Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CHINA FORTUNE
HKEx Stock Code : 00110 
 
Corporate Profile
The principal activities of the Group are distribution and trading of mobile phones and related accessories, development of marketing and after-sales service network and mining and processing of celestite, zinc and lead minerals.

Business Review - For the year ended December 31, 2012

Handset Distribution

Nokia, who was the biggest mobile phone manufacturer for over a decade, lost its market share in the mobile phone industry substantially to Apple Inc. and various brands of handsets with the Android platform in these few years. Changes in handset application habit of consumers turn popular handsets from mobile-phone-based into smartphone-based. In view of this, without launching the popular Android-based smartphone, Nokia decided to collaborate with Microsoft Windows Phone in 2011. Nevertheless, the market has been expecting the new Nokia handsets with Windows 8 system long enough, and which were eventually launched in late 2012. The market still needs further time to see whether more high-end smartphone models from Nokia can turn it around to increase its market share.

The Group has been a distributor of Nokia handsets since incorporation. So the recent situation of Nokia directly and substantially led to a downturn of revenue of the Group in the year. The Group paid special attention and efforts in mitigating the effect and risks in the Nokia Store fulfillment distribution business by lowering the inventory level to a minimal amount. The management will keep monitoring this business segment and take timely and appropriate action when necessary.

Investment in mobile phone operating system

On 29th December, 2012, the Group subscribed a convertible bond issued by Jolla Oy, which is a newly established company in Finland and engaged in mobile phone operating system development. After full conversion of the convertible bond into shares of Jolla Oy and together with further subscriptions, the Group acquired approximately 6.25% equity interest in Jolla Oy with an aggregate consideration of HK$10.2 million in March 2013. Although Jolla Oy is a newly established company in Finland, its team consists of well-experienced programmers and developers of mobile phone operating system. Jolla Oy's coming innovative and brand new mobile phone operating system is expected to bring new impact and opportunity to the market.

Mining

We commenced developing a new mining site exploitation system in our Strontium mining site since 2010. After the expiration of a five-year mining operating permit on 25th September, 2012, Sifa Mining obtained a two-year renewed one, in which Sifa Mining is restricted to exploration activities over the mining site only. After further submissions of relevant technical documentations to the Ministry of Land and Resources of the PRC for fulfilling exploitation requirements, a restriction-free mining operating permit can be renewed on or before the expiry of this two-year permit. No material and significant adverse effect in Sifa Mining's operation is foreseen with this exploitation restriction, since the mining site is undergoing the new exploitation system construction stage without normal exploitation activities scheduled in the relevant period, and a further renewal of a restrictionfree mining operating permit is assessed to be procedural. However, the development plan and construction progress in this new system had been inevitably and adversely affected by the downturn of the global mineral resources demand in the second half of the year and up to the current moment. Although it is expected that the downturn is temporary and only being a normal cycle adjustment in the industry, the management proceeded in a prudent way to restructure the overall construction schedule of this new mining system, by readjusting construction speed and time schedule for matching the industry cycle accordingly. As a result, we took the view that the recoverable amount of this cash-generating unit of the mining business is lower than its carrying value at 31st December, 2012. Accordingly, the shortfall of HK$60.8 million was recognised as impairment loss on mining right in this year. By offsetting with a HK$15.2 million deferred tax credit associated with this mining right impairment, the net effect of this impairment to the financial result in this year was HK$45.6 million.

Business Outlook - For the year ended December 31, 2012

The continued economic growth in the PRC is fuelled by a high internal consumption. As the world's biggest handset market, there were more than 1.1 billion handset subscribers in the PRC with an annual growth rate of around 10% in terms of new subscribers and replacements. There were over 21.9% 3G users out of the total subscribers, and forecasted to increase much further in the near future. On the other hand, there were more than 787 million mobile Internet users which implies that there are huge business opportunities in both mobile application and mobile commerce. Since the Group has been in the related mobile phone industry for decades, mobile phone operating system and mobile internet would be surely the key business areas that the Group is interested in. So besides the recent investment in Jolla Oy, the Group is actively looking for further opportunities which will further enhance the shareholders' value.

Source: China Fortune (00110) Annual Results Announcement
Chairman LAU Siu Ying Issued Capital (shares) 822M
Par Value HKD 0.1 Market Capitalisation (HKD) 242M
 
Login
Password
Register  Forget Password
Advanced Search
© 2024 The Standard, The Standard Newspapers Publishing Ltd.
Home | Business | Metro | Focus | Opinion | Markets | World | Sports | Entertainment | Monday Money | Property | Macau | Weekend