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Public company info - EJE (Hong Kong) Holdings Limited , 08101.HK
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EJE (Hong Kong) Holdings Limited, 08101.HK - Company Profile
Chairman Qin Yuquan
Share Issued (share) 347,000,000
Par Currency Hong Kong Dollar
Par Value 0.25
Industry Furniture & Household Goods
Corporate Profile Business Summary: The principal activity of the Company is investment holding. The principal activities of the Company’s subsidiaries are (i) manufacture of custom-made furniture; (ii) property investment; (iii) securities investment; (iv) money lending; and (v) the design, manufacture and sale of mattress and soft bed products. Performance for the year: The turnover of the Group for the year ended 31 March 2020 was approximately HK$140.5 million, increased of approximately 7.8% as compared to the financial year of 2019. the net profit/(loss) for the Group improved from last year net loss of approximately HK$11.7 million to this year net profit of approximately HK$83.4 million and basic earnings per share amounted to HK$2.88 cents for the year ended 31 March 2020 (2019: loss per share HK0.4 cents). Business Review： Since the Company begun to set foot in custom-made furniture business in China, the Group have acquired Pioneer One Investments Limited (Pioneer One) in 2017 which were licensed to operate custom-made furniture business under the brand name of “壹家壹品” (“Yijia Yipin”) in Southern China region for 5 years. The performance of the Group kept on improving ever since the acquisition. The custom-made furniture market in China also continue expanding and had consistently out perform the overall domestic furniture market in China. It proves the future of the furniture industry in China lies in this phenomenal custom-made business model. In May 2019, the Company further acquired Green Step to further expand the Group’s custom-made furniture business beyond Southern China region for the originally licensed 5 years duration. The trade war between China and United States of America (“US”) started to over shadow the Chinese economy in early 2018, the conflict and its adverse effect paramount in the second half of 2019. Right after the acquisition of Green Step, the GDP growth rate of Chinese economy decelerated faster in fourth quarter of 2019 and reached its lowest growth rate of 6% since 1992. Nevertheless, profit generated from furniture industry in China still increased 10.8% year on year. Unfortunately, with regard to the custom-made furniture sector in China, its turnover for 2019 finally failed to maintain a not less than 20% growth rate record for the previous 7 years. The reasons for such a turnaround for the custom-made furniture business in China were somewhat complicated. And, the Group shall discuss this in later section. In response to such changes, the Company had deliberately slowed down capital investment and adopted more cautious approach to manage the credit risk from trade receivable. Nevertheless, the outbreak of COVID-19 in early 2020 had took everyone by surprise. Countries all over the world were locked down, trade and business activities were largely restricted and reduced. In China, factories were temporarily closed to control the spread of the pandemic. China’s GDP growth rate for the first quarter 2020 turned around to decrease by 6.8% year on year, and profit generated from furniture segment also dramatically decreased 67.5% year on year. The Group’s factory in China gradually resumed operation in mid-February 2020. That was one of the greatest challenge the Group’s management team have ever faced. Through multiple times of trial and error, the Group have come up with some innovative strategies to strive for greater competitive advantage in the market. Actually, the management knows that it is both true and inevitable that the pandemic will discourage and even stop people to come visit the Group’s franchise store in person. However, the Group did not see it as threat but an opportunity. As a matter of fact, the management team is well aware of the greatest limitation for custom-made furniture business model is that its sales would need to be carried out through physical channel. Customer has to visit a franchise store to see the Group’s products and to discuss the design and related matters with designer. And, design is really the key essence of the custom-made furniture. People are willing to pay premium for style and quality, and they need to interact with designer to make sure the design can really meet their needs. In that sense, such limitation is really a disadvantage when compare to the sales of ready-made furniture product which people can buy directly online when it is not convenience for customer to visit a physical store. In respond to such limitation, the Company has pioneered a “Designer X” platform, where customer can get help from panel of designers online. This became feasible only when there is an excellent software and system which can enhance customer’s overall buying experience. On the other hand, the Company also started to promote what the Group called “V store”, which is in effect a smaller franchise store that will leverage the places of other customers to display Company’s products. This will substantially reduce cost in setting up a new franchise store and hence encourage more people to join the franchise network to promote the brand name and the sales. Now, the management even push things to the limit by exploring the feasibility to introduce online direct sales model to line up designer with customer. Which interest partners can join the franchise without even setting up a franchise store and they can trade with customer directly through the online platform. Going forward, if online sales through the Company’s platform become popular, the Company would only maintain major flagship showroom and stores to allow customers to see and touch the Group’s products, but then customer can also get in touch with the Group’s franchise partners and designers through online platform. The sales and subsequent follow up work could simply done online. This will further reduce the cost and barrier of joining the Group’s franchise. On the other hand, the Group have also notice a re-emerging importance for project sales. This was due to government’s ongoing policy to regulate the property developers in China. The latest trend is there would be further consolidation for the property developers in China to eliminate smaller and less efficient players. Those big players would be more willing to invest on premium quality furniture to compliment their property to meet the need of their new generation of customers. Even though the margin for project sales is normally lower, but it provides a relatively stable income source. Therefore, the Company will seek a balance development between the Group’s retail custom-made furniture business and project sales business with big property developers. For the mattress and soft bed sales business, it had been stopped operation since May 2018. Following the deregistration of Guangzhou Xinyue which was principally engaged in mattress and soft bed products’ sales business in March 2020, the Group has officially terminated the operation of this segment. As a result, net profit of approximately HK$21.5 million was recognized from the discontinued operation. Such profit was mainly attributable to one off written off of trade and other payable approximately HK$14.1 million. There were four investment properties held by the Group as of 31 March 2020 with the total book cost of approximately HK$205.5 million. The twelve months revenue of the segment increased by approximately HK$304,000 from last year approximately HK$5.5 million to this year approximately HK$5.8 million. This was due to some originally vacant properties was subsequently being occupied as well as the increase of rental upon renewal with certain properties during the year. The net profit of the segment has also increased from approximately HK$2.2 million of last year to approximately HK$3.0 million of this year. Unfortunately, due to recent negative market sentiment in Hong Kong, the fair value to these investment properties decreased by approximately 7.4%, which resulted in fair value loss of approximately HK$19.9 million. Regarding to money lending business, the original loan receivable was amounting to approximately HK$18.0 million as of 31 March 2020. However, due to the poor economic situation of Hong Kong over the last year and the outbreak of COVID-19, some borrowers were procrastinating the repayment of their loan. Which has caused an unfavorable expected credit loss of approximately HK$3.0 million assessed by valuer. The interest charged to borrower was ranging from 10% to 12% per annum. The total interest income generated from the business was approximately HK$1.0 million (2019: approximately HK$1.2 million). And, net loss of the segment was approximately HK$2.4 million (2019: approximately HK$698,000), which was mainly attributable to the expected credit loss mentioned above. Going forward, the Group is intended to maintain the loan receivable scale to no more than HK$30 million level, and the loan interest rate will be ranging from 8% to 12% per annum. Securities investment segment has recorded loss of approximately HK$1.1 million, representing approximately HK$2.5 million improvement from last year loss of approximately HK$3.6 million. The Group recorded fair value gain on financial assets at fair value through profit or loss approximately HK$1.4 million for the year ended 31 March 2020 which included unrealised fair value loss of approximately HK$4.0 million and realised gain of approximately HK$5.4 million. These unrealized fair value losses were mainly attributable to the poor performance of the global as well as Hong Kong’s securities market in the recent period. Prospects: In fact, custom-made furniture market used to be expanding significantly faster than the overall domestic furniture market in China. Its growth rate between 2012 and 2018 was never below 20%. Regardless to the impact of all adverse factors, the growth rate of the overall furniture market in China for 2019 can still maintained at 10.8%. With the increase of the middle class, more and more consumer groups are paying attention on overall life style and living standard. Old-style ready-made furniture can no longer satisfy diverse need of the customers and cannot satisfy their pursuit for life style and personalized taste for their home furniture. Despite of all temporarily adversities, the Company has strong faith in the domestic furniture market in China, believing that production and sales will gradually resume normal from third quarter of 2020 onward, and the financial performance would be picking up where the Group left off before the Sino-US trade war and COVID-19 as early as 2021. While facing a very challenging year ahead, the management has already started implementing plans to leverage O2O business model to keep up with the ever furious competition in the market. And, the Group shall never stop exploring new technology and strategies to boost sales and profit.

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