Nam Tai Property Inc. Announces Reports Q1 2020 Results

SHENZHEN, China, April 27, 2020 /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, 2020.

KEY HIGHLIGHTS

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

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FIRST QUARTER OF 2020

Key Highlights of Financial Position

FINANCIAL RESULTS

Revenue

Revenue for the first quarter of 2020 was $0.7 million compared to $0.6 million in the first quarter of 2019. Revenue for the first quarter of 2020 mainly consisted of rental income of $0.7 million from existing factory buildings located on the sites of Inno Valley, Wuxi and the leased space at Nam Tai - Tang Xi Technology Park. Revenue for the first quarter of 2019 mainly consisted of rental income of $0.6 million from the existing factory buildings located on the sites of Inno Valley and Wuxi.

Gross Profit

Gross profit for the first quarter of 2020 was $0.1 million compared to $0.4 million in the first quarter of 2019. Gross profit for the first quarter of 2020 mainly consisted of revenue of $0.7 million, offset by rental cost of $0.6 million for the period. Gross profit for the first quarter of 2019 mainly consisted of revenue of $0.6 million, offset by rental cost of $0.2 million for the period.

Net Loss from Operations

Net loss from operations for the first quarter of 2020 was $3.7 million compared to $3.3 million in the first quarter of 2019. Net loss from operations for the first quarter of 2020 mainly consisted of general and administrative expenses of $3.0 million and selling and marketing expenses of $0.8 million, offset in part by our gross profit of $0.1 million for the period. Net loss from operations for the first quarter of 2019 mainly consisted of general and administrative expenses of $2.9 million and selling and marketing expenses of $0.7 million, offset in part by our gross profit of $0.3 million for the period.

Consolidated Net Loss

Consolidated net loss for the first quarter of 2020 was $3.2 million compared to $1.8 million in the first quarter of 2019. Consolidated net loss for the first quarter of 2020 mainly consisted of net loss from operations of $3.7 million and other net loss of $0.1 million, offset in part by interest income of $0.4 million from time deposits and deferred income tax benefit of $0.2 million. Consolidated net loss for the first quarter of 2019 mainly consisted of a net loss from operations of $3.3 million, offset in part by interest income of $0.8 million from time deposits and other net income of $0.6 million.

Cash, Cash Equivalents and Short-term Bank Deposits

Cash, cash equivalents and short-term bank deposits decreased by $7.0 million in the first quarter of 2020 from $132.4 million as of December 31, 2019 to $125.4 million as of March 31, 2020. The decrease was mainly due to payment of $13.9 million for real estate properties under development, prepayment of the price of a land parcel in Dongguan City of $16.9 million, repayment of $7.3 million for bank loan, decrease in  accrued expenses and other payables of 6.8 million and purchase of trading securities of $2.8 million, which were offset by proceeds from shares issued for option exercise of $2.0 million, advance from customers of $4.6 million and long-term bank loans of $34.9 million obtained in 2020.

Restricted Cash

Restricted cash increased by $0.8 million in the first quarter of 2020. No Restricted cash existed at the end of 2019. The increase was mainly due to $0.8 million pledged deposits at Bank of China for a loan with the bank. The deposits are not allowed to be withdrawn until November 2020. No significant risk is expected on such deposits.

Prepaid Expenses and Other Receivables

Prepaid expenses and other receivables increased by $17.0 million in the first quarter of 2020 from $9.4 million as of December 31, 2019 to $26.4 million as of March 31, 2020. The increase mainly consisted of the prepayment of $16.9 million for the price of a land parcel in Dongguan City.

Real Estate Properties under Development, Net

Real estate properties under development, net increased by $11.2 million in the first quarter of 2020 from $251.7 million as of December 31, 2019 to $262.9 million as of March 31, 2020. The increase was due to progress of the construction of Nam Tai Inno Park and Nam Tai Technology Center.

Right of use assets

Right of use assets increased by $5.6 million in the first quarter of 2020 from $4.1 million as of December 31, 2019 to $9.7 million as of March 31, 2020. The increase was mainly due to the recognition of right of use assets for Nam Tai - U-Creative Space (Lujiazui), which were $5.8 million, in accordance with Accounting Standards Codification ("ASC") 842 Leases.

Deferred income tax assets

Deferred income tax assets increased by $0.2 million in the first quarter of 2020 from $2.0 million as of December 31, 2019 to $2.2 million as of March 31, 2020. The increase was mainly due to current loss of $0.7 million incurred during the construction of Nam Tai Technology Center, which is expected to be utilized in the next five years.

Accounts Payable

Accounts payable decreased by $0.4 million in the first quarter of 2020 from $36.7 million as of December 31, 2019 to $36.3 million as of December 31, 2020. The decrease mainly consisted of payment of $0.4 million for the completed construction of both Nam Tai Inno Park and Nam Tai Technology Center.

Advance from Customers

Advance from customers increased by $3.6 million in the first quarter of 2020 from $67.6 million as of December 31, 2019 to $71.2 million as of March 31, 2020. The increase was mainly attributed to $4.6 million in prepaid rent received from customers of Nam Tai Inno Park offset by foreign exchange loss of $1.0 million as a result of depreciation of RMB against the US dollar in the first quarter of 2020.

Lease liabilities

Lease liabilities increased by $5.4 million in the first quarter of 2020 from $4.2 million as of December 31, 2019 to $9.6 million as of March 31, 2020. The increase was mainly due to the recognition of lease liabilities for Nam Tai - U-Creative Space (Lujiazui), which were $5.6 million, in accordance with ASC 842 Leases.

Long-term bank loans

Long-term bank loans increased by $26.2 million in the first quarter of 2020 from $95.9 million as of December 31, 2019 to $122.1 million as of March 31, 2020. The increase was mainly due to loans of $3 million from Bank of China and $15.5 million from Xiamen International Bank for Nam Tai Inno Park, and a loan of $16.4 million from Shenzhen Rural Commercial Bank for Nam Tai Technology Center, which were offset by repayment of loan of $7.1 million to Bank of China and foreign exchange loss of $1.6 million as a result of depreciation of RMB against the US dollar in the first quarter of 2020.

Liquidity and Capital Resources

As of March 31, 2020, the Company had a total cash, cash equivalents and short-term bank deposits of $125.4 million. As of December 31, 2019, the Company had a total cash, cash equivalents and short-term bank deposits of $132.4 million.

As of March 31, 2020, the Company obtained a credit facility of RMB2.2 billion (equivalent to $310.29 million) with RMB931.2 million (equivalent to $131.3 million) withdrawn. Zastron Electronic (Shenzhen) Co., Ltd. entered into a project loan agreement with the Zhuhai Branch of Xiamen International Bank ("Xiamen International Bank") in January 2020 for a loan facility of RMB110 million (equivalent to $15.5 million) with the full balance withdrawn as of March 31, 2020.

According to our project development plan, project investment for the second quarter of 2020 is estimated to be $16.0 million. The total project investment for 2020 is estimated to be $92.1 million. In 2020, the Company plans to continue to acquire asset-heavy development projects in the Guangdong-Hong Kong-Macao Greater Bay Area and other first and second tier cities in China through means including bidding, auction and listing, merger and acquisition, or urban renewal.

Please see 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.

BUSINESS OVERVIEW

Impact of COVID-19

The recent outbreak of the COVID-19 pandemic has not had a significant impact on our liquidity and financial condition. While the pandemic continues in China and around the globe, we will continue to assess its impact on our business and take necessary actions.

• With respect to business invitation and leasing, the Nam Tai Inno Park Industrial Showroom was temporarily closed in February 2020 due to the pandemic.
• With respect to financial impact, as a socially responsible company, we have reduced the rent by half for the month of March 2020 for our tenants that met certain criteria in the Nam Tai Inno Valley and Nam Tai - Tang Xi Technology Park. Meanwhile, we also received a rent concession of 50% for the month of March 2020 from the lessor of Nam Tai - Tang Xi Technology Park.
• With respect to the construction work, the construction of Nam Tai Inno Park and Nam Tai Technology Center was suspended in February 2020. When construction resumes, we expect to be able to increase its pace so that the schedules of the projects will not be significantly affected.

During the times of severe outbreak of the pandemic in China, we attached great importance to providing employees and tenants with a safe and sanitary working environment. A series of measures were adopted to prevent the spread of the pandemic:

• Prompt preparation: we commenced the anti-pandemic work before the Spring Festival by distributing with masks, hand sanitizers and disinfecting alcohol. We also disinfected and cleaned public areas of our office and projects.
• Anti-pandemic plans and crisis management team: the Company has established a crisis management team and formulated a pandemic prevention and control plan for each of our projects and has continuously monitored the status of our projects.
• Active monitoring: we conduct active monitoring in a "24/7 mode (24 hours on all days of the week)". The monitored data includes the number of disinfection activities, food deliveries and personnel travel, etc. In addition, we also conduct strict inspections on automobiles, drivers and passengers accessing our parks.
• Cleaning and disinfection: our cleaning staff carries out disinfection and cleaning in various areas of our premises where employees may stay or touch, including elevators, door handles, parking spaces and outdoor green belts, and other public areas.

Progress of Leasing and Business Invitation

As of March 31, 2020, we pre-leased or leased a total of approximately 127,625 square meters in our projects, of which 60.2% of the leased area was in Shenzhen and 39.8% was in Wuxi. Given Nam Tai - U-Creative Space (Lujiazui) was in the early stage of operation, we did not include the project in the calculation.

Nam Tai Inno Park continues to be widely recognized by high-tech enterprise tenants. In March 2020, we signed an industrial R&D space lease contract with an enterprise tenant in the chip distribution industry. The tenant, founded in Shenzhen, is expected to move into Nam Tai Inno Park in the fourth quarter of 2020. By bringing the new high-tech enterprise tenant to our park, this lease contract reflects the market's recognition of our project and operational capabilities, and also strengthens our brand image as a technology park operator.

Project Construction and Operation Progress

• For Nam Tai Inno Park, we successfully filed the construction acceptance record in March 2020, which reflects the Company's ability to continuously proceed with the development of our projects even during tough times of the pandemic. It is expected that some of the industrial office spaces will be put into use from the second quarter of 2020.
• For Nam Tai Technology Center, we accelerated the construction progress after resuming the construction in March 2020. At present, the landscape reconstruction of the exhibition area has been completed with its fine decoration approaching completion. We are currently carrying out pile foundation construction. In order to enable stakeholders who are interested in the project to understand the construction progress, we plan to upload project pictures regularly under the "Nam Tai Technology Center" section of our Company's website from the second quarter of 2020.
• As a technology park operator dedicated to providing high-quality operation services, we organized an online live broadcast industrial event with the theme of "how do enterprises rescue themselves after the pandemic" in February 2020. The invited guest speaker provided the tenants of Nam Tai Inno Valley and Nam Tai - Tang Xi Technology Park with suggestions on how to deal with the impact of the COVID-19 pandemic and strengthen corporate management.

Project Resources

In March 2020, we participated in the public auction for the land use right of a land parcel in Machong Town, Dongguan City ("Dongguan Machong Land Parcel") organized by Dongguan Natural Resources Bureau and Dongguan Public Resources Trading Center. We successfully won the parcel through bidding over a number of competing real estate developers. The land parcel covers a capacity floor area up to 84,408 square meters with a non-capacity area including 25,863 square meters of parking spaces. As a condition of acquiring the land parcel, we will need to build a commercial floor area of 20,000 square meters on the plot at the standard of roughcast house to be handed over to an institution designated by the Machong Town Government for free upon completion. We have paid a deposit of RMB120 million (equivalent to approximately $16.93 million) on March 17, 2020 and are expected to settle the remaining land price of RMB585.48 million (equivalent to approximately $82.58 million) in the second quarter of 2020. The Dongguan Machong Land Parcel will be developed under the temporary project name of Nam Tai - Longxi. We believe that the potential future income and profits of the project will contribute to the Company's long-term sustainable development needs. Further details of the project will be disclosed in due course. The development of the project is of great strategic significance to the Company's sustainable development as it will help:

• to increase the Company's saleable area and broaden the source of potential income and profit;
• to diversify the Company's products and optimize the income structure;
• to strengthen the Company's brand awareness and potential clientele in the Greater Bay Area; and
• to diversify the Company's access to land resources through the way of public auction.

Dongguan is one of the fastest growing cities in the Greater Bay Area. It is located between Shenzhen and Guangzhou with significant geographical advantage. According to the Dongguan Statistics Bureau, the GDP of Machong Town in Dongguan increased by 7.8% year-on-year in 2018, totaling RMB 26 billion. The average transaction price of local commercial housing in 2019 was approximately RMB 17,600 per square meter, an increase of 14.7% year-on-year, according to CRIC Research.

The Dongguan Machong Land Parcel is currently an open space located in the central area of Machong Town and surrounded by a beautiful landscape and high-quality supporting facilities. To the north of the land, we can find the picturesque Machong River and Xinhua College of Sun Yat-sen University; to the south is the Machong Avenue; and to the west are Shuixiang Central Hospital and Nanfeng Times Square. We will build high-quality residential and commercial properties, and provide potential customers with high-quality residential and commercial space.

Macro Trend Update

The COVID-19 pandemic in China has gradually come under control. According to the website of China's National Health Commission, as of April 14, 2020, there were only 1,170 existing confirmed cases of COVID-19 infections in China, which represented a dramatic reduction from its peak of over 60,000 confirmed cases in mid-March.

China's manufacturing activities dropped significantly in February 2020 due to the COVID-19 pandemic but recovery was observed in March 2020. China's official Purchasing Managers' Index (PMI) fell to 35.7% in February 2020 from 50% in January 2020 but rebounded to 52% in March 2020, according to the website of the National Bureau of Statistics. In addition, as of March 25, 2020, the resumption rate of large-and-medium-sized enterprises reached 96.6% in the national procurement manager survey.

China's real estate market has cooled down in the first quarter of 2020 with its subsequent development remaining to be seen. From January to February 2020, China's commercial housing sales area was 84.75 million square meters, a decrease of 39.9% year-on-year, among which the sales area of residential buildings decreased by 39.2% and that of office buildings decreased by 48.4%, according to the National Bureau of Statistics. The existing floor area of the office market in Shenzhen expanded by 1.2% quarter-on-quarter to 7.38 million square meters in the first quarter of 2020, during which the net absorption floor area in the city was only 13,000 square meters, according to Savills's research.

Policy Update

In March 2020, five national ministries and commissions in China, including the Ministry of Science and Technology and National Development and Reform Commission, have jointly issued the "Strengthening 'From 0 to 1' Basic Research Work Program", in which the concept of "Shenzhen Comprehensive National Science Center" was first proposed. In April 2020, the Shenzhen Municipal Government issued "Several Opinions on Supporting Guangming Science City to Build a World-Class Science City" (the "Several Opinions"), which showed strong support to Shenzhen's Guangming Science City for the goal of building a world-class science city with high standard and high quality and put forward corresponding policies and measures throughout the entire chain of technological innovation. The "Several Opinions" proposed that by 2035, Guangming Science City will be developed into the core of a comprehensive national science center, forming a major world-leading scientific and technological infrastructure cluster and cultivating a number of emerging industrial clusters that will lead to future development. The policies promote the improvement of urban supporting facilities such as transportation, education, medical care, and culture, and the development of science and technology industry in Guangming District, Shenzhen. As certain of our technology parks are located in Guangming District and other parts of Shenzhen, we will continue to observe the policy developments and take advantage of the opportunities that may arise.

In April 2020, in order to increase the supply of commercial housing in Shenzhen and maintain market stability, the Shenzhen Housing and Construction Bureau and Shenzhen Planning and Natural Resources Bureau jointly issued the "Notice on Responding to New Coronary Pneumonia Epidemic and Promoting Urban Renewal and Related Work" (the "Notice"). The Notice stipulates that, valid through December 31, 2020, a commercial housing project of high-rise buildings with completion of more than half of the total number of floors is allowed to apply for pre-sales. This is a relaxation of the requirement of pre-sales which formerly only could be applied for commercial housing projects with seven floors or above that have completed at least two-thirds of the above-ground floors under the "Regulations of Shenzhen Municipality on the Supervision of the Real Estate Market".

OPERATING RESULTS

Project Portfolio - As of March 31, 2020

Properties Under Development

The table below sets forth certain information of our property projects under development as of March 31, 2020, comprising properties under development with the land use right certificate and construction permits obtained but the construction work not completed.

Properties for Future Development

The table below sets forth certain information of our property projects held for future development as of March 31, 2020, comprising properties for which we have obtained the land use right certificate while the construction work commencement permit of main structure is not yet obtained, or the relevant land authority has confirmed our successful bidding in a public auction.

Projects for Operation and Management

The table below sets forth certain information of our projects leased from third parties for operation and management as of March 31, 2020.

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 2020

Announcements of Financial Results

ABOUT NAM TAI PROPERTY INC.

We are a real estate developer and operator, mainly conducting business in Mainland China. Our main land resources are located in the Guangdong-Hong Kong-Macao Greater Bay Area ("Greater Bay Area") and Wuxi, China, of which the three plots in Shenzhen will be developed into Nam Tai Inno Park, Nam Tai Technology Center and Nam Tai Inno Valley technology parks respectively. We plan to build these technology parks into landmark parks in the region, and provide high-quality industrial offices, industrial service spaces and supporting dormitories to the park tenants. Based on the experience of developing and operating technology parks and the industrial relationship network accumulated over the past 40 years, we have also exported the operation mode of technology parks to other industrial properties, using the asset-light model to rent industrial properties for repositioning and business invitation. We will also expand the commercial and residential property business in China as an auxiliary development strategy for the Company. As the growth prospects of China maintain, we will actively seize development opportunities in the Greater Bay Area and other first- and second-tier cities in China, and continue to strengthen and expand the business of industrial real estate, and commercial and residential properties. 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. 

SOURCE Nam Tai Property Inc.

Related Links

http://www.namtai.com

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