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Public company info - SFund International Holdings Limited , 01367.HK
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SFund International Holdings Limited, 01367.HK - Company Profile
Chairman LI Qing
Share Issued (share) 480,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Textile & Apparels
Corporate Profile Business Summary: The group is primarily engaged in (a) trading of apparel products and provision of the apparel supply chain management services; (b) financial services; (c) money lending; and (d) securities investment. Performance for the year: During the financial year under review, the Group recorded a revenue of approximately HK$64.3 million (2018: HK$137.7 million), representing a decrease by 53.3% as compared to last year. Business Review The Group was principally engaged in (i) apparel supply chain management services business; (ii) financial services business; (iii) money lending business; and (iv) securities investment during the year. Apparel Supply Chain Management Services Business The Group provides apparel supply chain management services for woven wear (such as shirts, pants, jeans and jackets) and accessories. This includes sourcing of raw materials and third-party manufacturers, sample creation, product design and development, production management, merchandising, quality control, logistics management and social compliance monitoring services. The Group acts as a one-stop solution provider to its customers to meet their needs along the apparel supply chain. Revenue is derived primarily from the sale of apparel products it procures for its customers. Sales in 2019 to the USA customers declined because of the change in their sourcing strategies. The impact was mitigated as new customers in Hong Kong (China), Mainland China and Vietnam have been sought. Hence, the Group’s revenue from apparel operation decreased by approximately 56.8% from HK$107,652,000 in 2018 to HK$46,570,000 in 2019. The segment loss from the respective segment was HK$27,611,000 as compared to segment loss of HK$50,534,000 for the corresponding period last year. The manufacturing environment were concentrated in Cambodia, Bangladesh and the PRC. The continual strengthening of United States dollars (“US$”) against Renminbi (“RMB”) in 2019 has helped to stabilize the material costs which are mainly sourced in Mainland China. Overheads decreased significantly during the year as most of the IT projects related to improving supply chain management process have been completed. Financial Services Business During the year, the Group carried out financial services business through its subsidiaries including Type 1 (Dealing in Securities), Type 4 (Advising on Securities) and Type 9 (Asset Management) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”) in Hong Kong (China) as well as equity interests investment management, investment consultancy services, investment management services, entrusted management of equity interests investment fund and corporate management consultancy services in the People’s Republic of China (the “PRC”). During the year, the revenue and operating loss generated in this segment were HK$826,000 (2018: HK$15,685,000) and HK$48,595,000 (2018: HK$563,000), respectively. The segment loss in this segment were mainly due to increase in provision for impairment of accounts receivable, impairment of goodwill and impairment of intangible assets amounting to HK$44,272,000. As at 31 December 2019, the Group had overdue fund management fee receivables of HK$12,314,000 and HK$7,877,000 due from 湖南匯垠湘天投資合夥企業(Hunan Huiyin Xiangtian Investment Partnership*) and 湖南匯垠眾益投資合夥企業(Hunan Huiyin Zhongyi Investment Partnership*), respectively, investment funds registered in the Mainland China (the “PRC Funds”), of which the Group acts as the fund manager. The Group has carried out a comprehensive assessment on the recoverability of such fund management fee receivables based on currently available information. Taken into account of the initiated litigation on 唐山境界實業有限 公司(Tangshan Jingjie Industry Co., Ltd*) (investee company of the PRC Funds) and its related parties and the fact that part of their assets are frozen under judiciary, the Group hereby recognised an impairment amounted to HK$19.5 million on management fee receivables as well as an impairment on the goodwill of approximately HK$8.4 million due to the significant doubt of the recoverability of the fund management fee receivables based on prudent approach even though the PRC lawyer stated that the Company could have approximately to recover the outstanding amount. No related management fee income was recognised during the year. As at 31 December 2019, the recoverable amounts of the securities dealing CGU and asset management CGU for the goodwill determined based on value in use calculation using cash flow projections based on financial budgets approved by management covering a five-year period. Due to the absence of transactions in an active market for underlying assets, it is appropriate to use of discounted cash flows to estimate the fair value of such assets. The change in valuation method is due to the Group considers that it provides more reliable information about the recoverable amount as at 31 December 2019. As a result, an impairment of approximately HK$2,674,000 for the goodwill was recognised in profit or loss for the year ended 31 December 2019 due to the unfavourable income forecast in future. As at 31 December 2019, the recoverable amounts of the securities dealing CGU and asset management CGU for the intangible assets determined based on value in use calculation using cash flow projections based on financial budgets approved by management covering a five-year period. Due to the absence of transactions in an active market for underlying assets, it is appropriate to use of discounted cash flows to estimate the fair value of such value. The change in valuation method is due to the Group considers that it provides more reliable information about the recoverable amount as at 31 December 2019. As a result, an impairment of approximately HK$13,100,000 for the intangible asset was recognised in profit or loss for the year ended 31 December 2019 due to the unfavourable income forecast in future. Money Lending Business The Group engaged in the money lending business through Capital Strategic Partners Limited (“Capital Strategic”), an indirect wholly-owned subsidiary of the Company, which holds a money lenders licence under the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) to carry out money lending business in Hong Kong (China). During the year, the interest income and operating profit generated in this segment were HK$17,051,000 (2018: HK$20,423,000) and HK$13,042,000 (2018: HK$15,115,000), respectively. As at 31 December 2019, there were two transactions of loan advanced to customers. The loan were still outstanding as at 31 December 2019 with an aggregate outstanding loan principal of HK$115,000,000. On 24 November 2017, Capital Strategic entered into a loan agreement with Yuan Heng Gas Holdings Limited (“Yuan Heng”), a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (stock code: 332). Pursuant to the loan agreement, Capital Strategic agreed to grant to Yuan Heng a loan of HK$180,000,000 (“Original Facility”) for a term of 6 months from the date of the drawdown, which was 25 January 2018, and could be further extended for another 6 months with written consent of Capital Strategic (or any other date as may be agreed by Capital Strategic and Yuan Heng in writing). The loan is secured by the charge over the entire issued share capital of an indirect wholly-owned subsidiary of Yuan Heng and the floating charge over all or any part of the property and/or assets of an indirect wholly-owned subsidiary of Yuan Heng in favour of Capital Strategic. Yuan Heng had repaid HK$100,000,000 of the Original Facility to Capital Strategic by 6 August 2018. On 25 January 2019, Capital Strategic and Yuan Heng entered into the first supplemental agreement (the “1st Supplemental Agreement”) pursuant to which Capital Strategic had agreed to extend the maturity date of the remaining HK$80,000,000 of the Original Facility to 25 July 2019 (or any other date as may be agreed by Capital Strategic and Yuan Heng in writing). Yuan Heng had further repaid HK$5,000,000 of the Original Facility to Capital Strategic by 16 July 2019. On 26 July 2019, Capital Strategic and Yuan Heng entered into the second supplemental agreement (the “2nd Supplemental Agreement”) with retrospective effect from 25 July 2019 pursuant to which Capital Strategic had agreed to extend the maturity date of the remaining HK$75,000,000 of the Original Facility to 25 January 2020 (or any other date as may be agreed by Capital Strategic and Yuan Heng in writing). The loan continues to be secured by the share charge and the floating charge Subsequent to the financial year under review, on 21 January 2020, Yuan Heng had further repaid HK$35,000,000 of the Original Facility to Capital Strategic. Further details of the transaction is also set out in the Company’s announcements dated 24 November 2017, 25 January 2018, 25 January 2019 and 26 July 2019 and circular dated 22 December 2017, respectively. The loan is still outstanding as at 31 December 2019. On 14 February 2018, Capital Strategic entered into another loan agreement with China-HK Holdings Investment Limited (“China-HK”), a company incorporated in Hong Kong (China) with limited liability, pursuant to which Capital Strategic had agreed to provide a loan facility to the China-HK in the principal amount of HK$40,000,000 for a term of 6 months from the dates of the relevant drawdown, which could be further extended upon the request of China-HK and subject to agreement of Capital Strategic in writing. The loan is secured by the charge over the entire issued share capital of China-HK and 2 wholly-owned subsidiaries of China-HK. On 14 August 2018, Capital Strategic and China-HK entered into a supplemental loan agreement to extend the repayment date to 14 February 2019. Further details of the transaction is set out in the Company’s announcements dated 14 February 2018 and 14 August 2018. The loan is still outstanding as at 31 December 2019. Management had formulated a fundamental policy to establish its internal control systems. The Group would adopt a prudent approach and conduct regular reviews of the composition of the loans portfolio and lending rates charged to each customer to maximise the return of the money lending business as well as diversify the credit risk. Securities Investment During the year, the Group carried out the Group’s investment business in securities investment. During the year, the revenue arising from this segment was negative revenue of HK$117,000 (2018: negative revenue of HK$6,016,000). Revenue was attributable to the net unrealised loss on listed securities investment of HK$132,000 (2018: net unrealised loss of HK$6,016,000) and realised gain on listed securities investment of HK$15,000 (2018: nil) for the year ended 31 December 2019. The overall performance of the securities investment business recorded a loss of HK$131,000 for the year ended 31 December 2019 (2018: HK$6,022,000), which was primarily attributable to the unrealized loss on securities investment stated above. As at 31 December 2019, the market value of the Group’s listed securities portfolio was HK$1,091,000 (31 December 2018: HK$1,222,000). The Group is currently looking into other investment opportunities including private equities, debt securities, derivatives and funds. The management plans to revise its investment strategies and formulate new investment policies in the near future. Prospects: To improve the financial position of the Group, the Company is considering various options to strengthen the capital of the Company and will, when appropriate, disclose further development on the above matter, if any, by way of further announcement(s) in accordance with regulatory requirements. Apparel Supply Chain Management Services business The management of the Group expects the business environment for the apparel supply chain management services business in 2020 not favorable. As goods sold to our new customers are mostly sold to department and specialty stores in the USA, the increasing coronavirus infection in the US is expected to hit their business as people will avoid going out for shopping. Recent stock market volatility will also have negative wealth effect that deter consumer spending on apparels. The trade war between US and Mainland China are still not yet concluded. The management expects that apparel buyers will continue to diversify their production base away from Mainland China. This should help the apparel business as the Group has production base in Cambodia and Bangladesh. Money Lending Businesses The management expects that the money lending business segment will become one of the Group’s stable income sources. The management will go on paying close attention to the development of this business segment and promptly react to the demand in the market. It is expected that the Group will not expand its loan portfolio unless the Group managed to raise abundant funds through fund raising exercises. Financial Services Businesses The management continues looking into possible acquisitions of asset management companies and other financial service platforms located in both Hong Kong (China) and the PRC, in order to build a strong, growing and diversified financial services sector. Subsequent to the financial year under review, on 31 January 2020, the Group has entered into an agreement to acquire 30% equity interest in 廣俊粵港澳產業投資基金管理（廣州）有限公司 (Guangjun Guangdong– Hong Kong–Macao Industrial Investment Fund Management (Guangzhou) Company Limited*) (the “GJ Fund Management Company”) at a consideration of approximately HK$3 million. GJ Fund Management Company will establish a private equity fund for investing in an education project in Nansha district, Guangzhou Province, the PRC. The Group is optimistic about the prospect of GJ Fund Management Company and believe such acquisition would strengthen the Group’s network in the PRC fund industry, which is in line with the expansion plan of the Group. The Group will continue to expand its financial services segment by applying for the necessary licenses for, or acquiring licensed corporation to conduct regulated activities, or acquiring interest in, or setting up funds to invest in, companies or projects which have good potentials and prospect. As at the date of this report, the Company has been considering potential targets with an aim to maintaining a sufficient level of business operations and assets of the Group. The management expects that the contribution from financial services business segment will increase significantly in the near future. Securities Investment During the year, the Hong Kong stock market was highly volatile due to both domestic and worldwide social and economic issues. To cope with such situations, the Group will continue to closely monitor the market conditions and may consider to change its investment portfolio from time to time. We will also explore other investment opportunities including but not limited to investment in private equities, debt securities, derivatives and funds.

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