China Everbright Limited (“Everbright” or “the Group”, HKSE code:165) todayannounced its interim results for the period ended 30 June 2010. Performance reported during the period was supported by consistent value growth of projects invested on by the Group’s funds, leading to shareholders’ equity reporting a record high of HK$22.1 billion, while fair value for funds under management amounted to approximately HK$10 billion. 

 

No divestment of invested projects under Hong Kong operations during the period, along with the impacted performance of Everbright Securities and lack of 2009 final dividend payment from Everbright Bank, saw the Group’s profit after taxation and minority interests fall to HK$445 million. This represents a 38% decrease compared with the same period last year. Earnings per share was HK$0.2795, representing a decrease of 38% compared with the same period last year. 

 

During the period, the Group continued to maintain a strong financial position. As of 30 June 2010, its cash on hand amounted to HK$2.1 billion, with debt / equity ratio remaining at a healthy level of 4.4%. 

 

Everbright said, “The Group persisted with our ‘3+2 Macro Asset Management’ strategy and our pragmatic principles at operations. On one hand, we put strategic focus on building up and strengthening our investment funds, while on the other hand, we were cautiously looking for the best exit opportunities for our investments. In addition, we are committed to growing our fee-based business, laying solid foundations for our long-term development goals. Leveraging the advantages and unique positioning of our parent company in China, Everbright will continue to explore lucrative investment opportunities and returns amidst the challenging market.”

 

 

Operations Review
The Direct Investment Division reported HK$73 million in pre-tax profit for the first half-year, representing a decrease of 10% compared with the same period last year. Managing a total of six investment funds, the Group did not exit any investment projects during the period. Its Seabright China Special Opportunities (I) Limited (“SOF I”) and the RMB-denominated venture fund formed between the Group and Beijing Zhongguancun have started pre-IPO preparations for some of their investment projects. China Special Opportunities Fund, L.P. (“SOF (II)”) and its “parallel investment fund” completed 50% of their investments in the first half of 2010, while the Group’s two RMB-denominated venture funds have commenced their investments. 

 

The Asset Investment Division reported pre-tax loss of approximately HK$1 million for the first half of 2010. Of the two investment funds under its management, the Division’s real estate fund introduced UK-based asset management company, Ashmore, as a strategic investor in June 2010. Ashmore will hold no more than 39% of the equity interests of the real estate fund management company. This strategic partnership opens up for Everbright new opportunities for future fundraising and development in China, Europe and other overseas markets. During the period, the Group reached an agreement with certain local enterprises in Jiangyin City of Jiangsu Province, to establish a new energy fund worth RMB3 billion by way of joint venture, with a special focus on low-carbon projects. Subscription for the first tranche, amounting to RBM 1 billion, was fully subscribed,and the fund is currently identifying investment opportunities. It is expected that the infrastructure construction fund jointly established with Macquarie, will have the first tranche of subscription offering completed in the second half of 2010. 

 

The Asset Management Division reported a loss of HK$33.03 million in the first half. The Dragon Fund portfolio retained its high cash holding and reported a return rate of -8.4% for the period. In order to boost the Group’s profitability in secondary-market funds, an “SME Fund” was established in August with the primary aim of identifying, through meticulous research, small and medium-sized listed enterprises in Hong Kong with good potential. The building of investment portfolios will start in the second half of the year. In addition, the Group was also actively considering the possibility of introducing or acquiring other asset management teams 

 

Owing to stronger marketing efforts in a diversified range of products such as securities, bullion, futures and foreign exchange, the Group’s Brokerage and Wealth Management Division reported a growth in commission income. During the period, the Division reported a pre-tax profit of HK$41.06 million, representing a 52% increase compared with the same period last year. During the period, the Group opened a new brokerage and wealth management outlet in Mongkok, the third of its 

type in the territory. 
 

The Investment Banking Division successfully completed IPO sponsorship for the main-board listing of Flyke International Holdings Ltd during the first half of the year. The Division reported a profit of HK$16.74 million, a 22% drop compared to the same period last year. The Division took part in the underwriting and placing of 6 corporate exercises and acted as financial advisor in 9 projects. The Division also completed IPO sponsorship for Tian Shan Development (Holdings) Limited in Hong Kong in July. Several other IPO sponsorship projects are also underway for the second half of the year. 

 

Commission rate for brokerage businesses was substantially brought down by intense competition in the Mainland China stock markets, and Everbright Securities’ performance was affected to a certain extent. During the period, Everbright Securities Co., Ltd., in which the Group holds a 33.33% stake, reported total revenue of RMB2.29 billion. Profit after taxation under Hong Kong Financial Reporting Standards decreased by 36% to RMB784 million compared with the same period last year. Everbright Securities was one of the six domestic securities firms approved by the China Securities Regulatory Commission (“CSRC”) during the period, to pioneer the operation of finance bills and stock index futures. 

 

Everbright Bank realized its plan to float its A-shares on the Shanghai Stock Exchange on 18 August 2010. The issue size was approximately RMB21.3 billion and Everbright’s shareholding in Everbright Bank was diluted to 4.51% pursuant to its IPO exercise. The Bank reported continuous improvements in asset quality during the first half of 2010. Based on the unaudited accounts prepared under PRC accounting standards (same hereinafter), Everbright Bank’s total assets and loan balance as of 30 June 2010, amounted to RMB1,426.2 billion and RMB 725.9 billion respectively, representing a growth of 9.1% and 11.8% respectively, compared with the beginning of the year. Profit after taxation for the period amounted to RMB6.83 billion, grew by 99% over the same period.