Hengxin Technology Ltd. — Annual Report 2011

Feb 22, 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [145 x 46] intentionally omitted <==

HENGXIN TECHNOLOGY LTD. 亨鑫科技有限公司[*]

(carrying on business in Hong Kong as HX Singapore Ltd.)

(incorporated in Singapore with limited liability)

(Singapore Company Registration Number 200414927H)

(Hong Kong Stock Code: 1085) (Singapore Stock Code: I85)

ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

FINANCIAL HIGHLIGHTS

1. Revenue increased by 20.0% to RMB1,419.3 million

2. Gross profit increased by 18.2% to RMB262.1 million

3. Net profit attributable to equity holders of the parent decreased by 0.3% to RMB102.2 million

4. Basic earnings per share was RMB0.26

5. No dividend has been recommended by the Company for the financial year ended 31 December 2011

– 1 –

The board of directors (the “ Board ”) of Hengxin Technology Ltd. (the “ Company ”) is pleased to announce the consolidated results of the Company and its subsidiary (collectively hereinafter referred as the “ Group ”) for the year ended 31 December 2011 and for the three months ended 31 December 2011 together with the comparative figures for the corresponding periods in 2010 as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2011

Notes Revenue 5 Cost of sales Gross profit Other income 6 Selling and distribution expenses Administrative expenses Other operating expenses Finance costs 7 Profit before income tax 8 Income tax expense 9 Net profit attributable to equity holders of parent Other comprehensive income: Exchange difference arising from consolidation of foreign operations Total comprehensive income attributable to equity holders of the parent Earnings per share attributable to equity holders of the parent Basic and diluted(RMB cents) Dividends per share(RMB cents)

2011 2010 RMB’000 RMB’000 1,419,327 1,183,131 (1,157,224) (961,470) 262,103 221,661 7,405 15,292 (62,522) (55,841) (41,108) (36,256) (27,147) (10,404) (13,203) (9,723) 125,528 124,729 (23,279) (22,174) 102,249 102,555 (290) (20) 101,959 102,535 26.4 30.4 — 3.96

– 2 –

CONSOLIDATED INCOME STATEMENT

For the 3 months ended 31 December (“4Q”) 2011

Revenue Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Profit before income tax Income tax expense Net profit attributable to equity holders of parent Other comprehensive income: Exchange difference arising from consolidation of foreign operations Total comprehensive income attributable to equity holders of the parent Earnings per share attributable to equity holders of the parent Basic and diluted(RMB cents)

4Q ended 2011 4Q ended 2010 RMB’000 RMB’000 314,523 317,714 (254,885) (261,495) 59,638 56,219 3,669 2,390 (16,065) (14,566) (9,680) (10,889) (7,593) (3,598) (3,286) (751) 26,683 28,805 (5,597) (5,563) 21,086 23,242 (112) (25) 20,974 23,217 5.4 6.8

– 3 –

Profit before income tax is determined after charging (crediting) the following:

		Group			Group
	3 months	ended 31 December		Full year	ended 31 December
	2011	2010		2011	2010
	RMB’000	RMB’000	Change %	RMB’000	RMB’000	Change %
		(re-stated)			(re-stated)
(Reversal) Allowance for
inventory obsolescence	(318)	619	-151.4%	(67)	806	N.M.
Depreciation of property,
plant and equipment	4,209	4,096	2.8%	16,612	14,838	12.0%
Fair value loss on held-for-trading
investments	—	—	—	—	1,472	-100.0%
Gain on disposal of available-for-sale
investment	—	—	—	(690)	(109)	N.M.
Loss on disposal of property,
plant and equipment	5	2	N.M.	702	8	N.M.
Amortisation of prepaid lease payments	140	140	—	560	560	—
Foreign exchange losses	3,545	762	N.M.	11,825	421	N.M.
Interest expense	3,286	751	N.M.	13,203	9,723	35.8%
Interest income	(1,543)	(961)	60.6%	(3,590)	(4,732)	-24.1%
Research and development expenses1	4,042	2,613	54.7%	14,119	7,054	100.2%

N.M.: Not meaningful

• 1 Included in Other Operating Expenses

– 4 –

As at 31 December 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes ASSETS Current assets Cash and bank balances Pledged cash deposits Trade receivables 13 Other receivables and prepayments Inventories Available-for-sale investment Prepaid lease payment Total current assets Non-current assets Prepaid lease payment Available-for-sale investment Property, plant and equipment Deposit for acquisition of land use right Deferred tax assets Total non-current assets Total assets LIABILITIES AND EQUITY Current liabilities Short term loans Trade payables 14 Other payables Income tax payable Total current liabilities NET CURRENT ASSETS	2011 RMB’000 323,710 52,883 734,596 28,256 135,911 — 560 1,275,916 19,461 10,000 157,889 5,760 2,523 195,633 1,471,549 230,000 258,489 28,719 12,771 529,979 745,937	2010 RMB’000 247,078 62,596 626,702 12,958 128,377 2,000 560
		1,080,271
		20,021 — 140,978 5,760 2,518
		169,277
		1,249,548
		40,000 323,263 25,476 6,102
		394,841
		685,430

– 5 –

As at 31 December 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT’D)

Non-current liability Deferred tax liabilities TOTAL LIABILITIES NET ASSETS Equity attributable to equity holders of the parent Share capital General reserves Special reserve Translation reserve Accumulated profits TOTAL EQUITY	2011 2010 RMB’000 RMB’000 2,596 1,998 532,575 396,839 938,974 852,709 295,000 295,000 122,889 104,839 (6,017) (6,017) (294) (4) 527,396 458,891 938,974 852,709

– 6 –

STATEMENT OF FINANCIAL POSITION — COMPANY LEVEL As at 31 December 2011

ASSETS Current assets Cash and bank balances Other receivables and prepayments Amount due from subsidiaries Total current assets Non-current assets Subsidiaries Property, plant and equipment Total non-current assets Total assets LIABILITIES AND EQUITY Current liability Other payables Total current liability NET CURRENT ASSETS Non-current liability Deferred tax liabilities Total non-current liability TOTAL LIABILITIES NET ASSETS Equity attributable to equity holders of the parent Share capital Accumulated profits TOTAL EQUITY	2011 RMB’000 63,085 128 9,955 73,168 354,793 5 354,798 427,966 2,126 2,126 71,042 — — 2,126 425,840 295,000 130,840 425,840	2010 RMB’000 103,303 63 5,706
		109,072
		321,984 15
		321,999
		431,071
		4,423
		4,423
		104,649
		—
		—
		4,423
		426,648
		295,000 131,648
		426,648

– 7 –

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year/period ended 31 December 2011

GROUP RMB’000 Cash flows from operating activities Profit before tax Adjustments for: Depreciation of property, plant and equipment Amortisation of leasehold land Allowance (Reversal of) for stock obsolescence Loss on disposal of property, plant and equipment Interest expense Interest income Gain on disposal of available-for-sale investments Forfeiture of a customer deposit Loss on disposal of held-for-trading investments Exchange differences arising on foreign currency translation Operating profit before working capital changes Trade receivables Other receivables and prepayments Inventories Trade and bill payables Other payables and accruals Cash (used in) generated from operations Interest paid Interest income received Income tax paid Net cash (used in) generated from operating activities

1 Oct 11 to 31 Dec 11 1 Oct 10 to 31 Dec 10 1 Jan 11 to 31 Dec 11 1 Jan 10 to 31 Dec 10 26,683 28,806 125,528 124,729 4,209 4,096 16,612 14,838 140 140 560 560 (318) 619 (67) 806 5 2 702 8 3,286 751 13,203 9,723 (1,543) (961) (3,590) (4,732) — — (690) (109) 988 — 988 — — — — 1,472 1,125 (104) 4,780 (858) 34,575 33,349 158,026 146,437 106,019 73,952 (107,894) 91,470 (4,354) 9,981 (15,298) 11,190 (7,155) (26,383) (7,467) 55,064 (157,641) (17,098) (65,762) (151,379) 4,950 1,157 3,243 (6,914) (23,606) 74,958 (34,668) 145,868 (3,286) (751) (13,203) (9,723) 1,543 961 3,590 4,732 (50) (4,166) (16,017) (22,065) (25,399) 71,002 (60,782) 118,812

– 8 –

CONSOLIDATED STATEMENT OF CASH FLOWS (CONT’D)

For the year/period ended 31 December 2011

GROUP RMB’000

1 Oct 11 to 1 Oct 10 to 1 Jan 11 to 1 Jan 10 to 31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10

Cash flows from investing activities Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of available-for-sale investments Proceeds from disposal of available-for-sale investments Acquisition of held-for-trading investments Proceeds from disposal of held-for-trading investments Net cash used in investing activities Cash flows from financing activities Proceeds from issue of new shares, net of issue expenses Dividend paid Repayment of short-term bank loans Proceeds from short-term bank loans Decrease in pledged bank deposits Net cash (used in) generated from financing activities Net increase in cash and cash equivalents Effects of foreign exchange translation Cash and cash equivalents at the beginning of the financial period/year Cash and cash equivalents at the end of the financial period/year

(14,828) (6,585) (34,668) (16,567) — — 443 3 — — (10,000) (10,000) — — 2,690 10,609 — — — (20,000) — — — 18,528 (14,828) (6,585) (41,535) (17,427) — 89,230 — 89,229 — — (15,694) (14,719) (130,000) (109,528) (190,000) (585,221) 260,000 40,000 380,000 450,000 42,539 23,189 9,713 57,890 172,539 42,891 184,019 (2,821) 132,312 107,308 81,702 98,564 (1,240) 79 (5,070) 838 192,638 139,691 247,078 147,676 323,710 247,078 323,710 247,078

– 9 –

STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity for the year ended 31 December 2011

	Share	General	Special	Translation	Accumulated
GROUP	capital	reserve	reserve	reserve	profits	Total
RMB’000
Balance at 1 January 2011	295,000	104,839	(6,017)	(4)	458,891	852,709
Total comprehensive income
for the year	—	—	—	(290)	102,249	101,959
Transfer to reserves	—	18,050	—	—	(18,050)	—
Dividends	—	—	—	—	**(15,694) **	(15,694)
Balance at 31 December 2011	295,000	122,889	(6,017)	(294)	527,396	938,974
Consolidated Statement of Changes in Equity		for the year	ended 31 December		2010
	Share	General	Special	Translation	Accumulated
GROUP	capital	reserve	reserve	reserve	profits	Total
RMB’000
Balance at 1 January 2010	205,771	87,287	(6,017)	16	388,607	675,664
Issue of new ordinary shares
(net of share issue exp)	89,229	—	—	—	—	89,229
Total comprehensive income
for the year	—	—	—	(20)	102,555	102,535
Transfer to reserves	—	17,552	—	—	(17,552)	—
Dividends	—	—	—	—	(14,719)	(14,719)
Balance at 31 December 2010	295,000	104,839	(6,017)	(4)	458,891	852,709

– 10 –

STATEMENT OF CHANGES IN EQUITY

Statement of Changes in Equity of the Company for the year ended 31 December 2011

	Share	Accumulated
COMPANY	capital	profits	Total
RMB’000
Balance at 1 January 2011	295,000	131,648	426,648
Total comprehensive income for the year	—	14,886	14,886
Dividends	—	(15,694)	(15,694)
Balance at 31 December 2011	295,000	130,840	425,840
Statement of Changes in Equity of the Company for the year ended 31 December 2010
	Share	Accumulated
COMPANY	capital	profits	Total
RMB’000
Balance at 1 January 2010	205,771	118,243	324,014
Issue of new ordinary shares
(net of share issue exp)	89,229	—	89,229
Total comprehensive income for the year	—	28,124	28,124
Dividends	—	(14,719)	(14,719)
Balance at 31 December 2010	295,000	131,648	426,648

– 11 –

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The Company is a limited liability company incorporated in Singapore on 18 November 2004 under the Singapore Companies Act and its shares are dual primarily listed on the Singapore Exchange Securities Trading Limited (the “ SGX-ST ”) and The Stock Exchange of Hong Kong Limited (the “ SEHK ”) since 11 May 2006 and 23 December 2010 respectively. The registered office of the Company is located at 10 Anson Road #15-07, International Plaza, Singapore 079903. The principal place of business of the Group is located at No. 138 Taodu Road, Dingshu Town, Yixing City, Jiangsu Province, the People’s Republic of China (the “ PRC ”).

The principal activities of the Company are research, design, development and manufacture of telecommunications and technological products, production of radio frequency coaxial cables for mobile communications and mobile communications systems exchange equipment. The Group’s operations are principally conducted in the PRC.

The consolidated financial statements are presented in Renminbi (“ RMB ”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Financial Information has been prepared in accordance with the recognition and measurement criteria of Singapore Financial Reporting Standards (“ SFRS ”) (which include all Singapore Financial Reporting Standards and Singapore Financial Reporting Interpretations (“ INT SFRS ”) issued throughout the Relevant Periods.

The Financial Information has been prepared on a historical cost basis except as set out in the accounting policies below. The Financial Information is presented in RMB and all values are rounded to the nearest thousand (“ RMB’000 ”) except when otherwise indicated.

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates.

Accounting policies

The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial period reported on, as in the recently audited consolidated financial statements for the financial year ended 31 December 2010.

3. APPLICATION OF SINGAPORE FINANCIAL REPORTING STANDARDS

The adoption of new and revised SFRS did not have any impact on the results of the Group for the current and prior financial years.

– 12 –

4. SEGMENT INFORMATION

For management purposes, the Group is organized into business units based on their products, and currently has three reportable operating segments as follows:

• Manufacturing and sale of RF Coaxial Cable Series for mobile communications (“ RF Coaxial Cables ”)

• Coaxial Cables for telecommunications equipment and accessories (“ Accessories ”)

• Others

An analysis by principal activity of contribution to the results is as follows:

Segment revenues and results

For management purpose, the Group is organised into two core product lines — radio frequency coaxial cables, and other telecommunication equipment. These product lines are the basis on which the Group report its primary segment information.

Segment revenue and expense include the operating revenue and expenses which are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

GROUP

Year ended 31 December 2011 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the year 2010 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the year	Radio frequency coaxial cables RMB’000 1,194,923 130,632 2,954 (11,117) 1,011,635 115,212 4,046 (8,314)	Telecommunication equipment and accessories RMB’000 224,404 24,677 554 (2,086) 171,496 19,531 685 (1,409)	Others RMB’000 — — — — — — — —	Unallocated RMB’000 — (10,955) 82 — — (12,233) 1 —	Total RMB’000 1,419,327 144,354 3,590 (13,203) 3,848 (13,061) 125,528 (23,279) 102,249 1,183,131 122,510 4,732 (9,723) 10,560 (3,350) 124,729 (22,174) 102,555

* excludes research and development expenses

– 13 –

4. SEGMENT INFORMATION (CONT’D)

Other segment information

GROUP

Year ended 31 December 2011 Capital expenditure Depreciation expense Amortisation of leasehold land Allowance for inventory obsolescence 2010 Capital expenditure Depreciation expense Amortisation of leasehold land Allowance for inventory obsolescence Statement of net assets As at 31 December, 2011 Assets: Segment assets Unallocated assets Total assets Liabilities: Segment liabilities Unallocated liabilities Total liabilities 2010 Assets: Segment assets Unallocated assets Total assets Liabilities: Segment liabilities Unallocated liabilities Total liabilities	Radio frequency coaxial cables RMB’000 26,300 13,980 472 (53) 13,611 12,679 479 725 Radio frequency coaxial cables RMB’000 1,174,067 447,043 974,595 335,536	Telecommunication equipment and accessories RMB’000 4,935 2,623 88 (14) 2,307 2,150 81 81 Telecommunication equipment and accessories RMB’000 220,327 83,406 165,217 56,880	Others RMB’000 3,433 — — — 649 — — — Others RMB’000 3,982 — 649 —	Unallocated RMB’000 — 9 — — — 9 — — Unallocated RMB’000 — 73,173 — 2,126 — 109,087 — 4,423	Total RMB’000 34,668 16,612 560 (67) 16,567 14,838 560 806 Total RMB’000 1,398,376 73,173 1,471,549 530,449 2,126 532,575 1,140,461 109,087 1,249,548 392,416 4,423 396,839

– 14 –

4. SEGMENT INFORMATION (CONT’D)

Geographical segment

The segmented information for geographical regions is based on the locations of customers and the location of the assets. In line with the group’s business strategy, the market is currently grouped into three geographical regions, namely Central Asia, South Asia and Others.

Central Asia South Asia Others Total	FOR THE YEAR ENDED 31 DECEMBER Revenue from external customer Non-current assets 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 1,287,874 1,148,809 195,588 169,200 121,795 28,325 45 77 9,658 5,997 — — 1,419,327 1,183,131 195,633 169,277	FOR THE YEAR ENDED 31 DECEMBER Revenue from external customer Non-current assets 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 1,287,874 1,148,809 195,588 169,200 121,795 28,325 45 77 9,658 5,997 — — 1,419,327 1,183,131 195,633 169,277
		169,277

5. REVENUE

Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold, after deduction of relevant taxes and allowances for returns and trade discounts and the value of services rendered. An analysis of the Group’s revenue, other income and gains is as follows:

Sale of goods	For the year ended 31 December 2011 2010 RMB’000 RMB’000 1,419,327 1,183,131

The sales and net profit generated for each of the 6 months period are as follow:

GROUP

(a) Sales reported for first half (b) Net profit reported for first half (c) Sales reported for second half (d) Net profit reported for second half Total Sales Total Net Profit	2011 RMB’000 675,436 48,986 743,891 53,263 1,419,327 102,249	2010 RMB’000 584,095 54,749 599,036 47,806 1,183,131 102,555	Change % 15.6% -10.5% 24.2% 11.4%
			20.0%
			-0.3%

– 15 –

6. OTHER INCOME

Interest income Forfeiture of a customer deposit Compensation claims received Government grants Government grants — Job credit scheme Gain on disposal of available-for-sale investments Others Total 7. FINANCE COSTS Interest on short term bank borrowings	For the year ended 31 December 2011 2010 RMB’000 RMB’000 3,590 4,732 988 — 1,086 641 994 9,732 26 33 690 109 31 45 7,405 15,292 For the year ended 31 December 2011 2010 RMB’000 RMB’000 13,203 9,723

8. PROFIT BEFORE INCOME TAX

Profit before tax is arrived at after charging/(crediting) the following during the year:

Cost of inventories recognised as expense (including allowance of (reversal of) inventory obsolescence) Depreciation of property, plant and equipment Amortisation of leasehold land Auditors’ remuneration Employee benefits expense Cost of defined contribution plans Directors’ fees — directors of the Company Directors’ remuneration: Directors of the Company Directors of the subsidiaries Total staff costs Research and development expenses (included in Other Operating Expenses) Net foreign exchange losses Loss on disposal of property, plant and equipment Fair value loss on sale of held-for-trading investments Fair value gain on sale of available-for-sale financial assets	For the year ended 31 December 2011 2010 RMB’000 RMB’000 1,157,291 960,664 16,612 14,838 560 560 1,267 1,138 37,858 42,015 3,834 2,662 1,666 1,342 2,640 2,665 1,176 549 47,174 49,233 14,119 7,054 11,825 421 702 8 — 1,472 (690) (109)	For the year ended 31 December 2011 2010 RMB’000 RMB’000 1,157,291 960,664 16,612 14,838 560 560 1,267 1,138 37,858 42,015 3,834 2,662 1,666 1,342 2,640 2,665 1,176 549 47,174 49,233 14,119 7,054 11,825 421 702 8 — 1,472 (690) (109)
		49,233
		7,054 421 8 1,472 (109)

– 16 –

9. INCOME TAX EXPENSE

INCOME TAX EXPENSE
Current Under provision of current tax in prior years Deferred	For the year ended 31 December 2011 2010 RMB’000 RMB’000 22,589 21,639 97 70 593 465 23,279 22,174
		22,174

The Company is incorporated in Singapore and is subject to income tax rate of 17% for the year ended 31 December 2011 (2010: 17%).

The subsidiary, a wholly foreign-owned enterprise (“ WFOE ”), established in the city of the coastal open economic zone, and is subjected to a PRC corporate tax rate of 25%. In 2008, the subsidiary has been given the High-Tech Enterprise Award status and the applicable effective tax rate will be 15% based on PRC Enterprise Income Tax laws and for the three financial years starting from December 31, 2008. During the financial year, the subsidiary renews the status to enjoy a further three financial years starting from December 31, 2011. The effective tax rate for the subsidiary is 15.0% (2010 : 15.0%).

Taxes on profits elsewhere have been calculated at the rates of tax prevailing in the country in which the Group operates.

10. DIVIDENDS

In the financial year 2011, a first and final tax-exempt dividend of S$0.0077 per ordinary share amounting to approximately S$2,988,000 (approximately RMB15,694,000) was paid for the financial year ended 31 December 2010.

No dividend has been proposed for the current financial year.

11. SHARE CAPITAL

Details of the changes in the Company’s share capital are as follows:

Details of the changes in the Company’s share capital	are as follows:
Share capital — Ordinary Shares	No. of shares	RMB’000	S$’000
	’000
Balance as at 31 December 2010 and 2011	388,000	295,000	58,342

The Company does not hold any treasury shares as at 31 December 2010 and 2011.

– 17 –

12. EARNINGS PER SHARE

Earnings per share is calculated by dividing the Group’s net profit attributable to shareholders for the period/year by the weighted average number of ordinary shares outstanding during the year.

Earning per share_(RMB) — Basic — Diluted Weighted average no. of shares applicable to basic EPS(’000) Weighted average no. shares based on fully diluted basis(’000)_	Group 3 months ended 31 December 2011 31 December 2010 0.05 0.06 0.05 0.06 388,000 341,087 388,000 341,087	Group Full year ended 31 December 2011 31 December 2010 0.26 0.30 0.26 0.30 388,000 337,282 388,000 337,282	Group Full year ended 31 December 2011 31 December 2010 0.26 0.30 0.26 0.30 388,000 337,282 388,000 337,282
			0.30
			337,282 337,282

There were no potential dilutive ordinary shares in existence during the two years ended 31 December 2010 and 2011.

13. TRADE RECEIVABLE

Trade receivables Allowance for doubt debts Notes receivable	At at 31 December 2011 2010 RMB’000 RMB’000 666,807 607,841 (15,762) (15,762) 651,045 592,079 83,551 34,623	At at 31 December 2011 2010 RMB’000 RMB’000 666,807 607,841 (15,762) (15,762) 651,045 592,079 83,551 34,623
		592,079
		34,623

The Group allows credit period of 180 days to its trade customers. The aging of trade receivables, net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period, is as follows:

0 to 180 days 181 to 360 days Over 360 days	At at 31 December 2011 2010 RMB’000 RMB’000 590,053 500,229 131,544 97,288 12,999 29,185 734,596 626,702	At at 31 December 2011 2010 RMB’000 RMB’000 590,053 500,229 131,544 97,288 12,999 29,185 734,596 626,702
		626,702

– 18 –

14. TRADE PAYABLE

TRADE PAYABLE
Trade payables Bill payables	As at 31 December 2011 2010 RMB’000 RMB’000 82,819 137,213 175,670 186,050 258,489 323,263
		323,263

Trade payables comprise amounts outstanding for trade purchases. Payment terms with suppliers are mainly on credit within 90 days from the invoice date. The aging of trade payables and notes payables are as follows:

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	As at 31 December 2011 2010 RMB’000 RMB’000 126,475 192,781 111,687 128,253 19,953 1,044 374 1,185 258,489 323,263	As at 31 December 2011 2010 RMB’000 RMB’000 126,475 192,781 111,687 128,253 19,953 1,044 374 1,185 258,489 323,263
		323,263

15. NET ASSET VALUE

The net asset value per ordinary share of the Group and Company is shown below:

Net Assets_(RMB’000) Number of ordinary shares(’000) Net Asset Value per ordinary share(RMB)_	Group 31 December 2011 31 December 2010 938,974 852,709 388,000 388,000 2.42 2.20	Company 31 December 2011 31 December 2010 425,840 426,648 388,000 388,000 1.10 1.10	Company 31 December 2011 31 December 2010 425,840 426,648 388,000 388,000 1.10 1.10
			1.10

– 19 –

(I) MANAGEMENT DISCUSSION AND ANALYSIS

Year-on-year performance

Revenue

Group revenue for the financial year ended 31 December 2011 increased by approximately RMB236.2 million, or approximately 20.0% from RMB1,183.1 million in the previous financial year to approximately RMB1,419.3 million in the current financial year. Such increase was due to an overall higher demand by the telecom operators during the financial year which boosted both sales in RF Coaxial Cables and Accessories.

RF Coaxial Cable

Revenue generated from RF Coaxial Cables increased by approximately RMB183.3 million or approximately 18.1% from approximately RMB1,011.6 million in the previous financial year to approximately RMB1,194.9 million in the current financial year.

Accessories

Revenue generated from Accessories increased by approximately RMB52.8 million or approximately 30.8% from approximately RMB171.5 million in the previous financial year to approximately RMB224.3 million in the current financial year.

Gross profit margin

The Group was able to maintain a relatively steady gross profit margin during the financial year ended 31 December 2011 at approximately 18.5% compared to approximately 18.7% in the previous financial year. Cost control measures are continuously undertaken and monitored by the management. This includes the reduction of raw materials costs, increase in productivity, vigilant suppliers selection for better logistics coordination, better pricing and payment terms.

Other income

Other income decreased by approximately RMB7.9 million or approximately 50.3% from approximately RMB15.3 million in the previous financial year to approximately RMB7.4 million in the current financial year. The decrease is due to outright government grants amounting approximately RMB7.9 million being given to the Group’s key subsidiary, Jiangsu Hengxin Technology Co. Ltd in 2010 as against an amount of only RMB1.0 million in 2011.

Selling and distribution expenses

Selling and distribution expenses increased by approximately RMB6.7 million or approximately 12.0% from approximately RMB55.8 million in the previous financial year to approximately RMB62.5 million in the current financial year ended 31 December 2011. The increase was in line with the Group’s higher sales achieved during the financial year.

Administrative expenses

Administrative expenses increased by approximately RMB4.8 million or approximately 13.2% from approximately RMB36.3 million in the previous financial year to approximately RMB41.1 million in the current financial year ended 31 December 2011. The increase was mainly due to increase in business related activities commensurate with higher revenue levels.

– 20 –

Other operating expenses

Other operating expenses increased by approximately RMB16.8 million or approximately 161.5% from approximately RMB10.3 million in the previous financial year to approximately RMB27.1 million in the current financial year ended 31 December 2011. The increase was mainly due to foreign exchange losses exacerbated by the large swings in foreign exchange rates which arose from the recent financial crisis, at RMB11.8 million compared to RMB0.4 million in the previous financial year,. The increase in expenses were further contributed by higher R&D expenses incurred during the year in response to improvement on technical specifications of our products. Such R&D expenses were RMB14.1 million in the current financial year compared to RMB7.1 million in the previous financial year.

Finance costs

Finance costs increased by approximately RMB3.5 million or approximately 36.1% from approximately RMB9.7 million in the previous financial year to approximately RMB13.2 million in the current financial year ended 31 December 2011. The reduction in liquidity in the PRC financial market led to an increase in interest rates on borrowings, and together with the increase in borrowings, contributed to the increase in finance costs during the financial year.

Profit before income tax

Contributed by the above factors, profit before income tax increased by approximately RMB0.8 million or approximately 0.6% from approximately RMB124.7 million in the previous financial year to approximately RMB125.5 million in the current financial year ended 31 December 2011.

Income tax expense

The Group’s main subsidiary is subject to an incentive tax rate of 15% as it had been awarded as a high-tech enterprise. The increase in income tax expenses is due to the overall increase in profit before tax for the financial year. Accordingly, income tax expense increased by approximately RMB1.1 million or approximately 5.0% from approximately RMB22.2 million in the previous financial year to approximately RMB23.3 million in the current financial year ended 31 December 2011.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased approximately RMB0.4 million from approximately RMB102.6 million in 2010 compared to approximately RMB102.2 million in 2011.

– 21 –

Fourth quarter (“4Q”) performance

Revenue

Group revenue decreased by approximately RMB3.2 million, or approximately 1.0% from approximately RMB317.7 million in 4Q2010 to approximately RMB314.5 million in 4Q2011. The decrease was due to a slight slowdown in demand by telecom operators in the PRC during 4Q2011.

RF Coaxial Cable

Revenue generated from RF Coaxial Cables decreased by approximately RMB30.1 million or approximately 10.4% from approximately RMB288.9 million in 4Q2010 to approximately RMB258.8 million in 4Q2011.

Accessories

Revenue generated from Accessories increased by approximately RMB26.8 million or approximately 93.1% from approximately RMB28.8 million in 4Q2010 to approximately RMB55.6 million in 4Q2011.

Gross profit margin

Gross profit margin for 4Q2011 stood at approximately 18.9% compared to approximately 17.7% in 4Q2010. The higher gross profit margin for the quarter is due to higher gross margins contributed by the sale of Accessories.

Other income

Other income increased by approximately RMB1.3 million or approximately 54.1% from approximately RMB2.4 million in 4Q2010 to approximately RMB3.7 million in 4Q2011. The increase is due to higher interest income earned and a write back of defunct trade payables during the period.

Selling and distribution expenses

Selling and distribution expenses increased by approximately RMB1.5 million or approximately 10.3% from approximately RMB14.6 million in 4Q2010 to approximately RMB16.1 million in 4Q2011. The increase arose from marketing expenses that should have been incurred in the usual period of January was instead incurred in December due to the proximity of Chinese New Year in January 2012 which was earlier than usual.

Administrative expenses

Administrative expenses decreased by approximately RMB1.2 million or approximately 11.0% from approximately RMB10.9 million in 4Q2010 to approximately RMB9.7 million in 4Q2011 mainly due to an absence of dual listing expenses which were incurred in 2010.

– 22 –

Other operating expenses

Other operating expenses increased by approximately RMB4.0 million or approximately 111.1% from approximately RMB3.6 million in 4Q2010 to approximately RMB7.6 million in 4Q2011. The increase was due to higher foreign exchange losses led by large swings in foreign exchange rates during the period, coupled with higher R&D expenses incurred in response to improvement in technical specifications of our products.

Finance costs

Finance costs increased by approximately RMB2.5 million or approximately 312.5% from approximately RMB0.8 million in 4Q2010 to approximately RMB3.3 million in 4Q2011. The reduction in liquidity in the PRC financial market led to an increase in interest rates on borrowings, and together with the increase in borrowings, contributed to the increase in finance costs during the financial year.

Profit before income tax

Profit before income tax decreased by approximately RMB2.1 million or approximately 7.3% from approximately RMB28.8 million in 4Q2010 to approximately RMB26.7 million in 4Q2011 due to lower revenue generated in 4Q2011.

Income tax expense

The Group’s main subsidiary is subject to an incentive tax rate of 15% as it had been awarded as a high-tech enterprise. Income tax expenses is relatively unchanged at RMB5.6 million for both 4Q2010 and 4Q2011.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased by approximately RMB2.1 million or approximately 9.1% from approximately RMB23.2 million in 4Q2010 to approximately RMB21.1 million in 4Q2011.

STATEMENT OF FINANCIAL POSITION

Material fluctuations of balance sheet items are explained below:

Pledged bank deposits

Pledged bank deposits are used as a pledged against commercial bills used for payment to suppliers. The decrease by approximately RMB9.7 million from approximately RMB62.6 million as at 31 December 2010 to approximately RMB52.9 million as at 31 December 2011 was due to a lower amount of bank deposits required to be set aside as securities for a correspondingly lower amount payable in the form of commercial bills to suppliers.

Trade receivables

Trade receivables increased by approximately RMB107.9 million from approximately RMB626.7 million as at 31 December 2010 to approximately RMB734.6 million as at 31 December 2011.

– 23 –

Average trade receivables turnover days are 179 days as at 31 December 2011 compared to 212 days as at 31 December 2010. Efforts by the Group during the year to increase collection which resulted in a lower trade receivables turnover days as at the end of the financial year.

Other receivables and prepayments

Other receivables and prepayments increased by approximately RMB15.3 million from approximately RMB13.0 million as at 31 December 2010 to approximately RMB28.3 million as at 31 December 2011. The increase in balance is mainly due to a higher amount of advanced payment made to certain suppliers as at 31 December 2011.

Inventories

Inventories (comprising raw materials, work-in-progress and finished goods) increased by approximately RMB7.5 million from approximately RMB128.4 million as at 31 December 2010 to approximately RMB135.9 million as at 31 December 2011. This is in anticipation of deliveries prior to the Chinese New Year in 2012.

Property, plant and equipment

Property, plant and equipment increased by approximately RMB16.9 million from approximately RMB141.0 million in 31 December 2010 to approximately RMB157.9 million as at 31 December 2011 due to the construction of a new building in the premises of our PRC subsidiary arising from the need for more office space by the Group.

Available-for-sale investment

The Group made a 10% equity stake in a PRC-based company during 3Q2011. The Company is also in the telecommunications industry, and the Group believes that the business of the investee company is able to complement its existing business moving forward.

Short-term bank loans

Short-term bank loans increased by approximately RMB190.0 million from approximately RMB40.0 million in 31 December 2010 to approximately RMB230.0 million as at 31 December 2011 as the need for more working capital arising from the higher demand for the Group’s products and the reduction in available liquidity in the PRC resulted in a higher amount of loans obtained during the year.

Trade payables and Other payables

Trade payables decreased by approximately RMB64.8 million from approximately RMB323.3 million as at 31 December 2010 to approximately RMB258.5 million as at 31 December 2011 in line with the decrease in purchases for raw materials during the period.

Other payables and accruals increased by approximately RMB3.2 million from approximately RMB25.5 million as at 31 December 2010 to approximately RMB28.7 million as at 31 December 2011 as a result of certain payments to be made for the construction of the new office building.

– 24 –

Income tax payable

Income tax payable increased by approximately RMB6.7 million during the period as income taxes for 3Q2011 had yet to be paid to the income tax authorities. It was subsequently paid off in January 2012.

Cash and bank balances

Cash and bank balances increased by approximately RMB76.6 million from RMB247.1 million to approximately RMB323.7 million mainly due to higher loans obtained during the year.

(II) LIQUIDITY, FINANCIAL RESOURCES

In addition to its short-term interesting-bearing facilities, the Group generally finances its operations from cash flows generated internally.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of debt and equity balance.

The Management monitors capital based on the Group net gearing ratio. The Group net gearing ratio is calculated as net borrowings divided by total equity. Net borrowings are calculated as total short-term loans less cash and cash equivalents at the end of the reporting period.

	As at 31 December	As at 31 December
	2011	2010
	RMB’000	RMB’000
Net cash borrowings	(93,710)	(207,078)
Total equity	938,974	852,709
Net debt to equity ratio_(%)_	(9.98)	(24.28)

Amount repayable in one year or less, or on demand:

As at 31 December	As at 31 December	2011	As at 31 December 2010	As at 31 December 2010
Secured		Unsecured	Secured	Unsecured
RMB’000		RMB’000	RMB’000	RMB’000
	—	230,000		—	40,000

There is no amount repayable after one year.

(III) PROSPECTS (A COMMENTARY AT THE DATE OF THE ANNOUNCEMENT OF THE COMPETITIVE CONDITIONS OF THE INDUSTRY IN WHICH THE GROUP OPERATES AND ANY KNOWN FACTORS OR EVENTS THAT MAY AFFECT THE GROUP IN THE NEXT REPORTING PERIOD AND THE NEXT 12 MONTHS)

According to statistics provided by the three major Chinese telecom operators China Mobile, China Unicom and China Telecom, the number of 3G subscribers in the PRC has now reached a total of 127.5 million as at 31 December 2011, compared to only 47.1 million as at 31 December 2010. The growth in 3G subscribers is largely driven by the expansion of smartphones’ penetration to the lay mobile subscribers.

– 25 –

With the proliferation of smartphones across China and the introduction of cloud computing, the demand for mobile phone data traffic remains increasingly high, further driving the expansion of mobile networks.

Nonetheless, the average revenue per user (“ ARPU ”) has been decreasing steadily in the PRC, and telecom operators are exploring ways to reduce costs, which includes cutting down network expansions while increasing network optimisation. In addition, the older networks which rely on Radio Frequency (“ RF ”) systems will be gradually replaced with better and higher quality RF cabling systems at even lower costs. In this aspect, the Group is working continuously to improve its quality while mindful of the costs to customers. We will however, continue to closely monitor market and industry developments so that we can respond quickly and effectively to relevant changes.

India continues to be the Group’s significant market after China. Our sales to the Indian market have slowed down in the second half of 2011 due to various telecom regulatory issues raised by the Indian authorities. The successful execution of our Indian business in 2012 is heavily reliant on whether the Indian regulatory bodies will restrict telecom operators’ ability to boost revenue through charging higher-paying services to more customers through various collaborations with other Indian telecom operators. This will directly impact on the rate of expansion of mobile communication networks within India. With the telecom operators’ market’s revenue stagnating due to rapidly declining ARPU, and the fact that it has one of the lowest ARPU in the world, the Group is witnessing an intensely competitive market in the Indian continent.

The Group will hence continue to focus in expanding its overseas clientele base outside India and the PRC.

The antenna manufacturing line, together with its testing facility, is scheduled to be completed by mid 2012. The Group hopes to be able to commence manufacture for sale within the PRC in the second half of 2012, but this is conditional upon the Group being able to submit its tender in time, as telecom operators will require a certain timeframe in conducting vigorous quality assessment before accepting our products for tender.

The purchase of large scale equipments for production of high temperature resistant cable (“ HTRC ”) products is temporarily suspended due to the high costs of certain raw material components. The Group will provide updates as and when new developments arise.

In view of the mobile networks consolidation across the globe and increasing competition, the Group is expected to face continued pressure on selling prices and narrowing margins. If we are unable to effectively respond to these risks and pricing pressures, our revenue, gross margin & profitability could be materially affected and our gross margins could continue to be reduced. The global economic recovery is still fragile with the debt crisis in Europe casting its shadow over consumer sentiment. We are also mindful of the expected further strengthening of the Renminbi, the rising costs of labour across China, the rising costs of commodities such as copper and aluminium, and the intense competition within the industry.

The Group will also be keeping a close tab on the technological and business developments within the industry and explore other investment and business opportunities.

– 26 –

(IV) SUPPLEMENTARY INFORMATION

1. Reconciliation between SFRSs and IFRSs

For the year ended 31 December 2011, there were no material differences between the consolidated financial statements of the Group under SFRSs and IFRSs (this includes all of IFRS, International Accounting Standards and Interpretations).

2. Operational and Financial Risk Management

(i) Market risk

The major market risks the Group is exposed to include changes in the sale prices of key products, changes in the costs of raw materials (mainly copper) and fluctuations in interest and foreign exchange rates.

(ii) Commodity price risk

The Group is also exposed to commodity price risk arising from fluctuations in product sale prices and costs of raw materials.

(iii) Interest rate risk

The major market interest rate risk that the Group is exposed to includes the Group’s short-term debt obligations which are subject to variable interest rates.

(iv) Foreign currency risk

The Group’s revenue and costs are denominated in RMB, Indian Rupees (“ INR ”) and United States Dollars (“ USD ”). Some costs may be denominated in HKD, INR or Singapore Dollars (“ SGD ”).

3. Contingent liabilities

The Group has commitments as at 31 December 2011 in respect of the following:

Contracted but not provided for: Property, plant and equipment Donation commitment	2011 RMB’000 6,258 7,500 13,758	2010 RMB’000 14,590 8,000
		22,590

At 31 December 2011, certain constructions were built on a piece of land located in the PRC (the “ No. 5 Land ”) amounting to approximately RMB31.6 million. In addition the Group had prepaid RMB5.76 million as deposit for the acquisition of such land but the Group has yet to obtain the land certificate. In the opinion of the Group, the No. 5 Land is highly likely to be put on auction. Pursuant to a directors’ resolution in 2010, the Group resolved to take part in the future auction (if any) of the No. 5 Land at an estimated price of approximately RMB6.8 million or at a higher price to be authorised by the directors.

– 27 –

The PRC subsidiary has committed to donate RMB500,000 per annum from 2007, for a period of 20 years to a charitable organisation in the PRC.

4. Employees and Remuneration Policies

As at 31 December 2011, there were 698 (2010: 661) employees in the Group. Staff remuneration packages are determined in consideration of market conditions and the performance of the individuals concerned, and are subject to review from time to time. The Group also provides other staff benefits including medical and life insurance, and grants discretionary incentive bonuses and share options to eligible staff based on their performance and contributions to the Group.

The Company adopted the share option scheme for its employees at an extraordinary general meeting held on 27 October 2010 (the “ Scheme ”). No option has been granted under the Scheme since its adoption and up to the date of this announcement.

5. Material Litigation and Arbitration

As at 31 December 2011, the Group was not involved in any material litigation or arbitration.

6. Audit Committee

The Company’s audit committee members are Mr. Tay Ah Kong Bernard, Mr. Chee Teck Kwong Patrick, Mr. Tam Chi Kwan Michael and Ms. Zhang Zhong. The audit committee, which is chaired by Mr. Tay Ah Kong Bernard, has reviewed the annual results of the Group for the year ended 31 December 2011.

7. Compliance with the Code on Corporate Governance Practices

The Company has complied with the code provisions of the Code on Corporate Governance Practices (the “ Corporate Governance Code ”) in Appendix 14 of the Rules Governing the Listing of Securities on the SEHK (the “ Listing Rules ”) for the year ended 31 December 2011.

8. Compliance with the Model Code for Securities Transactions by Directors of Listed Issuer

The Board confirms, having made specific enquiries with all directors and supervisors, that during the year ended 31 December 2011, all members of the Board and all supervisors have complied with the required standards of the Model Code for Securities Transactions by Directors of Listed Issuer as set out in Appendix 10 of the Listing Rules.

9. Annual General Meeting

The 2011 annual general meeting of the Company will be held on 26 April 2012 in Singapore. For further details of the annual general meeting, please refer to the Notice of Annual General Meeting, which will be despatched in due course.

10. Review of financial results

The results have not been audited or reviewed by the auditors.

– 28 –

11. Audit or review in accordance with applicable accounting standards

The figures have not been audited or reviewed by the Company’s auditors.

The figures in respect of the results announcement of the Group for the year ended 31 December 2011 have been checked by the Company’s auditors, Deloitte & Touche LLP. The work performed by Deloitte & Touche LLP in this respect did not constitute an assurance engagement in accordance with Singapore Standards of Auditing, Singapore Standards on Review Engagements or Singapore Standards on Assurance Engagements and consequently no assurance has been expressed by Deloitte & Touche LLP on the Results Announcement.

12. Auditors’ report (including any qualifications or emphasis of matter)

Not applicable.

13. Dividends

No dividend has been recommended by the Company for the financial year ended 31 December 2011.

14. Purchase, Sales or Redemption of the Company’s Securities

For the year ended 31 December 2011, neither the Company nor its subsidiaries had purchased, sold or redeemed any of the securities of the Company.

15. Disclosure of person occupying a managerial position in the issuer or any of its principal subsidiaries who is a relative of a director or chief executive officer or substantial shareholder of the issuer pursuant to SGX Listing Manual Rule 704(11) in the format below. If there are no such persons, the issuer must make an appropriate negative statement.

				Details of changes
		Family relationship		in duties and
		with any director	Current position and	position held, if
		and/or substantial	duties, and the year the	any, during
Name	Age	shareholder	position was held	the year
Cui Guoqiang	37	Nephew of Mr	He is an Assistant to	N/A
		Cui Genxiang,	Deputy General
		Executive	Manager and is
		Chairman of	responsible for sales.
		the Company	He joined the
			Company on 3
			February 2008.

16. If the group has obtained a general mandate from shareholders for IPTs, the aggregate value of such transactions as required under SGX Listing Manual Rule 920(1)(a)(ii). If no IPT mandate has been obtained, a statement to that effect.

No mandate from shareholders has been obtained for IPTs.

– 29 –

17. Disclosure on the Website of the Exchanges

This announcement shall be published on the website of SGX-ST (http://www.sgx.com), the SEHK (http://www.hkex.com.hk) and on the Company’s website (http://www.hengxin.com. sg).

By Order of the Board Hengxin Technology Ltd Cui Genxiang Executive Chairman

Singapore, 22 February 2012

As at the date of this announcement, the executive directors of the Company are Mr. Cui Genxiang and Mr. Xu Guoqiang; the non-executive director is Ms. Zhang Zhong; and the non-executive independent directors are Mr. Tay Ah Kong Bernard, Mr. Chee Teck Kwong Patrick and Mr. Tam Chi Kwan Michael.

• for identification purpose only

– 30 –