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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Magnificent Hotel Investments Limited    201   HK0201008726

MAGNIFICENT HOTEL INVESTMENTS LIMITED

(201)
  Report
End-of-day quote. End-of-day quote Hong Kong Stock Exchange - 09/30
0.098 HKD   -2.00%
09/17MAGNIFICENT HOTEL INVESTMENTS : Interim report 2020
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Magnificent Hotel Investments : INTERIM REPORT 2020

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09/17/2020 | 02:45am EDT

MAGNIFICENT HOTEL INVESTMENTS LIMITED

華 大 酒 店 投 資 有 限 公 司

(Stock Code: 201)

INTERIM REPORT 2020

CORPORATE INFORMATION

Executive Directors

Mr. William CHENG Kai Man (Chairman)

Mr. Albert HUI Wing Ho

Madam Kimmy LAU Kam May

Madam NG Yuet Ying

Madam Wendy CHENG Wai Kwan

(appointed on 25th May, 2020)

Madam Jennie WONG Kwai Fong

(retired on 22nd May, 2020)

Non-Executive Director

Madam Mabel LUI FUNG Mei Yee

Independent Non-Executive Directors

Mr. Vincent KWOK Chi Sun

Mr. CHAN Kim Fai

Mr. LAM Kwai Cheung

Company Secretary

Madam KOO Ching Fan

Auditor

Deloitte Touche Tohmatsu 35th Floor, One Pacific Place

88 Queensway Hong Kong

Solicitors

Withers

30th Floor

United Centre

95 Queensway Hong Kong

Principal Bankers

The Hongkong and Shanghai Banking

Corporation Limited

Bank of China (Hong Kong) Limited

Registered Office

3rd Floor, Shun Ho Tower 24-30 Ice House Street Central, Hong Kong

Share Registrars

Tricor Tengis Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

Tel: 2980 1333

Company's Website

www.magnificenthotelinv.com

1

Analysis and Discussion Management

INTERIM RESULTS

The board of directors (the "Board") of Magnificent Hotel Investments Limited (the "Company") announces that the loss for the period attributable to owners of the Company for the six months ended 30th June, 2020 was HK$154 million (profit for the six months ended 30th June, 2019: HK$58 million), decreased by HK$212 million.

INTERIM DIVIDEND

The Board has resolved not to declare an interim dividend for the six months ended 30th June, 2020 (six months ended 30th June, 2019: HK0.08 cent per share).

MANAGEMENT DISCUSSION AND ANALYSIS

During the period under review, the Group continued with its hotel investments, hotel management and property leasing.

Loss for the period attributable to owners of the Company for the six months ended 30th June, 2020 was HK$154 million (profit for the six months ended 30th June, 2019: HK$58 million), decreased by HK$212 million.

Six months ended

30.6.2019

30.6.2020

Change

HK$'000

HK$'000

(unaudited)

(unaudited)

Profit (loss) from operation of hotels

63,261

(49,907)

N/A

- Profit (loss)

101,208

(12,111)

- Depreciation

(37,947)

(37,796)

Profit (loss) from property investment

14,566

(99,247)

N/A

Income from securities investments

3,557

53

-99%

Other income and expenses and gain and losses

8,804

9,489

+8%

90,188

(139,612)

N/A

Administrative expenses

(18,698)

(19,113)

+2%

Income tax (expense) credit

(13,891)

4,866

N/A

Profit (loss) after taxation

57,599

(153,859)

N/A

The overall loss for the six months ended 30th June, 2020 was mainly due to the hotel operating loss, revaluation loss and depreciation.

2

PERFORMANCE

  • For the six months ended 30th June, 2020, the GROUP'S INCOME was mostly derived from the aggregate of income from operation of hotels and investment properties rental income, which was analysed as follows:
    Income

Six months ended

30.6.2019

30.6.2020

Change

Reasoning

HK$'000

HK$'000

(unaudited)

(unaudited)

Income from

248,370

71,463

-71%

Decrease in

operation of hotels

room rates and

occupancies

Income from

16,739

18,782

+12%

Royal Scot

investment properties

Hotel,

London and

apartment

leasing

Dividend income

3,557

53

-99%

Decrease in

dividend

received from

stock

investment

Other income

8,804

9,489

+8%

Total

277,470

99,787

-64%

The total income for the Group decreased by 64% from HK$277 million to HK$100 million for the same period compared with last year.

Management Discussion and Analysis

3

Analysis and Discussion Management

The Group presently owns eight hotels, operates seven hotels and leases out one hotel in London. The income from operation of hotels decreased by 71% to HK$71 million (six months ended 30th June, 2019: HK$248 million). Royal Scot Hotel in London was leased to a hotel management company, Travelodge.

Best

Ramada

Best

Best

Western

Best

Magnificent

Hong Kong

Western

Western

Hotel

Western

Grand

International

Harbour

Grand

Plus Hotel

Causeway

Plus Hotel

City

Hotel,

View

Hotel

Hong Kong

Bay

Kowloon

Hotel

Shanghai

Change

%

2020

Jan to Jun

Average room

occupancy

77%

75%

91%

78%

84%

92%

20%

Total revenue

(HK'000)

14,387

13,397

15,582

8,573

9,486

8,372

1,666

2019

Jan to Jun

Total revenue

(HK'000)

51,823

52,349

43,122

31,573

36,326

25,027

8,150

Change (%)

-72

-74

-64

-73

-74

-67

-80

-71

Best Western Grand Hotel will be re-branded to the higher class RAMADA HONG KONG GRAND in August 2020.

As at 30th June, 2020, an independent third party valuation of Royal Scot Hotel, London was GBP88,500,000 (As at 30th June, 2019: GBP95,000,000). The rental income of Royal Scot Hotel, London for the period was GBP1,769,000, equivalent to HK$17,474,000 (six months ended 30th June, 2019: GBP1,564,000, equivalent to HK$15,565,000), increased by 12%.

4

COST

  • The SERVICE COST of the Group for the period was HK$80.6 million (six months ended 30th June, 2019: HK$143.2 million), representing hotel operation cost, decreased by HK$62.6 million, which is a 44% decrease.

Six months ended

Name of Hotel

30.6.2019

30.6.2020

Change

HK$ million

HK$ million

per month

per month

Ramada Hong Kong Harbour View

4.97

2.50

-50%

Best Western Grand Hotel

4.55

2.31

-49%

Best Western Plus Hotel Kowloon

3.54

1.96

-45%

Best Western Plus Hotel Hong Kong

4.13

2.56

-38%

Best Western Hotel Causeway Bay

3.21

1.81

-44%

Grand City Hotel

2.68

1.67

-38%

Magnificent International Hotel, Shanghai

1.14

0.63

-45%

Cost of sale of HK$0.2 million (six months ended 30th June, 2019: HK$2 million) was from cost of food and beverage, which represented a HK$1.8 million decrease.

  • During the period, the ADMINISTRATIVE EXPENSES excluding depreciation was HK$15.4 million (six months ended 30th June, 2019: HK$14.9 million), representing costs for corporate management office including directors' fees, salaries for executive staff and employees, rental, marketing expenses and office expenses. The increase was due to the professional fee arising from the acquisition of Wood Street Hotel in London.
    The accounting standards require hotel properties of the Group to provide DEPRECIATION which amounted to HK$37.8 million (six months ended 30th June, 2019: HK$37.9 million) for the period.

Management Discussion and Analysis

5

Analysis and Discussion Management

DEPRECIATION OF HOTEL PROPERTIES

Six months ended

Name of Hotel

30.6.2019

30.6.2020

Change

HK$ million

HK$ million

HK$ million

Ramada Hong Kong Harbour View

3.0

3.0

-

Best Western Grand Hotel

14.5

14.6

+0.1

Best Western Plus Hotel Kowloon

8.6

8.1

-0.5

Best Western Plus Hotel Hong Kong

1.9

2.1

+0.2

Best Western Hotel Causeway Bay

5.7

5.8

+0.1

Grand City Hotel

2.9

2.9

-

Magnificent International Hotel, Shanghai

1.3

1.3

-

Total amount for the period

37.9

37.8

-0.1

FUNDING

  • As at 30th June, 2020, the OVERALL DEBTS of the Group were HK$772 million (31st December, 2019: HK$419 million), of which HK$747 million (31st December, 2019: HK$391 million) was assets secured bank borrowings and HK$25 million was advances from shareholder (31st December, 2019: HK$28 million). The increase in overall debts was due to the increase in bank borrowings to make up appropriate cash reserve in deposits in case of any banking system disorder in Hong Kong because of the unstable social situation. Subsequently, HK$356.2 million bank loan was repaid during July and August 2020. Therefore, the overall debts of the Group would be about HK$416 million.
    The gearing ratio was 21% (31st December, 2019: 10%) in terms of overall debts of
    HK$772 million (31st December, 2019: HK$419 million) against funds employed of HK$3,685 million before revaluation of all hotel properties (31st December, 2019: HK$3,991 million).

6

The overall debts were analysed as follows:

As at 31st

Interest Paid

December,

As at 30th

As at 30th

2019

June, 2020

Change

June, 2020

HK$ million

HK$ million

HK$ million

HK$ million

Bank loans

391

747

+356

3.8

Shareholder's loan

28

25

-3

0.8

Overall debts

419

772

+353

4.6

  • FINANCE COST: Of these loans, the total interest expenses amounted to HK$4.6
    million (30th June, 2019: HK$4 million), the bank loans interest expenses amounted
    to HK$3.8 million (30th June, 2019: HK$4 million) and the shareholder's loan
    interest expenses amounted to HK$0.8 million (30th June, 2019: Nil). The interests increased was mainly due to the increase in shareholder's loan during the period.
    The Group's bank borrowings carry interest at floating rates and are mainly denominated in Hong Kong dollar and Pound Sterling. Accordingly, the Group exposes to exchange risk and the management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.
    As at 30th June, 2020, the Group had a total number of 503 employees (31st December, 2019: 618 employees). Remuneration and benefit were set with reference to the market.

BUSINESS HIGHLIGHTS

During the period, the tourism market in Hong Kong was most devastated by the local social unrest and the COVID-19. Overseas/PRC visitors have dropped to less than 100 a day and most hotels and retail stores suffer from an over 90% drop in turnover. Our hotel management achieved a reduction of operating costs of HK$63 million (44%) while maintaining high occupancies above 80%.

During the period, the rental income of Royal Scot Hotel, London increased by 12% compared with the same period last year.

The Group acquired Wood Street Police Headquarter building in the centre of City of London for GBP40 million on 29th January, 2020 which has a gross internal area of 117,472 s.f. on a 20,000 s.f. island site for the refurbishment of a deluxe hotel of about 210 guest rooms, restaurants, bar and facilities (subject to approval). The management is proud of having this opportunity to renovate this landmark heritage building in the centre of City of London.

Management Discussion and Analysis

7

Analysis and Discussion Management

LOOKING AHEAD

The Group has eight income producing hotels, six in Hong Kong, one in Shanghai, one in London, and the newly acquired Wood Street Hotel refurbishment project in London.

Hong Kong has been suffering from US-Sino trade war, social disorders and coronavirus in the last several months which has stopped international/PRC tourism visiting. Such unforeseeable circumstances have adversely affected the local economy, hospitality, retail and hotel market of Hong Kong with most establishments either closed or operating on low occupancies with significant losses.

It is the management's view that with the remaining months of this financial year due to the continuous COVID-19 effect, unstable US-China relationship, it is quite unlikely overseas/PRC visitors will return to Hong Kong in significant volume. Hotels and retail stores will continue to suffer from low occupancies and high operating costs. The management will continue to try to maintain high hotel occupancies and to control hotel operating costs.

In longer term, the continuous adverse US-China relationship will impact on the geopolitics, which will continue to damage any tourism and economy recovering.

PUBLIC FLOAT

Based on information that was publicly available to the Company and within the knowledge of the Directors, the Company has maintained the prescribed amount of public float during the period and up to the date of this report as required under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the six months ended 30th June, 2020.

8

DIRECTORS' INTERESTS IN LISTED SECURITIES

As at 30th June, 2020, the interests or short positions of the directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) which were required (a) to be recorded in the register required to be kept by the Company under Section 352 of the SFO; or (b) to be notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code"), were as follows:

The Company

Nature of

Number of shares/

Approximate %

Name of director

Capacity

interests

underlying shares held

of shareholding

William Cheng

Interest of

Corporate

6,360,585,437

71.09

Kai Man

controlled

(Note)

corporations

Note:

Shun Ho Property Investments Limited ("Shun Ho Property") beneficially owned 2,709,650,873 shares of the Company (the "Shares") (30.29%) and was taken to be interested in 395,656,000 Shares (4.42%) held by Good Taylor Limited, 273,579,983 Shares (3.06%) held by South Point Investments Limited, 3,500,000 Shares (0.04%) held by Shun Ho Technology Developments Limited and 2,978,198,581 Shares (33.29%) held by Fastgrow Engineering & Construction Company Limited ("Fastgrow"), representing a total of 6,360,585,437 Shares (71.09%). Mr. William Cheng Kai Man had controlling interests in the above-mentioned companies. All the above interests in the Shares are long position.

9

Associated corporations

Name of associated

Nature of

Number of

Approximate %

Name of director

corporation

Capacity

interests

shares held

of shareholding

William Cheng

Shun Ho Property

Beneficial owner

Personal and

369,489,999

63.73%

Kai Man

(Note 1)

and interest of

corporate

controlled corporations

William Cheng

Shun Ho Holdings Limited

Beneficial owner

Personal and

217,452,825

71.44%

Kai Man

("Shun Ho Holdings")

and interest of

corporate

(Note 2)

controlled corporations

William Cheng

Trillion Resources Limited

Beneficial owner

Personal

2

100

Kai Man

("Trillion Resources")

(Note 3)

Notes:

  1. Shun Ho Property, the Company's immediate holding company, is a public limited company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange.
  2. Shun Ho Holdings, the Company's intermediate holding company, is a public limited company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange.
  3. Trillion Resources, the Company's ultimate holding company, is a company incorporated in the British Virgin Islands.
  4. All the above interests in the shares of the associated corporations are long position.

An employee share option scheme of the Company was adopted at the extraordinary general meeting held on 14th November, 2013 and was amended at the annual general meeting held on 18th June, 2014 ("Share Option Scheme"). Since the adoption of the Share Option Scheme and up to the date of this report, no share option has been granted under the Share Option Scheme.

Save as disclosed above, as at 30th June, 2020, none of the directors or chief executive of the Company had any interest or short position in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be recorded in the register required to be kept by the Company under Section 352 of the SFO; or (b) to be notified to the Company and the Stock Exchange pursuant to the Model Code and none of the directors or their associates or their spouse or children under the age of 18, had any right to subscribe for the securities of the Company or associated corporations, or had exercised any such right during the period.

10

SUBSTANTIAL SHAREHOLDERS

As at 30th June, 2020, the following persons (not being directors or chief executive of the Company) had interests in the Shares as recorded in the register required to be kept by the Company under Section 336 of the SFO:

Number of Shares/

Approximate %

Name of shareholder

Capacity

underlying Shares held

of shareholding

Shun Ho Property (Note 1)

Beneficial owner

6,360,663,987

(L)

71.09

and interest of

controlled corporations

Omnico Company Inc.

Interest of

6,360,663,987

(L)

71.09

("Omnico") (Note 2)

controlled corporations

Shun Ho Holdings (Note 2)

Interest of

6,360,663,987

(L)

71.09

controlled corporations

Trillion Resources (Note 2)

Interest of

6,360,663,987

(L)

71.09

controlled corporations

Liza Lee Pui Ling (Note 3)

Interest of spouse

6,360,663,987

(L)

71.09

Fastgrow

Beneficial owner

2,978,198,581

(L)

33.29

Credit Suisse Trust Limited

Interest of

782,114,500

(L)

8.74

(Note 4)

controlled corporations

Hashim Majed Hashim A.

Interest of

782,114,500

(L)

8.74

(Note 4)

controlled corporations

North Salomon Limited (Note 4)

Interest of

782,114,500

(L)

8.74

controlled corporations

Saray Capital Limited (Note 4)

Interest of

782,114,500

(L)

8.74

controlled corporations

11

Number of Shares/

Approximate %

Name of shareholder

Capacity

underlying Shares held

of shareholding

Saray Value Fund SPC

Beneficial owner and

782,114,500 (L)

8.74

(Note 4)

interest in persons

acting in concert

Saray Value SPV Asia I

Beneficial owner and

782,114,500 (L)

8.74

(Note 4)

interest in persons

acting in concert

Shobokshi Hussam Ali H.

Interest of

782,114,500 (L)

8.74

(Note 4)

controlled corporations

FMR LLC (Note 5)

Interest of

469,451,000 (L)

5.25

controlled corporation

Notes:

  1. Shun Ho Property beneficially owned 2,709,729,423 Shares (30.29%) and was taken to be interested in 395,656,000 Shares (4.42%) held by Good Taylor Limited, 273,579,983 Shares (3.06%) held by South Point Investments Limited, 3,500,000 Shares (0.04%) held by Shun Ho Technology Developments Limited and 2,978,198,581 Shares (33.29%) held by Fastgrow, representing a total of 6,360,663,987 Shares (71.09%). The above-mentioned companies were wholly-owned subsidiaries of Shun Ho Property.
  2. Shun Ho Property is directly and indirectly owned as to 60.38% by Omnico, which was in turn owned as to 100% by Shun Ho Holdings, which was in turn directly owned as to 50.60% by Trillion Resources, which was in turn wholly-owned by Mr. William Cheng Kai Man. Therefore, Omnico, Shun Ho Holdings and Trillion Resources were taken to be interested in 6,360,663,987 Shares by virtue of their direct or indirect interests in Shun Ho Property.
  3. Madam Liza Lee Pui Ling was deemed to be interested in 6,360,663,987 Shares by virtue of the interest in such Shares of her spouse, Mr. William Cheng Kai Man, a director of the Company.

12

  1. Saray Value SPV Asia I ("Saray Value SPV") beneficially held 676,050,500 Shares (7.56%). Saray Value Fund SPC ("Saray Value Fund") beneficially held 106,064,000 Shares (1.18%). Both Saray Value SPV and Saray Value Fund were wholly-owned subsidiaries of Saray Capital Limited. Therefore, Saray Value SPV had interest in persons acting in concert of 106,064,000 Shares held by Saray Value Fund. Saray Value Fund had interest in persons acting in concert of 676,050,500 Shares held by Saray Value SPV. Saray Capital Limited was held by Shobokshi Hussam Ali H. as to 35% and Hashim Majed Hashim A. as to 45%. Therefore, the total number of Shares in which Saray Value SPV, Saray Value Fund, Saray Capital Limited, Shobokshi Hussam Ali H. and Hashim Majed Hashim A. were interested under Sections 317 and 318 of SFO was 782,114,500 Shares (8.74%).
    Saray Value SPV was held by North Salomon Limited as to 88.49% and Saray Value Fund was held by North Salomon Limited as to 75.04%. North Salomon Limited was held by Credit Suisse Trust Limited as to 100%. Therefore, the total number of Shares in which North Salomon Limited and Credit Suisse Trust Limited were interested under Sections 317 and 318 of SFO was 782,114,500 Shares (8.74%).
  2. Fidelity Management & Research (Japan) Limited beneficially held 220,316,000 Shares (2.46%). Fidelity Management & Research (Hong Kong) Limited beneficially held 90,048,000 Shares (1.01%). FMR Investment Management (UK) Limited beneficially held 159,087,000 Shares (1.78%). Both Fidelity Management & Research (Japan) Limited and Fidelity Management & Research (Hong Kong) Limited were wholly-owned by Fidelity Management & Research Company. FMR Investment Management (UK) Limited was wholly-owned by Fidelity Management & Research Company, Fidelity Management & Research Company was wholly-owned by FMR LLC. Therefore, FMR LLC was deemed to have interest in 469,451,000 Shares (5.25%).
  1. Long Position

Save as disclosed above, there was no person, other than a director or chief executive of the Company, who has an interest or short position in the Shares and underlying Shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO.

INDEPENDENT REVIEW

The interim results for the six months ended 30th June, 2020 are unaudited, but have been reviewed in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants, by Deloitte Touche Tohmatsu, whose independent review report is included on page 16 of this interim report. The interim results and the interim report 2020 have also been reviewed by the Group's Audit Committee.

13

CORPORATE GOVERNANCE

  1. Compliance with the Corporate Governance Code
    During the six months ended 30th June, 2020, the Company has complied with all the code provisions of the Corporate Governance Code set out in Appendix 14 of the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited with the exception of the following deviations:
    Code Provision A.2.1: chairman and chief executive should not be performed by the same individual
    The Company does not have separate appointments for Chairman and Chief Executive Officer. Mr. William Cheng Kai Man holds both positions. The Board believes that vesting the roles of both Chairman and Chief Executive Officer in the same person enables the Company to have a stable and consistent leadership. It also facilitates the planning and execution of the Company's strategy and is hence, for the interests of the Company and its shareholders.
    Code Provision A.4.1: non-executive directors should be appointed for a specific term
    Except three non-executive directors, all directors of the Company (including executive or non-executive directors) are not appointed for a fixed term. The Articles of Association of the Company stipulate that every director (including executive or non-executive directors) shall retire and be re-elected at least once every three years. Therefore, the Company has adopted adequate measures to ensure the corporate governance of the Company complies with the same level to that required under the Corporate Governance Code.
    Code Provision A.5.2: the nomination committee should perform the duties set out in paragraphs (a) to (d)
    The terms of reference of the nomination committee adopted by the Company are in compliance with Code Provision A.5.2 except that it is not the duty of the nomination committee to select individuals nominated for directorships. The nomination committee comprises a majority of independent non-executive directors who are not involved in the daily operation of the Company and may not have sufficient knowledge of industry practice. Such duty should be performed by the board.

14

Code Provision B.1.2: the remuneration committee's terms of reference should include, as a minimum, paragraphs (a) to (h)

The terms of reference of the remuneration committee adopted by the Company are in compliance with Code Provision B.1.2 except that it is not the duties of the remuneration committee to approve the management's remuneration proposals, compensation payable to executive directors and senior management for any loss or termination of office or appointment and compensation arrangements relating to dismissal or removal of directors for misconduct. The remuneration committee comprises a majority of independent non-executive directors who are not involved in the daily operation of the Company and may not have sufficient knowledge of industry practice. Such duties should be performed by the board.

  1. Compliance with the Model Code
    The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules as the code of conduct regarding securities transactions by the directors. Having made specific enquiry of all directors, the Company confirmed that all directors have complied with the required standard set out in the Model Code during the six months ended 30th June, 2020.
  2. Change in information of director
    Pursuant to Rule 13.51B(1) of the Listing Rules, the change in information of director of the Company, as notified to the Company, subsequent to the date of the
    2019 Annual Report is set out below:
    Madam Ng Yuet Ying
    • appointed as an executive director of Shun Ho Property Investments Limited and Shun Ho Holdings Limited.

By Order of the Board

William CHENG Kai Man

Chairman

Hong Kong, 19th August, 2020

15

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF

MAGNIFICENT HOTEL INVESTMENTS LIMITED

華大酒店投資有限公司

(incorporated in Hong Kong with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated financial statements of Magnificent Hotel Investments Limited (the "Company") and its subsidiaries set out on pages 17 to 42, which comprise the condensed consolidated statement of financial position as of 30th June, 2020 and the related condensed consolidated statement of profit or loss, consolidated statement of total comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

19th August, 2020

16

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

Six months

ended 30th June,

NOTES

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Revenue

3

Contracts with customers

71,463

248,370

Leases

18,782

16,739

Dividend income

53

3,557

Total revenue

90,298

268,666

Cost of sales

(238)

(2,123)

Other service costs

(80,354)

(143,203)

Depreciation of property,

plant and equipment

(37,405)

(37,540)

Depreciation of right-of-use assets

(391)

(407)

Gross (loss) profit

(28,090)

85,393

Decrease in fair value of

investment properties

(116,429)

-

Other income and gains and losses

9,489

8,804

Administrative expenses

(19,113)

(18,698)

- Depreciation

(3,748)

(3,839)

- Others

(15,365)

(14,859)

Finance costs

5

(4,582)

(4,009)

(Loss) profit before taxation

(158,725)

71,490

Income tax credit (expense)

6

4,866

(13,891)

(Loss) profit for the period attributable

to owners of the Company

7

(153,859)

57,599

HK cents

HK cents

(Loss) earnings per share

9

Basic

(1.72)

0.64

17

CONDENSED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

(Loss) profit for the period

(153,859)

57,599

Other comprehensive (expense) income

Item that will not be reclassified to profit or loss

Fair value (loss) gain on equity instruments at

fair value through other comprehensive income

(75,997)

8,404

Item that may be reclassified subsequently

to profit or loss

Exchange differences on translation of foreign

operations

(76,024)

(1,413)

Other comprehensive (expense) income

for the period

(152,021)

6,991

Total comprehensive (expense) income

attributable to owners of the Company

(305,880)

64,590

18

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30TH JUNE, 2020

As at

As at

30th June,

31st December,

NOTES

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

NON-CURRENT ASSETS

Property, plant and equipment

10

2,585,816

2,655,849

Right-of-use assets

25,595

26,481

Investment properties

11

1,382,890

1,097,900

Deposit paid for acquisition of an

investment property

-

429,470

Equity instruments at fair value through

other comprehensive income

190,546

266,543

4,184,847

4,476,243

CURRENT ASSETS

Inventories

1,014

1,172

Trade and other receivables

12

11,986

6,276

Other deposits and prepayments

10,858

8,422

Bank balances and cash

390,674

82,502

414,532

98,372

CURRENT LIABILITIES

Trade and other payables and accruals

13

39,782

39,363

Rental and other deposits received

3,512

3,157

Contract liabilities

2,880

1,633

Amount due to immediate holding

company

16(b)

24,563

27,808

Tax liabilities

5,680

20,648

Bank loans

14

508,691

125,386

585,108

217,995

NET CURRENT LIABILITIES

(170,576)

(119,623)

TOTAL ASSETS LESS CURRENT

LIABILITIES

4,014,271

4,356,620

19

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL

POSITION (Continued)

AT 30TH JUNE, 2020

As at

As at

30th June,

31st December,

NOTES

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

CAPITAL AND RESERVES

Share capital

15

841,926

841,926

Reserves

2,843,404

3,149,284

TOTAL EQUITY

3,685,330

3,991,210

NON-CURRENT LIABILITIES

Bank loans

14

238,664

266,024

Rental deposits received

230

1,552

Deferred tax liabilities

90,047

97,834

328,941

365,410

4,014,271

4,356,620

20

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

Attributable to owners of the Company

Foreign

Special

Property

Securities

currency

Share

capital

revaluation

revaluation

translation

Other

Retained

capital

reserve

reserve

reserve

reserve

reserve

profits

Total

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

(Note a)

(Note b)

(Note c)

At 1st January, 2019 (audited)

841,926

612,477

179

244,354

(51,759)

3,561

2,410,923

4,061,661

Profit for the period

-

-

-

-

-

-

57,599

57,599

Fair value gain on equity instruments

at fair value through other

comprehensive income

-

-

-

8,404

-

-

-

8,404

Exchange differences arising on

translation of foreign operations

-

-

-

-

(1,413)

-

-

(1,413)

Total comprehensive income

(expense) for the period

-

-

-

8,404

(1,413)

-

57,599

64,590

Final dividend paid for the year

ended 31st December, 2018 (note 8)

-

-

-

-

-

-

(58,335)

(58,335)

At 30th June, 2019 (unaudited)

841,926

612,477

179

252,758

(53,172)

3,561

2,410,187

4,067,916

At 1st January, 2020 (audited)

841,926

612,477

179

190,186

(34,380)

3,561

2,377,261

3,991,210

Loss for the period

-

-

-

-

-

-

(153,859)

(153,859)

Fair value loss on equity instruments

at fair value through other

comprehensive income

-

-

-

(75,997)

-

-

-

(75,997)

Exchange differences arising on

translation of foreign operations

-

-

-

-

(76,024)

-

-

(76,024)

Total comprehensive expense

for the period

-

-

-

(75,997)

(76,024)

-

(153,859)

(305,880)

At 30th June, 2020 (unaudited)

841,926

612,477

179

114,189

(110,404)

3,561

2,223,402

3,685,330

21

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN

EQUITY (Continued)

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

Notes:

  1. The special capital reserve represents the difference arising from the reduction of the nominal value of the Company's shares in year 1999.
  2. The property revaluation reserve is arisen from the transfer of properties from property, plant and equipment to investment properties and will be transferred to retained profits when the relevant properties are disposed of.
  3. The other reserve represents the difference between the sales proceeds from the disposal of partial interest in a subsidiary and the reduction of interest in the carrying amounts of assets and liabilities of the subsidiary in previous years.

22

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Net cash (used in) from operating activities

(24,709)

122,068

Net cash (used in) from investing activities

Acquisition of property, plant and equipment

(29,431)

(3,085)

Proceeds from disposal of property,

plant and equipment

132

21,587

Deposit paid for acquisition of property,

plant and equipment

-

(5,800)

(29,299)

12,702

Net cash from (used in) financing activities

Interest paid

(4,582)

(4,009)

Bank loans raised

384,430

-

Repayment of bank loans

(11,522)

(51,900)

Dividend paid to shareholders

(2,071)

(60,404)

Repayment to immediate holding company

(3,245)

(5,088)

363,010

(121,401)

Net increase in cash and cash equivalents

309,002

13,369

Cash and cash equivalents at the beginning

of the period

82,502

499,169

Effect of foreign exchange rate changes

(830)

(133)

Cash and cash equivalents at the end of the period

390,674

512,405

23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30TH JUNE, 2020

1. BASIS OF PREPARATION

Magnificent Hotel Investments Limited (the "Company") is a public limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange").

The Company's immediate and intermediate holding company are Shun Ho Property Investments Limited and Shun Ho Holdings Limited, respectively, both are public limited companies incorporated in Hong Kong whose shares are listed on the Hong Kong Stock Exchange. The directors of the Company consider the Company's ultimate holding company to be Trillion Resources Limited, an international business company incorporated in the British Virgin Islands.

The condensed consolidated financial statements are presented in Hong Kong Dollars ("HK$"), which is also the functional currency of the Company. The principal activities of the Company and its subsidiaries (collectively referred to as the "Group") are the investment and operation of hotels, property investment and securities investment.

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange.

The financial information relating to the year ended 31st December, 2019 that is included in these condensed consolidated financial statements as comparative information does not constitute the Company's statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements is as follows:

The Company has delivered the financial statements for the year ended 31st December, 2019 to the Register of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance.

24

1. BASIS OF PREPARATION (Continued)

The Company's auditor has reported on those financial statements. The auditor's report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance.

In preparing the condensed consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the fact that the Group's current liabilities exceeded its current assets by HK$170,576,000 as at 30th June, 2020. In the opinion of the directors of the Company, the Group has a number of sources of finance available to fund its operations, including internal resources and available unutilised banking facilities. The immediate holding company has also agreed not to demand for repayment until the Group has the financial ability to do so. Accordingly, the condensed consolidated financial statements have been prepared on a going concern basis.

1A. SIGNIFICANT EVENTS IN THE CURRENT INTERIM PERIOD

The outbreak of Covid-19 and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, business environment, directly and indirectly affect the operations of the Group. To address negative impact arising from the pandemic, the Government of the Hong Kong Special Administrative Region (the "Government of the HKSAR") has announced some financial measures and supports for corporates. As a result of these factors, the financial positions and performance of the Group were affected in different aspects, including reduction in revenue, change in fair value of investment properties and recognition of government grants in respect of Covid-19-related subsidies.

During the current interim period, the Group recognised government grants of HK$7,457,000 in respect of Covid-19-related subsidies, of which amounted to HK$4,207,000 related to Employment Support Scheme provided by the Government of the HKSAR and set off the relevant salary expenses.

25

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties and certain financial instruments, which are measured at fair values, as appropriate.

Other than changes in accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30th June, 2020 are the same as those followed and presented in the preparation of the Group's financial statements for the year ended 31st December, 2019.

Application of amendments to HKFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatory effective for the annual period beginning on or after 1st January, 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1

Definition of Material

and HKAS 8

Amendments to HKFRS 3

Definition of a Business

Amendments to HKFRS 9,

Interest Rate Benchmark Reform

HKAS 39 and HKFRS 7

26

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

Application of amendments to HKFRSs (Continued)

Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS standards and the amendments to HKFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

2.1 Impacts of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31st December 2020.

27

3. REVENUE

Revenue represents the aggregate of income from operation of hotels, property rental and dividend income, and is analysed as follows:

Six months

ended 30th June,

20202019

HK$'000 HK$'000

(Unaudited) (Unaudited)

Income from operation of hotels

71,463

248,370

Income from property rental

18,782

16,739

Dividend income

53

3,557

90,298

268,666

Disaggregation of revenue for operation of hotels:

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Types of goods or services

(time of revenue recognition):

Room revenue and other ancillary

services (recognised over time)

70,171

238,305

Food and beverage

(recognised at a point in time)

1,292

10,065

71,463

248,370

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Geographical markets:

Hong Kong

69,797

240,220

The People's Republic of China

(the "PRC")

1,666

8,150

71,463

248,370

28

4. SEGMENT INFORMATION

The Group's operating and reportable segments, based on information reported to the chief operating decision maker (the "CODM"), the Chairman of the Company, for the purpose of resources allocation and performance assessment are as follows:

  1. Hospitality services - Best Western Plus Hotel Kowloon
  2. Hospitality services - Best Western Plus Hotel Hong Kong
  3. Hospitality services - Magnificent International Hotel, Shanghai
  4. Hospitality services - Best Western Hotel Causeway Bay
  5. Hospitality services - Ramada Hong Kong Harbour View
  6. Hospitality services - Best Western Grand Hotel
  7. Hospitality services - Grand City Hotel
  8. Property investment - Shops, hotel and residential property
  9. Securities investment

Information regarding the above segments reported below.

29

4. SEGMENT INFORMATION (Continued)

The following is an analysis of the Group's revenue and results by operating and reportable segment for the periods under review:

Segment revenue

Segment (loss) profit

Six months

Six months

ended 30th June,

ended 30th June,

2020

2019

2020

2019

HK$'000

HK$'000

HK$'000

HK$'000

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Hospitality services

71,463

248,370

(46,925)

65,097

- Best Western Plus Hotel Kowloon

9,486

36,326

(10,352)

6,543

- Best Western Plus Hotel Hong Kong

15,582

43,122

(1,881)

16,424

- Magnificent International Hotel, Shanghai

1,666

8,150

(3,350)

11

- Best Western Hotel Causeway Bay

8,573

31,573

(8,139)

6,562

- Ramada Hong Kong Harbour View

14,387

51,823

(3,610)

18,981

- Best Western Grand Hotel

13,397

52,349

(15,058)

10,528

- Grand City Hotel

8,372

25,027

(4,535)

6,048

Property investment - Shops,

hotel and residential property

18,782

16,739

(97,647)

16,739

Securities investment

53

3,557

53

3,557

90,298

268,666

(144,519)

85,393

Other income and gains and losses

9,489

8,804

Administrative expenses

(19,113)

(18,698)

Finance costs

(4,582)

(4,009)

(Loss) profit before taxation

(158,725)

71,490

Segment (loss) profit represents the result of each segment without allocation of administration expenses, other income and gains and losses and finance costs. This is the measure reported to the CODM for the purposes of resources allocation and performance assessment.

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales for both periods.

30

4. SEGMENT INFORMATION (Continued)

The following is an analysis of the Group's assets and liabilities by operating and reportable segment:

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Segment assets

Hospitality services

2,515,367

2,550,295

- Best Western Plus Hotel Kowloon

267,382

274,966

- Best Western Plus Hotel Hong Kong

317,221

317,628

- Magnificent International Hotel, Shanghai

64,311

67,053

- Best Western Hotel Causeway Bay

309,817

315,115

- Ramada Hong Kong Harbour View

495,353

497,931

- Best Western Grand Hotel

676,848

690,187

- Grand City Hotel

384,435

387,415

Property investment - Shops,

hotel and residential property

1,382,890

1,527,370

Securities investment

190,546

267,872

Total segment assets

4,088,803

4,345,537

Unallocated assets

510,576

229,078

Consolidated assets

4,599,379

4,574,615

31

4. SEGMENT INFORMATION (Continued)

The following is an analysis of the Group's assets and liabilities by operating and reportable segment: (Continued)

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Segment liabilities

Hospitality services

30,442

27,278

- Best Western Plus Hotel Kowloon

5,334

5,224

- Best Western Plus Hotel Hong Kong

6,181

4,242

- Magnificent International Hotel, Shanghai

1,854

1,458

- Best Western Hotel Causeway Bay

3,411

3,520

- Ramada Hong Kong Harbour View

4,326

4,467

- Best Western Grand Hotel

5,401

5,854

- Grand City Hotel

3,935

2,513

Property investment - Shops,

hotel and residential property

11,886

11,899

Securities investment

1

2

Total segment liabilities

42,329

39,179

Unallocated liabilities

871,720

544,226

Consolidated liabilities

914,049

583,405

For the purposes of monitoring segment performances and allocating resources between segments:

  • all assets are allocated to operating and reportable segments other than the Group's head office corporate assets (including certain property, plant and equipment) and bank balances and cash; and
  • all liabilities are allocated to operating and reportable segments other than the Group's head office corporate liabilities, amount due to immediate holding company, bank loans, tax liabilities and deferred tax liabilities.

32

5. FINANCE COSTS

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Interests on:

Bank loans

3,816

4,009

Amount due to immediate holding

company (note 16(b))

766

-

4,582

4,009

6. INCOME TAX (CREDIT) EXPENSE

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

The taxation (credit) expense comprises:

Current tax

Hong Kong

34

10,941

The United Kingdom (the "UK")

3,041

2,507

3,075

13,448

(Over) underprovision in prior years

Hong Kong

(285)

-

The UK

131

(102)

2,921

13,346

Deferred tax

(7,787)

545

(4,866)

13,891

33

  1. INCOME TAX (CREDIT) EXPENSE (Continued)
    Hong Kong Profits Tax is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The annual tax rate used is 16.5% for the six months ended 30th June, 2020 (six months ended 30th June, 2019: 16.5%).
    Taxation arising in the PRC and the UK are recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year prevailing in the relevant jurisdictions.
    No deferred tax liabilities on the temporary differences attributable to the undistributed retained profits earned by the Group's PRC subsidiary were charged to profit or loss for the six months ended 30th June, 2019 and 2020.
  2. (LOSS) PROFIT FOR THE PERIOD

Six months

ended 30th June,

20202019

HK$'000 HK$'000

(Unaudited) (Unaudited)

(Loss) profit for the period has been arrived

at after charging (crediting):

Depreciation of right-of-use assets

391

407

Depreciation of property, plant and equipment

41,153

41,379

Interest on bank deposits (Note)

(318)

(4,831)

Loss (gain) on disposal of property,

plant and equipment (Note)

7

(3,318)

Note: The amounts are included in other income and gains and losses.

34

  1. DIVIDEND
    During the six months ended 30th June, 2020, no final dividend was declared and paid to shareholders for the year ended 31st December, 2019 (six months ended 30th June, 2019: a final dividend of HK0.652 cent per share amounting to HK$58,335,000 was declared and paid to shareholders for the year ended 31st December, 2018).
    The directors have resolved not to declare or propose an interim dividend for the six months ended 30th June, 2020 (six months ended 30th June, 2019: HK0.08 cent per share amounting to HK$7,158,000).
  2. (LOSS) EARNINGS PER SHARE
    The calculation of the basic (loss) earnings per share is based on the loss for the period attributable to owners of the Company of HK$153,859,000 (profit for the six months ended 30th June, 2019: HK$57,599,000) and on 8,947,051,000 shares (six months ended 30th June, 2019: 8,947,051,000 shares) in issue during the period.
    Diluted (loss) earnings per share for both periods are not presented as there are no potential ordinary shares outstanding during both periods.
  3. PROPERTY, PLANT AND EQUIPMENT
    During the six months ended 30th June, 2020, the Group has acquired property, plant and equipment (8 Park St. James, St. James's Terrace, London to be registered address of Wood Street Hotel Limited in the UK) of HK$29,431,000 (six months ended 30th June, 2019: HK$3,085,000).
    The Group has disposed of property, plant and equipment with carrying amount of HK$139,000 (six months ended 30th June, 2019: HK$18,269,000) during the period.
    During the period, a building with a carrying amount of HK$57,499,000 is transferred from property, plant and equipment to investment properties.

35

11. INVESTMENT PROPERTIES

Investment properties are stated at fair value based on the valuations performed by independent professional valuers which are not connected with the Group and the Directors of the Company. The fair value is derived by using income capitalisation method and by making reference to comparable rental and sales transactions as available in the market which involves certain estimates. During the assessment of the fair values of investment properties, the valuers and the Directors of the Company have exercised their judgement and are satisfied that the method of valuation and the key inputs, including capitalisation rates and market rents, are reflective of the current market conditions. If there are changes in the assumptions used for the valuations, the fair value of the investment properties will change in the future.

The investment properties of the Group with an aggregate carrying amount of approximately HK$1,383 million (31st December, 2019: HK$1,098 million) were rented out under operating leases at the end of the reporting period. Outgoing expenses for investment properties that are not generating income during the period are insignificant. The resulting loss on fair value changes of investment properties HK$116,429,000 has been recognised directly in profit or loss for the six months ended 30th June, 2020 (six months ended 30th June, 2019: nil).

In estimating the fair value of the properties, the highest and best use of the properties is their current use.

The income capitalisation approach estimates the values of the properties on an open market basis by capitalising rental income on a fully leased basis having regard to the current passing rental income from existing tenancies and potential future reversionary income at the market level. The term value involves the capitalisation of the current passing rental income over the existing lease term. The reversionary value is taken to be current market rental income upon the expiry of the lease and is capitalised on a fully leased basis. In this approach, the valuers have considered the term yield and reversionary yield. The term yield is used for capitalisation of the current passing rental income as at the date of valuation whilst the reversionary yield is used to convert reversionary rental income.

During the six months ended 30th June, 2020, a deposit paid for acquisition of an investment property (37 Wood Street, London) of HK$429,470,000 was transferred to investment properties upon the completion of the acquisition.

36

12. TRADE AND OTHER RECEIVABLES

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Trade receivables from contracts with

customers

2,038

3,408

Other receivables

9,948

2,868

11,986

6,276

Except for a credit period of 30 to 60 days granted to travel agencies and certain customers of the hotels, the Group does not allow any credit period to customers. The following is an aged analysis of the Group's trade receivables from contracts with customers presented based on the invoice date at the end of the reporting period:

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Not yet due

1,764

3,362

Overdue:

0 - 30 days

52

37

31 - 60 days

108

9

61 - 90 days

114

-

2,038

3,408

37

13. TRADE AND OTHER PAYABLES AND ACCRUALS

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Trade payables

1,661

2,392

Other payables and accruals

38,121

36,971

39,782

39,363

The following is an aged analysis of the Group's trade payables presented based on the invoice date at the end of the reporting period:

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

0 - 30 days

1,484

2,296

31 - 60 days

34

54

61 - 90 days

143

42

1,661

2,392

38

14. BANK LOANS

As at

As at

30th June,

31st December,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Audited)

Secured bank loans

747,355

391,410

The carrying amounts of bank loans are

repayable (based on scheduled repayment

dates set out in the loan agreements):

Within one year

19,320

20,697

Within a period of more than one year

but not exceeding two years

238,664

20,697

Within a period of more than two years

but not exceeding five years

-

245,327

257,984

286,721

The carrying amounts of bank loans that

contain a repayable on demand clause

(shown under current liabilities)

but repayable:

Within one year

420,809

35,219

Within a period of more than one year

but not exceeding two years

66,406

26,274

Within a period of more than two years

but not exceeding five years

2,156

42,806

Within a period of more than five years

-

390

489,371

104,689

747,355

391,410

Amounts shown under current liabilities

508,691

125,386

Amounts shown under non-current liabilities

238,664

266,024

747,355

391,410

All the Group's bank loans are floating rate borrowings. The bank loans are secured over certain of the Group's assets as disclosed in note 18. Effective interest rate is 1.34% per annum (31st December, 2019: 1.90% per annum).

39

15. SHARE CAPITAL

Number

of shares

Amount

'000

HK$'000

Ordinary shares

Issued and fully paid:

At 1st January, 2019 (audited),

30th June, 2019 (unaudited),

31st December, 2019 (audited)

and 30th June, 2020 (unaudited)

8,947,051

841,926

16. RELATED PARTY TRANSACTIONS

Other than those disclosed in the condensed consolidated financial statements, the Group had the following transactions with related parties during the period:

Six months

ended 30th June,

2020

2019

HK$'000

HK$'000

(Unaudited)

(Unaudited)

Shun Ho Property Investments Limited

(the Company's immediate holding

company) and its subsidiaries*

Short term lease payment (note a)

550

1,161

Interest expenses (note b)

766

-

Corporate management fee income for

administrative facilities provided

1,342

1,548

Corporate management fee income for

hotel operations services provided

-

419

Dividend paid/payable

-

46,559

Dividend received/receivable

-

3,393

Shun Ho Holdings Limited (the Company's

intermediate holding company)

Corporate management fee income for

administrative facilities provided

75

75

Compensation of key management

personnel (note c)

4,119

4,771

  • exclude the Company and its subsidiaries

40

16. RELATED PARTY TRANSACTIONS (Continued)

Notes:

    1. No commitment arised from the lease rental from the immediate holding company.
    2. The amount due to immediate holding company was unsecured, carried interest at fixed rate 2% per annum and repayable on demand.
    3. The compensation of key management personnel comprised short-term and post employment benefits attributable to such personnel.
  1. PROJECT/CAPITAL COMMITMENTS
    The Group had outstanding commitments contracted for but not provided in the condensed consolidated financial statements in respect of expenditure on property, plant and equipment amounted to HK$1,363,000 (31st December, 2019: HK$706,000).
  2. PLEDGE OF ASSETS/REVENUE
    At the end of the reporting period, the bank loan facilities of the Group were secured by the followings:
    1. investment properties and property, plant and equipment of the Group with carrying amounts as at 30th June, 2020 of approximately HK$948 million (31st December, 2019: HK$1,098 million), and HK$2,400 million (31st December, 2019: HK$2,433 million), respectively;
    2. pledge of shares in certain subsidiaries with an aggregate net asset value as at 30th June, 2020 of approximately HK$558 million (31st December, 2019: HK$729 million);
    3. assignment of the Group's property rental of certain subsidiaries;
    4. charge over deposits and securities of a subsidiary; and
    5. assignment of insurance on a hotel property.

41

19. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Fair value of the Group's financial assets that are measured at fair value on a recurring basis

Some of the Group's financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable.

  • Level 1 fair value measurements are based on quoted prices (unadjusted) in active market for identical assets or liabilities;
  • Level 2 fair value measurements are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
  • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value as at

Valuation

30th June,

31st December,

Fair value

technique(s)

Financial asset

2020

2019

hierarchy

and key input(s)

HK$'000

HK$'000

(Unaudited)

(Audited)

Equity instrument at fair

190,546

266,543

Level 1

Quoted bid

value through other

prices in an

comprehensive income

active market

The directors of the Company consider that the carrying amounts of the other financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.

42

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Disclaimer

Magnificent Hotel Investments Ltd. published this content on 17 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 September 2020 06:44:05 UTC

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Financials
Sales 2019 428 M 55,2 M 55,2 M
Net income 2019 31,8 M 4,11 M 4,11 M
Net Debt 2019 332 M 42,8 M 42,8 M
P/E ratio 2019 47,8x
Yield 2019 0,47%
Capitalization 877 M 113 M 113 M
EV / Sales 2018 2,63x
EV / Sales 2019 4,33x
Nbr of Employees 503
Free-Float 28,9%
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Kai Man Cheng Chairman & Chief Executive Officer
Wing Ho Hui Executive Director
Mei Yee Lui Fung Non-Executive Director
Chi Sun Kwok Independent Non-Executive Director
Kim Fai Chan Independent Non-Executive Director