NAM TAI PROPERTY INC. Reports Q1 2017 Results

SHENZHEN, China, May 2, 2017 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the first quarter ended March 31, 2017.

KEY HIGHLIGHTS
(In thousands of US dollars, except per share data, percentages and as otherwise stated)

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FIRST QUARTER OF 2017

Key Highlights of Financial Position

OPERATING RESULTS

Operation income for the first quarter of 2017 and the corresponding quarter of last year were mainly derived from properties and lands located in Shenzhen, the PRC. Operating loss for the first quarter of 2017 was $1.4 million, a decrease of $0.6 million, compared to operating loss of $2.0 million for the first quarter of 2016.

Net income for the first quarter of 2017 was $1.8 million and mainly represented interest income of $2.5 million earned from time deposits, exchange gain of $0.8 million as a result of the appreciation of Renminbi against the US dollar in the first quarter of 2017, and net operation income of $0.6 million, but partly offset by general and administrative expenses of $2.0 million, or income of $0.05 per diluted share. Compared to the financial results for the corresponding period in 2016, the net loss of $0.3 million mainly represented general and administrative expenses of $2.2 million, but partly offset by the interest income of $1.6 million earned from time deposits and net operation income of $0.2 million, or a loss of $0.01 per diluted share.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi-denominated assets to US dollars for reporting purposes has resulted in foreign exchange gain in this quarter. Due to fluctuations in the exchange rate of Renminbi against the US dollar, foreign exchange gain for the first quarter of 2017 was $0.8 million, or amounting to approximately 47% of our net income for this period. However, since the majority of our payment obligations are also denominated in Renminbi, we do not expect the movement of Renminbi against the US dollar to materially and adversely impact our business. 

Capitalization on project investment was $1.4 million for Q1 2017 and our accumulated project investment was $39.4 million up to March 31, 2017, which was recorded under the account of real estate properties under development in the balance sheet as at March 31, 2017.

Our business of land development is currently in the preparatory stage where it takes time to apply for and obtain the relevant licences from the PRC government. During this period, our only sources of income are limited deposit interest and rental income; therefore, we expect to continue to incur losses in the meantime.

Please see the Company's Condensed Consolidated Statements of Comprehensive Income beginning on page 7 below for further details. This information has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of Q1 2017.

COMPANY OUTLOOK

With respect to the development of "Inno Park" and "Inno City" in Shenzhen, the PRC, the construction permit application processes are proceeding smoothly and every related step is progressing on schedule and within the Company's expectations.

As part of our preparation for the development of "Inno Park", the Company is pleased to report that, following our internal team's close collaboration with the external project management company (WSP Parsons Brinckerhoff), quantity surveyor (Currie & Brown) and architectural design firm (Ronald Lu and Partners) on the construction drawing design and organization of the tender for the general construction contractor, the main construction contractor will be selected and ready to be engaged and commence work in the beginning of 2018. As the construction work will start ahead of schedule, the groundbreaking ceremony for the construction of the basement area will be held on May 5, 2017.

As part of our preparation for the development of "Inno City", the PRC Government has verbally agreed and approved the construction of Phase I and II of "Inno City" to be combined together as one single project and the Company is currently waiting for the official approval from the PRC Government. This could significantly lower the costs and shorten the time of the construction. The Company will select one architectural design firm out of four potential candidates; the selection of the project management company and quantity surveyor is still in progress, but they are expected to be engaged and commence work before July 2017. As the Inno City Project will commence ahead of schedule, the Company is required to demolish all the old factory buildings between October to December 2017; as such, the Company purchased new office premises for a total amount of $13.5 million in April 2017.

Part I: Summary of gross floor areas for the two projects:

Part II: Timetable for the two projects:

Part III: Budgetary Estimate for the two projects:

As for our Wuxi plant, the factory building continues to be listed for sale and we still expect it to be sold sometime during or within 2017. An auction is under preparation and we are currently preparing the concerned executive plan and looking for potential buyers. This auction is scheduled to complete in September 2017.

Appointment of Chief Executive Officer

Effective May 1, 2017, Mr. Julian Lin ("Mr. Lin"), will be appointed as Chief Executive Officer of the Company. He has worked with the Company as our chief external SEC counsel for 5 years and has familiarized himself with the finance, business and operations of Nam Tai Group. Mr. Lin has been practicing as an attorney for more than 15 years and has previously worked in one of the largest U.S. law firms in Hong Kong before joining the Company. His legal practice encompasses a broad range of capital markets, private equity, mergers and acquisitions. He has substantial experience in fundraising activities, both in the establishment of the funds and in their investment activities.

Due to his diverse legal experience, the Company is confident that Mr. Lin can assume the position of Chief Executive Officer to advise on the legal aspects of the Company's construction projects and to support the continuous growth of the Company.

Potential Risks in our business

We currently derive a majority of our income from rental and interest income but please note that our rental income will cease after October 2017. Since 2016, we have seen a stabilizing trend on the benchmark interest rates in China. However, due to the current economic conditions in China, we expect the People's Bank of China to keep Renminbi-denominated official time deposit interest rates in China at a low level throughout 2017. With this lower interest rate and rental income, we expect to continue to incur operating losses in 2017 and beyond.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi-denominated assets to US dollars for our reporting purposes has resulted in foreign exchange gain in this quarter. As such, we do expect to see fluctuations in the reporting of foreign exchange loss/gain in the financial statements due to the movement of Renminbi against the US dollar. Nevertheless, as a majority of our payments are in Renminbi, we also do not expect the movement of Renminbi against the US dollar to adversely impact our business.

In order for the Projects to proceed smoothly and start ahead of the schedule, it is necessary for the Company to negotiate with banks for the implementation of funds needed to assist in future development of the Projects.

As of end of March, 2017, we had a total cash balance of $182.7 million and no debt. With our current cash position, we believe our finances remain healthy to fund the initial stages of these property development projects for the coming one and half years. All of our land development related applications are subject to government policies and regulations in the real estate market. As this is our first venture into  land development projects after the cessation of our LCM business, we may encounter industry-specific difficulties that result in losses as we progress with our projects in Shenzhen. As we are currently in the planning stage for our property projects and can only generate limited income from deposit interest income and rental income, we will continue to record operating losses. Cash on hand is expected to decrease continuously, but most of the expenses incurred will be for project development, which will be capitalized as real estate properties under development (non-current asset) on our balance sheet. For more information on risks in our business, please refer to the Risk Factors section of our 2016 Annual Report on Form 20-F as filed with the SEC and on our website.

According to our project development plan, project investment for Q2 2017 is estimated to be $7.5 million, and project investment for the year of 2017 is estimated to be $60 million.

The information contained in or that can be accessed through the website mentioned in this announcement does not form part of this announcement.

PAYMENT OF QUARTERLY DIVIDENDS FOR 2016 AND 2017

As announced on December 12, 2016, the Company had set the payment schedule of quarterly dividends for 2017. The dividend for Q2 2017 was paid on April 20, 2017.

The following table updates the previously announced schedule for declaration and payment of quarterly dividends in 2017.

The Company's decision to continue making dividend payments in 2017 as set out and confirmed in the above table does not necessarily mean that cash dividend payments will continue thereafter or at the same amount. Whether future dividends after 2017 are to be declared will depend upon Company's future growth and earnings at each relevant period, of which there can be no assurance, and the Company's cash flow needs for business operations and transformation. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2017, and we also cannot assure you what the amounts of such dividends will be or whether such dividends, once declared for a specific period, will continue for any future period, or at all.

PROPOSED SCHEDULE OF RELEASE OF QUARTERLY FINANCIAL RESULTS FOR 2017

To maintain the efficiency of delivering the Company's quarterly financial results to the market, the Company's management has decided to follow approximately the same schedule in 2016 for its release of the 2017 quarterly financial results. Details of the expected quarterly release dates are as follows:

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE

Certain statements included in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "plan", "seek" or "believe". These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activities, performance, or achievements expressed or implied by the forward-looking statements, including, but not limited to, delay in the Company's ability to obtain all requisite permits and approvals from relevant government authorities in relation to the redevelopment of two parcels of properties in Gushu, Shenzhen, and Guangming, Shenzhen, respectively, and the successful redevelopment of the two parcels of properties; the sufficiency of the Company's cash position and other sources of liquidity to fund its property developments; continued inflation and appreciation of the Renminbi against the US dollar; rising labor costs in China and changes in the labor supply and labor relations. In particular, you should consider the risks outlined under the heading "Risk Factors" in our most recent Annual Report on Form 20-F and in our Current Report filed from time to time on Form 6-K. The Company's decision to continue dividend payments in 2017 does not necessarily mean that dividend payments will continue thereafter. Whether future dividends will be declared depends upon the Company's future growth and earnings, of which there can be no assurance, as well as the Company's cash flow needs for further expansion. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2017, what amount those dividends may be or whether such dividends, once declared for a specific period, will continue for any future period, or at all; and whether we will purchase any of our shares in the open markets or otherwise. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements apply only as of the date of this press release; as such, they should not be unduly relied upon as circumstances change. Except as required by law, we are not obligated, and we undertake no obligation, to release publicly any revisions to these forward-looking statements that might reflect events or circumstance occurring after the date of this release or those that might reflect the occurrence of unanticipated events.

ABOUT NAM TAI PROPERTY INC.

We are a real estate developer. We hold two parcels of land located in Gushu and Guangming, Shenzhen, China. We are converting these two parcels of land that formerly housed the manufacturing facilities of our prior businesses into high-end commercial complexes. We expect we will derive our principal income in the future from rental income from these commercial complexes.

Nam Tai Property Inc. is a corporation registered in the British Virgin Islands and listed on the New York Stock Exchange (Symbol: "NTP").

Please refer to the Nam Tai website (www.namtai.com) or the SEC website (www.sec.gov) for Nam Tai press releases and financial statements.

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