Nam Tai Property Inc. Reports Q2 2019 Results

SHENZHEN, China, July 29, 2019 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the second quarter ended June 30, 2019.

FINANCIAL RESULTS

Net Operation Income

Net operation income for the second quarter of 2019 was $0.4 million compared to nil in the second quarter of 2018. Operation income for the second quarter of 2019 mainly consisted of rental income of $0.7 million from the existing factory buildings located on the site of Inno Valley and Wuxi.

Net operation income for the first half of 2019 was $0.8 million compared to nil in the first half of 2018. Operation income for the first half of 2019 mainly consisted of rental income of $1.3 million from the existing factory buildings located on the site of Inno Valley and Wuxi.

Operating Loss

Operating loss for the second quarter of 2019 was $3.4 million compared to an operating loss of $4.2 million in the second quarter of 2018. Operating loss for the second quarter of 2019 mainly consisted of general and administrative expenses of $2.8 million and selling and marketing expenses of $1.0 million; offset in part by our net operation income of $0.4 million for the period. Operating loss for the second quarter of 2018 mainly consisted of general and administrative expenses of $4.2 million.

Operating loss for the first half of 2019 was $6.6 million compared to an operating loss of $13.3 million in the first half of 2018. Operating loss for the first half of 2019 mainly consisted of general and administrative expenses of $5.8 million and selling and marketing expenses of $1.6 million; offset in part by our net operation income of $0.8 million for the period, the expense mainly included salary and benefits of $3.9 million. Operating loss for the first half of 2018 mainly consisted of general and administrative expenses of $13.3 million, including accrual of compensation for loss of office of $3.7 million for the retirement of a senior officer, stock option compensation expenses of $2.0 million for certain officers and employees, salary and benefits of $3.3 million, depreciation of $2.0 million and audit, legal and professional fees of $1.0 million.

Net Loss

Net loss for the second quarter of 2019 was $3.3 million compared to net loss of $5.8 million in the second quarter of 2018. Net loss for the second quarter of 2019 mainly consisted of operating loss of $3.4 million, offset in part by interest income of $0.7 million earned from time deposits and exchange loss of $0.7 million as a result of the depreciation of Renminbi against the US dollar in the second quarter of 2019. Net loss for the second quarter of 2018 mainly consisted of operating loss of $4.2 million, offset in part by interest income of $1.6 million and exchange loss of $3.3 million.

Net loss for the first half of 2019 was $5.1 million compared to net loss of $3.3 million in the first half of 2018. Net loss for the first half of 2019 mainly consisted of operating loss of $6.6 million, offset in part by interest income of $1.5 million. Net loss for the first half of 2018 mainly consisted of a gain of $6.8 million on disposal of an office property in Hong Kong, exchange gain of $3.1 million, offset in part by operating loss of $13.3 million.

Cash, Cash Equivalents and Short-term Investment

Cash, cash equivalents and short-term investment decreased by $11.9 million in the first half of 2019 from $109.9 million as of December 31, 2018 to $98 million as of June 30, 2019. This decrease was mainly due to $29.4 million spent for Nam Tai Inno Park and Nam Tai Technology Center in the first half of 2019 and offset by $22.5 million advance from customers from Nam Tai Inno Park.

Real Estate Properties under Development, Net

Real estate properties under development increased by $28.1 million in the first half of 2019 from $171.6 million as of December 31, 2018 to $199.7 million as of June 30, 2019. This increase consisted of $28.1 million for construction completed for both Nam Tai Inno Park and Nam Tai Technology Center, capitalized under percentage-of-completion method (before foreign currency translation adjustment).

Accounts Payable

Accounts payable increased by $0.6 million in the first half of 2019 from $87.2 million as of December 31, 2018 to $87.8 million as of June 30, 2019. This increase mainly consisted of accrued payable for construction completed for both Nam Tai Inno Park and Nam Tai Technology Center, accounted for under percentage-of-completion method.

Advance from Customers

Advance from customers increased by $21.1 million in the first half of 2019 from $0.3 million as of December 31, 2018 to $21.4 million as of June 30, 2019. This increase is mainly attributed to Nam Tai Inno Park's rental received from customers of $21.1 million.

Liquidity and Capital Resources

As of June 30, 2019, we had a total cash balance of $96.3 million and we have no material debt. According to our project development plan, project investment for the third quarter of 2019 is estimated to be $89.2 million. The total project investment for the year 2019 is estimated to be $167.0 million. The Company is in discussions with several financial institutions towards a loan for financing the construction of Nam Tai Technology Center.

Please see page 7 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. The information contained herein has also been published on the Company's website at https://www.namtai.com/quarterly/index.html.

RECENT DEVELOPMENTS

The development of our projects in Guangming, Shenzhen, and Gushu, Shenzhen, continues to proceed as planned.

For Nam Tai Inno Park ("Inno Park"), our construction continued smoothly in the second quarter of 2019. The main structure of Inno Park was completed in April, 2019 and the installation of interior walls and electrical wiring are underway. In the second quarter of 2019, we continued our efforts on holding various industrial conferences and activities with the goal of strengthening our brand as the operator of technology parks, building connections with potential corporate tenants and deepening our relationships with cooperative partners. These activities include a Sino-Japanese Industrial Cooperation and Communication Conference and, a Corporate Financing and Taxation Forum both held in May 2019 as well as a Strategic Cooperation Agreement Signing Ceremony between the Company and Harbin Institute of Technology (Shenzhen) held in June 2019. Following Inno Park's opening for leasing since the end of March 2019, we have entered into leasing agreements with tenants for 316 dormitory units of Inno Park as of June 30, 2019, equivalent to approximately 14,000 square meters. We are also pleased to report that we have received social recognition for our focus on safety and protection of construction. In April 2019, the Company was named as the Demonstration Site for Construction Safety in the Construction Safety Improvement Campaign organized by the Bureau of Housing and Construction of Shenzhen, which reflects the practice of social responsibility of the Company.  

"Innovating·Integrating·Empowering" Nam Tai Inno Park Sino-Japanese Industrial Cooperation and Communication Conference

In May 2019, Nam Tai Inno Park Sino-Japanese Industrial Cooperation and Communication Conference was successfully held in Inno Park. This conference was co-led by Nam Tai and Shenzhen Association of Trade Services with official attendees from Science and Innovation Bureau, Industry and Information Bureau in Guangming District, Shenzhen. More than 100 Chinese and Japanese corporate participants attended this conference including those from new-generation information technology, smart manufacturing, artificial intelligence, robotics, high-end service and services trade industries. This conference provided an excellent platform for communicating the advanced business model and management practice for Chinese and Japanese corporate participants.

"Winning the Future by Finance and Taxation" Nam Tai Inno Park Corporate Financing and Taxation Forum

In May 2019, Nam Tai Inno Park Corporate Financing and Taxation Forum, co-led by Nam Tai and Shenzhen Antecedent Enterprise Management Consulting Company and attended by a number of entrepreneurs, was held successfully in Inno Park. Several finance and tax experts were invited to share their knowledge and experience on financial and tax planning. As the operator of technology parks, we understand the needs of technology companies and plan to strengthen our relationships with potential corporate tenants by providing integrated services.

Strategic Cooperation Agreement Signing Ceremony between Nam Tai and Harbin Institute of Technology (Shenzhen)

In June 2019, the Strategic Cooperation Agreement Signing Ceremony between Nam Tai and Harbin Institute of Technology (Shenzhen) was held in Inno Park. During the ceremony, both parties signed the cooperation agreement and announced the intention to establish cooperation on public technological services, think tanks, talent cultivation and etc. Witnessed by Mr. Xianlin Liu, the academician of Chinese Academy of Engineering along with officials from Science and Innovation Bureau of Guangming District, Shenzhen, the ceremony led to the formation of the Harbin Institute of Technology and Nam Tai Big Data and Artificial Intelligence Public Technological Services Platform.

Phase I of Nam Tai Inno City was re-named as Nam Tai Technology Center to better reflect its positioning as a premier future center for leading technology enterprises. For Nam Tai Technology Center, after the Construction Planning Permit was obtained in May 2019, we also obtained the Construction Permit in July 2019. Pursuant to the Construction Permit, we are allowed to commence the construction of the main structure in July 2019. It is a key step for us to facilitate the construction and completion of Nam Tai Technology Center on schedule. Currently most of the work related to pile driving and foundation laying is finished. In addition, the Company has selected, through an auction process, China Nuclear Industry 22ND Construction Co., Ltd ("CNI22") as the main contractor for the construction of the main structure of Nam Tai Technology Center. CNI22, incorporated in 1992 with the registered location in Yichang City, Hubei Province, is a subsidiary of China Nuclear Engineering Corporation Limited and an integrated construction company with the Class One Qualification of General Contracting for Building Construction. With respect to the additional land premium for Nam Tai Technology Center, the payment is planned to be made in the third quarter of 2019.

Alongside the renaming of Nam Tai Technology Center, we will replace the name of Nam Tai Inno City Phase II by Nam Tai Inno Valley ("Inno Valley") prior to its redevelopment. As of June 30, 2019, approximately 90% of the available rental spaces of the existing buildings, equivalent to approximately 23,700 square meters, were leased. In the second quarter of 2019, we continued our efforts to improve the operations of Inno Valley by working to provide industrial support and services for our corporate tenants. These efforts included a series of industrial activities, such as the Finance and Taxation Forum held in April 2019, the Talent Household Policy Sharing Seminar held in May 2019 and the Primary Economist Training held in June 2019. In addition, we entered into strategic cooperation agreements with ten third-party professional institutions in the second quarter of 2019, through which these institutions may offer professional services, including legal, finance and tax, information technology, human resource, translation and intellectual property services, to our corporate tenants. 

As for our Wuxi facilities, we leased out the facilities and delivered them to a third party in February 2019. The facilities are under renovation by the third party and open for leasing.

Properties Under Development

The table below sets forth certain information of our property projects or project phases under development as of June 30, 2019, comprising  properties for which the land use right certificate and construction permits have been obtained, construction is in progress but before construction acceptance certificates are obtained.

Properties For Future Development

The table below sets forth certain information of our property projects held for future development as of June 30, 2019, comprising properties for which we have obtained the land use right certificate or we have entered into land grant contracts although the land use right certificate is not yet obtained, or the relevant lands and resources authority has confirmed our successful bidding in a public auction. 

Potential Risks in Our Business

Upfront payment for leased units in an industrial zone is a relatively new leasing model that has not been widely adopted. We have made the upfront leasing model available in addition to the traditional leasing model because it helps to safeguard our cash flow by allowing us to receive the total lease payment upfront, notwithstanding that it also entails a discount compared to properties that can be subdivided and sold individually. Furthermore, as this is a new leasing model, relevant regulators have not yet issued any regulations concerning its legality. We cannot guarantee that relevant regulators will not issue any regulation in the future. If the terms are not widely accepted, the market may demand that we provide further discounts. If the regulators find the leasing model to be in violation of applicable regulations, our financial condition, results of operations and cash flows may be adversely affected.

The real estate industry in China is subject to government regulations, including measures that are intended to curtail rapid price increases and property speculation.  The regulations at both central government level and local government level change from time to time, to stimulate or depress the real estate market, and it is difficult to foresee the timing or direction of regulatory changes. In May 2019, Bureau of Housing and Urban-Rural Development in Shenzhen has issued the Measures on Standardizing Industrial Buildings Leasing Market and Stabilizing Leasing Pricing ("Measures") which proposed some measures aiming at the increase in supply, limitation on potential tenant qualification, enhancement on the industrial supervision, etc. Although the Measures have not been finalized nor become effective, they have already impacted the expectation of customers and financial institutions. For example, the Measures stipulate that the tenants of industrial buildings could only be enterprises rather than natural persons. This will narrow the scope of potential tenants which may in turn have an adverse impact on our operational performance. Bank and other financial institutions may tighten their policies toward industrial real estate, decline or reduce financing and loans to our natural person customers, which may lead to early termination of lease agreements before delivery of rental property.

In addition, we cannot assure you that the PRC government or the Shenzhen Municipal government will not adopt new measures in the future that may hinder the growth of the real estate industry. Frequent changes in government policies may also create uncertainty that could discourage investment in real estate. Our business may be adversely affected as a result of decreased transaction volumes or real estate prices that may directly or indirectly result from such government policies.

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

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

Certain statements included in this announcement, 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", "might", "can", "could", "will", "would", "anticipate", "believe", "continue", "estimate", "expect", "forecast", "intend", "plan", "seek", or "timetable". 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 and the industry in which we operate. These statements are only predictions based on our current expectations about future events. There are several factors, many beyond our control, which could cause results to differ materially from our expectation. These risk factors are described in our Annual Report on Form 20-F and in our Current Reports filed on Form 6-K from time to time and are incorporated herein by reference. Any of these factors could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may also be other factors currently unknown to us, or have not been described by us, that could cause our results to differ from our expectations. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels 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 announcement; 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 announcement or those that might reflect the occurrence of unanticipated events.

SCHEDULE FOR RELEASE OF QUARTERLY FINANCIAL RESULTS FOR 2019

To maintain the efficiency of delivering the Company's quarterly financial results to the market, the Company's management  expect to release the quarterly financial results in accordance with the following schedule for 2019. Details of the expected quarterly release dates are as follows:

ABOUT NAM TAI PROPERTY INC.

We are an owner, developer and operator of technology parks. We hold several parcels of land located in Guangming and Gushu, Shenzhen, China. We are converting  two parcels of land that formerly housed the manufacturing facilities of our prior businesses into high-end technology parks, Nam Tai Inno Park and Nam Tai  Technology Center. We expect our principal income in the future will be derived from rental income from technology parks. 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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