Tuesday, April 13, 2021
 
Columnist
Martin Hennecke
 
CHINA GAMMA
HKEx Stock Code : 00164 
 
Corporate Profile
The Group focus on the development of strategic rare resources business, this business will become the major core business of the Group. The Group's other businesses include Gamma ray irradiation services; Property development, rental and sales; Trading of building materials & provision of renovation services; Securities trading and investment.

Business Review - For the year ended March 31, 2013

Property Business

The Group's property business includes property development, rental and sales and trading of building materials and provision of renovation services.

As discussed in the Interim Report 2012 of the Company, the growth of property market in the PRC slowed down in recent years. In light of the uncertainty of market conditions, the Group took the opportunity to transact its properties under development which located in Chongqing, the PRC in August 2012. The disposal realized a total proceeds of RMB35,000,000 (equivalent to approximately HK$42,840,000) and recognized a gain of approximately HK$1,656,000.

Total proceed generated from our property business was HK$50,886,000 (2012: HK$17,316,000) including the proceed of disposing subsidiaries holding properties in China, turnover of property development, rental and sales and trading of building materials and provision of renovation services, which were approximately HK$42,840,000, HK$8,018,000 and HK$28,000 for the year (2012: HK$Nil, HK$16,450,000 and HK$866,000) respectively. Segment loss from property development, rental and sales narrowed down to HK$2,185,000 (2012 as restated: HK$6,345,000) while loss for trading of building materials and provision of renovation services was HK$774,000 (2012: HK$392,000).

Gamma Ray Irradiation Services

Gamma ray irradiation is a proven effective means of cold pasteurization of food and sterilization of medical products. The Group's gamma ray irradiation business is conducted through 淄博利源高科輻照技術有限公司 (Zibo Liyuan Gamma Ray Technologies Co. Limited*), a 80% owned subsidiary of the Group which is licensed by Ministry of Environmental Protection of the PRC for provisioning of irradiation services by utilizing gamma ray technologies. Turnover generated from the gamma ray irradiation services for the financial year was HK$5,941,000 (2012: HK$9,404,000). This segment reported a loss of HK$2,515,000 (2012: Profit of HK$1,080,000). During the financial year under review, an increase in competition which resulted in a decline in margins amidst weaker market demand have affected the operating performance of the business. As such, the Group has increased its marketing efforts, including conducting more seminars to expand customer base during the year. Despite moderate competition may happen in the short term, the Group believes there will be long term sustainable growth in this industry.

Resources Business

Since the Group has set up its resources division, it has been exploring and expanding into resources business with great potentials and applications in various industries in China and other regions. We started with midstream business in the resources industry and our first project is related to rare earth refinery and processing business in China. It is conducted through 冕寧縣茂源稀土科技有限公司 (Mianning Mao Yuan Rare Earth Technology Company Limited*), a 54% owned subsidiary of the Group, which operates a major rare earth refinery and processing plant situated in Mianning, Sichuan province.

As discussed in the Company's interim report for the six months period ended 30 September 2012, due to a change in the market situation e.g. price drop, decrease in demand, PRC government policies controlling the supply of rare earth raw materials etc., particularly since August 2012, the whole rare earth industry has been disrupted. In view of the abrupt worsening of the business environment, and the uncertain timing of a recovery of the demand for rare earth products, the Group took a prudent approach to procure less rare earth raw materials and reduced its rare earth oxides production. The Group also prudently reviewed the asset value of the business and recognised an impairment loss on intangible asset of the rare earth refinery and processing business which amounted to HK$82,346,000 (2012: HK$Nil).

Currently, the demand and price of rare earth products still remain low and the prospects of the rare earth market is an uncertainty. In view of this, the Group started to rationalize the resources business by considering the possibilities of restructuring the rare earth refinery and processing business, and made a plan to sell a group of subsidiaries that engaged in the rare earth refinery and processing business if the assets value would be better reflected by such a sale transaction rather than through continuing use. The Group is actively seeking buyers for the said business. As such, the rare earth refinery and processing business is reclassified as assets and liabilities held for sale and the details are presented under the heading “Assets/ liabilities classified as held for sale” in the Group's consolidated financial statements in accordance with the Hong Kong Financial Reporting Standards.

Meanwhile, the Group has been actively exploring into different opportunities related to value chain of resources from upstream, midstream to downstream. A number of potential resources projects have been assessed and various studies on these potential projects were made. The resources division will continue to evaluate the viability and economics of these potential projects. We hope that through these evaluations, the Group will be able to identify and develop suitable resources projects which generate profitable return to the shareholders.

For the financial year under review, turnover from the Group's resources business amounted to HK$34,536,000 (2012: HK$6,000). The segment reported a loss of HK$152,072,000 (2012: HK$25,787,000), after the recognition of an impairment loss on and amortisation of intangible asset of the rare earth refinery and processing business which in total amounted to HK$132,710,000 (2012: HK$13,537,000).

Other Operation

During the year under review, Hong Kong stock markets remained volatile amid sluggish global economies. Due to both unrealised and realised gains on equity investments held for trading, the securities trading and investment business reported a profit of HK$3,076,000 (2012: HK$14,999,000).

Business Outlook - For the year ended March 31, 2013

The global economic condition has shown signs of improvement but remains weak. The economy of the United States has been growing slowly while the risk of the Euro zone debt crisis is not over yet. The Chinese economy also sees some modest growth although the momentum of recovery has been slow. Domestic demand remains sluggish.

Property Business

Against the backdrop of a more stable policy environment in the real estate industry, new home sales in China have recovered since the second half of 2012, and the momentum should remain steady. As for non-residential property in China, the development of commercial properties, and property related to cultural and tourism development is getting mature which creates more opportunities for developers. The Group has always been devoting resources to land bank acquisitions in China and other regions for different types of property development. The Group continues to explore opportunities in property development and investment in China and other regions, to leverage on our expertise and experience in the property business, as well as to support the development of our other businesses.

Gamma Ray Irradiation Services

In view of sluggish Chinese demand and slow global economic recovery, demand for food irradiation and sterilization of medical devices using gamma ray technologies for export will likely be impacted in the near term. However, higher domestic food and drug hygiene standard and safety requirements and the government's commitment to enforce related regulations should encourage domestic food and drug manufactures to adopt gamma ray irradiation in sterilization. In order to cater for the sustainable growth of gamma ray irradiation services in China, the Group plans to expand its services to products with high margins, such as health food, drugs and chemicals, as well as to provinces such as Henan, Hebei and Jiangsu. The Group will also increase its marketing efforts, including conducting more seminars to food and drug safety bureau, and food and drug enterprises in China, to increase potential domestic customers awareness of gamma ray irradiation applications, with a view to expand domestic customer base. In addition, the Group will continue to enhance its technology to strengthen our competitive position. The Group believes that its gamma ray irradiation business would benefit from the remarkable growth of food and drug industry in the long term.

Resources Business

Since the establishment of our resources division, the Group has been exploring different opportunities related to value chain of resources from upstream, midstream to downstream. The division strives for becoming one of the key players in upstream, midstream and downstream businesses and becoming a full vertically integrated player in the industry. While we are at an early stage in exploring into potential resources projects, a number of potential resources projects have been assessed and various studies on these potential projects were made. Our resources division will continue to evaluate the viability and economics of these potential projects. We hope that through this continuous review, the Group will be able to develop a suitable portfolio of resources business with stable and profitable return to the shareholders.

Source: China Gamma (00164) Annual Results Announcement
Chairman N/A Issued Capital (shares) 3,799M
Par Value HKD 0.01 Market Capitalisation (HKD) 391M
 
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