Web3 Meta Limited — Interim / Quarterly Report 2018

Nov 10, 2017

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.

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MILLION STARS HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8093)

ANNOUNCEMENT OF FIRST QUARTERLY RESULTS FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2017

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

This announcement, for which the directors (the “Directors”) of Million Stars Holdings Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the “GEM Listing Rules”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

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QUARTERLY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017 (UNAUDITED)

The board of Directors (the “Board”) of the Company is pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (the “Group”) for the three months ended 30 September 2017, together with the unaudited comparative figures for the corresponding period in 2016 as follows:

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes REVENUE 2 Cost of sales Gross profit Other revenue and other income Selling and distribution expenses Administrative expenses Profit before taxation 3 Taxation 4 Profit for the period attributable to owners of the Company Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Other comprehensive income for the period Total comprehensive income for the period attributable to owners of the Company Earnings per Share attributable to owners of the Company Basic and Diluted (HK cents) 5

Three months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 62,627 10,519 (39,458) (6,966) 23,169 3,553 71 18 (2,563) (504) (9,316) (2,851) 11,361 216 (1,751) (36) 9,610 180 350 7 350 7 9,960 187 2.40 0.05

2017 HK$’000 (Unaudited) 62,627 (39,458) 23,169 71 (2,563) (9,316) 11,361 (1,751) 9,610 350 350 9,960 2.40

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the three months ended 30 September 2017

As at 1 July 2017 (audited) Profit for the period (unaudited) Other comprehensive income for the period (unaudited) Total comprehensive income for the period (unaudited) As at 30 September 2017 (unaudited) As at 1 July 2016 (audited) Profit for the period (unaudited) Other comprehensive income for the period (unaudited) Total comprehensive income for the period (unaudited) As at 30 September 2016 (unaudited)	Share capital HK$’000 4,000		Attributable	to owners of the Company	to owners of the Company		Total HK$’000 59,593
		Share premium HK$’000 39,782	Statutory reserve HK$’000 (note i) 208	Exchange fluctuation reserve HK$’000 (note ii) 757	Other reserve HK$’000 (note iii) 100	Retained earnings HK$’000 14,746
	— —	— —	— —	— 350	— —	9,610 —	9,610 350
	— 4,000 4,000	— 39,782 39,782	— 208 208	350 1,107 276	— 100 100	9,610 24,356 17,506	9,960 69,553 61,872
	— —	— —	— —	— 7	— —	180 —	180 7
	— 4,000	— 39,782	— 208	7 283	— 100	180 17,686	187 62,059

Notes:

(i) Statutory reserve

Pursuant to the relevant laws and regulations for business enterprises in the PRC, a portion of the profits of the entities which are registered in the PRC have been transferred to the statutory reserve which is restricted as to use. When the balance of such reserve reaches 50% of the capital of that entity, any further appropriation is optional. The statutory reserve can be utilised, upon approval of the relevant authority, to offset prior years’ losses or to increase capital. However, the balance of the statutory reserve must be maintained at a minimum 25% of capital after such usage.

(ii) Exchange fluctuation reserve

Exchange fluctuation reserve represents exchange differences relating to the translation of the net assets of foreign operations of the Group from their functional currencies to the Group’s presentation currency (i.e. Hong Kong dollar) that are recognised directly in other comprehensive income and accumulated in the exchange fluctuation reserve. Such exchange differences accumulated in the exchange fluctuation reserve are reclassified to profit or loss on the disposal of the foreign operations.

(iii) Other reserve

Other reserve represents the difference between the nominal value of the shares issued by the Company in exchange for the nominal value of the share capital of its subsidiary arising from the Reorganisation.

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Notes:

1. GENERAL INFORMATION, BASIS OF PREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidated financial statements for the three months ended 30 September 2017 have been prepared in accordance with the accounting principles generally accepted in Hong Kong and comply with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the applicable disclosure provisions of Chapter 18 of the GEM Listing Rules.

The accounting policies and methods of computation used in the preparation of the unaudited condensed consolidated financial statements for the three months ended 30 September 2017 are consistent with those adopted in the annual report for the year ended 30 June 2017 except for the adoption of the new and revised Hong Kong Financial Reporting Standards (the “New and Revised HKFRSs”) (which include all HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the HKICPA that are adopted for the first time for the current periods financial statements.

The adoption of the New and Revised HKFRSs has had no significant effect on the unaudited condensed consolidated financial statements for the three months ended 30 September 2017 and there have been no significant changes to the accounting policies applied in these unaudited condensed consolidated financial statements for the three months ended 30 September 2017.

The Group has not applied any new and revised standards, amendments or interpretations that have been issued but are not yet effective. The Group is currently assessing the impact of the adoption of such new and revised standards, amendments or interpretations to the Group but is yet to be in a position to state whether they would have any material financial impact on the Group’s results of operations and financial position.

The unaudited condensed consolidated financial statements for the three months ended 30 September 2017 have been prepared on the historical cost basis.

The unaudited condensed consolidated financial statements have not been audited by the Company’s auditors, but have been reviewed by the audit committee of the Company.

2. REVENUE

Revenue represents the aggregate of the net invoiced value of leather products sold, after allowances for returns, provision of online payment technical support and the internet advertising design and agency services.

3. PROFIT BEFORE TAXATION

The Group’s profit before taxation is arrived at after charging:

	Three months	ended
	30 September
	2017	2016
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Depreciation of property, plant and equipment	91	41

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4. TAXATION

Hong Kong Profits Tax is calculated at the rate of 16.5% (2016: 16.5%) on the estimated assessable profit for the period. The rate of the Corporate Income Tax of the People’s Republic of China (the “PRC”) of the Group’s subsidiary operating in the PRC during the period was 25% (2016: 25%) on its assessable profits. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries on jurisdictions in which the Group operates for the periods.

Current income tax: Hong Kong Profits Tax PRC Enterprise Income Tax Total income tax expense for the period	Three months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 723 36 1,028 – 1,751 36	Three months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 723 36 1,028 – 1,751 36
		36

5. EARNING PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

The calculation of the basic earnings per Share attributable to owners of the Company was based on (i) the profit attributable to owners of the Company for the period of approximately HK$9,610,000 (2016: HK$180,000) and (ii) the number of 400,000,000 (2016: 400,000,000) Shares in issue during the period.

The diluted earnings per Share for the three months ended 30 September 2017 and 2016 are equal to the basic earnings per Share as there were no dilutive potential ordinary shares in issue during the period.

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INTERIM DIVIDEND

The Board does not recommend the payment of any interim dividend for the three months ended 30 September 2017 (2016: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Introduction

The Group is an integrated company specialising in (i) the manufacture and sales of private label leather garments for its customers on original equipment manufacturer basis; (ii) providing mobile payment technical support; and (iii) the internet advertising design and agency business.

Business Review

For the manufacturing and sales of leather garment business, most of the major customers are fashion brands with the price range of leather garments fall under the high-end and middleend categories. For the three months ended 30 September 2017 (the “Quarter”), the Group recorded quarter-on-quarter growth in both order quantity and sales revenue from its international fashion brand customers.

For the new business of providing on online payment technical support in the PRC, the Board believes that the demand for this service is expected to be strong in future. The Group gained a foothold in the mobile payment service market through the acquisition of two Shenzhenbased companies in April 2017. Revenue generated from the provision of mobile payment technical services amounted to over RMB8 million during the Quarter.

In recent years, internet advertising has become one of the pillar industries of China’s new economy, with an estimated market size up to RMB319 billion and a growth rate of over 20% in 2017. The Board believes the foray into the internet advertising market will create a new business driver to the Company and generate a long-term return to its Shareholders.

During the Quarter, the Group gained access to the internet advertising market through the acquisition of Beijing Dongrun Hudong Technology Company Limited* (北京東潤互動科技 有限公司) by a wholly-owned subsidiary, contributing revenue of over RMB18 million to the Group. Million Stars Internet Media Limited, a wholly-owned subsidiary, also successfully expanded into the overseas internet advertising markets and generated revenue of HK$13 million during the Quarter.

The Group also reported an increase in administrative expense during the Quarter mainly due to the business expansion and higher office setup cost.

Outlook

The Group will strengthen its investment in the internet advertising market and mobile payment technical service market and step up its efforts in expanding the customer base and sources of revenue in the future.

• for identification only

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Financial Review

Overview

Revenue of the Group for the three months ended 30 September 2017 amounted to approximately HK$62.6 million, representing a significant increase of approximately 495% as compared to the corresponding period in the previous financial year.

The Group’s gross profit for the three months ended 30 September 2017 was approximately HK$23.2 million, increased by approximately HK$19.6 million compared with the same period of last year.

Profit attributable to equity holders of the Company for the three months ended 30 September 2017 amounted to approximately HK$9.6 million, which represented an increase in profit of approximately HK$9.4 million compared with the three months ended 30 September 2016.

Revenue

The Group’s revenue principally represented income derived from the manufacturing and sales of leather products to higher end fashion brand customers and provision of online payment technical support as well as internet advertising design and agency services.

The Group’s revenue for the three months ended 30 September 2017 was approximately HK$62.6 million, recorded a significant rise of approximately 495% from that of approximately HK$10.5 million for the three months ended 30 September 2016 mainly attributable to the provision of technical support on mobile payment and internet advertising design & agency services.

Cost of Sales and Gross Profit

Cost of sales mainly represented cost of raw materials, cost of accessories, labour costs, other manufacturing overheads, cost of mobile payment technical support and internet advertising design and agency services.

The Group’s cost of sales for the three months ended 30 September 2017 was approximately HK$39.5 million, representing an increase of approximately HK$32.5 million from that for the three months ended 30 September 2016 mainly due to the cost incurred for mobile payment technical support and internet advertising design and agency services.

Other Revenue and Other Income

Other revenue and other income mainly represented sundry income that are incidental to the Group’s business which principally including interest income and sales of scrap materials for the three months ended 30 September 2016 and 2017, and were approximately HK$18,000 and approximately HK$71,000, respectively.

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Selling and Distribution Expenses

Selling and distribution expenses comprised mainly logistic expenses and marketing expenses. The selling and distribution expenses for the three months ended 30 September 2017 were approximately HK$2.6 million (2016: HK$0.5 million). The increase in selling and distribution expenses was mainly due to the higher delivery costs in view of higher sales quantity and marketing expenses for mobile payment technical support and advertisement services.

Administrative Expenses

Administrative expenses comprised mainly payroll expenses, rent and rates and other office administrative expenses. Administrative expenses were increased from approximately HK$2.9 million for the three months ended 30 September 2016 to approximately HK$9.3 million for the three months ended 30 September 2017, representing an increase of approximately 227%.

The higher administrative expenses for the three months ended 30 September 2017 were recorded mainly due to the increase in salaries and wages and office administrative expenses.

Taxation

Income tax represents Hong Kong Profits Tax at 16.5% for the Company’s subsidiaries in Hong Kong and the PRC Corporate Income Tax at 25% for the Company’s subsidiaries in the PRC. One of the subsidiaries of the Company, which is incorporated in the Horgos Economic Development Zone and engaged in industries particularly encouraged by the local government, is entitled to a preferential tax treatment of five years exemption from enterprise income tax.

Profit for the Period

The Group recorded profit for the period of approximately HK$9.6 million for the three months ended 30 September 2017 and approximately HK$0.2 million for the three months ended 30 September 2016, respectively. The significant rise of approximately HK$9.4 million in profit for the period was a result of significant increase in revenue as mentioned above.

Financial Position, Liquidity and Financial Resources

The Group adopts a prudent cash and financial management policy. In order to achieve better cost control and minimise the cost of funds, the Group’s treasury activities are centralised and cash is generally deposited with banks in Hong Kong and the PRC.

The Group has maintained its funds at a sound and healthy financial resource level during the period under review. As at both 30 September 2017 and 30 June 2017, the Group did not have any outstanding bank borrowings. There was no seasonality as to the Group’s borrowing requirements and no committed borrowing facilities.

No gearing ratio (which is calculated by dividing the net debt by total equity where net debt comprise borrowings less cash and bank balances) was presented as the Group did not have net debt as at both 30 September 2017 and 30 June 2017.

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As at 30 September 2017, included in net current assets were cash and bank balances (including pledged bank deposits) totalling approximately HK$47.0 million (30 June 2017: HK$42.6 million), the increase of which was mainly due to the profit retained and lower level of trade receivables as comparing to 30 June 2017.

Financial Management Policies

The Group in its ordinary course of business is exposed to market risks such as foreign currency risk and interest rate risk. The Group’s risk management strategy aims to minimise the adverse effects of these risks on its financial performance.

Cash is generally deposited at banks in Hong Kong and the PRC and denominated mostly in Hong Kong dollar, United States dollar and Renminbi. As at 30 September 2017, no related hedges were made by the Group (30 June 2017: nil).

As most of the Group’s trading transactions, monetary assets and liabilities are denominated in United States dollar, Renminbi and Hong Kong dollar, the impact of foreign exchange exposure to the Group during the three months ended 30 September 2017 was minimal and there was no significant adverse effect on normal operations.

Charge Over Assets of the Group

As at 30 September 2017, the Group’s banking facilities were supported by pledged bank deposits of the Group of approximately HK$1.0 million (30 June 2017: HK$1.0 million).

Capital Commitments and Contingent Liabilities

As at 30 September 2017, the Group did not have any significant capital commitment (30 June 2017: nil) and any significant contingent liability (30 June 2017: nil).

Material Acquisition and Disposal

On 5 September 2017, Beijing Dongrun Xindong Technology Limited (“Dongrun Xindong”) (北京東潤欣動科技有限公司), an indirect wholly-owned subsidiary of the Company, entered into the sale and purchase agreement with the vendors, pursuant to which Dongrun Xindong has agreed to acquire and the vendors has agreed to sell, the entire equity interests in and all the assets of Beijing Dongrun Hudong Technology Company Limited (北京東潤互動科技有 限公司) at a total consideration of RMB2,000,000. The acquisition has been completed.

During the three months ended 30 September 2017, the Group did not have any material disposal.

• for identification only

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DIRECTORS AND CONTROLLING SHAREHOLDERS’ INTEREST IN COMPETING BUSINESS

For the three months ended 30 September 2017, the Directors are not aware of any business or interest of the Directors, the controlling shareholders of the Company or their respective close associates (as defined under the GEM Listing Rules) that compete or may compete with the business of the Group and any other conflicts of interest which any such person has or may have with the Group.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the three months ended 30 September 2017, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted a code of conduct for securities transactions and dealing (the “Code of Conduct”) by Directors on terms no less exacting than the required standard set out in Rules 5.48 to 5.67 of the GEM Listing Rules (the “Model Code”). The Company has made specific enquiry of all Directors as to whether they have complied with the required standard set out in the Model Code and the Code of Conduct during the three months ended 30 September 2017.

All the Directors have confirmed that they have complied with the required standards set out in the Model Code and the Code of Conduct throughout the three months ended 30 September 2017.

CORPORATE GOVERNANCE PRACTICES

During the three months ended 30 September 2017, the Group is in compliance with the Corporate Governance Code as set out in Appendix 15 to the GEM Listing Rules, except the provisions detailed below:

	Code Provision	Deviation	Considered Reason for Deviation
A.2.1	The roles of chairman and chief	Mr. Zhu Yongjun, the chairman	Mr. Zhu Yongjun has stepped down as
	executive officer should be	(“Chairman”) of the Company,	the CEO on 5 September 2017 and
	separate and should not be	took up the role of Chief	remains as the Chairman of the
	performed by the same	Executive Officer (“CEO”) from	Company while Ms. Wang Fei was
	individual.	17 March 2017 to 4 September	appointed as CEO of the Company on
		2017.	5 September 2017. Therefore, there is
			no deviation from the Code Provision
			A.2.1 as of the date of this
			announcement.

• for identification only

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	Code Provision	Deviation	Considered Reason for Deviation
A.7.1	Board meetings papers should be	During the year, certain ad hoc	The Board members of the Company
	sent, in full, to all directors at	Board meetings were held and	were informed by the management of
	least 3 days before the intended	the relevant board meeting	the Company by email, by WeChat or
	date of meeting.	papers were sent to all Directors	by phone on the updated information
		less than 3 days before the date	of proposed ad hoc projects/
		of the Board meeting.	transaction to be entered by the
			Company from time to time. Although
			the meeting papers could not be sent
			to the directors at least 3 days, the
			Board members still have sufficient
			information to discuss the matters on
			proposed projects or transactions of
			the Company. The Board will use its
			best efforts to meet the requirements
			of Code Provision A7.1. in future.
C.1.2	Management should provide all	During the year, management did	As all the executive Directors were
	members of the Board with	not provide monthly update with	involved in the daily operation of the
	monthly updates giving a	the Directors regularly.	Group and were fully aware of the
	balanced and understandable		performance, position and prospects of
	assessment of the Company’s		the Company, and the management has
	performance, position and		provided to all Directors (including
	prospects in sufficient detail to		non-executive Directors and
	enable the Board as a whole and		independent non-executive Directors
	each Director to discharge their		(“INEDs”)) quarterly updates that
	duties under Rule 5.01 and		provide a balanced and understandable
	Chapter 17.		assessment of the Company’s
			performance, position and prospects in
			sufficient detail prior to the regular
			board meetings of the Company.
			In addition, the management of the
			Company has provided all members of
			the Board, in a timely manner, updates
			on any material changes to the
			performance, position and prospects of
			the Company and sufficient
			background or explanatory information
			for matters brought before the Board.
			Therefore, the Company considers that
			all members of the Board have been
			given a balanced and understandable
			assessment of the Company’s
			performance, position and prospects in
			sufficient detail.

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CHANGE OF DIRECTORS’ INFORMATION

Upon specific enquiry by the Company and following confirmations from Directors, save as otherwise set out in this announcement, there is no change in the information of the Directors required to be disclosed pursuant to Rule 17.50A(1) of the GEM Listing Rules since the Company’s last published annual report. The change of Director’s information as required to be disclosed pursuant to Rule 17.50B of the Listing Rules are set out below:

1. Mr. Tang Yau Sing resigned as a member of Corporate Governance Committee of the Company with effect from 5 September 2017.

2. Ms. Wang Fei was appointed as a member of Corporate Governance Committee of the Company with effect from 5 September 2017.

3. Mr. Tang Yau Sing resigned as an authorised representative of the Company with effect from 27 September 2017.

4. Ms. Tian Yuan was appointed as an authorised representative of the Company with effect from 27 September 2017.

5. Mr. Tang Yau Sing retired as Executive Director and ceased to be the Compliance Officer of the Company with effect from 3 November 2017

6. Ms. Tian Yuan was appointed as Compliance Officer of the Company with effect from 3 November 2017.

7. Ms. Chen Feng and Mr. Gao Shuo were appointed as Independent Non-executive Directors of the Company with effect from 6 November 2017.

8. Ms. Chen Feng and Mr. Gao Shuo were appointed as member of each of the Audit Committee, Remuneration Committee, Nomination Committee and the Corporate Governance Committee with effect from 6 November 2017.

9. Mr. Chong Ka Yee was appointed as a Non-executive Director of the Company with effect from 6 November 2017.

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AUDIT COMMITTEE AND REVIEW OF FINANCIAL RESULTS

The audit committee of the Company (“Audit Committee”) has been established in accordance with the GEM Listing Rules and comprises Mr. Chui Man Lung Everett (chairman of the Audit Committee), Ms. Chen Feng (appointed on 6 November 2017), Mr. Cheung Kam Tong Antonio, Mr. Han Chu and Mr. Gao Shuo (appointed on 6 November 2017), all of them are independent non-executive Directors. The primary duties of the Audit committee are to review and supervise the financial reporting process, risk management and internal control system of the Group, and to review the Company’s financial reports and to provide advice and comments thereon to the Board.

The Audit Committee has reviewed with the management the unaudited condensed consolidated results of the Group for the three months ended 30 September 2017, the accounting principles and practices adopted by the Group, and other financial reporting matters. The Audit Committee was satisfied that such results complied with the applicable accounting standards, the requirements under the GEM Listing Rules and other applicable legal requirements, and that adequate disclosures have been made.

The condensed consolidated results of the Group for the three months ended 30 September 2017 have not been audited by the auditors of the Company.

By order of the Board Million Stars Holdings Limited Zhu Yongjun Chairman

Hong Kong, 10 November 2017

As at the date hereof, the Board comprises Mr. Zhu Yongjun, Ms. Wang Fei and Ms. Tian Yuan as executive Directors; Mr. Chong Ka Yee as non-executive Director and Ms. Chen Feng, Mr. Cheung Kam Tong Antonio, Mr. Chui Man Lung Everett, Mr. Han Chu and Mr. Gao Shuo as independent non-executive Directors.

This announcement will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for at least 7 days from the day of its publication and on the website of the Company at http://www.millionstars.hk.

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