Sunwah International Reports Positive Gains for the Second Quarter Ended December 31, 2010

TORONTO, Feb. 14 /CNW/ - Sunwah International Limited (TSX: SWH), ("Sunwah" or the "Company"), an Asian-based financial services firm, (formerly "Kingsway International Holdings Limited", TSX: KIH) today announced its financial results for the second quarter ended December 31, 2010.  All figures quoted are in U.S. dollars unless otherwise specified.

The financial performance for Sunwah International Limited and its subsidiaries (collectively the "Group") for the current quarter showed a significant improvement over the corresponding period last year. 

Financial highlights for Q2 Fiscal 2011 include:

  • Total revenue increase of 43% to $13.3 million and 53% to $19.0 million for the respective three and six month periods ended December 31, 2010;
  • Net income increase of 66% to $6.2 million and 296% to $6.8 million for the respective three and six periods ended December 31, 2010; 
  • Trading income from financial assets held for trading increase of 41% to $8.8 million and 87% to $11.4 million for the respective three and six month periods ended December 31, 2010;
  • Revenue from services and other income increase of 46% to $4.5 million and 20% to $7.6 million for the respective three and six month periods ended December 31, 2010.

"We are very pleased with this quarter's financial performance and that of the initial six months of the current fiscal year" said Douglas Betts, President and CEO of Sunwah International Limited.  "The positive effects of a corporate revitalization impacting both Sunwah International and our principal operating subsidiary, SW Kingsway Capital, are only now beginning to be felt.  Moving forward we believe the structural and strategic changes implemented will continue to generate increasingly consistent and positive earnings for our shareholders."

Financial Results for the Second Quarter

Total revenue increased significantly to $13.3 million in the current quarter, from $9.4 million in the same quarter last year.  Trading income from financial assets held for trading of $8.8 million was recorded in the quarter, compared with $6.3 million for the same period last year.  The improved performance was attributable to the recovery of the Hong Kong stock market and an increased focus by management on selective investments.  Revenue from services and other income increased to $4.5 million in Q2 of FY2011 from $3.1 million in Q2 of FY2010, mainly due to the increase in market turnover and equity capital market transactions in the current quarter.   

Selling and administrative expenses increased to $8.0 million in the current quarter from $3.8 million for the corresponding period last year, mainly due to the increase in staff costs for (i) a non cash deduction arising from the grant of Company stock options to several directors, officers and employees of approximately $2.0 million; and (ii) an increase in both basic salary, commission and variable staff costs following higher operating income.

Net income of $6.2 million, or $0.0687 basic earnings per share was recorded in the current quarter, compared with $3.7 million, or $0.0465 basic earnings per share for the same period last year.  Net income included a $2.6 million gain from a deemed partial disposal of interest in SW Kingsway Capital when it placed shares in the Hong Kong market.

Segmented Results of Operations for the Second Quarter of FY2011

               
  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 2,502 1,446 - - - 280 4,228
Dividend income - - - 112 - - 112
Interest and other income 179 2 - 9 - (24) 166
Trading (loss)/income (15) - - 5,450 3,398 - 8,833
  2,666 1,448

-

5,571 3,398 256 13,339
Inter-segment revenue 228 213 - - - 129 570
Selling and administrative expenses (2,971) (1,506) (28) (828) 60 (3,272) (8,545)
Share of profit/(loss) on investments subject to significant influence 7 - - - 109 - 116
Other (expenses)/income (63) (12)  - (3) (543) 2,573 1,952
(Loss)/income before income taxes and non-controlling interests (133) 143 (28) 4,740 3,024 (314) 7,432

  • Brokerage

    Revenue increased to $2.7 million for the second quarter, compared with $2.1 million for the same period last year, mainly due to the recovery in fund raising markets and active market conditions.

    Overall, the division recorded a loss of $0.1 million for the quarter, compared with $0.2 million for the same period last year.

  • Corporate Finance & Capital Markets

    Total revenue of the division for the quarter increased to $1.4 million from $0.3 million for the corresponding quarter last year, mainly attributable to the division's participation in several underwriting and placing activities.

    Overall income of $0.1 million was recorded for the quarter, compared with an income of $0.01 million for the same period last year.

    The division is working on projects which include sponsoring several IPOs for listing on the Stock Exchange of Hong Kong.  It is expected that the division is likely to achieve a growth in revenue in the current year upon the completion of the listing of these IPO clients.

  • Asset Management

    The division recorded an overall loss of $0.03 million for the quarter, compared with $0.07 million for the same quarter last year.

    During the quarter, Sunwah International Asset Management ("SIAM") was formed to act as a global fund platform for the "family of funds" model.  The funds will include a series of private equity funds which focus on different segments and regions.  The division is negotiating with several global fund managers and it is expected that the first SIAM fund will be launched in FY2011. 

  • Investment In Securities

    Revenue of $5.6 million was recorded for the quarter, compared with revenue of $5.0 million for the same period last year.  The improved performance was a result of the recovery of the Hong Kong stock market. The division is working to diversify the investment portfolio in order to lower the concentration risk of individual stocks.

    Selling and administrative expenses increased to $0.8 million in the current quarter, from $0.2 million in the same quarter last year, attributable to the increase in variable staff costs which is in line with the better performance in the division.

    Overall, the division recorded an income of $4.7 million for the first quarter, compared with $4.9 million for the corresponding quarter last year. 

  • Structured Investment

    The division mainly invested in several listed securities of natural resources companies and an investment vehicle engaged in the acquisition of high-end automotive dealerships in China. In July 2010, through a private placement offering the Group acquired an approximately 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 division recorded overall income from continuing operations of $3.0 million in the current quarter, compared to $1.5 million in the same quarter last year. The investment in Salmon River was treated on an equity accounting basis and have not been marked to market.

  • Corporate and Other Activities

    The division recorded an overall loss of $0.3 million for the quarter, compared with $0.7 million for the same period last year.  The results included the non cash adjustment to account for the increase in staff costs from the grant of Company stock options to several directors, officers and employees of $2.0 million and a $2.6 million gain on deemed partial disposal of interest in SW Kingsway Capital.

Dividends

The FY2010 final dividend of CAD2.0 cents per common share was paid on December 2, 2010 from retained earnings. 

Outlook

The Company continues to believe in the strength and the growth of the Chinese economy.  As China develops, it is creating its own substantial consumer market.  This consumer market continues to be driven by the increase in urbanization of its population and the growth of its middle class.  As a result, China is decreasing its dependence on foreign exports as a key driver of its economy.  Exports while continuing in importance are gradually being replaced by domestic demand as a growth driver of the Chinese economy.

The Strategic Investment group established in FY2009 continues to focus on the natural resource sector, in particular mining and energy as the Company believes these sectors while important today, will be even more strategic in the future.  The results to date have justified this focus and we will continue with this emphasis on the natural resources sector as long as we believe in the continued growth of the Chinese economy.

The changes that we have implemented over the last year are now starting to have a positive impact on the financial performance of the Company and it is believed that these changes will continue to have a major positive impact on the growth of the Company and creation of value for the Shareholders.  While we are anticipating a slowing of the rate of growth in China as the Chinese authorities attack the causes of inflation, we continue to believe in the over all strength and diversity of the Chinese economy and its continued growth.

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:

please contact: Gary Quedado, Sunwah International Limited, (416) 861-3099 Ext. 0238 gquedado@sunwahinternational.com


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