Web3 Meta Limited - Interim / Quarterly Report 2018

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 萬星控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8093)

ANNOUNCEMENT OF THIRD QUARTERLY RESULTS FOR THE NINE MONTHS ENDED 31 MARCH 2018

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

GEM has been positioned as a market designed to accommodate small and mid-sized 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.

Given that the companies listed on GEM are generally small and mid-sized companies, 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 31 MARCH 2018 (UNAUDITED)

The board (the “Board”) of Directors of Million Stars Holdings Limited is pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (the “Group”) for the nine months ended 31 March 2018, together with the unaudited comparative figures for the corresponding period in 2017 as follows:

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the nine months ended 31 March 2018

Notes
REVENUE
2
Cost of sales
Gross profit
Other income and other (loss)/gain, net
Selling and distribution expenses
Administrative expenses
Profit/(loss) before tax
3
Income tax expense
4
Profit/(loss) for the period
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/(loss) for the period
Profit/(loss) for the period attributable to:
— Ordinary shareholders of the Company
— Non-controlling interests
Total comprehensive income/(loss) for the period
attributable to:
— Ordinary shareholders of the Company
— Non-controlling interests
Earnings/(loss) per share attributable to owners
of the Company
5
Basic and diluted

Nine months ended
31 March
2018
2017
HK$’000
HK$’000
(unaudited)
(unaudited)
336,536
34,486
(174,848)
(24,008)
161,688
10,478
(255)
245
(6,738)
(1,602)
(36,907)
(11,077)
117,788
(1,956)
(679)
(371)
117,109
(2,327)
8,252
53
8,252
53
125,361
(2,274)
112,023
(2,327)
5,086
–
117,109
(2,327)
120,041
(2,274)
5,320
–
125,361
(2,274)
HK$28.01 cents
HK$(0.58) cents

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months ended 31 March 2018

		Attributable to owners of the Company	Attributable to owners of the Company	Attributable to owners of the Company		Total HK$’000 59,593	Non- controlling interests HK$’000 –	Total HK$’000 59,593
Share capital HK$’000 4,000	Share premium HK$’000 39,782	Statutory reserve HK$’000 (note i) 208	Exchange reserve HK$’000 (note ii) 757	Other reserve HK$’000 (note iii) 100	Retained earnings HK$’000 14,746
– –	– –	– –	– 8,018	– –	112,023 –	112,023 8,018	5,086 234	117,109 8,252
– – – – – 4,000 4,000	– – – – – 39,782 39,782	– 1,352 – – 1,352 1,560 208	8,018 – – 28 8,046 8,803 276	– – – – – 100 100	112,023 (1,352) 5,320 – 115,991 130,737 17,506	120,041 – 5,320 28 125,389 184,982 61,872	5,320 – (5,320) – – – –	125,361 – – 28 125,389 184,982 61,872
– –	– –	– –	– 53	– –	(2,327) –	(2,327) 53	– –	(2,327) 53
– 4,000	– 39,782	– 208	53 329	– 100	(2,327) 15,179	(2,274) 59,598	– –	(2,274) 59,598

Notes:

(i) Statutory reserve

Pursuant to the relevant laws and regulations for business enterprises in the People’s Republic of China (the “PRC”), a portion of the profits of the entities which are registered in the PRC has 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 reserve

Exchange reserve represents exchange differences relating to the translation of the net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. Hong Kong dollars) that are recognised directly in other comprehensive income and accumulated in the exchange reserve. Such exchange differences accumulated in the exchange 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 underwent for the preparation of the listing of the Company’s shares on GEM.

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Notes:

1. BASIS OF PREPARATION AND BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements for the nine months ended 31 March 2018 have been prepared in accordance with the accounting principles 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 nine months ended 31 March 2018 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 period financial statements.

The adoption of the New and Revised HKFRSs has had no significant effect on the unaudited condensed consolidated financial statements for the nine months ended 31 March 2018 and there have been no significant changes to the accounting policies applied in these unaudited condensed consolidated financial statements for the nine months ended 31 March 2018.

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 nine months ended 31 March 2018 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 income from provision of internet advertising agency services, mobile payment technical support services and the net invoiced value of leather products sold, after allowances for returns.

3. PROFIT/(LOSS) BEFORE TAX

The Group’s profit/(loss) before tax is arrived at after charging:

	Nine months ended	Nine months ended
	31 March
	2018	2017
	*HK$’000*	HK$’000
	(unaudited)	(unaudited)
Depreciation of property, plant and equipment	489	122

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4. INCOME TAX EXPENSE

Hong Kong Profits Tax is calculated at the rate of 16.5% (2017: 16.5%) on the estimated assessable profit for the periods. The rate of the PRC Enterprise Income Tax of the Group’s subsidiaries operating in the PRC during the period was 25% (2017: 25%) on its assessable profits. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries or jurisdictions in which the Group operates for the period.

Current income tax: Hong Kong Profits Tax PRC Enterprise Income Tax Income tax expense for the period	Nine months ended 31 March 2018 2017 *HK$’000* HK$’000 (unaudited) (unaudited) 436 292 243 79 679 371	Nine months ended 31 March 2018 2017 *HK$’000* HK$’000 (unaudited) (unaudited) 436 292 243 79 679 371
		371

5. EARNING/(LOSS) PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

The calculations of the basic earnings per Share attributable to owners of the Company were based on (i) the profit attributable to owners of the Company for the periods; and (ii) the number of 400,000,000 (2017: 400,000,000) shares (the “Shares”) in issue during the period.

The diluted earnings per Share for the nine months ended 31 March 2018 and 2017 are equal to the basic earnings per Share as there were no dilutive potential ordinary Shares in issue during the period.

6. DIVIDENDS

The Company has not declared or paid any dividends during the period ended 31 March 2018 and 2017.

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INTERIM DIVIDEND

The Board does not recommend the payment of any interim dividend for the nine months ended 31 March 2018 (2017: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Introduction

The Group is an integrated company specialising in (i) provision of the internet advertising agency services; (ii) provision of mobile payment technical support services; and (iii) the manufacture and sales of private label leather garments for its customers.

Business Review

Internet Advertising Agency Services

The internet has powered transformation and innovation of traditional sectors, driven by the improving telecommunication infrastructure, the growing internet user base and the introduction of the “Internet Plus” plan. Internet advertising, a booming sector combining advertising and the internet, has attracted an increasing number of advertisers by its distinctiveness such as broad audience, high accuracy and strong interaction. It has become a key advertising channel for advertisers, as demonstrated by the surging market size of internet marketing. According to the annual inventory data of the online advertising market published by iResearch in 2016, the online advertising market size in the PRC reached RMB290.7 billion in 2016, representing a year-on-year growth of 32.9%. Internet development in the PRC is expected to stay on the fast track in 2018, coupled with strong user stickiness and further unleashed potential of mobile internet marketing. With the online advertising market having a significant room for development and growth potential in the future, the mobile advertising segment is positioned to further attract a larger proportion of advertisers by its innovative and sophisticated offerings. The market size of internet advertising in the PRC is expected to exceed RMB500 billion in 2018, of which mobile internet advertising will account for more than RMB360 billion or nearly 73.6%. Mobile programmatic marketing, pan-entertainment marketing and we-media community marketing are expected to become the main stream of mobile marketing in the next few years.

The advertising pattern is shifting from pay-for-media to pay-for-audience, driven by the rapidly evolving internet and advertising sector as well as the advancement in audience targeting technologies. Technology of demand-side platform (“DSP”) in the internet advertising sector has gradually become matured. As a systematic online advertising platform, DSP serves advertisers by facilitating their placing of advertisements on the internet or over mobile internet. DSP accommodates advertisers with an unified bidding and feedback framework in an easier way, allowing them to acquire quality advertising space promptly at reasonable prices for online advertisements transacted with multiple advertising platforms.

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During the period, the Group successfully entered the domestic internet advertising market through its wholly-owned subsidiary, Horgos Dongrun Network Technology Company Limited* (霍爾果斯東潤網絡科技有限公司) (“Dongrun Network”). Dongrun Network, an internet advertising service provider empowered by its self-developed DSP system, is committed to providing advertisers with accurate programmatic advertising services through marketing planning, media agency and programmatic purchase and data analysis. Focusing on internet advertising services, the company acquires media resources and services through purchase or exchange, and offers integrated and optimised media resources to advertisers to meet their marketing needs. Its internet-focused customer base includes Tencent, Fang.com (房天下), 37 Interactive Entertainment (三七互娛), Dianping.com (大眾點評), Renrenche. com (人人車) and Jiayuan.com (世紀佳緣), among other well-known names, in a wide range of segments such as e-commerce, online tourism, game, video, dating and automobile. During the period, Dongrun Network recorded a revenue of approximately HK$173,349,000.

During the period, the Group extended its presence in the mobile internet advertising market through its wholly-owned subsidiaries, Shenzhen Ai Wan Yue Technology Company Limited (深圳愛玩悅科技有限公司) and Horgos Sifan Information Technology Company Limited (霍爾果斯思凡信息科技有限公司) (collectively, referred as “Ai Wan Yue”). Ai Wan Yue mainly provides customers with App Stores optimisation services based on its proprietary technology, including improvement of App placements at App Stores, and provides customers with optimisation services of keyword search ranking and marketing services. During the period, Ai Wan Yue recorded a revenue of approximately HK$22,803,000.

During the period, the Group successfully expanded its overseas internet advertising market through its wholly-owned subsidiary, Million Stars Internet Media Limited (“MSIM”). Through its proprietary internet advertising platform as well as global mainstream online platforms such as Facebook and Google, MSIM provides customers with access to global advertising, including big data support, integrated marketing solutions, localisation support and account stabilisation services. During the period, MSIM recorded a revenue of approximately HK$50,094,000.

Mobile Payment Technical Support Services

Shenzhen Xiangjiao Huyu Technology Company Limited (深圳市香蕉互娛科技有限公司) and Horgos Xiangjiao Chaoren Information Technology Company Limited (霍爾果斯香蕉超人信息科技有限公司), wholly-owned subsidiaries of the Group, are the leading integrated payment platforms in China focusing on providing one-stop mobile payment solutions for internet players. Accordingly, merchants can have a quick access to Alipay, WeChat, UnionPay and other payment channels and manage and track their orders. During the period, the Group’s technical support services on mobile payment contributed a revenue of approximately HK$38,461,000.

Production and Sale of Leather Products Business

The Group is engaged in production and sale of leather garments through its wholly-owned subsidiaries, Perline Company Limited (柏麗發展有限公司) and Foshan Nanhai Shengli Leather Garment Co. Ltd.* (佛山市南海盛麗皮衣有限公司), and most of its customers are middle to high-end leather fashion brands. For the nine months ended 31 March 2018, the order volume and sales revenue from the Group’s customers of international fashion brands increased by approximately 25% as compared to the corresponding period of last year. During the period, the sales revenue from leather products amounted to approximately HK$42,940,000.

for identification only

– 7 –

Outlook

Looking ahead, the Group will seize the opportunities in the booming internet advertising sector to step up investments in internet advertising and technical support services on mobile payment, seeking to tap on new customers and revenue streams for delivering better returns to its shareholders.

Financial Review

Revenue

The Group’s revenue principally represented income derived from (i) provision of internet advertising agency services; (ii) provision of mobile payment technical support services; and (iii) the manufacturing and sales of leather garment products to high-end fashion brand customers.

The Group has recorded a revenue of about HK$336.5 million for the nine months ended 31 March 2018, representing an increase of about 875% as compared with about HK$34.5 million for the nine months ended 31 March 2017.

The increase in sales in the nine months period ended 31 March 2018 is mainly due to revenue growth from new business segments, namely, provision of internet advertising agency services and mobile payment technical support services.

Cost of Sales and Gross Profit

Cost of sales mainly represents purchase costs of provision of internet advertising agency services, mobile payment technical support services and costs of raw materials, costs of accessories, labour costs, other manufacturing overheads.

The Group’s cost of sales amounted to about HK$174.8 million for the nine months ended 31 March 2018. Cost of sales rose by about 628% as compared with the cost of sales for the nine months ended 31 March 2017, mainly due to the costs incurred for internet advertising agency services and mobile payment technical support services.

Gross profit margin of about 48.0% for the nine months ended 31 March 2018 was higher comparing to the gross profit margin of about 30.4% for the nine months ended 31 March 2017, mainly due to high profit margins attributable to provision of internet advertising agency services as well as mobile payment technical support services.

Other Income and Other Loss/Gain, net

Other income and other loss/gain, net mainly represents sundry income incidental to our business, principally including interest income, income from sales of scrap materials, net exchange differences and gain on disposal of a subsidiary, amounting to net loss of about HK$0.3 million and net gain of HK$0.2 million for the nine months ended 31 March 2018 and 2017, respectively. The movement was mainly in relation to the exchange loss during the period.

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Selling and Distribution Expenses

Selling and distribution expenses mainly comprise marketing expenses and logistic expenses.

The selling and distribution expenses have increased from about HK$1.6 million for the nine months ended 31 March 2017 to about HK$6.7 million for the nine months ended 31 March 2018, representing a rise of about HK$5.1 million.

The higher selling expenses were mainly due to the increase in salaries and wages expenses incurred for internet advertising agency services and mobile payment technical support services during the period.

Administrative Expenses

Administrative expenses mainly comprise payroll expenses, rent and rates and other office administrative expenses.

Administrative expenses have increased from about HK$11.1 million for the nine months ended 31 March 2017 to about HK$36.9 million for the nine months ended 31 March 2018, representing an increase of about HK$25.8 million.

The higher administrative expenses were mainly attributable to 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 PRC Enterprise Income Tax at 25% for the Company’s subsidiary in Foshan, the PRC. Certain subsidiaries of the Company, which are incorporated in the Horgos Economic Development Zone and engaged in industries particularly encouraged by the local government, are entitled to a preferential tax treatment of five years exemption from enterprise income tax.

Profit for the Period

The Group recorded a profit for the period of approximately HK$117.1 million for the nine months ended 31 March 2018 and a loss of approximately HK$2.3 million for the nine months ended 31 March 2017, respectively. The significant rise of approximately HK$119.4 million in profit for the period was a result of significant growth in revenue and high profit margins of new business segments.

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 costs of funds, the Group’s treasury activities are centralised and cash is generally deposited with banks in Hong Kong and Mainland China.

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The Group has maintained its funds at a sound and healthy financial resource level during the period under review. As at 31 March 2018, included in net current assets were cash and bank balances (including pledged bank deposits) totalling approximately HK$95.0 million (30 June 2017: HK$42.6 million), the increase in which was mainly due to retained profits.

The Group’s outstanding borrowings as at 31 March 2018 amounting to HK$0.6 million (30 June 2017: HK$ Nil) were principally denominated in RMB and carried at fixed interest rates. The Group monitored capital using gearing ratio, which is total debt of the Group divided by total equity of the Group. Total debt to equity ratio of the Group expressed as a percentage of interest bearing borrowings over the total equity of approximately HK$185.0 million (at 30 June 2017: HK$59.6 million) was approximately 0.32% as at 31 March 2018 (30 June 2017: Nil).

As at 31 March 2018 and 30 June 2017, there was no seasonality as to the Group’s borrowing requirements and no committed borrowing facilities.

Financial Management Policies

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

Cash is generally deposited with banks in Hong Kong and Mainland China, which are denominated mostly in United States dollars, Hong Kong dollars and Renminbi. Hong Kong dollars are pegged to United States dollars under the current policy of the Government of Hong Kong.

As the Group’s trading transactions, monetary assets and liabilities in Mainland China are denominated mainly in Renminbi, and trading transactions, monetary assets and liabilities in Hong Kong and overseas are denominated mainly in Hong Kong dollars (being the Group’s operating and reporting currencies) and United States dollars (to which Hong Kong dollars were pegged), the impact of foreign exchange exposure to the Group was minimal and the changes in foreign exchange rates did not have a significant adverse effect on normal operations during the reporting periods.

With the current interest rates staying at relatively low levels, the Group has not entered into any interest rate hedging contracts or any other interest rate related derivative financial instrument. However, the Group continues to monitor its related interest rate exposure closely.

Charge Over Assets of the Group

As at 31 March 2018, the Group’s banking facilities were supported by pledged bank deposits of approximately HK$1.0 million (30 June 2017: HK$1.0 million).

Capital Commitments and Contingent Liabilities

As at 31 March 2018, the Group did not have any significant capital commitment (30 June 2017: nil). As at 31 March 2018, the Group did not have any significant contingent liability (30 June 2017: nil).

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Material Acquisitions and Disposals

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 have 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 was completed.

During the nine months ended 31 March 2018, the Group did not have any material disposal.

DIRECTORS AND CONTROLLING SHAREHOLDERS’ INTEREST IN COMPETING BUSINESS

During the nine months ended 31 March 2018, the Directors are not aware of any business or interest of the Directors or the controlling shareholders of the Company that competes or may compete with the business of the Group and any other conflicts of interest which any such person has or may have with Group.

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

During the nine months ended 31 March 2018, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

AUDIT COMMITTEE AND REVIEW OF FINANCIAL STATEMENTS

The Audit Committee has been established in accordance with the GEM Listing Rules and comprises Mr. Chen Ce (Chairman), Ms. Chen Feng and Mr. Gao Shuo, all of them are independent non-executive Directors.

The Audit Committee has reviewed with the management this quarterly results announcement, including the unaudited consolidated results for the nine months ended 31 March 2018, prior to recommending them to the Board for approval.

The consolidated results for the nine months ended 31 March 2018 have not been audited by the Company’s auditor.

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

Hong Kong, 9 May 2018

for identification only

– 11 –

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 Mr. Chen Ce, Ms. Chen Feng 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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