北亚策略(08080) - 2020 - 中期财报

GEM Market Characteristics and Disclaimer Characteristics of GEM Market The GEM market of the Hong Kong Stock Exchange is positioned to provide a listing platform for small and medium-sized companies, where investment risks and market volatility may be higher than main board listed companies, and high liquidity is not guaranteed - The GEM market aims to accommodate small and medium-sized companies, and its investment risks may be higher than those of companies listed on the Main Board of the Stock Exchange[4][8] - GEM securities may face higher market volatility risks, and high liquidity is not guaranteed[5][8] Disclaimer Hong Kong Exchanges and Clearing Limited and the Stock Exchange are not responsible for the contents of this report, and the Board of Directors collectively and individually assumes responsibility for the accuracy, completeness, and non-misleading nature of the information in the report - Hong Kong Exchanges and Clearing Limited and the Stock Exchange are not responsible for the contents of this report and make no statement as to its accuracy or completeness[6][8] - The directors of the Company (the Board) collectively and individually accept full responsibility for the accuracy, completeness, and non-misleading or fraudulent nature of the information contained in this report[7][9] Financial Statements UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the six months ended September 30, 2019, the company's revenue increased by 25.1% year-on-year, but profit for the period decreased by 6.8% year-on-year, with basic earnings per share also decreasing accordingly Key Profit or Loss Data for the Six Months Ended September 30, 2019 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,779,852 | 1,423,023 | +25.1% | | Cost of Sales | (1,567,706) | (1,187,278) | +32.0% | | Gross Profit | 212,146 | 235,745 | -10.0% | | Operating Profit | 71,040 | 83,981 | -15.4% | | Profit Before Income Tax | 74,484 | 84,039 | -11.4% | | Income Tax Expense | (9,592) | (14,414) | -33.5% | | Profit for the Period | 64,892 | 69,625 | -6.8% | | Basic Earnings Per Share (HK cents) | 23.8 | 25.5 | -6.7% | UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended September 30, 2019, the company's total comprehensive income for the period was HK$47,260 thousand, an increase from the same period last year, mainly influenced by profit for the period and currency translation differences from foreign operations Comprehensive Income Data for the Six Months Ended September 30, 2019 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Profit for the Period | 64,892 | 69,625 | | Currency Translation Differences from Foreign Operations | (17,632) | (27,961) | | Total Comprehensive Income for the Period | 47,260 | 41,664 | UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of September 30, 2019, the company's total assets significantly increased compared to March 31, 2019, primarily driven by increases in trade and other receivables and financial assets within current assets. Total liabilities also rose significantly, leading to a gearing ratio increase from 45.5% to 60.3% Key Financial Position Data as of September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Total Non-current Assets | 541,035 | 496,228 | +9.0% | | Total Current Assets | 2,078,745 | 1,318,990 | +57.6% | | Total Assets | 2,619,780 | 1,815,218 | +44.3% | | Equity | | | | | Total Equity | 1,039,493 | 988,800 | +5.1% | | Liabilities | | | | | Total Current Liabilities | 1,548,066 | 805,541 | +92.2% | | Total Non-current Liabilities | 32,221 | 20,877 | +54.3% | | Total Liabilities | 1,580,287 | 826,418 | +91.2% | | Net Current Assets | 530,679 | 513,449 | +3.4% | - Trade and other receivables (current portion) increased significantly from HK$620,335 thousand to HK$1,193,087 thousand[18] - Trade and other payables increased from HK$471,190 thousand to HK$1,091,806 thousand, leading to a substantial increase in current liabilities[19][129] UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended September 30, 2019, the company's total equity increased to HK$1,039,493 thousand, primarily influenced by profit for the period and equity-settled share-based payment transactions, partially offset by currency translation differences from foreign operations Changes in Equity for the Six Months Ended September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | April 1, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Issued Share Capital | 27,258 | 27,258 | | Reserves | 1,012,235 | 961,542 | | Total Equity | 1,039,493 | 988,800 | | Profit for the Period | 64,892 | - | | Currency Translation Differences from Foreign Operations | (17,632) | - | | Equity-settled Share-based Payment Transactions | 3,433 | - | UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended September 30, 2019, the company's net cash flow from operating activities significantly increased, net cash outflow from investing activities slightly increased, and net cash flow from financing activities turned positive from no inflow in the prior period, collectively driving a substantial increase in cash and cash equivalents Cash Flow Data for the Six Months Ended September 30, 2019 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | 75,823 | 44,353 | +71.0% | | Net Cash Flows Used in Investing Activities | (32,342) | (26,741) | +21.0% | | Net Cash Flows from Financing Activities | 40,499 | — | N/A | | Increase in Cash and Cash Equivalents | 83,980 | 17,612 | +376.8% | | Cash and Cash Equivalents (End of Period) | 698,701 | 245,734 | +184.3% | - In investing activities, expenditures for purchasing financial assets at fair value through profit or loss amounted to HK$79,337 thousand, with sales proceeds of HK$37,119 thousand[27] - Financing activities included new bank and other loans of HK$47,174 thousand, zero repayment of bank loans, and a principal portion of lease payments of HK$6,675 thousand[30] Notes to Financial Statements General Information The Group is primarily engaged in hi-tech product distribution and services, leasing, and investment holding businesses. The company is registered in Bermuda, and its ordinary shares are listed on the GEM of the Hong Kong Stock Exchange - The Group's principal activities include hi-tech product distribution and services, leasing, and investment holding[32] - The Company is a limited company incorporated in Bermuda, and its ordinary shares are listed on the GEM of the Hong Kong Stock Exchange[32] Basis of Preparation and New Accounting Policies This report is prepared in accordance with the GEM Listing Rules and has adopted new and revised Hong Kong Financial Reporting Standards (HKFRSs) effective from April 1, 2019, particularly HKFRS 16 'Leases', which has had a significant impact on the financial statements, leading to the recognition of right-of-use assets and lease liabilities - This report has adopted new and revised Hong Kong Financial Reporting Standards (HKFRSs) effective from April 1, 2019, with HKFRS 16 'Leases' having a significant impact[32][34] - HKFRS 16 requires lessees to adopt a single balance sheet model for all leases, recognizing right-of-use assets and lease liabilities[34][37] Impact of Adopting HKFRS 16 (as of April 1, 2019) | Metric | Increase (HK$ Thousand) | | :--- | :--- | | Right-of-use assets | 15,844 | | Lease liabilities | 15,844 | - HK(IFRIC)-Int 23 'Uncertainty over Income Tax Treatments' has no material impact on the Group's financial information[55][56] Revenue and Segment Information For the six months ended September 30, 2019, the Group's total revenue increased by 25.1% year-on-year, primarily driven by the hi-tech product distribution and services business. China (including Hong Kong) is the main market, with a high reliance on a few major customers Revenue Composition for the Six Months Ended September 30, 2019 | Revenue Source | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue from Contracts with Customers | 1,749,444 | 1,393,034 | +25.6% | | Sales of Goods | 1,739,541 | 1,342,965 | +29.5% | | Commission and Other Service Income | 9,903 | 50,069 | -80.2% | | Revenue from Lease Arrangements | 30,408 | 29,989 | +1.4% | | Total Revenue | 1,779,852 | 1,423,023 | +25.1% | - The Group is divided into two main reportable operating segments: hi-tech product distribution and services, and leasing[62] Revenue by Geographical Location for the Six Months Ended September 30, 2019 | Geographical Location | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | China, including Hong Kong | 1,580,424 | 1,405,433 | +12.5% | | Asia — Other | 199,428 | 17,590 | +1033.7% | | Total Revenue | 1,779,852 | 1,423,023 | +25.1% | - Revenue from two major customers totaled approximately HK$1,046,459 thousand, accounting for over 10% of total revenue, indicating high customer concentration[90][93] Finance Income and Costs For the six months ended September 30, 2019, the company's finance income significantly increased, mainly from bank deposit interest. Finance costs also slightly increased, primarily due to the new interest portion of lease payments and interest on bank and other loans Finance Income and Costs for the Six Months Ended September 30, 2019 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Finance Income: Interest Income from Bank Deposits | 4,465 | 687 | +549.9% | | Finance Costs: Interest Portion of Lease Payments | 494 | — | N/A | | Finance Costs: Interest on Bank and Other Loans | 527 | 279 | +88.9% | | Finance Costs: Net Foreign Exchange Loss from Financing Activities | — | 350 | -100.0% | | Total Finance Costs | 1,021 | 629 | +62.3% | Income Tax Expense For the six months ended September 30, 2019, the company's income tax expense was HK$9,592 thousand, a decrease from the same period last year. Hong Kong profits tax rate is 16.5%, China mainland enterprise income tax rate is 25%, and some high-tech enterprises enjoy a preferential tax rate of 15% Income Tax Expense for the Six Months Ended September 30, 2019 | Tax Type | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Hong Kong Profits Tax — Current Period | 7,994 | 11,034 | -27.6% | | China Mainland Enterprise Income Tax — Current Period | 2,878 | 3,380 | -14.8% | | Deferred Tax | (1,280) | — | N/A | | Total Income Tax Expense | 9,592 | 14,414 | -33.5% | - Hong Kong profits tax rate is 16.5%, and China mainland enterprise income tax rate is 25%[98][99] - Subsidiary North Asia America Electronic Technology (Shenzhen) Co., Ltd., as a high-tech enterprise, enjoys a preferential tax rate of 15%[99] Earnings Per Share For the six months ended September 30, 2019, the company's basic earnings per share was 23.8 HK cents, and diluted earnings per share was 23.8 HK cents, both lower than the same period last year. The calculation considered the impact of share consolidation and the dilutive effect of share options Earnings Per Share Data for the Six Months Ended September 30, 2019 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company (HK$ Thousand) | 64,892 | 69,625 | | Weighted Average Number of Ordinary Shares in Issue (Basic) | 272,580,805 | 272,580,805 | | Dilutive Effect — Share Options | 4,461 | 195,151 | | Weighted Average Number of Ordinary Shares in Issue (Diluted) | 272,585,266 | 272,775,956 | | Basic Earnings Per Share (HK cents) | 23.8 | 25.5 | | Diluted Earnings Per Share (HK cents) | 23.8 | 25.5 | - The basic and diluted earnings per share amounts for the period ended September 30, 2018, have been adjusted for the share consolidation (completed on March 26, 2019)[104][150] Dividends The Board does not recommend the payment of an interim dividend for the six months ended September 30, 2019 - The Directors do not recommend the payment of an interim dividend for the six months ended September 30, 2019 (2018: Nil)[110] Capital Expenditure As of September 30, 2019, the company's capital expenditure was mainly concentrated on property, plant and equipment, with additions of HK$13,757 thousand during the period, a decrease compared to the same period last year Changes in Capital Expenditure as of September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | September 30, 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Property, Plant and Equipment (Beginning of Period) | 68,404 | 50,320 | | Additions | 13,757 | 27,744 | | Disposals | (10,440) | (5,198) | | Depreciation | (10,047) | (11,657) | | Exchange Adjustments | (1,986) | (4,039) | | Property, Plant and Equipment (End of Period) | 59,688 | 57,170 | | Intangible Assets (End of Period) | 373,692 | 373,692 | | Total (End of Period) | 433,380 | 430,862 | Trade and Other Receivables As of September 30, 2019, the company's net trade and bills receivables significantly increased, mainly due to an increase in receivables aged 90 days or less. Net finance lease receivables decreased, but the non-current portion increased Trade and Other Receivables as of September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade and Bills Receivables, Net | 933,342 | 384,347 | +142.8% | | Finance Lease Receivables, Net | 208,084 | 215,218 | -3.3% | | Prepayments, Deposits and Other Receivables, Net, Current Portion | 123,744 | 71,171 | +73.9% | | Total Trade and Other Receivables, Current Portion | 1,193,087 | 620,335 | +92.3% | | Total Trade and Other Receivables, Non-current Portion | 76,416 | 52,568 | +45.3% | Aging Analysis of Trade and Bills Receivables (Net) as of September 30, 2019 | Aging | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | 90 days or less | 904,110 | 306,442 | | 91 to 180 days | 18,149 | 60,432 | | 181 to 270 days | 4,194 | 3,171 | | 271 to 365 days | 778 | 8,402 | | Over 365 days | 6,111 | 5,900 | | Total | 933,342 | 384,347 | - The Group's trade terms with customers are mainly letter of credit or documents against payment, with credit periods typically ranging from 5 to 180 days, and new customers usually require advance payments[118] Trade and Other Payables As of September 30, 2019, the company's total trade and other payables significantly increased, primarily driven by a substantial increase in trade and bills payables Trade and Other Payables as of September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade and Bills Payables | 1,091,806 | 471,190 | +131.7% | | Contract Liabilities | 126,925 | 121,415 | +4.5% | | Accrued Operating Expenses | 106,289 | 91,938 | +15.6% | | Receipts in Advance | 16,662 | 10,812 | +54.1% | | Deposits Received | 33,584 | 46,526 | -27.8% | | Other Payables | 98,401 | 52,136 | +88.7% | | Total | 1,473,667 | 794,017 | +85.6% | Aging Analysis of Trade and Bills Payables as of September 30, 2019 | Aging | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | 90 days or less | 850,889 | 267,342 | | 91 to 180 days | 163,740 | 142,619 | | 181 to 270 days | 22,318 | 3,312 | | 271 to 365 days | 51,287 | 56,710 | | Over 365 days | 3,572 | 1,207 | | Total | 1,091,806 | 471,190 | Share Capital As of September 30, 2019, the company's issued share capital was HK$27,258 thousand, with 272,580,805 ordinary shares. Share options granted during the period led to an increase in equity-settled share-based payment transaction expenses, but no share options have been exercised yet Share Capital Structure as of September 30, 2019 | Metric | September 30, 2019 (Thousand Shares) | September 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Authorized Ordinary Shares | 4,000,000 | 400,000 | | Authorized Preference Shares | 3,000,000 | 300,000 | | Issued Ordinary Shares | 272,581 | 27,258 | - Share consolidation completed on March 26, 2019, where every ten ordinary shares of HK$0.01 each were consolidated into one ordinary share of HK$0.10[150] Changes in Share Options as of September 30, 2019 | Metric | Outstanding as of April 1, 2019 | Granted during the Period | Outstanding as of September 30, 2019 | | :--- | :--- | :--- | :--- | | Number of Share Options | 7,323,200 | 7,608,000 | 14,931,200 | | Weighted Average Exercise Price Per Share (HK$) | 1.15 | 0.82 | 0.98 | - For the six months ended September 30, 2019, the fair value of share options granted was HK$3,433 thousand, and recognized as share option expense[160] Equity As of September 30, 2019, the company's total equity was HK$1,039,493 thousand, an increase from April 1, 2019, primarily influenced by profit for the period and equity-settled share-based payment transactions Summary of Changes in Equity as of September 30, 2019 | Metric | September 30, 2019 (HK$ Thousand) | April 1, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Share Capital | 27,258 | 27,258 | | Other Reserves | 1,083,246 | 1,097,445 | | Accumulated Losses | (71,011) | (135,903) | | Total | 1,039,493 | 988,800 | - Profit for the period of HK$64,892 thousand and equity-settled share-based payment transactions of HK$3,433 thousand increased equity, while currency translation differences from foreign operations of (HK$17,632 thousand) decreased equity[162] Related Party Transactions For the six months ended September 30, 2019, the Group's total key management personnel remuneration was HK$8,018 thousand, an increase from the same period last year, mainly due to new equity-settled share option expenses Key Management Personnel Remuneration for the Six Months Ended September 30, 2019 | Remuneration Type | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Salaries, Allowances and Bonuses | 6,450 | 5,872 | | Equity-settled Share Option Expenses | 1,532 | — | | Retirement Benefits — Defined Contribution Plans | 36 | 36 | | Total | 8,018 | 5,908 | Fair Value and Fair Value Hierarchy of Financial Instruments As of September 30, 2019, the company's financial assets at fair value through profit or loss amounted to HK$80,857 thousand, primarily based on quoted market prices (Level 1). Management assessed that the carrying amounts of most financial assets and liabilities approximated their fair values due to their short-term maturities - The fair values of cash and cash equivalents, trade and other receivables, and payables approximate their carrying amounts, mainly due to their short-term maturities[166] Assets Measured at Fair Value as of September 30, 2019 | Asset Type | September 30, 2019 (HK$ Thousand) | March 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Financial Assets at Fair Value Through Profit or Loss (Level 1) | 80,857 | 36,760 | - During the period, there were no transfers between Level 1 and Level 2 fair value measurements for financial assets and liabilities, nor any transfers into or out of Level 3[171] BUSINESS REVIEW Financial and Business Performance Overview For the six months ended September 30, 2019, the Group's revenue increased by 25.1% year-on-year, but net profit slightly decreased by 6.8%. The hi-tech product distribution and services business regained growth momentum in the second quarter, primarily due to a customer's strategic procurement plan in response to the US-China trade war. The leasing business also grew, but the scale of finance leases and interest income decreased - During the interim period, the Group's unaudited consolidated revenue was approximately HK$1,779,852 thousand, representing a year-on-year increase of 25.1%[173] - Revenue from the hi-tech product distribution and services segment increased by 25.6%, and revenue from the leasing segment increased by 1.4%[173] - The hi-tech product distribution and services segment regained growth momentum in the second quarter, primarily due to a large order placed by a customer in response to the US-China trade war[174][175] - Operating lease business grew, but the scale of finance lease arrangements and finance lease interest income decreased, as customers adopted a cautious attitude towards purchasing SMT equipment[174][175] - General and administrative expenses increased by 23.0% to HK$69,311 thousand, mainly due to share option expenses and expected credit losses on receivables[177][178] - Selling and distribution expenses decreased by 16.5% to HK$80,500 thousand, due to lower gross profit margins on large orders and adjustments to related sales incentives[177][178] - Unaudited consolidated net profit for the period was approximately HK$64,892 thousand, a slight decrease of 6.8% year-on-year. Basic earnings per share was approximately 23.8 HK cents, a year-on-year decrease of 6.7%[177][178] Hi-Tech Product Distribution and Services Segment Revenue from the hi-tech product distribution and services segment increased by 25.6% year-on-year, primarily driven by a large order placed by a customer as part of a strategic procurement plan in response to the US-China trade war. Direct machine sales grew significantly, but commission and other service income substantially decreased - Revenue from this segment was approximately HK$1,749,444 thousand, a year-on-year increase of 25.6%[183] - Direct machine sales were approximately HK$1,696,762 thousand, a year-on-year increase of 30.4%, primarily due to a customer's strategic procurement plan in response to the US-China trade war[183] - Commission and other service income was approximately HK$9,903 thousand, a substantial year-on-year decrease of 80.2%, mainly because the large consignment order from the prior period did not recur in the interim period[183] - This segment recorded an unaudited net profit of approximately HK$65,851 thousand, compared to HK$67,468 thousand in the same period last year[185][188] Leasing Segment Revenue from the leasing segment increased by 1.4% year-on-year, with a slight decrease in net profit. Due to new customers' cautious approach to finance lease arrangements, the segment is allocating more resources to operating lease business - Revenue from this segment was approximately HK$30,408 thousand, a year-on-year increase of 1.4%[187][189] - Net profit recorded was approximately HK$14,006 thousand, compared to HK$14,134 thousand in the same period last year[187][189] - Total principal amount of finance lease receivables was approximately HK$208,084 thousand, a decrease of 3.3% compared to March 31, 2019[187][189] - Due to new customers' cautious approach to the scale of finance lease arrangements, the leasing segment is allocating more resources to operating lease business[187][189] OUTLOOK Overall Summary Despite a revenue decline in the previous quarter, the Group regained growth momentum in the second quarter. Management is confident in the prospects of both the hi-tech product distribution and services and leasing segments, and will seize opportunities from China's 5G infrastructure development and commercialization, continuously managing cash, costs, and risks to enhance capabilities and efficiency - The Group regained growth momentum in the second quarter, and management is confident in the prospects of both the hi-tech product distribution and services and leasing segments[191][193] - The Group will seize the immense opportunities brought by China's 5G infrastructure development and commercialization, as customers accelerate the upgrade of mobile devices and telecommunication station equipment[191][193] - The Group will continue to manage cash, costs, and risks, and enhance capabilities and efficiency through collaboration with the management team[191][193] Hi-Tech Product Distribution and Services Segment Outlook The smartphone market outlook is not optimistic in the short term, but IDC forecasts a moderate recovery from H2 2019 to 2020, with 5G commercial deployment driving smartphone shipment growth. The global economy remains fragile due to the US-China trade war, and the IMF has lowered its global growth forecast. The Group will continue to invest in service and support infrastructure, and closely monitor working capital, gross profit margins, and operating costs - The smartphone market outlook is not optimistic in the short term, but IDC forecasts a moderate recovery from H2 2019 to 2020[192][194][197] - Following 5G commercial deployment, smartphone shipments are expected to grow by 1.6% in 2020, accounting for 28.1% of global shipments by 2023[197] - The global economy remains fragile due to the US-China trade war, and the International Monetary Fund (IMF) has lowered its global growth forecast to 3%[197] - The Group will continue to invest in service and support infrastructure, and closely monitor working capital, gross profit margins, operating costs, and industry developments to maintain cash flow and profitability[197] Leasing Segment Outlook The US listing of Chinese tech companies on the 'Entity List' has caused disruption in the hi-tech OEM industry, prompting Huawei to seek alternative OEM partners, creating opportunities for the Group's leasing business in the SMT market. Customers prefer leasing over purchasing equipment due to policy uncertainties, and SMT, semiconductor packaging, and testing leasing businesses are expected to continue growing in 2020. The Group will continue to focus on SMT and semiconductor packaging equipment leasing, and monitor other equipment leasing demands to achieve robust and rapid growth in new businesses - The US listing of Chinese tech companies on the 'Entity List' has caused disruption in the Chinese hi-tech OEM industry, creating opportunities for the Group's leasing business in the SMT market[199][203] - Customers prefer leasing over purchasing equipment due to uncertainties regarding future policies and developments[200][203] - SMT, semiconductor packaging, and testing leasing businesses are expected to continue growing in 2020[200][203] - The Group will continue to focus on SMT and semiconductor packaging equipment leasing, and closely monitor other equipment leasing demands to achieve robust and rapid growth in new businesses and revenue[200][203] LIQUIDITY AND FINANCIAL RESOURCES Gearing Ratio & Borrowings As of September 30, 2019, the Group's gearing ratio increased to 60.3%, primarily due to an increase in floating-rate borrowings to HK$47,409 thousand - As of September 30, 2019, the Group's floating-rate borrowings were approximately HK$47,409 thousand (March 31, 2019: Nil)[201] - The Group's gearing ratio (total liabilities divided by total assets) was 60.3%, compared to 45.5% as of March 31, 2019[201] Contingent Liabilities As of September 30, 2019, the Group provided guarantees to certain banks for performance bonds and tender bonds amounting to HK$1,438 thousand - As of September 30, 2019, the Group provided guarantees to certain banks for performance bonds and tender bonds amounting to HK$1,438 thousand (March 31, 2019: HK$1,403 thousand)[201][202] Foreign Currency Exposure The Group's business transactions are primarily conducted in HKD, USD, JPY, and RMB, with cash and bank deposits mainly denominated in HKD and USD. The Group minimizes foreign currency exchange risk by matching payables with receivables and maintaining sufficient foreign currency cash balances, and will continue to closely monitor exchange rates and implement necessary hedging arrangements - The Group's business transactions are primarily conducted in HKD, USD, JPY, and RMB, with cash and bank deposits mainly denominated in HKD and USD[206][210] - The Group minimizes foreign currency exchange risk by matching payables for purchases with receivables from sales, and by maintaining sufficient foreign currency cash balances[206][210] - The Group will continue to closely monitor the exchange rates of RMB, USD, and JPY, and implement hedging arrangements when necessary[206][210] Employee Information As of September 30, 2019, the Group's number of employees increased to 297, with total staff costs (including contributions to retirement benefit schemes) of approximately HK$48,681 thousand - As of September 30, 2019, the Group had 297 employees (September 30, 2018: 267 employees)[207][211] - For the six months ended September 30, 2019, total staff costs (including contributions to retirement benefit schemes) were approximately HK$48,681 thousand (same period last year: HK$43,755 thousand)[207][211] Capital Commitments As of September 30, 2019, the Group had no significant capital commitments - As of September 30, 2019, the Group had no significant capital commitments[208][212] Other Information Directors' and Chief Executive's Interests and Short Positions in Shares and Underlying Shares As of September 30, 2019, the company's directors and chief executive and their associates held long positions in the company's shares and/or underlying shares, primarily through share options Directors' Long Positions in Underlying Shares (Share Options) as of September 30, 2019 | Director's Name | Capacity | Number of Underlying Shares Held (Share Options) | Approximate Percentage of Underlying Shares Held | | :--- | :--- | :--- | :--- | | Zhang Yifan | Beneficial Owner | 5,449,600 | 1.99% | | Xu Guangming | Beneficial Owner | 472,000 | 0.17% | | Liang Xianzhi | Beneficial Owner | 472,000 | 0.17% | | Chen Liji | Beneficial Owner | 472,000 | 0.17% | | Gan Xiaojin | Beneficial Owner | 472,000 | 0.17% | - The above percentage of shareholding is calculated based on 272,580,805 ordinary shares in issue as of September 30, 2019[215] Other Persons' Interests and Short Positions in Shares and Underlying Shares As of September 30, 2019, major shareholder Ms. Lu Ying and her wholly-owned Sincere Ardent Limited held long positions in the company's shares and underlying shares, totaling 67.25% of the issued ordinary shares Other Persons' Long Positions in Shares and Underlying Shares as of September 30, 2019 | Shareholder's Name | Capacity | Number of Ordinary Shares Held | Number of Underlying Shares Held (Share Options) | Approximate Percentage of Shares and Underlying Shares Held | | :--- | :--- | :--- | :--- | :--- | | Lu Ying | Beneficial Owner | 40,000,000 | 544,000 | 67.25% | | Sincere Ardent Limited | Interest of Controlled Corporation | 142,768,723 | — | 52.37% | - Sincere Ardent Limited is wholly-owned by Ms. Lu Ying, who is deemed to have an interest in the shares held by Sincere Ardent Limited[219] Share Option Scheme The company adopted a share option scheme on September 4, 2014, to reward participants who have contributed to the Group. As of September 30, 2019, a total of 14,931,200 share options remained outstanding, with 7,608,000 granted during the period, but no share options were exercised - The company adopted a share option scheme on September 4, 2014, with a ten-year validity, aiming to reward employees, agents, consultants, or representatives who have contributed to the Group[222][224] Changes in Share Option Scheme as of September 30, 2019 | Category | Outstanding as of April 1, 2019 | Granted during the Period | Exercised during the Period | Cancelled during the Period | Lapsed during the Period | Outstanding as of September 30, 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Executive Directors | 3,525,600 | 3,812,000 | - | - | - | 7,337,600 | | Independent Non-executive Directors | 600,000 | 816,000 | - | - | - | 1,416,000 | | Major Shareholders | 272,000 | 272,000 | - | - | - | 544,000 | | Employees of the Group | 3,525,600 | 3,524,000 | - | - | - | 7,049,600 | | Total | 7,323,200 | 7,608,000 | - | - | - | 14,931,200 | Fair Value and Assumptions for Share Options Granted | Metric | Granted on August 16, 2017 | Granted on June 26, 2019 | | :--- | :--- | :--- | | Expected Dividend Yield (%) | 0.000 | 0.000 | | Expected Volatility (%) | 79.012 | 74.808 | | Risk-free Interest Rate (%) | 2.030 | 1.830 | | Expected Option Life (Years) | 10.000 | 10.000 | | Fair Value of Total Share Options Granted (HK$ Thousand) | 4,684 | 3,433 | Competing Interests As of September 30, 2019, none of the company's directors, major shareholders, or their associates were engaged in any business that competes or may compete with the Group's business, or had any other conflicts of interest with the Group - As of September 30, 2019, none of the Directors, major shareholders, or their associates were engaged in any business that competes or may compete with the Group's business, nor had any other conflicts of interest[349] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended September 30, 2019, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended September 30, 2019, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[351][355] Corporate Governance Code The company is committed to maintaining a high level of corporate governance and complies with the Corporate Governance Code set out in Appendix 15 of the GEM Listing Rules. Although the roles of Chairman and Chief Executive Officer are combined, the Board believes that the balance of power and division of responsibilities are adequately safeguarded - The company complies with the Corporate Governance Code set out in Appendix 15 of the GEM Listing Rules and is committed to maintaining a high level of corporate governance[352][356] - Code Provision A.2.1 stipulates that the roles of Chairman and Chief Executive Officer should be separate, but the Board believes that under the leadership of the Chairman, with the participation and support of experienced and high-caliber personnel, the segregation of power and responsibilities is adequately safeguarded[353][356] Directors' Securities Transactions All Directors confirm that for the six months ended September 30, 2019, they have complied with the required standards of dealing as set out in Rules 5.48 to 5.67 of the GEM Listing Rules - All Directors confirm that for the six months ended September 30, 2019, they have complied with the required standards of dealing as set out in Rules 5.48 to 5.67 of the GEM Listing Rules[354][357] Disclosure on Change of Director's Information under GEM Listing Rule 17.50A(1) Mr. Chen Liji retired as Chief Executive Officer of Kaisun Holdings Limited on June 19, 2019, but continues to serve as Chairman and Executive Director - Mr. Chen Liji retired as Chief Executive Officer of Kaisun Holdings Limited (stock code: 8203) on June 19, 2019, but continues to serve as Chairman and Executive Director[359][361] Audit Committee The company has established an Audit Committee comprising three independent non-executive directors, chaired by Mr. Liang Xianzhi, who possesses appropriate professional qualifications and financial experience. The committee's primary responsibilities include ensuring the adequacy and effectiveness of accounting and financial controls, and it has reviewed the unaudited condensed consolidated financial information in this report - The Audit Committee comprises three independent non-executive directors, with Mr. Liang Xianzhi as Chairman, who possesses appropriate professional qualifications and experience in financial matters[360][362] - The committee's primary responsibilities include ensuring the adequacy and effectiveness of the Group's accounting and financial controls, monitoring internal control systems, risk management, and financial reporting processes[360][362] - The unaudited condensed consolidated financial information in this report has been reviewed by the Audit Committee[363] Board Composition As of the date of this report, the Board of Directors comprises Ms. Zhang Yifan (Chairperson and Executive Director), Mr. Xu Guangming (Executive Director), and three Independent Non-executive Directors: Mr. Liang Xianzhi, Mr. Chen Liji, and Mr. Gan Xiaojin - The Board of Directors comprises Ms. Zhang Yifan (Chairperson and Executive Director), Mr. Xu Guangming (Executive Director), and Mr. Liang Xianzhi, Mr. Chen Liji, and Mr. Gan Xiaojin (Independent Non-executive Directors)[363]