I am delighted to report another year of record results for New Capital. New Capital looks forward to the opportunities and challenges presented by the diversification of business. The Company continued to deliver value to all our stakeholders and to make strategic investments that will drive sustained, superior performance over the long term.
It is encouraging to report that New Capital faces the future from a strong and confident position. The current year profit shows a robust growth of 37% to reach HK$ 35.4 million after considering the gain in China Property Development (Holdings) Limited ("CPDH? from the divestment of the Richmond Park Project. Underlying earnings per share has improved to HK 5.59 cents per share against HK 4.13 cents per share in 2006. The good performance has reflected in an increase in dividend distribution for the year over the previous year. We have proposed dividends of HK 2 cents per share, an increase of 25%.
CPDH, one of the major investments of New Capital, in order to take full advantage of the excellent market conditions existed during 2007, sold its 100% subsidiary which owns a high-end residential development project in Beijing ("the Richmond Park Project?. CPDH completed the sale of the Richmond Park Project in December 2007 and generated an IRR return of over 24% for CPDH"s investment in the project. The divestment allows CPDH to shorten investment period and realize its return without waiting for the completion of the whole project and thus the liquidation of the project company. The sale of the Richmond Park Project has contributed significant positive effect to the result of the Company.
Beijing Far East
Beijing Far East Instrument Company Limited, another long-term investment of New Capital, continues to deliver attractive return to the Company in 2007 resulting from the strong and growing demand for "Rosemount?products. In continuation of the pursuit to be the leading industrial measurement instrumentation manufacturer in China, Far East will expand further into "Rosemount?wireless products. This year, with a top line growth over previous year of over 27 % and its profit before adjustment reached Rmb 9.3 million, it is clearly shown that the business is well positioned for further growth. These exciting developments will allow the Company to benefit from collaborative initiatives, whilst the co-operative family of businesses should also see new opportunities arising from the resulting synergies.
Wuhan Xing Cheng Building
New Capital is also looking for the opportunities for growth and keen to explore all investment opportunities in the commercial property market as well as the second tier cities market. We anticipate needs for commercial property expansion in the near future to cater to the growing demand across different cities in China. With this in mind, the Company acquired two retail floors of Wuhan Xing Cheng Building, a 12-floor office tower located at the central areas in Wuhan. It is fully leased with 8% rental yield per annum and we expect a potential for capital appreciation in the medium term.
Gold Mine Project
The fundamental strength and diversity of our business give us confidence about the future. We continue to explore ways to enhance our performance consistently. In October 2007, we accepted an offer from Hong Ta Group to buy the development right of a gold mine in Yun Nan. Valuation of the mine is about Rmb 605 million and our investment is expected to be Rmb 28 million. It would be a valuable investment opportunity for a foreign investor in the gold-mining business which has been properly approved by the government authority. Technical due diligence and legal formalities related to the transfer of share ownership were completed and it is now subject to the financial due diligence in the final stage.
It is the Company"s intention to maintain a reasonable dividend distribution for our shareholders. We plan to reinvest profit of the Company in profitable operations to create substantial higher return for shareholders. This includes active positioning of the Company to take advantage of the market correction currently taking place in the stock market. With the substantial fall out of stock prices across the board, this will create an excellent opportunity for cash rich companies like us to enter the quoted investment market.
The government"s effort to cool the property market has enabled the property sector to continue its development in a more healthy way and for a longer sustainable period. All cities except the highly speculated first tier cities have reported a healthy growth in property prices in the first quarter of 2008. The government"s austerity measures have resulted in a consolidation of the industry. A number of developers have been under financial pressure and had to put existing projects on sale or to seek financial partners. This has provided excellent opportunity for New Capital to identify new real estate development opportunities with favorable investment terms for the year ahead. The management believes that the demand for property is underpinned by its vast population and the solid economic growth of the country. Investing in housing development projects in secondary cities, avoiding the speculative high end sector, will bring healthy return to the Company with limited risk exposure.
2008 may be a stormy year for most companies, but the Company has positioned itself to take advantage of such situation and confident that it will return another year of good result for all shareholders.