28 Jun 2010 14:10
CPE.L
China Private Equity Investments Holdings Limited
("CPE" or the "Company" or "Group")
The Company's principal activity is to invest in unlisted companies in the telecommunications, media, and technology sectors ("TMT")
Final Results for the year ended 31 December 2009
Highlights
·; Results in line with management expectations
·; Profit on ordinary activities of the Group after taxation was US$2.53 million (2008 : loss of US$0.48 million)
·; Fortel Technology Holdings Ltd, the Group's significant investment, investment scheduled for IPO within the next 18 months
·; The private equity market in China continues to grow substantially giving rise to significant investment opportunities.
Duncan Chui, CPE's CEO commented:-
"I am delighted to announce that we are planning to list our Fortel business on an international stock exchange within the next 18 months while also planning to make one to two new investments in the telecommunications, media, and technology sector during 2010.
We have a strong local presence in our key markets which is underpinned by a significant contact base and a strong management team. With China forecasted to deliver exceptional growth in the years ahead, I am confident of CPE's long term prospects and I look forward to further progress in due course".
Enquiries:
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Chairman's statement
It gives me great pleasure to present our maiden annual results following our admission to the AIM Market of the London Stock Exchange in October 2009.
This step also marked our entry into China's rapidly developing private equity market via our unique "anchor investment strategy" in Fortel Technology Holdings Ltd, which focuses on the rapidly growing telecommunications, media, and technology ("TMT") and financial services sectors.
Implementation of CPE's investment strategy began in late 2008 with the acquisition of a 38% equity interest in Fortel Technology Holdings Limited ("Fortel"), a digital media and technology services company operating primarily in China. Our Board firmly believes that in order to build a portfolio of early to expansion stage media and technology companies in a developing economy like China, where policies are evolving and markets are growing rapidly, we must have local access to different aspects of a target investee, as well as the ability to get involved on the day-to-day operations of our portfolio companies.
Fortel, which was founded by our Chief Executive Officer Duncan Chui, who has significant Hong Kong and Chinese private equity experience, provides the business with an excellent source of TMT sector intelligence from which to build the company's investment portfolio. This has been underpinned by its infrastructure support across key areas such as marketing, human resources, general management, as well as government relations. Thanks to our investment in Fortel, we can report a profit for 2009 of US$2,562,000 or 24 cents per share (which would be 4.8 cents per share following the bonus issue on 3 June 2010), compared with a loss of US$480,000 in 2008, equivalent to a loss of 13 cents per share.
For 2010, our primary objective is to ensure Fortel's growth and prepare it for an independent listing on an international stock exchange within the next 18 months. Secondly, we shall dedicate our existing financial resources to evaluating and financing two or three investment opportunities which we have identified in the TMT area, and which our management team believe can easily leverage the operational resources provided by Fortel to accelerate their growth within the Chinese market.
While our financial resources, and therefore our ability to fund further acquisitions, remain limited as we raised only US$5 million at the time of our AIM admission due to exceptionally volatile market conditions, we will address this issue in due course while staying close to our key markets by offering our corporate advisory services with regards to M&A, corporate restructuring and or pre-IPO opportunities within the Hong Kong and Greater China territories.
Finally, I would like to take this opportunity to thank CPE's management team, staff and advisers for their support and commitment during the year and we look to report steady progress over the long term as we develop CPE's investment platform to provide investors with access to China's rapidly growing TMT and financial services markets.
Patrick Macdougall
Chairman of the Board
Chief Executive's review
Review of the Business
2009 was a year of recovery for most investors worldwide, especially investors who took a heavy hit from the global financial tsunami since the second half of 2008. In China, 2009 was more than just a year of recovery, but a year which China has recorded unusually strong growth in its private equity markets, both in terms of the amount of funds raised and the amount of funds invested, and both accounting for approximately one-third of the entire Asia private equity markets. The phenomenal growth in this market offered many investment opportunities across many industries, such as green energy, environmental protection, natural resources, financial services, and of course information technology. However, the increasing popularity of China as the destination of many private equity investments has outweighed the number of successful exits or IPOs of Chinese companies overseas in recent years, as the quality of deals and the management of the portfolio companies remain as some of the most challenging hurdles that most foreign investors have to overcome. We therefore remain highly selective and disciplined in identifying investment targets which will fulfil our investment strategy.
The main asset of the Company during the year was Fortel Technology Holdings Limited ("Fortel"), which is a technology and digital media services provider operating in the People's Republic of China. The Company held approximately 37% equity interests in Fortel during the year and considered Fortel as an anchor investment of the Company, providing a theme from which the Group will build its investment portfolio in the coming years.
At the time when the Group acquired an equity interest in Fortel in mid-2008, the business of Fortel was beginning to take off. During the year, Fortel developed rapidly and has turned profitable by the third quarter through actively marketing and selling its proprietary software system which provides a one-stop solution to electronic content distribution through the internet and mobile phones. One of the unique features of Fortel's software solution is its ability, flexibility and efficiency in handling delivery of digital video content to different kinds of mobile phones users. Typical users of the system include traditional publishers, movie distributors, TV stations, or owners of digital content. Fortel also operates a social networking site called iHompy, which boasts over 81,000 paid subscribers (as at December 2009) and is fast becoming a leading online community for end users who require external storage and application services for the management of digital photos, which are not available through other general social networking sites.
The operational priority of the Group during the year was therefore to develop and promote Fortel's business and its growth, which will continue to remain as the priority for the Group throughout 2010. It is expected that Fortel will seek its own independent listing on an international stock exchange within the next 18 months.
In addition to Fortel, several investment opportunities were also evaluated by the Group during the year, which were mostly early to expansion stages technology or media companies operating in China. The Group has identified a couple of promising opportunities and has been working closely with the entrepreneurs and/or founders to reorganise their corporate structure to comply with both international as well as Chinese regulations as entities with foreign ownerships.
The Group intends to remain a niche player in this exciting and rapidly growing Chinese private equity market as the quality of deal flow improves, focusing on our strengths and expertise to build a synergistic portfolio of digital media and technology businesses.
Future Developments
While the priority of the Group is to promote and develop the business of Fortel and to prepare Fortel for an independent listing on an internationally recognised Stock Exchange, the Group expects to make one to two new investments in the telecommunications, media, and technology sector ("TMT") in 2010, as well as to engage in various passive financial investment opportunities, such as the participation in pre-IPO opportunities, or advising certain mergers or acquisitions opportunities involving restricted assets and/or businesses in China.
Post Balance Sheet Events
The Company held an Extraordinary General Meeting on 3 June 2010 to approve the issue and allotment of bonus shares to our existing shareholders. The resolution was unanimously in favour of the issue and as a result, each ordinary shareholder received another 4 bonus shares from the Company. The issue of bonus shares will hopefully increase the liquidity of the shares being traded on the secondary market.
By order of the Board
Duncan Chui
Chief Executive Officer
28th June 2010
Consolidated statement of comprehensive income for the year ended 31 December 2009
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|
|
| 2009 |
| 2008 |
|
| Notes |
| US$'000 |
| US$'000 |
|
|
|
|
|
|
|
| Gross portfolio return |
|
| 4,813 |
| - |
|
|
|
|
|
|
|
| Administrative expenses |
|
| (2,422) |
| (508) |
|
|
|
|
|
|
|
| Operating profit / (loss) |
|
| 2,391 |
| (508) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finance income |
|
| 141 |
| 28 |
|
|
|
|
|
|
|
| Profit / (loss) before taxation |
|
| 2,532 |
| (480) |
|
|
|
|
|
|
|
| Taxation |
|
| - |
| - |
|
|
|
|
|
|
|
| Profit / (loss) for the period |
|
| 2,532 |
| (480) |
|
|
|
|
|
|
|
| Other comprehensive income |
|
| - |
| - |
|
|
|
|
|
|
|
| Total comprehensive income / (loss) for the year |
|
| 2,532 |
| (480) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
| 1 |
|
|
|
| Basic |
|
| 24 cents |
| (13cents) |
| Diluted |
|
| 24 cents |
| (13cents) |
Consolidated statements of changes in equity for the year ended 31 December 2009
|
| Share capital | Share based payment reserve | Retained earning / (accumulated losses) | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 |
|
|
|
|
|
|
| Group balance at 18 January 2008 |
|
|
|
|
|
|
|
|
|
|
| Issue of shares | 20,347 | - | - | 20,347 |
|
|
|
|
|
|
| Loss for the period | - | - | (480) | (480) |
|
|
|
|
|
|
| Group balance at 1 January 2009 | 20,347 | - | (480) | 19,867 |
|
|
|
|
|
|
| Issue of shares | 5,000 | - | - | 5,000 |
|
|
|
|
|
|
| Issue costs | (874) | - | - | (874) |
|
|
|
|
|
|
| Exchange difference arising from share issue | 99 | - | - | 99 |
|
|
|
|
|
|
| Issue of share options | - | 799 | - | 799 |
|
|
|
|
|
|
| Profit for the period | - | - | 2,532 | 2,532 |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2009 | 24,572 | 799 | 2,052 | 27,423 |
Consolidated statement of financial position as at 31 December 2009
|
|
|
| 2009 |
| 2008 |
|
| Notes |
| US$'000 |
| US$'000 |
|
|
|
|
|
|
|
| Non-current assets |
|
|
|
|
|
| Fixtures, fittings and equipment |
|
| 1 |
| 2 |
| Investment at fair value through profit or loss | 4 |
| 23,911 |
| 19,122 |
| Deposit |
|
| 8 |
| - |
| Total non-current assets |
|
| 23,920 |
| 19,124 |
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
| Loans and other receivables |
|
| 1,111 |
| 1,351 |
| Quoted financial assets at fair value through profit or loss |
|
| 860 |
| - |
| Cash and cash equivalents |
|
| 1,717 |
| 133 |
| Total current assets |
|
| 3,688 |
| 1,484 |
|
|
|
|
|
|
|
| Total assets |
|
| 27,608 |
| 20,608 |
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
| Trade and other payables |
|
| 176 |
| 476 |
| Shareholder's loan |
|
| 9 |
| 265 |
| Total liabilities |
|
| 185 |
| 741 |
|
|
|
|
|
|
|
| Net current assets |
|
| 3,503 |
| 743 |
|
|
|
|
|
|
|
| Net assets |
|
| 27,423 |
| 19,867 |
|
|
|
|
|
|
|
| Equity and reserves |
|
|
|
|
|
| Share capital |
|
| 24,572 |
| 20,347 |
| Share based payment reserve |
|
| 799 |
| - |
| Retained earnings / (accumulated loss) |
|
| 2,052 |
| (480) |
|
|
|
|
|
|
|
| Total equity and reserves attributable to owners of the parent |
|
| 27,423 |
| 19,867 |
|
|
|
|
|
|
|
Consolidated cash flow statement for the year ended 31 December 2009
|
| 2009 |
| 2008 | |||||
|
| US$'000 |
| US$'000 | |||||
| Cash generated from operating activities | ||||||||
| Profit / (loss) before taxation | 2,532 |
| (480) | |||||
|
| ||||||||
| Adjustments for : |
|
|
|
|
|
|
| |
| Depreciation |
|
|
|
| 1 |
| 1 | |
| Financing income |
|
|
|
| (131) |
| (28) | |
| Gain on disposal of quoted securities |
| (10) |
| - | ||||
| Gross portfolio return |
|
|
| (4,813) |
| - | ||
| Share option costs |
|
|
| 799 |
| - | ||
|
|
|
|
|
|
|
|
|
|
| Decrease / (increase) in receivables |
| 533 |
| (1,351) | ||||
| (Decrease) / increase in payables |
|
| (300) |
| 476 | |||
| Net cash used in operating activities |
|
| (1,389) |
| (1,382) | |||
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
| |||
| Acquisition of property, plant and equipment |
| - |
| (3) | ||||
| Finance income |
|
|
|
| 131 |
| 28 | |
| Purchase of financial assets |
|
| (850) |
| - | |||
| Loans granted |
|
| (1,095) |
| - | |||
| Proceeds from repayment of loan granted | 818 |
| - | |||||
| Net cash (used in) / generated from investing activities | (996) |
| 25 | |||||
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
|
| |||
| Net proceeds from issue of shares | 4,225 |
| 1,225 | |||||
| (Repayment)/receipt of loan from shareholders | (256) |
| 265 | |||||
| Net cash generated from financing activities |
| 3,969 |
| 1,490 | ||||
|
|
|
|
|
|
|
|
|
|
| Net increase in cash and cash equivalents | 1,584 |
| 133 | |||||
| Cash and cash equivalent at the beginning of the period | 133 |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalent at the end of the period |
| 1,717 |
| 133 | ||||
Notes to the financial information for the year ended 31 December 2009
1. Board Approval and 2009 Annual Report and Financial Statements
The financial information included in this report has been extracted from the Group Financial Statements for the year ended 31 December 2009 which were approved by the Board of Directors on 28th June 2010. These Group Financial Statements have been prepared in accordance with the accounting policies set out therein and in accordance with International Financial Reporting Standards.
The auditors have reported on the 2009 Financial Statements, their report is unqualified. The information included does not constitute the Company's statutory accounts. The full financial statements will be included in the Group's annual report.
2. Earnings per Share - continuing operations
The calculation of the basic and diluted earnings/(loss) per share attributable to the ordinary equity holders of the Group is based on the following:
|
|
| 2009 |
| 2008 |
|
| '000 | '000 | ||
|
|
|
|
|
|
| Numerator |
|
|
|
|
| Basic / Diluted : | Net profit / (loss) | US$2,532 |
| US$(480) |
|
|
|
|
|
|
| Denominator |
|
|
|
|
| Basic: | Weighted average shares | 10,460 |
| 3,556 |
|
| Effect of diluted securities : |
|
|
|
|
| Share options | 178 |
| - |
|
|
|
|
|
|
| Diluted : | Adjusted weighted average shares | 10,638 |
| 3,556 |
3. Financial assets
|
|
|
| Group |
|
|
|
|
| 2009 |
|
|
|
| US$'000 |
| |
| Addition during the year |
|
| 19,122 |
|
| Fair value through profit and loss |
|
| - |
|
| Balance as at 31 December 2008 |
|
| 19,122 |
|
|
|
|
|
|
|
| Fair value through profit and loss |
|
| 4,813 |
|
| Effect of foreign exchange |
|
| (24) |
|
| Balance as at 31 December 2009 |
|
| 23,911 |
|
On 8 September 2008, the Group acquired 38% of the issued share capital of Fortel Technology Holdings Limited (Fortel). This has been accounted for as an investment as it is to be held as part of an investment portfolio. The Group will dispose of the shareholding upon approval by the investment committee who monitors the investment/divestment decision on an ongoing basis.
The Group adopted price of recent investment methodology prescribes in the IPEVCV guidelines to value its investments at fair value through profit and loss. Applying the methodology, the third party's purchase consideration was used as the input to estimate the fair value of the investment. There has been no further transactions occurring since the sale of Fortel shares, which occurred on 22 December 2009, which is in the opinion of the directors to provide evidence for the year end valuation.
In December 2009, Fortel issued new shares to a new investor. Following this additional investment, CPE's holding in Fortel has been reduced from 38.0% to 37.1%. At the year end, based on the price of recent investments in Fortel, the Group's investment has increased from US$19 million to US$23.9 million.
4. Posting of Accounts
The Company will post the Annual Report and Accounts for the year ended 31 December 2009 to shareholders shortly. The Annual Report and Accounts will also be made available on the Company's website at www.cpe-invest.com.