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Public company info - Long Well International Holdings Limited , 00850.HK

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Long Well International Holdings Limited, 00850.HK - Company Profile
Chairman Huang Guobiao
Share Issued (share) 8,968,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Petroleum & Gases
Corporate Profile Business Summary: The principal activity of the Company is investment holding. The principal activities of its subsidiaries are trading of commodities and chemical products, property investment, money lending business, securities brokerage, asset management, insurance brokerage and the exploitation and sale of crude oil. Performance for the year: During the year ended 31 March 2020, the Group achieved a revenue of approximately HK$25,403,000 (2019: HK$105,502,000) and a gross profit of approximately HK$23,538,000 (2019: HK$70,066,000), representing a decrease of 75.9% and 66.4% from the year of 2019 respectively. The Group recorded consolidated operating loss of approximately HK$169,349,000 (2019: HK$339,330,000) representing a decrease of 50.1% from the year of 2019. Business Review: Commodity trading In the reporting period, the commodity trading business recorded total revenue of approximately HK$6,124,000 (2019: HK$72,796,000) which accounted for 24.1% of the Group’s revenue (2019: 69.0%), representing a decrease of 91.6% as compared with the year of 2019. This was mainly due to decrease in trading volume in oil products and nonoil product lines in particularly plastic materials products, chemical products and display driver IC products during the reporting period. Since the beginning of 2020, the outlook of the global economy has been filled with uncertainties, in particular, with two major events that are likely to have adverse impact on the development of the Group’s commodity trading business, i.e. the outbreak of COVID-19 and the oil price war between Russia and Saudi Arabia. Due to the outbreak of COVID-19, the global economy has been facing increasing pressure and the overall economic activities have slowed down with widespread lockdowns of cities, resulting in a significant drop in manufacturing purchasing managers index and GDP growth across different countries. Global economic activities have been reduced and therefore it is likely to affect the development of the Group’s commodity trading business. The collapse in worldwide demand for oil resulted from the outbreak of COVID-19 has led to a drastic decrease in oil price and created oversupply of oil. Furthermore, the disagreement between Saudi Arabia and Russia, two major oil production countries, on reducing oil production has a negative impact on the oil price. The oil price level remains at a relatively low level as compared to the level in 2019. The Company believes that the Group’s business environment will continue to be challenging in the short to medium term as it takes time for economic recovery. For the reporting period, the trading volume of oil products of the Group decreased as compared with last year. During the reporting period, the Group has reviewed and enhanced its own internal control procedures in this business segment to mitigate the internal control risks. The Group has also taken the initiative to diversify its supplier base to avoid reliance on a limited number of supply channels. Leveraging on the benefit of closer supervision, more efficient reporting system and enhanced internal control, the Group shall be able to further expand its own customers and suppliers network, broaden its product base, and strengthen the communication with its customers and suppliers. As for the oil products trading, the Group recorded sales from customers of approximately HK$434,513,000 for the reporting period (2019: HK$2,083,646,000), representing a decrease of 79.1% as compared with 2019. A total of 95,676 tons (2019: 459,790 tons) of oil products were traded in China and other Asia Pacific countries and maintaining steady gross profit. To ensure a steady profit growth in commodity trading business and achieve risk diversification, the Group’s operating teams carried out non-oil product lines for tradings. During the reporting period, revenue of approximately HK$6,631,000 (2019: HK$64,063,000) was generated from these product lines. Looking forward into the next year, the Group’s operation teams will put effort to expand markets and the business scale, including the trading transactions of more new product categories, and aim to lead the Group’s commodity trading business into a new field and increase the Group’s competitiveness in the field of commodity trading. Crude oil The Group owns 96% interest of an indirect subsidiary 齊齊哈爾市東北石油開發有限責任 公司, which owns an oilfield project in Fulaerji District near Qiqihar City of Heilongjiang Province of China (“Oilfields”). During the reporting period, for the purpose of renewing the licence《安全生產許可証》 for the forthcoming operation in the Oilfields, the modification works to the Oilfields have been completed in accordance with the local fire safety requirements and the inspection of the fire safety modification has been completed. The Oilfields subsequently obtained the acceptance from the relevant governmental department for the PRC fire safety modification. The outbreak of COVID-19 has caused some delays to this process. The renewal of the licence《安全生產許可証》is expected to be completed by late of 2020. The management has been monitoring the crude oil market and oil price trend in order to determine the appropriate time to re-launch the crude oil business. One of the major reasons for the re-launch was due to the gradual increase in the global oil price in 2019. However, in view of the significant drop in global oil price in March 2020 due to the oil – 25 – price war between Russia and Saudi Arabia, the management would continue to monitor the latest development of the crude oil market while equipping the Group with the ability to resume production of crude oil at an appropriate time. Financial services The financial services segment includes money lending, securities brokerage and asset management businesses. (a) Money lending Two indirect wholly-owned subsidiaries of the Company have obtained the money lending licences in Hong Kong. During the reporting period, interest revenue was approximately HK$14,731,000 (2019: HK$19,468,000), representing a decrease of 24.3% and maintained a steady profit. The licensing of money lenders and regulation of money-lending transactions are governed by the Money Lenders Ordinance, Chapter 163 of the Laws of Hong Kong. The market of money lending business by licensed money lenders in Hong Kong is keen and competitive. In order to optimise the funding use in business but also to ensure the compliance of the related laws and regulations, the operation team has established a credit policy and loan approval process to minimise the credit risk. (b) Securities brokerage An indirect wholly-owned subsidiary of the Company, namely China-Hong Kong Link Securities Company Limited (“CHKLS”), has obtained a licence by Securities and Futures Commission of Hong Kong to carry out type 1 (dealing in securities) regulated activities on 30 September 2015. The Group commenced the business on 30 March 2017. During the reporting period, CHKLS mainly provided securities brokerage, underwriting and placements services. CHKLS has successfully acted as placing agents, co-lead managers and underwriters for several listed companies in Hong Kong. During the reporting period, CHKLS has generated revenue of approximately HK$1,513,000 (2019: HK$4,895,000) to the Group, representing a decrease of 69.1%. (c) Asset management To cope with the development strategy of stepping into the financial services market in Hong Kong, a newly acquired indirect wholly-owned subsidiary of the Company, namely China Hong Kong Link Asset Management Limited (“CHKLAM”), has successfully obtained a licence by Securities and Futures Commission of Hong Kong to carry out type 9 (asset management) regulated activities on 16 February 2018. On 7 May 2018, CHKLAM also successfully obtained a licence by Securities and Futures Commission of Hong Kong to carry out type 4 (advising on securities) regulated activities. Insurance brokerage The Group’s wholly owned subsidiary, namely People Insurance Broker Limited (“People Insurance”), is carrying out insurance brokerage service in Hong Kong with the licence to transact all types of general insurance business and long term insurance business in Hong Kong. During the reporting period, the insurance brokerage income was approximately HK$2,048,000 (2019: HK$3,260,000) representing a decrease of 37.2%. Prospects: The sudden global economic recession triggered by COVID-19, the oil price war between Russia and Saudi Arabia, and the looming uncertainties about China’s economic recovery, will undoubtedly weaken international demand in the second and third quarters of 2020. This is not a normal recession but it will take time to resume the same level of economic activity pre-crisis and the same growth rate. Despite the above uncontrollable events, the Group has actively maintained and expanded its business. Under the current circumstance, the Group will continue to focus on developing the Group’s current operations, identify suitable business opportunities and closely monitor the latest economic situation when implementing its business plans as needed. In 2018, HKEX announced new IPO rules to allow companies with weighted voting right structures. It also established a new concessionary secondary listing route for companies based in the mainland and abroad, wishing for a second listing in Hong Kong. The new rules have basically reformed the listing regime and will make listing more flexible. Also the return of China concept stocks will benefit the Hong Kong stock market in the long run as it will introduce new funds and capitals to the market. The Directors expected revenue growth with promising market outlook, the Group intends to deploy more resources in money lending, securities brokerage and asset management services business.

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