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Public company info - Sky Blue 11 Company Limited , 01010.HK
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Sky Blue 11 Company Limited, 01010.HK - Company Profile
Chairman Yang Lin
Share Issued (share) 370,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Semiconductors
Corporate Profile Business Summary: The Group is principally engaged in (i) the design and sales of integrated circuits and semi-conductor parts; (ii) trading of construction materials; (iii) financial leasing in the PRC; (iv) money lending in Hong Kong; (v) research and development in real time 2D-3D conversion display products; (vi) air business management; and (vii) investment holding. Performance for the year: For the year ended 31 December 2019, the Group recorded a consolidated revenue of approximately HK$74.3 million (2018: approximately HK$60.7 million) and a loss for the year attributable to owners of the parent of approximately HK$21.1 million (2018: approximately HK$40.2 million). Business Review For the year ended 31 December 2019, the businesses of (i) money lending in Hong Kong; and (ii) research and development in real time 2D-3D conversion display products are minor segments of the Group in terms of operation sizes. In March 2020, the Company has decided to exit from the business of research and development in real time 2D-3D conversion display products. For the year ended 31 December 2019, the Group recorded a consolidated revenue of approximately HK$74.3 million (2018: approximately HK$60.7 million) and a loss for the year attributable to owners of the parent of approximately HK$21.1 million (2018: approximately HK$40.2 million). Looking back into the year ended 31 December 2019, the Group was experiencing a tough and challenging business environment, with lower economy growth momentum, higher cost pressure, higher competitive forces and more uncertain prospects. Despite the management used their best endeavor to deal with such hardship, certain business segments of the Group have experienced a sharp decline, while others maintained a normal performance. In general, the Group recorded an improved result compared with last year. Design and sales of integrated circuit and semi-conductor parts Design and distribution of integrated circuit and semi-conductor parts in People’s Republic of China (the “PRC”), Hong Kong and Taiwan remains as the core business of the Group. The Group acquired raw material integrated circuit (“IC”) and semi-conductor related parts from external suppliers and relies on internet technology and related equipment for design of IC related products before sourcing out to external sub-contractors for production and does not involve in any internal manufacturing processes in the course of business. The Group’s IC products are used in industrial and house measuring tools and electronic bicycles battery charger market. In particular, a core research and development team in Shanghai operations provides the design of the products and the products are then sourced to certain external suppliers or sub-contractors for subsequent productions. After conducting successful testing of the sub-contracted products in Shanghai operations, the Group then sold the products to customers, which are usually end-product manufacturers/producers. For the year ended 31 December 2019, the operation of this segment recorded (i) a revenue of approximately HK$30.5 million, which shows a decrease of approximately 16.2% as compared with the corresponding period last year; and (ii) a gross profit of approximately HK$14.2 million, which shows an increase of approximately 4.3% as compared with the corresponding period last year. Management has noticed that competition in the PRC IC market was becoming more intensive, due to technology advances, cost increases and customers’ changing demands. Especially, as the US-China trade war continued and the US dollars appreciated in 2019, the cost of raw material (e.g. silicon wafers which are of US dollar settlement) and staff continued increasing, which leaded to lower profit margin and higher operating pressure. There are mainly two types of products in integrated circuit and semi-conductor parts: caliper and microcontroller unit (“MCU”), each of the products has approximately 10 different models. The total product mix between caliper and MCU during the period remains stable, approximately 58% (2018: approximately 68%) and approximately 42% (2018: approximately 32%) of the revenue was generated from the caliper and MCU respectively. The management continued its strategy on (i) improving the competitiveness of the products; and (ii) developing new product lines and sales and distribution channels. Trading of construction materials The segment of trading of construction materials had a sharp decrease in 2019. The Group mainly served customers in the Pan-Asia Pacific, including certain islands of the US territories. In 2019, the US-China trade war significantly damaged customers’ confidence in stableness of the Group’s supply chain. Despite the management’s arduous effects to improve customer relationship and confidence, no concrete purchase orders from new customers have been placed in 2019. On the other hand, existing customers of this segment had experienced operation down-scale or stagnancy for months in 2019, which in turn lowered their demands in the Group’s supplies. Plus, the management decided to holdover some of the existing customers’ purchase orders after carefully considering their financial difficulties and payment abilities. The operation in trading of construction materials recorded nil revenue for the year ended 31 December 2019 (2018: approximately HK$23.9 million). The Group’s response to such hardship in the business environment was to remain cautious, prudent and conservative, with possibility of scaling down operation size and avoiding unnecessary costs, such as marketing and promotion expenses. Financial leasing in the PRC The Group operates its financial leasing business in the PRC through its indirectly wholly-owned subsidiary, Solomon International Leasing (Tianjin) Company Limited* (“Solomon”), which is principally engaged in various types of financial leasing, such as direct leasing, sublease, hire purchase, leveraged leasing, entrusted leasing, joint leasing, sale and dealing of the residual value of lease items and leasing consultation business. For the year ended 31 December 2019, the Group recorded a revenue of approximately HK$0.9 million (2018: approximately HK$0.3 million) deriving from its financial leasing businesses in the PRC. Although at a lower rate, the PRC economy maintained a growth trend, thanks to which the demand for financial leasing in the PRC remains high. However, the year 2019 witnessed a higher default rate due to increasing economic uncertainty and harshening business environment. The management has accordingly adopted stricter policies to identify possible customers and to negotiate a leasing deal. Therefore, operation scale of this segment became smaller as compared with 2018, with the total money value of leasing amounts decreasing from approximately HK$5.8 million in 2018 to approximately HK$5.7 million in 2019. Money lending in Hong Kong The Group operates its money lending business through its indirectly wholly owned subsidiary, Wellba Investment Limited (裕霸投資有限公司), which is principally engaged in money lending in Hong Kong. In the past, main customers of this segment include high-value clients and listed companies in Hong Kong. For the year ended 31 December 2019, the Group recorded an interest income of HK$1.3 million (2018: approximately HK$2 million) in this segment. In 2019, protests against the political establishment in Hong Kong leaded to a more challenging and more uncertain business environment. Hong Kong economy has been decreasing at the sharpest rate in over one decade. Given such political uncertainty and economic recession, the management has decided to scale down this segment after taking into account the increasing credit risks, despite there was a larger demand for money lending services in Hong Kong. The management is of the view that a cautious and conservative strategy is more appropriate in the existing environment. Research and development in real time 2D-3D conversion display products In January 2019, the Group acquired 70% equity interest of Shenzhen Qiping Technology Company Limited* (深圳奇屏科技有限公司) (“Shenzhen Qiping”), which is principally engaged in hardware and software integration services for real time 2D-3D conversion display products. The Group has therefore tapped into this high-tech industry. Group of Shenzhen Qiping is a technology servicer principally engaged in (i) research and development in real time 2D-3D conversion display products; and (ii) selling and providing maintenance services for integrated real time 2D-3D conversion display system on tablet computer, electronic products, digital products, cellphone batteries, wireless data terminals and cellphone accessories with maintenance services to the end user. Given that real time 2D-3D conversion display is technically new and has not fully expanded its market, the Group recorded a minor revenue of approximately HK$0.5 million (2018: nil). Since late 2019, this segment showed a sign of decline. The business of Shenzhen Quipping has a nature of innovation and high-tech, and therefore the Group originally expected of a profit in the long term. However, the Group did not have sufficient resources to support the growth of the business of Shenzhen Qiping, such as providing marketing and funding, and there was a mismatch between the Company and other investors regarding the development plan of Shenzhen Qiping. Therefore, the Company is of the view that this business segment’s full potential may take a longer time to realize than the Company’s original expectation. On 28 March 2020, the Company had conditionally agreed to dispose of its whole interests in the business of Shenzhen Qiping to a third party independent to the Group at the consideration of HK$2.5 million. Nevertheless, the purchaser has agreed to grant to the Company a buy-back right to repurchase the business of Shenzhen Qiping at HK$2.6 million within 12 months since 28 March 2020. Given the relatively small size of Shenzhen Qiping, the Company is of the view that exiting from this business segment would not have a material impact on the operations and financials of the Group as a whole. Aircraft business management and luxury yacht management To further diversify the business units of the Group, the Company announced on 25 April 2019 that it would (i) carry out luxury yacht relevant business, including but not limited to luxury yacht sales agent, leasing and trading business; and (ii) explore opportunities relating to aircraft business, including but not limited to jet business management, aircraft sales service and pilot training service. International Business Aviation (Hong Kong) Limited (香港國際公務航空有限公司) (“IBA HK”) (formerly known as Rockey Company Limited), a subsidiary of the Company, completed the change of its company name in May 2019. On the basis of the original business, IBA HK has organically expanded into aircraft business management and related operation services. On 1 May 2019, IBA HK entered into a business aircraft entrusted management contract with aircraft owners in respect of three private business aircrafts, which is registered by Federal Aviation Administration (FAA). Hence, the business aircraft service has been launched formally by IBA HK. On 23 July 2019, IBA HK entered into a sales agency framework cooperation agreement with Liaoning Jinlong Super Yacht Manufacturing Co., Ltd.* (遼寧錦龍超級遊艇製造有限公司) (“Jinlong”) in the PRC, intending to become a non-exclusive agent of the yacht products from Jinlong in Europe, South America, the United States, Hong Kong and Shenzhen to sell its 46-meter super yachts and 110-inch catamaran yachts. With the efforts of the management team of IBA HK, the Group’s business aircraft service and luxury yacht management has been running smoothly and making profits through 2019. The management has been focusing on expanding the PRC and overseas markets. The main revenue comprises of business aircraft management service fee, aircraft operation agency fee, pilot rental fee, aircraft maintenance and management fee, etc. For the year ended 31 December 2019, the Group recorded a revenue of approximately HK$42.9 million (2018: Nil) of this segment. Investment holding (i) Investment in Cornerstone Securities Limited As at 31 December 2019, the Group had 23,000,000 unlisted shares of Cornerstone Securities Limited (“Cornerstone Securities”), representing approximately 8.81% of the entire issued capital of Cornerstone Securities (the “Investment in Cornerstone Securities”). Cornerstone Securities is a company incorporated in Hong Kong with limited liability. It holds licenses to conduct the type 1 regulated activity (dealing in securities) and the type 6 regulated activity (advising on securities) and is principally engaged in security dealing business. The Investment in Cornerstone Securities was initially acquired by the Group in November 2017 at the cost of HK$23.0 million. As at 31 December 2019, this investment had a fair value of approximately HK$23.1 million according to a valuation prepared by external independent qualified valuer, representing approximately 14.0% of the Group’s consolidated total assets of approximately HK$164.8 million as at 31 December 2019. For the year ended 31 December 2019, this investment recorded an unrealized loss of approximately HK$0.1 million, generated from change in fair value included in other comprehensive income. There was no realized gain or loss, or dividends received. The Group has made an irrevocable election to account the Investment in Cornerstone Securities as fair value through other comprehensive income. The Group intends to hold this investment as a long-term investment. For the year ended 31 December 2019, there was no pattern or practices of short-term profit-making related to it. (ii) Investment in ChipMOS As at 1 January 2019, the Group had an investment on 10,284 American depositary shares of ChipMOS Technologies Inc. (“ChipMOS”), representing approximately 0.21% of the issued and outstanding American depositary shares of ChipMOS (the “Investment in ChipMOS”) based on the public information. ChipMOS is listed on the Taiwan Stock Exchange Market in April 2014 (TWSE: 8150), and a leading independent provider of total semiconductor testing and packaging solutions to fabless companies, integrated device manufacturers and foundries. ChipMOS merged with its parent company, ChipMOS Technologies (Bermuda) Limited in October 2016. Consideration of the merger was the combination of cash and newly-issued American depository shares trading on the NASDAQ Stock Market with ticker of “IMOS”. Further information on ChipMOS can be found on the website of www.chipmos.com. The Investment in ChipMOS had a cost of approximately HK$1.3 million, and was regarded as a held-for-trading equity instrument. On 7 March 2019, the Group disposed all of its remaining 10,284 ChipMOS Taiwan ADS at the prevailing market price of US$16.881 per ChipMOS Taiwan ADS. For the year ended 31 December 2019, this investment recorded (i) dividends income of HK$Nil million; and (ii) a realized gain of approximately HK$0.02 million, generated from dealing activities. (iii) Investment in Imperial Pacific As at 31 December 2019, the Group had an investment on 15,000,000 listed shares of Imperial Pacific International Holdings Limited (“Imperial Pacific”), representing 0.01% of the issued shares of Imperial Pacific (the “Investment in Imperial Pacific”) based on the public information. Imperial Pacific is listed on the Stock Exchange (stock code: 1076), and is principally engaged in the gaming and resort business including the development and operation of integrated resort on the Island of Saipan. Further information on Imperial Pacific can be found on the website of www.imperialpacific.com. The Investment in Imperial Pacific had a cost of approximately HK$1.5 million. As at 31 December 2019, this investment had a fair value of approximately HK$1.5 million according to the quoted price of the shares of Imperial Pacific, representing approximately 0.9% of the Group’s consolidated total assets of approximately HK$164.8 million as at 31 December 2019. For the year ended 31 December 2019, this investment recorded (i) no dividends; (ii) no realized gain; and (iii) an unrealized gain of approximately HK$0.8 million, generated from change in fair value. The Group intends to held the Investment in Imperial Pacific as a held-for-trading equity. Prospects: The management of the Group is conservative, if not negative, on the prospects in the year 2020. For the year ended 31 December 2019, the global economy has shown signs of hardship: (i) the Chinese economy was slowing down its growth momentum; and (ii) the Hong Kong economy entered into a recession which has not been witnessed in over one decade. The U.S.-China trade conflict remains unmitigated and the political uneasiness in Hong Kong remains unpleased. Then in early 2020, there came the COVID-19 outbreak, which has already interrupted the Group’s operation in the PRC. Worse still, the management is afraid that more profound impact of the virus outbreak is not fully revealed. Possible challenges to the Group may include significantly higher material cost for its production activities and significantly higher default rates for its financial service activities. In view of the increasing uncertainties in economic environment, the business growth has become increasingly challenging for the Group’s operation. Hence, the Group will continue with its cautious and prudent business approach. Design and sales of integrated circuit and semi-conductor parts The management shall carry on tremendous effort to improve the existing products over competitors both in terms of performance as well as price. Meanwhile, the management is diligently diversifying different product lines and exploring new sales and distribution channels in order to broaden the revenue source. More cost control measures will be adopted by the management depending on the future business trends. Trading of construction materials The management is considering to downsize, temporarily close or discontinue this segment due to lack of appropriate opportunities and increasing default risk of its customers. Given the financial and operational difficulty encountered by existing customers, the management intends to focus on recovering receivables. Save for taking up normal procedures, the management is in the course of assessing other options to increase recoverability, including but not limited to (i) filing bankruptcy petition against the customer; (ii) requesting collaterals as guarantee for the receivables; (iii) seeking factoring services from professional financial institutions; and/or (iv) settling the receivables with other assets. On 27 March 2020, the Company has entered into a settlement package with a customer to recover and settle all the amount owed by this customer to the Group, including a billing amount of approximately HK$23.4 million generated from the business segment of trading of construction materials. For more information, please refer to the section “Transactions after the Reporting Period”. Financial leasing in the PRC The management will adopt a stricter policy in this segment to deal with generally increasing credit risk in the PRC. The management reserves the option of halting expansion of this segment, such as turning down new customers. The management is also assessing whether additional steps are required to recover the receivables from customers. Under a more prudent strategy, the management expects this segment will have a scale-down. Money lending in Hong Kong The management will continuously adopt a cautious and conservative strategy when accepting new money lending proposals in Hong Kong. On the other hand, the management will closely monitor the recoverability of the loans granted before. Given the economic downslide in Hong Kong, the management expects this segment will have a scale-down. Research and development in real time 2D-3D conversion display products On 28 March 2020, the Company had conditionally agreed to dispose of its whole interests in the business of this segment to a third party independent to the Group. Nevertheless, the purchaser has agreed to grant to the Company a buy-back right to repurchase this business at an acceptable price within 12 months since 28 March 2020. Upon completion of the disposal, the Group will exit from this business, but keep an option to re-enter by having a buy-back right. Although the Company has no intention to exercise the buy-back right as at this moment, the management will monitor the performance, trend and prospects of real time 2D-3D conversion display products, from time to time. Aircraft business management and luxury yacht management The Company management will continue to explore business opportunities relating to aircraft business management and luxury yacht management. The Group has adopted a market-expansion strategy by actively identifying potential clients. Given the potential of this business segment, the management is of the view that it will broaden the Group’s revenue source and bring better return to the Company. Investment holding The world economy maintained a moderate pace of growth, with uncertainty over international trade and global economic and financial returns. The management will maintain a cautious and prudent approach for exploring any new investment opportunities to enhance shareholder’s value.

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