Nam Tai Property (NTP) Reports Q4 Loss of $0.16

Nam Tai Property (NYSE: NTP) reported Q4 EPS of ($0.16), versus ($0.07) reported last year.

OPERATING RESULTS

Net operation income for the fourth quarter of 2018 was $0.4 million, an increase of $0.2 million compared to an operation income of $0.2 million in the fourth quarter of 2017. Operation income for the fourth quarter of 2018 mainly consisted of rental income of $0.4 million from the existing factory buildings located on the site of Phase II of Nam Tai Inno City.

Operating loss for the fourth quarter of 2018 was $3.6 million, an increase of $1.4 million compared to an operating loss of $2.2 million in the fourth quarter of 2017. This period to period increase was mainly due to an increase in expenses incurred in connection with our growing operations. Operating loss for the fourth quarter of 2018 mainly consisted of general and administrative expenses of $3.5 million and selling and marketing expenses of $0.5 million, which were offset in part by our net operation income of $0.4 million for the period, compared to general and administrative expenses of $2.4 million in the fourth quarter of 2017, which were offset in part by our net operation income of $0.2 million for that period.

Net loss for the fourth quarter of 2018 was $6.3 million, compared to net loss of $2.5 million in the fourth quarter of 2017. Net loss for the fourth quarter of 2018 mainly consisted of net operating loss of $3.6 million and a loss of $4.1 million related to the disposal of certain fixed assets in our Wuxi factory; offset in part by interest income of $1.0 million earned from time deposits. Net loss for the fourth quarter of 2017 mainly consisted of net operating loss of $2.2 million and a loss of $4.6 million related to the write down of our demolished factory buildings located on the site of Phase I of Nam Tai Inno City; offset in part by an exchange gain of $2.4 million as a result of the appreciation of Renminbi against the U.S. dollar in the fourth quarter of 2017 and interest income of $1.6 million earned from time deposits. Net loss per diluted share for the fourth quarter of 2018 was $0.16 compared to net loss per diluted share of $0.07 for the fourth quarter of 2017.

Net loss for the twelve months ended December 31, 2018 was $13.3 million compared to net income of $3.9 million for the twelve months ended December 31, 2017. Net loss for the twelve months ended December 31, 2018 mainly consisted of general and administrative expenses of $20.4 million, a loss of $4.1 million related to the disposal of certain fixed assets in our Wuxi factory and an exchange loss of $1.3 million as a result of the depreciation of the Renminbi against the U.S. dollar; offset in part by a gain of $6.8 million on disposal of an office property in Hong Kong, interest income of $5.6 million earned from time deposits and operation income of $0.4 million. Net income for the twelve months ended December 31, 2017 mainly consisted of an exchange gain of $8.6 million as a result of the appreciation of Renminbi against the U.S. dollar during the twelve months ended December 31, 2017, interest income of $7.6 million earned from time deposits and operation income of $1.9 million; offset in part by general and administrative expenses of $9.5 million and a loss of $4.6 million related to the write down of our demolished factory buildings located on the site of Phase I of Nam Tai Inno City. Net loss per diluted share for the twelve months ended December 31, 2018 was $0.35 compared to net income per diluted share of $0.11 for the twelve months ended December 31, 2017.

The majority of our assets are denominated in Renminbi. The translation of Renminbi-denominated assets to U.S. dollars for reporting purposes has resulted in a foreign exchange loss, due to fluctuations of the exchange rate for the Renminbi against the U.S. dollar. However, since the majority of our payment obligations are also denominated in Renminbi, we do not expect the movement of U.S. dollar against the Renminbi to materially and adversely impact our business.

Capitalization on project investment was $99.1 million for the fourth quarter of 2018, which mainly consisted of capitalizing payment obligations of $71.2 million in respect to additional land premiums for the land underlying Phase I of Nam Tai Inno City, and was $121.8 million for the twelve months ended December 31, 2018. Our accumulated project investment was $171.6 million as of December 31, 2018, which was recorded under "real estate properties under development" on our balance sheet as of December 31, 2018.

Please see page 7 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. The information contained herein has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of the fourth quarter of 2018 on page 7, Condensed Consolidated Statements of Comprehensive Income.

COMPANY OUTLOOK

The development of Nam Tai Inno Park in Guangming, Shenzhen, and Nam Tai Inno City in Gushu, Shenzhen, continues to proceed smoothly.

For Nam Tai Inno Park, we opened an industrial showroom on the first floor of future building A and held an Internet-of-Things industry conference on December 22, 2018. The showroom was constructed to facilitate discussions with potential tenants and business partners. It includes comprehensive models and a layout of Nam Tai Inno Park, meeting and conference rooms to negotiate the implementation of various technologies and features, a dedicated audio/video room to showcase the technology complex and various units, and a back office area for our staff. The industrial showroom is also designed to attract potential tenants and promote our brand as an operator of high-tech research and development centers. We plan to continuously renovate our industrial showroom by integrating our potential partners' technologies and latest commercial elements for technology parks to further strengthen our position in the market.

For Phase I of Nam Tai Inno City, we re-executed our land use rights contract on October 25, 2018, with the urban planning, land and resources commission of Shenzhen municipality, which allows the 50-years term of our land use rights to restart from the date of re-execution. Upon the receipt of the completion acceptance certificate, we will be permitted to exchange our existing general property ownership certificate for the entire Phase I complex for new 50-year, individual property ownership certificates for each developed unit, thereby allowing us to sell individual units. As a part of re-executing the land use rights contract, we are required to pay, and have capitalized the entire payment of $71.2 million in, additional land premiums for the land underlying Phase I of Nam Tai Inno City, of which $21.4 million was paid on October 27, 2018 and the remainder will be paid by mid 2019. Our payment of additional land premiums may be offset in part by the increased cost basis of our development project when calculating land appreciation tax, if we choose to sell the developed units.

For Phase II of Nam Tai Inno City, we continued with our efforts to lease out offices and workshops to tenants in the technology sphere. As of December 31, 2018, we have successfully rented out the majority of the leasable office and workshop spaces. We decided to lease out our current spaces to early stage companies due to our demolition and construction schedule, which is planned to occur in a few short years, making the existing buildings less attractive to industrial tenants with scaled operations and longer time horizons. Our primary focus is not to generate significant revenue but to maintain the active operation of the facilities ahead of their redevelopment, which is expected to start in March 2023.

As for our Wuxi facility, we have rented it to a third party for further renovation and development commencing from October 2018.

For earnings history and earnings-related data on Nam Tai Property (NTP) click here.

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