The new project will be completed by the end of this year. Since its establishment in 2010 and during the track record period, the company has completed a new industrial building, Skyline Centre, and successfully increased its capital value in August 2014. the company also started the construction of another industrial building, Star Center, in June 2013. the building is expected to be completed in the fourth quarter of 2016. As the operation process of property development projects is similar, through property projects such as Skyline Centre and Star Centre, the company has accumulated experience in identifying and acquiring development sites, obtaining pre-construction approval, project planning and design (including selection and engagement of architectural and engineering companies), project execution and supervision (including engagement of contractors to undertake foundation and superstructure construction works) and pre-sale and marketing.
In the future, we will focus on property upgrading and property reconstruction projects. All properties held by the company as at the latest practicable date are used for industrial purposes. The company intends to convert Yu Fung property and the redevelopment of Chai Wan Kok property into a commercial property of studio office buildings, with the aim of commencing the property upgrading works of Yu Fung property and the redevelopment of Chai Wan Kok property in the fourth quarter of 2016.
The profit level in the past is not stable. During the track record period, the company's profits mainly came from the sale of workshop units in the Skyline Centre. For the three financial years ended 2015, the Company recorded net profits of approximately HK $0.20 million, HK $196.1 million and HK $37.1 million respectively, while the fair value income of investment properties was approximately HK $5.1 million, HK $12.0 million and HK $16.4 million respectively in the same period. Excluding the relevant fair value gains, the Company will record an adjusted net loss of approximately HK $4.9 million, an adjusted net profit of HK $184.1 million and an adjusted net profit of HK $20.7 million respectively for the three years ended 31 December 2015.
The largest shareholder promised not to sell for three years after the IPO. Chen Wenhui, the largest shareholder of the company, held 91.8% of the shares before the listing of the company, and voluntarily made an irrevocable non-sale commitment to the Stock Exchange, the company and exclusive sponsor Guotai Junan International to extend the lock-up period of its shares to 36 months from the listing date, during which time he will not cease to be the controlling shareholder of the company.
It is recommended to subscribe carefully. As a local industrial property developer in Hong Kong, the deterioration of macroeconomic conditions is bound to cast a shadow over the future development of the company. The valuation of the property developed by the company is reasonable, but the investment attraction potential is weak. In terms of valuation, the company trades at a price-to-earnings ratio of 8.69 to 10.87 times 2015 and a price-to-book ratio of 1.57 to 1.80 times; as of the last feasible date, the discount rate on its net assets was 56.5% to 80.0%. Compared with the same industry, the valuation is reasonable, so it is recommended to subscribe carefully.
