funds focusing on different segments and regions. Negotiations are currently being undertaken with several global fund managers and it is expected that the first SIAM fund will be launched in the current year.

  • Investment In Securities

    Revenue of $3.0 million was down for the quarter, as compared with revenue of $6.2 million for the same period last year. The decreased performance was mainly attributable to the decrease in unrealized gain on mark to market on several securities in the Group's investment portfolio in the current quarter. During the quarter, the division invested in several high yield corporate bonds. The division is working to diversify the investment portfolio in order to lower the concentration risk of individual stocks.

    Overall, the division recorded income of $2.5 million for the third quarter, compared with income of $5.2 million for the corresponding quarter last year.

  • Structured Investment

    Several investments were undertaken in listed securities of natural resources companies and an investment vehicle engaged in the acquisition of high-end automotive dealerships.

    In December 2010, an investment was made in an unlisted private investment fund. During the quarter, the division acquired a 7.5% shareholding interest in a private company engaged in the provision of education services.

    On an overall basis, this division recorded a loss from continuing operations of $2.2 million in the current quarter, compared to income of $1.7 million in the same quarter last year. The decrease in trading income attributable to the decrease in net unrealized gain on the investment portfolios, as well as the non-cash fair value loss on financial derivative liabilities of $1.2 million on the Company's convertible debentures, led to the loss in the current quarter.

  • Corporate and Other Activities

    The division recorded an overall loss of $0.3 million for the quarter, compared with $0.9 million for the same period last year.

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 both 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 both mining and energy.

We also believe that there will be an increasing flow of investment capital from Europe (both Western and Eastern Europe), North America and the Mid-East towards Asia, particularly China and South East Asia. The Group continues to position itself as a financial services provider participating in these flows of capital. In particular, 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 dramatically 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 America and European capital markets both in terms of capital markets performance but also in terms of the number of new financings. This will be tempered by recent policy changes by the Chinese authorities designed to moderate growth to quell inflation, which will result in a more modest period of capital markets activities in both China and Hong Kong.

About Sunwah International Limited (TSX: SWH)

Sunwah is a strategically positioned asset-based financial services provider, linking the global investment community with the PRC'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, SW 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 five offices located in Hong Kong, Beijing, Shanghai, Shenzhen 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 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 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 is listed on the main board of the Toronto Stock Exchange under the symbol SWH.

For more information on Sunwah'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 Limited, (416) 861-3099 Ext. 0238 gquedado@sunwahinternational.com


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