Value Partners sees sharp decline in profit to shareholders, despite revenue gains
14 August 2013
News, Hong Kong
By Asia Asset Management
Hong Kong-based Value Partners Group saw profit attributable to shareholders tumble 96% year on year for the first six months of the year to HK$3.3 million (US$423,000) from HK$88.2 million. Nevertheless, for the period, the company’s total revenues were up 34.5% to HK$358.6 million from HK$266.6 million while its gross management fees rose 27.5% to HK$291 million.
Value Partners said in a statement that the company remained profitable in the first half of 2013 despite a challenging environment for the fund industry.
“The group managed to achieve strong net sales of US$553 million [in the six months], which is a 6.8 times increase compared to same period last year,” the statement said. ‘The strong net inflow is mainly contributed by the group’s existing equity funds, as well as the new Value Partners Greater China High Yield Income Fund. Its High-Dividend Stocks Fund drew a net subscription of US$309 million in the period and this represented the largest amount of net inflow for the group. The QFII A-share fund, inflow from China and Taiwan businesses also served as key growth drivers.”
Timothy Tse, CEO of Value Partners, said: “I am glad that we are able to achieve strong net inflow, despite a tough investment environment. In the first six month of the year, our profit recorded a decline of 96%. However, we saw a healthy growth on our revenue, management fee, as well as performance fees. We even managed to drive up our net management fee margins, thanks to greater inflow into our own branded funds with which we enjoy a higher profit margin.” By the end of June 2013, Value Partners’ total unaudited AUM stood at 8.6 billion.
Mr. Tse attributed the substantial decline in net profit to the net fair value losses of the group’s seed capital investments and investments in its own funds: “As a result, the aggregate losses on investments amounted to HK$101.8 million, but by the end of July 2013, the group already recouped HK$36.7 million that was lost. By excluding the net fair value losses, Value Partners’ fund management business remained robust. The group recorded an increase of 42.0% in its operating profit (before other gains/losses), which rose to HK$126.1 million.
“As China restructures its economic model for more a balanced and sustainable development, Value Partners sees arising opportunities and the group has been actively pursuing its presence in the domestic China fund management industry, to capture capital outflow from China. It has also been broadening its product offerings across asset class and geographies, and has started collaborating with various top-tier Mainland distributors to offer more products. The group is in discussion with Mainland institutional investors seeking to capture business in the segment.”
“Chengdu Vision Credit, a joint venture of the group, operating the firm’s small loans business, has continued to grow and has built a sizeable team. The loan balance outstanding was around HK$77 million by the end of June 2013, mainly focusing on the white collar, small-business entrepreneurs and small- and medium size enterprises. The company has a healthy loan quality and the group is confident that this business will contribute positively to the group’s revenue source.”
Value Partners stated that the group managed to maintain sound financial health. Its total expenses amounted to HK$137.9 million (1H 2012: HK$116.8 million). The fixed costs of the group’s fund management business were well covered by net management fee income alone, at a coverage ratio of 2.7 times. Its balance sheet and liquidity remained strong, with a net cash balance of HK$822.9 million. Net cash inflows from operating activities amounted to HK$126.9 million, and the group had no borrowings.
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