Origo Partners PLC : Interim Management Statement
13 November 2013
Origo Partners PLC
Interim Management Statement
For the three month period from July 1, 2013 to September 30, 2013
This Interim Management Statement by Origo Partners Plc ("Origo" or "theCompany") and its subsidiaries ("theGroup") relates to the three month period from July 1, 2013 to September 30, 2013 ("thePeriod").
Highlights from the Period:
· Unaudited net asset value of US$127.1 million compared to US$131.2 million for the period ending June 30, 2013
· Unaudited net asset value per share of US$0.36 at the end of the Period compared to US$0.38 per share for the period ending June 30, 2013
· Total investments of US$4.7 million
· Cash position of US$4.3 million
CEO Statement
In line with our previous predictions, the resilience of the Chinese economy this year has surprised many international observers. We expect this trend to continue throughout the remainder of the year and gain further momentum in 2014 in the wake of the Third Plenary Session of the 18th CPC Central Committee in Beijing which concluded yesterday and set out a decision on "major issues concerning comprehensively deepening reforms".
However, despite this positive outlook, Chinese IPO markets are still shut and credit conditions are challenging - in particular for private companies. M&A activity is not filling the gap for capital hungry growth companies and PE deal-making remains muted. Across the industry, managers - including Origo - are focusing on the nuts and bolts of private equity investing: managing portfolios and improving the operations of investee companies.
In Mongolia, market conditions too have gradually improved throughout the summer and early autumn. This week, Mongolia annulled 106 exploration licenses, including two low priority licenses held by Kincora Copper Ltd, an Origo portfolio company. Understandably, this was reported in the international press as something of a backlash against foreign investment in the country. In fact, this decision was widely anticipated, following a notice to relevant license holders in February this year in the wake of charges against the former head of the Mineral Resource Authority for Mongolia (MRAM). As far as Kincora is concerned, the company's flagship license, Bronze Fox, is not contested and remains in good standing. The same applies to all licenses held by Origo's other portfolio companies.
Looking atthe bigger picture, we believe the direction of policy is moving in the right direction, albeit less quickly than one would wish.
Notably, on October 3 Mongolia's Parliament approved the Mongolian Law on Investment which overturns two previous laws, easing the regulatory approval required for foreign private investment. Furthermore, it contains legal guarantees, provides tax stability and sets out other incentives so as to promote investment in Mongolia. In sum, the revised law represents a significant, positive change to government policy. We also take comfort in reports indicating that the Mongolian government and Rio Tinto are making progress - albeit slowly - towards a resolution over the financing of Ouy Tolgoi - widely considered as the litmus test for foreign investment in the country. Yet, we anticipate that it will take well into the second half of 2014 until investor sentiment and asset prices respond to improving conditions on the ground. Meanwhile, our portfolio companies effectively remain in a holding pattern, preserving cash and maintaining their exploration and development budgets at a minimum.
After a comprehensive review, and against a backdrop of difficult trading conditions, the Board announced a revised strategy and related cost-saving measures in June. In the Period we have reduced cost across the board, including cutting head-count by close to two thirds, secured a significantly cheaper lease for our Beijing office as well as discontinued leases in other locations, and renegotiated arrangements with a number of advisors and service providers. We expect the cost savings program to be fully implemented by year-end-year, resulting a significantly leaner and nimbler operation, which will set the Company up to focus on managing its assets in 2014 and beyond.
1. Resources and Commitments
At September 30, 2013, Origo had cash and cash equivalents of US$4.3 million. Payables to debtors and other liabilities (excluding USR fair value movements, provisions for performance incentives and deferred income tax liabilities) amounted to US$1.6 million, comprising tax provisions applicable in the event of realisation of certain assets (US$500k) and pension accruals to Directors and employees (US$700k).
In the Period,Origo ceased to control the Mongolia Stock Exchange(MSE) Liquidity Fund, which is in the process of being wound-up. In accordance with relevant accounting standards, the cash balance (equivalent to US$3.2 million) of this former Group company is no longer consolidated in Origo's accounts. At the end of the Period, Origo maintained a residual interest of US$1.7 million in fixed deposits held through MSE. These deposits matured and the cash was returned to the Company in October.
In addition, the Group also has interests totaling US$8.0 million in listed investments and funds it manages which invest in quoted investments. Additionally, Origo holds a US$15 million partnership interest in China Cleantech Partners LLP, which remains uncommitted.
2. Unaudited Net Asset Value
No revaluation of the portfolio took place during the Period as per Origo's policy to reassess the value of the Company's assets on a bi-annual basis. However, adjusting to reflect the purchase and sale of investments, currency movements and market values in respect of quoted investments, the Company estimates unaudited net asset value at the end of the Period was US$127.1 million (US$0.36 per share). The equivalent NAV per share translated into British Sterling at the prevailing exchange rate at the end of the Period was 23 pence which is lower than 25 pence per share for the period ending June 30, 2013. The decrease in NAV was due primarily to ongoing operating expenses (US$1.8 million) and non-cash based charges relating to interest accrued (US$1.2 million) to the zero-dividend preferred shares.
3. Portfolio Composition
In line with the Group's strategy, investments are made predominately in privately held companies across various sectors of China's economy, and in companies and assets with exposure to the Chinese market, with the objective of providing shareholders with above market returns, primarily through capital appreciation. Currently, the Group focuses on the following sectors: metals & mining, agriculture and cleantech.
As at September 30, 2013, the portfolio was carried at the aggregate value (excluding revaluations of unquoted portfolios) of US$179.6 million compared to US$174.5 million for the period ending June 30, 2013. The top ten investments represented 92 per cent of the fair value of the portfolio, with the top five investments accounting for 67 per cent.
Table 1: Top 10 Investments (US$ million)
* Legal & beneficial interests, excluding impact of outstanding options/warrants and any outstanding convertible instruments
** A private equity fund focusing on China's cleantech sectors, jointly formed and co-managed by the Group and Ecofin Limited
Reflecting the Group's strategy of investing in privately held companies, 96 per cent of the portfolio (in terms of fair value) at the end of the Period was invested in unquoted portfolio companies.
The Company's direct holdings in listed companies comprised stakes in HaloSource Inc. (LSE: HAL), Kincora Copper Limited (TSXV: KCC), Rex International Holdings Limited (SGX: REXI).
The Group also has indirect interests in other quoted investments through its investments in the fund managed by the Group - the China Commodities Absolute Return Ltd ("CCF")
The weighted average holding period for the portfolio was 2.2 years, with 55 per cent of the Portfolio having been held for less than 3 years; 45 per cent having been held for 3 years or longer.
In terms of sectors, the composition of the portfolio at the end of Period comprised:
Metals & Mining (47 per cent)
Agriculture (19 per cent)
Cleantech (29 per cent)
Consumer, Technology and Media (5 per cent).
4. Investments and Divestments
The Group invested a total of US$4.7 million to existing investee companies during the period.
ENDS
Origo Partners plc
Chris Rynning
Niklas Ponnert
chris@origoplc.com
niklas@origoplc.com
Nominated Adviser and Joint Broker:
Liberum Capital Limited
Simon Atkinson / Richard Bootle
+44 (0)20 3100 2222
Joint Broker:
Investec Plc
Tim Mitchell / Jeremy Ellis
+44 (0)20 7597 4000
Public Relations:
Aura Financial
Andy Mills / Katie Sunderland
+44 (0)20 7321 0000
This information is provided by RNS
The company news service from the London Stock Exchange ENDIMSBLBDBISBBGXD
Origo Partners PLC
Interim Management Statement
For the three month period from July 1, 2013 to September 30, 2013
This Interim Management Statement by Origo Partners Plc ("Origo" or "theCompany") and its subsidiaries ("theGroup") relates to the three month period from July 1, 2013 to September 30, 2013 ("thePeriod").
Highlights from the Period:
· Unaudited net asset value of US$127.1 million compared to US$131.2 million for the period ending June 30, 2013
· Unaudited net asset value per share of US$0.36 at the end of the Period compared to US$0.38 per share for the period ending June 30, 2013
· Total investments of US$4.7 million
· Cash position of US$4.3 million
CEO Statement
In line with our previous predictions, the resilience of the Chinese economy this year has surprised many international observers. We expect this trend to continue throughout the remainder of the year and gain further momentum in 2014 in the wake of the Third Plenary Session of the 18th CPC Central Committee in Beijing which concluded yesterday and set out a decision on "major issues concerning comprehensively deepening reforms".
However, despite this positive outlook, Chinese IPO markets are still shut and credit conditions are challenging - in particular for private companies. M&A activity is not filling the gap for capital hungry growth companies and PE deal-making remains muted. Across the industry, managers - including Origo - are focusing on the nuts and bolts of private equity investing: managing portfolios and improving the operations of investee companies.
In Mongolia, market conditions too have gradually improved throughout the summer and early autumn. This week, Mongolia annulled 106 exploration licenses, including two low priority licenses held by Kincora Copper Ltd, an Origo portfolio company. Understandably, this was reported in the international press as something of a backlash against foreign investment in the country. In fact, this decision was widely anticipated, following a notice to relevant license holders in February this year in the wake of charges against the former head of the Mineral Resource Authority for Mongolia (MRAM). As far as Kincora is concerned, the company's flagship license, Bronze Fox, is not contested and remains in good standing. The same applies to all licenses held by Origo's other portfolio companies.
Looking atthe bigger picture, we believe the direction of policy is moving in the right direction, albeit less quickly than one would wish.
Notably, on October 3 Mongolia's Parliament approved the Mongolian Law on Investment which overturns two previous laws, easing the regulatory approval required for foreign private investment. Furthermore, it contains legal guarantees, provides tax stability and sets out other incentives so as to promote investment in Mongolia. In sum, the revised law represents a significant, positive change to government policy. We also take comfort in reports indicating that the Mongolian government and Rio Tinto are making progress - albeit slowly - towards a resolution over the financing of Ouy Tolgoi - widely considered as the litmus test for foreign investment in the country. Yet, we anticipate that it will take well into the second half of 2014 until investor sentiment and asset prices respond to improving conditions on the ground. Meanwhile, our portfolio companies effectively remain in a holding pattern, preserving cash and maintaining their exploration and development budgets at a minimum.
After a comprehensive review, and against a backdrop of difficult trading conditions, the Board announced a revised strategy and related cost-saving measures in June. In the Period we have reduced cost across the board, including cutting head-count by close to two thirds, secured a significantly cheaper lease for our Beijing office as well as discontinued leases in other locations, and renegotiated arrangements with a number of advisors and service providers. We expect the cost savings program to be fully implemented by year-end-year, resulting a significantly leaner and nimbler operation, which will set the Company up to focus on managing its assets in 2014 and beyond.
1. Resources and Commitments
At September 30, 2013, Origo had cash and cash equivalents of US$4.3 million. Payables to debtors and other liabilities (excluding USR fair value movements, provisions for performance incentives and deferred income tax liabilities) amounted to US$1.6 million, comprising tax provisions applicable in the event of realisation of certain assets (US$500k) and pension accruals to Directors and employees (US$700k).
In the Period,Origo ceased to control the Mongolia Stock Exchange(MSE) Liquidity Fund, which is in the process of being wound-up. In accordance with relevant accounting standards, the cash balance (equivalent to US$3.2 million) of this former Group company is no longer consolidated in Origo's accounts. At the end of the Period, Origo maintained a residual interest of US$1.7 million in fixed deposits held through MSE. These deposits matured and the cash was returned to the Company in October.
In addition, the Group also has interests totaling US$8.0 million in listed investments and funds it manages which invest in quoted investments. Additionally, Origo holds a US$15 million partnership interest in China Cleantech Partners LLP, which remains uncommitted.
2. Unaudited Net Asset Value
No revaluation of the portfolio took place during the Period as per Origo's policy to reassess the value of the Company's assets on a bi-annual basis. However, adjusting to reflect the purchase and sale of investments, currency movements and market values in respect of quoted investments, the Company estimates unaudited net asset value at the end of the Period was US$127.1 million (US$0.36 per share). The equivalent NAV per share translated into British Sterling at the prevailing exchange rate at the end of the Period was 23 pence which is lower than 25 pence per share for the period ending June 30, 2013. The decrease in NAV was due primarily to ongoing operating expenses (US$1.8 million) and non-cash based charges relating to interest accrued (US$1.2 million) to the zero-dividend preferred shares.
3. Portfolio Composition
In line with the Group's strategy, investments are made predominately in privately held companies across various sectors of China's economy, and in companies and assets with exposure to the Chinese market, with the objective of providing shareholders with above market returns, primarily through capital appreciation. Currently, the Group focuses on the following sectors: metals & mining, agriculture and cleantech.
As at September 30, 2013, the portfolio was carried at the aggregate value (excluding revaluations of unquoted portfolios) of US$179.6 million compared to US$174.5 million for the period ending June 30, 2013. The top ten investments represented 92 per cent of the fair value of the portfolio, with the top five investments accounting for 67 per cent.
Table 1: Top 10 Investments (US$ million)
|
Company
|
Sector
|
Instrument
|
Ownership*
|
Cost
|
Fair value
|
% of NAV |
|
China Rice Ltd
|
Agriculture
|
Preferred Stock & Loan
|
32.1%
|
28.0
|
34.6
|
27.2%
|
|
Gobi Coal & Energy Ltd
|
Metals & Mining
|
Common Stock
|
14.0%
|
15.0
|
26.8
|
21.1%
|
|
Celadon Mining Ltd
|
Metals & Mining
|
Common Stock
|
9.7%
|
13.1
|
25.3
|
19.9%
|
|
Unipower Battery Ltd
|
Clean tech
|
Preferred Stock & Loan
|
16.5%
|
13.3
|
18.0
|
14.2%
|
|
China Cleantech Partners
|
Clean tech
|
Limited Partnership Interests**
|
50.1%
|
15.0
|
15.0
|
11.8%
|
|
IRCA Holdings Ltd.
|
Metals & Mining
|
Common Stock & Loan
|
49.1%
|
30.0
|
13.2
|
10.4%
|
|
Niutech Energy Ltd
|
Clean tech
|
Preferred Stock
|
21.1%
|
6.4
|
12.6
|
9.9%
|
|
Moly World Ltd
|
Metals & Mining
|
Common Stock
|
20.0%
|
10.0
|
10.0
|
7.9%
|
|
Kincora Copper Ltd
|
Metals & Mining
|
Common Stock & Loan
|
32.6%
|
9.5
|
4.7
|
3.7%
|
|
Rising Technology Corporation Ltd
|
TMT
|
Common Stock
|
1.6%
|
5.6
|
4.2
|
3.3%
|
* Legal & beneficial interests, excluding impact of outstanding options/warrants and any outstanding convertible instruments
** A private equity fund focusing on China's cleantech sectors, jointly formed and co-managed by the Group and Ecofin Limited
Reflecting the Group's strategy of investing in privately held companies, 96 per cent of the portfolio (in terms of fair value) at the end of the Period was invested in unquoted portfolio companies.
The Company's direct holdings in listed companies comprised stakes in HaloSource Inc. (LSE: HAL), Kincora Copper Limited (TSXV: KCC), Rex International Holdings Limited (SGX: REXI).
The Group also has indirect interests in other quoted investments through its investments in the fund managed by the Group - the China Commodities Absolute Return Ltd ("CCF")
The weighted average holding period for the portfolio was 2.2 years, with 55 per cent of the Portfolio having been held for less than 3 years; 45 per cent having been held for 3 years or longer.
In terms of sectors, the composition of the portfolio at the end of Period comprised:
Metals & Mining (47 per cent)
Agriculture (19 per cent)
Cleantech (29 per cent)
Consumer, Technology and Media (5 per cent).
4. Investments and Divestments
The Group invested a total of US$4.7 million to existing investee companies during the period.
ENDS
Origo Partners plc
Chris Rynning
Niklas Ponnert
chris@origoplc.com
niklas@origoplc.com
Nominated Adviser and Joint Broker:
Liberum Capital Limited
Simon Atkinson / Richard Bootle
+44 (0)20 3100 2222
Joint Broker:
Investec Plc
Tim Mitchell / Jeremy Ellis
+44 (0)20 7597 4000
Public Relations:
Aura Financial
Andy Mills / Katie Sunderland
+44 (0)20 7321 0000
This information is provided by RNS
The company news service from the London Stock Exchange ENDIMSBLBDBISBBGXD
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