Nam Tai Property Inc. Reports Q2 2016 Results

SHENZHEN, China, August 1, 2016 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the second quarter ended June 30, 2016.

KEY HIGHLIGHTS

(In thousands of US dollars, except per share data, percentages and as otherwise stated)

OPERATING RESULTS

Operation income for the second quarter of 2016 and the same quarter of last year were derived from properties and lands located in Shenzhen. Operating loss for the second quarter of 2016 was $1.5 million, a decrease of $1.2 million, compared to operating loss of $2.7 million in the second quarter of 2015. Operating loss for the six months ended June 30, 2016 was $3.5 million, a decrease of $1.7 million, compared to operating loss of $5.2 million in the same period of 2015. The rental agreement with an external lessee on the Guangming land ended in the second quarter of 2015 due to the expiry of lease terms. As such, from the third quarter of 2015 onwards, the operation income is reduced.

Net loss for the second quarter of 2016 was $2.6 million mainly represented the exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars in Q2 2016 and general and administrative expenses of $1.9 million, partly offset by the interest income from time deposits of $1.3 million and net operation income of $0.3 million, or loss of $0.07 per diluted share, compared to net income of $0.8 million mainly represented the interest income from time deposits of $2.3 million, exchange gain of $0.6 million as a result of the appreciation of Renminbi against US dollars in the second quarter of 2015, net operation income of $0.2 million and incentive government allowance of $0.2 million, partly offset by the general and administrative expenses of $2.8 million, or $0.02 per diluted share in the second quarter of 2015

Net loss for the six months ended June 30, 2016 was $3.0 million and mainly included the general and administrative expenses of $4.1 million and exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars during the six months ended June 30, 2016, partly offset by the interest income from time deposits of $2.9 million and net operation income of $0.6 million, or loss of $0.08 per diluted share, compared to net income of $0.8 million mainly included interest income from time deposits of $4.8 million, net operation income of $0.6 million, exchange gain of $0.5 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2015 and reversal of liabilities of $0.5 million, partly offset by the general and administrative expenses of $5.8 million, or $0.02 per diluted share in the same period of 2015.

Capitalization on project investment was $2.0 million for Q2 2016, totaling $3.3 million for the first half of year 2016, and our accumulated project investment was $36.3 million up to June 30, 2016, which is recorded under the account of real estate properties under development in the balance sheet as at June 30, 2016.

Our business of land development is now in the preparation stage where it takes time to apply for the relevant licences from the PRC government. During this preparation stage of the land development process, our only sources of income are from limited deposit interest and rental income; therefore, we expect to incur losses during this stage.

Please see page 7 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. This information has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of Q2 2016 on page 7, Condensed Consolidated Statements of Comprehensive Income.

COMPANY OUTLOOK

Schedules of the Two Projects in Shenzhen

As a part of our preparation for the development of our "Inno Park" project, our internal team is working closely with the external project management company (WSP Parsons Brinckerhoff), quantity surveyor (Currie & Brown) and architectural design firm (Ronald Lu and Partners), on revising and updating the master layout plan of our "Inno Park" for the application of the third license, < Permit for Construction Engineering Planning>, and we believe that we can obtain the necessary permits and licenses and start the construction on schedule.

As a part of our preparation for the development of the "Inno City" project, we have begun our preparation and will kick-off the project soon.

In accordance with the current plan, the construction of our Inno Park project is expected to commence around June 2017, and the construction of our Inno City project is expected to commence around September 2019.

Real Estate Market Conditions in China

According to the Knight Frank Global Residential Cities Index, which tracks the performance of housing prices across 150 cities worldwide, the survey result for Q1 2016 that was released on July 11, 2016 found that housing prices among several cities in China accounted for four of the world's top five high performing cities. In particular, Shenzhen leads the rank with a price growth of 62.5% recorded in the year preceded March 2016, followed by Shanghai with an annual growth of 30.5%. Nanjing and Beijing also ranked fourth and fifth with annual price growths of 17.8% and 17.6%, respectively. For a limited time, you may find Knight Frank Global Residential Cities Index on the website of Knight Frank. This report, however, also mentioned that in spite of the rapid growth in housing prices, new rules introduced in March 2016 by the PRC government in certain tier one cities, including Shenzhen and Shanghai, are likely to lead to a more muted growth for the remainder of 2016.

Our "Inno City" project is located 4km away from Qianhai after its expansion, a special economic zone within Shenzhen, which has attracted many foreign banks and leading financial institutions in the past two years in response to the belief that Qianhai will be made a test bed for China's Renminbi liberalization and other financial reforms.

Recently, a commercial plot in Shenzhen that measures 152,400 square meters in size was sold for $2.1 billion in June 2016, a price that was 1.6 times higher than the local government's minimum asking price and counted as the highest amount ever paid for a single parcel of land in China as at the end of the first half of 2016. This parcel of land is located 1.8 km away from our "Inno Park" project. However, we note that our "Inno Park" is zoned as an industrial plot, not a commercial plot, as compared to this other parcel of land.

Outside of the first tier cities, the overall property market conditions in China remained sluggish with high levels of unsold properties. Property price adjustments in China are widely expected in the second half of 2016 and we will closely monitor the market trends.

In view of the movement of the property market in Shenzhen for the past 12 months, we have engaged three internationally well-known independent appraisal firms (namely Jones Lang Lasalle, Savills and DTZ) to prepare the latest valuation reports on our three land parcels (in Guangming, Gushu and Wuxi). For a limited time, you may find these reports on our Company website.

A summary of our planned gross floor area of the two land parcels in Shenzhen is as follows:

Please note that the eventual plot ratio and GFA for the two parcels of land could be different from the above descriptions, and are subject to the final approval of the relevant authorities in China and adjustment by ourselves.

As for our Wuxi plant, the factory building continues to be listed for sale and we expect it to be sold by 2017.

We currently derive a majority of our income from rental and interest income. Since the beginning of 2016, we have seen a stabilizing trend on the benchmark interest rates in China. However, due to the current economic conditions in China, we expect the Peoples Bank of China ("PBOC") to keep Renminbi denominated official time deposit interest rates in China at a low level throughout 2016. With this lower interest rate and rental income, we expect to continue to incur operating losses in 2016 and beyond.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi denominated assets to US dollars for our reporting purposes has resulted in foreign exchange loss in this quarter. As such, we do expect to see fluctuations in the reporting of foreign exchange loss/gain in the financial statements due to the movement of Renminbi against the US dollars. Nevertheless, as a majority of our payments are in Renminbi, we also do not expect the movement of Renminbi against the US dollar to adversely impact our business.

As of June 30, 2016, we have a total cash balance of $199.7 million and no debt. With our current cash position, we believe our finances remain healthy to fund the initial stages of these property development projects within the coming two years. All of our land development related applications are subject to government policies and regulations in the real estate market. As this is our first venture into the land development projects after the cessation of our LCM business, we may encounter industry-specific difficulties that result in losses as we progress with our projects in Shenzhen. As we are currently in the planning stage of our property projects, and can only generate small income from deposit and rental income, we will continue to record operating losses. Cash on hand is expected to drop continuously, but most of the expenses incurred will be for project development, which will be capitalized as real estate properties under development (non-current asset) on our balance sheet. For more information on risks in our business, please refer to the Risk Factors section of the 2015 Form 20-F as filed with the SEC and on our website.

The information contained in or that can be accessed through the website mentioned in this announcement does not form part of this announcement.

PAYMENT OF QUARTERLY DIVIDENDS FOR 2016

As announced on December 23, 2015, the Company set the payment schedule of quarterly dividends for 2016. The dividend for Q3 2016 was paid on July 20, 2016.

The following table updates the previously announced schedule for declaration and payment of quarterly dividends in 2016.

The Company's decision to continue making the dividend payments in 2016 as set out and confirmed in the above table does not necessarily mean that cash dividend payments will continue thereafter. Whether future dividends after 2016 are to be declared will depend upon Company's future growth and earnings at each relevant period, of which there can be no assurance, and the Company's cash flow needs for business operations and transformation. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2016, and we also cannot assure you what the amounts of such dividends will be or whether such dividends, once declared for a specific period, will continue for any future period, or at all.

PROPOSED SCHEDULE OF RELEASE OF QUARTERLY FINANCIAL RESULTS FOR 2016

To maintain the efficiency of delivering the Company's quarterly financial results to the market, the Company's management has decided to follow approximately the same schedule of 2015 to release the quarterly financial results for 2016. Details of the expected quarterly release dates are as follows:

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE

Certain statements included in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "plan", "seek" or "believe". These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activities, performance, or achievements expressed or implied by the forward-looking statements, including, but not limited to, delay in the Company's ability to obtain all requisite permits and approvals from relevant government authorities in relation to the redevelopment of two parcels of properties in Gushu, Shenzhen, and Guangming, Shenzhen, respectively, and the successful redevelopment of the two parcels of properties; the sufficiency of the Company's cash position and other sources of liquidity to fund its property developments; continued inflation and appreciation of the Renminbi against the US dollar; rising labor costs in China and changes in the labor supply and labor relations. In particular, you should consider the risks outlined under the heading "Risk Factors" in our most recent Annual Report on Form 20-F and in our Current Report filed from time to time on Form 6-K. The Company's decision to continue dividend payments in 2016 does not necessarily mean that dividend payments will continue thereafter. Whether future dividends will be declared depends upon the Company's future growth and earnings, of which there can be no assurance, as well as the Company's cash flow needs for further expansion. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2016, what amount those dividends may be or whether such dividends, once declared for a specific period, will continue for any future period, or at all; and whether we will purchase any of our shares in the open markets or otherwise. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements apply only as of the date of this press release; as such, they should not be unduly relied upon as circumstances change. Except as required by law, we are not obligated, and we undertake no obligation, to release publicly any revisions to these forward-looking statements that might reflect events or circumstance occurring after the date of this release or those that might reflect the occurrence of unanticipated events.

ABOUT NAM TAI PROPERTY INC.

We are a real estate developer. We hold two parcels of land located in Gushu and Guangming, Shenzhen, China. We are converting these two parcels of land that formally housed the manufacturing facilities of our prior businesses into high-end commercial complexes. We expect our principal income in the future will be derived from rental income from these commercial complexes.

Nam Tai Property Inc. is a corporation registered in the British Virgin Islands and listed on the New York Stock Exchange (Symbol: "NTP").

Please refer to the Nam Tai website (www.namtai.com) or the SEC website (www.sec.gov) for Nam Tai press releases and financial statements.