Sunwah International Reports Second Quarter Fiscal 2021 Results

TORONTO, Feb. 11, 2021 /CNW/ - Sunwah International Limited, (TSX: SWH) ("Sunwah International" or the "Company"), a Hong Kong based investment firm and member of major Asian conglomerate, Sunwah Group, today announced its financial results for the second quarter ended December 31, 2020, reporting a net loss of US$0.19 million.  All figures quoted are in U.S. dollars.

Q2 FY2021 Highlights:

• A loss before tax of $0.19 million for the quarter and $0.39 million for the year-to-date (Q2 FY2020: a loss of $0.78 million; a loss of $1.56 million for the six months of FY2020);
• A loss attributable to shareholders of the Company of $0.17 million for Q2 FY2021 and $0.32 million for the year-to-date (Q2 FY2020: a loss of $0.71 million; a loss of $1.39 million for the six months of FY2020);
• A share of profit of an associate of $0.13 million for the quarter and $0.15 million for the year-to-date, representing results from the Company's primary investment in financial services through Sunwah Kingsway Capital Holdings Limited (Q2 FY2020: a share of loss of an associate of $0.03 million; $0.38 million for the first half of FY2020);
• Revenues from the Company's Restaurant Operations investment (through HFL Limited) of $0.70 million
  for Q2 FY2021 (Q2 FY2020: $0.87 million) and $1.26 million for the year-to-date ($1.70 million for the six months of FY2020);
• Cost of sales for Sunwah International's Restaurant Operations investment, HFL Limited, of $0.22 million for the quarter and $0.40 million for the six months of FY2021 (Q2 FY2020: $0.26 million; $0.49 million for the first half of FY2020);
• Selling, general and administrative expenses of $0.86 million with HFL Limited accounting for approximately $0.65 million for the quarter (Q2 FY2020: $0.96 million total with $0.77 million from the operation of HFL Limited) and $1.60 million for the year-to-date with $1.25 million from the operation of HFL Limited (the first half of FY2020: $2.00 million with $1.54 million from the operation of HFL Limited).

"In view of increased COVID-19 restrictions in Hong Kong during the quarter, which had an especially negative effect on our restaurant investment, and ample cause for market uncertainty in general in Hong Kong, we are cautiously satisfied with Sunwah International's Q2 results, which we attribute mainly to cautious management policy, government subsidies, and, of course, improving investor sentiment," said Michael Choi, CEO of Sunwah International.  "In terms of the next few quarters, our hope is that capital markets continue to recover and that the consumer and hospitality sectors follow suit as restrictions lift. Nevertheless, should economic volatility take hold once again, we feel we are well prepared to endure even a protracted period of negative investor sentiment, drawing on our 30-year track record and experience in successfully navigating numerous downturns."

Hong Kong capital markets rebounded during the second quarter of Sunwah International's 2021 fiscal year, particularly following the result of the U.S. presidential election (in light of strained U.S.-China relations leading up to it) and the announcement of successful COVID-19 vaccine candidates in November.  The secondary listing of US-listed Chinese companies on the Hong Kong Stock Exchange also stimulated Hong Kong investor sentiment alongside an increase in market activity with respect to new economy stocks, including Tencent, Alibaba and Meituan. 

Amid improved financial markets, the Company's flagship investment in Sunwah Kingsway Capital (SWK) performed well owing largely to solid results from proprietary investments.  SWK is a highly respected domestic financial services provider in Hong Kong, operating one of the region's leading brokerage houses. 

It is noted that the performance of Sunwah International's restaurant operation investment (in HFL Limited) was down in comparison with the same period last year (when Hong Kong's hospitality sector was still grappling with the harmful impact of widespread social unrest). Due to increased social distancing measures and restrictions imposed during Q2 FY2021 HFL Limited had to limit the number of diners to two persons per table and was also required to close its dinner time business in keeping with a ban on all restaurant service after 6 PM. While HFL benefitted from some income through Hong Kong's Employment Support Scheme and Catering Business Subsidy Scheme, revenues were down year-over-year. 

Throughout the remainder of Fiscal 2021, Sunwah International will continue to steer the current economic climate prudently with circumspect investment policy and low gearing as well as targeted efforts to diversify its income base.  This includes recognizing that while the Company's interest in the restaurant and hospitality sector has produced decent results to date, Sunwah International must remain prepared, if necessary, to alter course by lessening or withdrawing its focus on this industry given the high degree of uncertainty in Hong Kong's consumer marketplace at present.  In Sunwah International's newfound status as an investment company, it is in the normal course of business to invest and divest in various businesses, and the Company is well prepared to efficiently execute on any change in direction should Management determine this to be the best course of action.

Financial Overview:

In accordance with the Company's refocused investments, Sunwah International now presents its results according to the following main segments:

1. Financial Services Division – This division comprises the results from the Company's remaining interest (26.05%) in Sunwah Kingsway Capital Holdings Limited, its former principal subsidiary and now main investment interest (now accounted for as an associate under the equity method of accounting).
   Q2 FY2021 highlights:
1. Share of profit totaling $127,000 for the quarter and $145,000 for the year-to-date, up considerably from a share of loss of $29,000 in last year's comparable quarter and a share of loss of $377,000 for the six months of FY2020. 
2. While SWK's year-over-year increase for the quarter and year-to-date is in part due to improved investor sentiment in Hong Kong, the quarter's gain is mainly attributable to the improvement of its proprietary trading business.
2. Restaurant Operations – This division encompasses Sunwah International's activities in the restaurant business following its acquisition of HFL Limited, an Asian food and beverage company operating a premium Chinese seafood restaurant in Hong Kong.  Q2 FY2021 highlights:
1. A loss of $0.08 million for the quarter (Q2 FY2020: a loss of $0.16 million) and a loss for the first half year of $0.19 million (six months of FY2020: a loss of $0.35 million);
2. Revenues of $0.70 million for the quarter (Q2 FY2020: $0.87 million) and $1.26 million for the year-to-date (six months of FY2020: $1.70 million);
3. Other Income mainly in the form of subsidies under the Hong Kong government's Employment Support Scheme and Catering Business Subsidy Scheme (in support of Covid-19 economic recovery efforts) of $0.11 million for the current period and $0.22 million for the first half of FY2021;
4. Cost of sales of $0.22 million, representing the cost of food and beverages used in restaurant operations (Q2 FY2020: $0.26 million) and $0.40 million for the first half year (six months of FY2020 $0.49 million);
5. General, selling and administration expenses of $0.54 million (Q2 FY2020: $0.57 million) and $1.03 million for the year-to-date (six months of FY2020: $1.15 million).  This includes staff costs (wages and allowances, pension costs, employee benefits etc.) of approximately $0.37 million for the quarter (Q2 FY2020: $0.40 million) and $0.70 million for the first half of FY2021 (six months of FY2020: $0.80 million).
6. Depreciation and amortization amounting to $0.11 million for (Q2 FY2020: $0.20 million) and $0.22 million for the year-to-date (six months of FY2020: $0.39 million).
3. Strategic Investments and other activities – This division includes strategic investments, proprietary investments and other activities of the Group.  Q2 FY2021 highlights:
1. A net loss of $0.25 million for the quarter (Q2 FY2021: loss of $0.16 million) and $0.35 million for the year-to-date (six months of FY2020: $0.40 million)
2. A net fair value loss on financial assets at fair value through profit or loss of $52,000 (Q2 FY2020: a net fair value gain of $40,000), mainly due to the fair value change in long-term investments. A loss of $27,000 was recorded for the year-to-date (six months of FY2020: a gain of $41,000);
3. Selling, general and administrative expenses for the quarter of $0.21 million (Q2 FY2020: $0.20 million) and $0.35 million for the year-to-date (six months of FY2020: $0.46 million).

For more information on Sunwah International's Q2 FY2021 operating results, please see the Management's Discussion and Analysis (MD&A) and the unaudited interim consolidated financial statements, which are filed on SEDAR and also available on the Company's website at www.sunwahinternational.com.

About Sunwah International Limited

Sunwah International Limited is an investment firm and a member of Sunwah Group, one of Hong Kong's most prominent multi-national conglomerates. The Company's current primary investment interest, Hong Kong based Sunwah Kingsway Capital Holdings Limited, is listed on the Stock Exchange of Hong Kong under the stock code 00188. Sunwah Kingsway is licensed to provide a range of financial solutions in Hong Kong and abroad that include award-winning brokerage services and innovative corporate finance offerings.

Leveraging the expansive relationship network and strategic strengths of Sunwah Group, the company is now also focused on the food and beverage industry following the recent acquisition of HFL Limited, which operates a premium Chinese seafood restaurant in Hong Kong.

Forward-Looking Statements

This press release announcing the financial results for Sunwah International's second quarter ended December 31, 2020 should be read in conjunction with the unaudited interim consolidated financial statements and management's discussion and analysis of Sunwah International Limited (the "Company") and its subsidiaries.

This press release contains certain statements that reflect management's expectations and objectives for the Company's future performance, opportunities and growth, which statements constitute "forward–looking information" and "forward-looking statements" (collectively "forward-looking information") under applicable securities laws. Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward-looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward–looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions. Specifically, this press release includes forward-looking information in respect of Sunwah International's 2021 objectives, including its focus on a variety of industries as an investment holding company and its initiative to expand and diversify, and its strategies to achieve those objectives. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.

Except as required by applicable law, management and the board of directors of the Company (the "Board of Directors") undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Sunwah International Limited

Kristen Humphrey, Sunwah International Limited, [phone], [email protected].

Related Links

www.kingswaygroup.ca