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Public company info - Zhong Hua International Holdings Ltd. , 01064.HK
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Zhong Hua International Holdings Ltd., 01064.HK - Company Profile
Chairman -
Share Issued (share) 714,000,000
Par Currency Hong Kong Dollar
Par Value 0.025
Industry Property Investment
Corporate Profile Business Summary: The Group is principally engaged in property investment and development in Mainland China and have two property interests, one in Chongqing (重慶市) and the other in Guangzhou (廣州市). Performance for the year: Zhong Hua International Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”) recorded a revenue of HK$41,732,000 (2018: HK$51,300,000) for the year ended 31 December 2019. Net loss attributable to ordinary equity holders of the Company for the year was HK$18,505,000 (2018: profit of HK$11,989,000). Business Review The Company is an investment holding company. Its subsidiaries are principally engaged in property development, investment and management businesses in Mainland China and have two major property interests, one in Chongqing (重慶市) and the other in Guangzhou (廣州市). Guang Yu Square in Chongqing The Group’s property interest in Chongqing is situated at Chaotinmen, Yuzhong District, Chongqing (重慶市渝中區朝天門). With a history of over five centuries and situated in the northeast of Yuzhong District and at the delta of Yangtze River (長江) and Jianing River (嘉寧江), Chaotinmen is the most prominent port in Chongqing for transporting goods and passengers to and from the Three Gorges (三峽). Guang Yu Square (港渝廣場) is located at the junction of Chao Dong Road (朝東路) and Shanxi Sixth Lane (陝西六巷) in Chaotinmen which is within walking distance of about 15 minutes to the Port of the Three Gorges (三峽碼頭) and walking distance of about 20 minutes to Jiafangbei (解放碑), the most prime shopping area in Chongqing as well as with walking distance of about 5 minutes to Raffles City Chongqing (重慶來福仕廣場), the newly developed and most spectacular commercial landmark in Chongqing and within walking distance of about 10 minutes to Chaotinmen Square (朝天門廣場), which is one of the most famous sightseeing points in Chongqing. Guang Yu Square is a 15-storey commercial building with a total gross floor area of about 49,400 square metres, out of which the Group owns portion of Basement, Levels 1 to 4, Levels 8 and 11 with total gross floor area of about 24,400 square metres. The property, which has been fully refurbished in 2016, is presently a multi-floor shopping mall focusing in wholesale and retailing of men’s wear and footwear. There are about 50–70 shops per level with shop area ranging from 20–60 square metres per shop. Most shops are leased to unsolicited third parties for a term of about one year renewable automatically with prevailing market rental. The shopping mall (the floors owned by the Group) is almost fully occupied and shop turnover rate is maintained at a relatively low level. Given Chaotinmen has been one of the major clothing distribution points in Chongqing for nearby cities and the Three Gorges region for decades, Guang Yu Square is one of the most popular men’s wear and footwear wholesale points in the region. Following the commencement of business of the Raffles City Chongqing (owned and operated by third parties) in late 2019, Guang Yu Square extended business hours from 4 pm to 8 pm for attracting more walk-in customers. Barring from the temporary closure of the shopping mall as interrupted by the COVID-19 pandemic, it is expected that the property will generate higher revenue to the Group per month in the second half of 2020. Metropolis Shoes City in Guangzhou The Group’s property interest in Guangzhou is situated at Yuexiu District, Guangzhou (廣州市越秀區). Metropolis Shoes City (廣州大都市鞋城) is located at the east of Jiefang Road South (解放南路), to the south of Daxin Road (大新路), to the north of Yede Road (一德路) and to the west of Xieen Lane (謝恩里) in Yuexiu District which is within walking distance of about 3 minutes to the Old Hall (舊館) of the Canton Fair (廣州交易會), which was once the only export window in China before its Reform and Open Door Policy (改革開放政策) implemented in 1978 and within walking distance of about 5 minutes to the riverbank of the Pearl River (珠江), the icon of Guangzhou. The Metropolis Shoes City (before operation ceased) was a 2-storey non-permanent building with gross floor area of about 14,700 square metres and had obtained the construction safety permits and fire safety permits granted by relevant governmental authorities annually since 2010. The mall had about 500 shops with shop area of about 30 square metres per shop. Most shops were leased to unsolicited third parties for a term of about one year renewable automatically with prevailing market rental. The mall was almost fully occupied and shop turnover was maintained at a relatively low level. With a history of over one century for footwear wholesale business in the region, the Metropolis Shoes City was the most popular footwear boutique showcase and wholesale centre in Guangzhou. In order to support the Renovation Scheme for Old Zones in Guangzhou (廣州市老城區改造提升工程) promulgated by the Guangzhou Municipal People’s Government (廣州市人民政府) (the “Guangzhou Government”) and the Upgrade Programme of Jiefang Road South for the 70th National Day Celebration (迎賀建國七十週年美化解放南路一帶外貌設施) implemented by the Yuexiu District People’s Government (越秀區人民政府) (the “Yuexiu Government”), the Metropolis Shoes City ceased operation in August 2019 for re-development purpose. The Yuexiu Government expressed that they would use their best endeavors to support G2 Zheng Da’s re-development plan. With the collaboration of the Yuexiu Government and the Group, most of the tenants of the Metropolis Shoes City were relocated to another vacant mall (owned and operated by third parties) within the same district in November 2019. As to-date, except for a few shops next to the mall continued to operate business as usual, the mall was demolished and the development site was vacant. The re-development project is at its planning stage and intended to be developed into a 22-storey versatile grade A commercial building complex with twin towers and 3-level of basement for wholesale and exhibition hall facilities, office and service apartment uses with ancillary facilities such as carpark and loading/unloading bays with total gross floor area of about 234,000 square metres. It is also planned that the basement of the new building complex will be linked via subway to two metro stations, namely Yide Lu Station (一德路站) and Haizhou Square Station (海珠廣場站). It is the present intention of the Group that the new commercial complex, if completed, will be held for long-term investment purpose. Despite the planning work was interrupted by the COVID-19 pandemic in February and March 2020, negotiations with various governmental authorities are underway with an aim to mapping out a final re-development plan in late 2020. According to the latest construction schedule, it is expected that the development project will take about four years and be completed by two phases, the first of which will be completed in late 2022 and the second stage will be completed in late 2024. Subject to the grant of inspection and safety permits by the relevant regulatory authorities, it is expected that the new commercial complex will commence business and generate rental revenue to the Group at its earliest in 2023. The development project will be constructed with a budgeted cost of about RMB1,700 million (HK$1,920 million), of which the Group and the Vendors (as defined below) will bear 25% and 75% of the total costs, respectively, (assumed on the basis that the Group held 25% interest in the development project as at the date of this report). Further details of the equity holding (including the Vendors) are disclosed in the section headed “Material Acquisition Update” below. It is intended that the construction costs will be financed by bank borrowings (with pledge of the Group’s property assets), project financing, equity financing and new funds of potential investors. In certain circumstances the potential contractors and building materials suppliers will advance working capital to the development project, which is a common industry practice in Mainland China. Notwithstanding the development project in Guangzhou ceased to contribute significant revenue to the Group in coming years, it is expected that it will continue to generate rental income from a few remaining units not yet demolished, temporarily carpark and festival bazaar in 2020 until the construction work commences. The subject asset will remain as an investment property under Hong Kong Accounting Standard 40 – Investment Property and be measured at its fair value with changes in fair value recognised in the Group’s financial statements for subsequent financial years. It is expected that the new commercial complex will be held for earning rentals and capital appreciation purposes upon completion. Meantime, the Group will proactively explore other income sources and new business projects in Guangzhou in order to compensate the revenue forgone due to the closure of the wholesale mall last year. Prospects: The challenges arising from the COVID-19 pandemic in Mainland China and Hong Kong are unprecedented as the Group’s principal operations in Mainland China have ceased in compliance with state orders since Chinese New Year while most staff are restricted from travelling freely in Mainland China and cross border to/from Hong Kong. In view of the severity of the outbreak, it is necessary and appropriate to accord priority to the health and safety of all personnel when performing their duties. Following the COVID-19 cases dropping to a level under-control as per official statistics in Mainland China (except for the Hubei Province) in late February 2020, the Group’s operation in Guangzhou resumed limited operation on 24 February 2020 while operation in Chongqing resumed pilot operation on 15 March 2020, both in accordance with the business resumption permits granted by local governments. The Directors are striving with its staff to adhere to stringent hygiene standards in offices and shopping areas with a view to catching up the revenue that has fallen behind budget. To alleviate the adverse impact of the outbreak and economic crackdown nationwide in the first quarter, the Central Government of China has already rolled out tax cuts (including refund of social security funds) and trillions of yuan worth of emergency funds to help hard-hit medium to small businesses. The Directors believe that this may help to boost both the productivity of private sector ( 民企 ) and domestic consumer market ( 內需市場 ), which in turn will serve to benefit the Group’s business as a whole. The Sino-US Trade Agreement Phase I was concluded in January 2020, however, it is uncertain at this stage whether China will re-initiate the talk or defer the execution of the agreement due to the impact of COVID-19 outbreak globally. Hence, the development of the Sino-US Trade Agreement as well as its impact on the Group remains uncertain and the Directors will continue to monitor the situation closely with a view to minimizing any adverse impact on the Group’s businesses. With strong assets backing and extremely low gearing level, the Directors will lever these advantages to finance the Group’s re-development project in Guangzhou as well as explore new business opportunities in 2020 and 2021. The Directors will also strengthen its management expertise and redeploy the Group’s resources for meeting these new challenges. Looking ahead, 2020 will be a tough year but the Directors remain optimistic about the economic bounce back in Mainland China and Hong Kong in the second half year.

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