Nam Tai Property : NTP - Reports Q2 2017 Results

SECOND QUARTER NEWS RELEASE

SHENZHEN, PRC - July 31, 2017 - Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the second quarter ended June 30, 2017.

(In thousands of US dollars, except per share data, percentages and as otherwise stated)

Notes:

1. Net income for the three months ended June 30, 2017 mainly included exchange gain of $2.7 million as a result of the appreciation of Renminbi against US dollars in Q2 2017, interest income of $1.8 million earned from time deposits and net operation income $0.5 million, but partly offset by general and administrative expenses of $2.9 million.

2. Net income for the six months ended June 30, 2017 mainly included interest income of $4.3 million earned from time deposits, exchange gain of $3.5 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017 and net operation income $1.1 million, but partly offset by general and administrative expenses of $4.9 million.

3. Capitalization on project investment was $3.5 million for Q2 2017, totaling $4.9 million for the first half of year 2017 and our accumulated project investment was $43.6 million up to June 30, 2017, which was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017.

4. Percentage change is not applicable if either of the two periods contains a loss.

5. This information has been published on the Company's website http://www.namtai.com/investors#investors/quarterly_earnings under the quarterly earnings report of Q2 2017 on page 7, Condensed Consolidated Statements of Comprehensive Income.

6. Attached please find the unaudited financial results cut off July 28, 2017 for additional reference.

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE SECOND QUARTER OF 2017

Key Highlights of Financial Position

Notes:

1. As compared with December 31, 2016, the decrease of $13.5 million in the cash, cash equivalents and short term investments was mainly due to the payments of $13.4 million for new office premises and $3.0 million being made for land development project and accordingly was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017, partly offset by the exchange gain of $3.2 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017.

2. Cash in the financial ratio included cash, cash equivalents and short term investments in the amount of $170.7 million, $184.2 million and $199.7 million as at June 30, 2017, December 31, 2016 and June 30, 2016 respectively. As compared with June 30, 2016, the decrease of $29.0 million in the cash, cash equivalents and short term investments was mainly due to the payments of $13.4 million for new office premises, $6.6 million for dividend payment, $5.3 million being made for land development project and accordingly was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017, and the exchange loss of $0.8 million as a result of the depreciation of Renminbi against US dollars from June 30, 2016 to June 30, 2017.

   OPERATING RESULTS

   Operation income for the second quarter of 2017 and the same quarter of last year were mainly derived from properties and lands located in Shenzhen. Operating loss for the second quarter of 2017 was $2.3 million, an increase of $0.8 million, compared to operating loss of $1.5 million in the second quarter of 2016.

   Net income for the second quarter of 2017 was $2.1 million mainly represented exchange gain of $2.7 million as a result of the appreciation of Renminbi against US dollars in the second quarter of 2017, interest income of $1.8 million earned from time deposits and net operation income of $0.5 million, but partly offset by general and administrative expenses of $2.9 million, or income of $0.06 per diluted share. Compared to the financial results for the same period in 2016, the net loss then of $2.6 million mainly represented exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars in Q2 of 2016 and general and administrative expenses of $1.9 million, but partly offset by the interest income of $1.3 million earned from time deposits and net operation income of $0.3 million, or a loss of $0.07 per diluted share.

   Net income for the six months ended June 30, 2017 was $3.9 million mainly represented interest income of $4.3 million earned from time deposits, exchange gain of $3.5 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017 and net operation income of $1.1 million, but partly offset by general and administrative expenses of $4.9 million, or income of $0.10 per diluted share. Compared to the financial results for the same period in 2016, the net loss then of $3.0 million mainly represented general and administrative expenses of $4.1 million and exchange loss of $2.3 million as a result of the depreciation of Renminbi against US dollars during the six months ended June 30, 2016, but partly offset by the interest income of $2.9 million earned from time deposits and net operation income of $0.6 million, or a loss of $0.08 per diluted share.

   As the majority of our assets are denominated in Renminbi, the translation of Renminbi denominated assets to US dollars for reporting purposes has resulted in foreign exchange gain for the six months ended June 30, 2017. Due to the fluctuation of exchange rate for Renminbi against the US dollar, foreign exchange gain for the six months ended June 30, 2017 was $3.5 million, or approximately 91% of the amount of our net income for this period. However, since the majority of our payment obligations are also denominated in Renminbi, we do not expect the movement of Renminbi against the US dollar to materially and adversely impact our business.

   Capitalization on project investment was $3.5 million for Q2 2017, totaling $4.9 million for the first half of year 2017 and our accumulated project investment was $43.6 million up to June 30, 2017, which was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017.

   Our business of land development is currently in the preparatory stage where it takes time to apply for the relevant licenses and permits from the PRC government. During this preparatory stage of the land development, our only sources of income are from limited deposit interest and rental income; therefore, we expect to continue to incur losses during this stage.

   Please see page 7 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. This information has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of Q2 2017 on page 7, Condensed Consolidated Statements of Comprehensive Income.

   COMPANY OUTLOOK

   With respect to the development of "Inno Park" and "Inno City" in Shenzhen, the construction permit application processes have been proceeding smoothly and every related step is on schedule and within the Company's expectations.

   As part of our preparation for the development of "Inno Park", the Company is pleased to report that after our internal team has been working closely with the external project management company (WSP), quantity surveyor (Currie & Brown) and architectural design firm (Ronald Lu and Partners) on the construction drawing design and the tender for the general construction contractor, the main construction contractor will be selected in the second half of this year and commence work in the beginning of 2018. Since the construction work for the basement area started ahead of schedule, we held a groundbreaking ceremony for the construction of the basement area on May 5, 2017.

   As part of our preparation for the development of "Inno City", the PRC Government has verbally agreed and approved the construction of Phase I and II of "Inno City" to be combined together as one single project and the Company is currently waiting for the official approval from the PRC Government. This could significantly lower the costs and shorten the time of the construction. The Company is currently negotiating and finalizing its agreements with the selected architectural design firm, the project management company and quantity surveyor. They are expected to be engaged and commence work in the second half of this year. As the Inno City Project may commence ahead of schedule upon the receipt of the approval to combine the two phases, the Company plans to demolish all the old factory buildings between October to December 2017. The Company has also purchased new office premises for a total amount of $13.5 million in April 2017. The Company will move its headquarters to this new location and demolish the existing headquarters in the first half of 2018.

   Our Chairman, Mr. M.K. Koo ("Mr. Koo"), announced on July 12, 2017 that he has entered into a share purchase agreement to dispose all of his shareholdings in the Company to Kaisa Group Holdings Ltd. (1638:Hong Kong) ("Kaisa"), a real estate developer listed on The Stock Exchange of Hong Kong Limited. The closing of which is scheduled no later than August 11, 2017, and subject to Kaisa's satisfaction of due diligence review and other customary closing conditions. Consistent with the Company's previously announced strategic plan to identify a strategic partner that can assist the Company in its various development projects, the Company is now pleased to introduce Kaisa, after a three year search, as the best candidate identified to become an investor and potential strategic partner.

   Part I: Summary of gross floor areas for the two projects:

   Inno Park Shenzhen, Guangming

   (Approved)

   Inno City Shenzhen, Gushu

   (Planned)

   (In square meters, except plot ratios)

   Land area 103,739 52,625

   Plot ratios 2.59 6.00

   Office	175,406	Office + Soho	187,880
   Apartment	61,000	Apartment	48,300
   Gross floor area (GFA)	Commercial	28,594	Commercial	25,000
   Other	4,159	Other	7,200
   269,159	268,380

   Underground floor area	62,673	80,000
   Total construction floor area (CFA)	331,832	348,380

   Remark The above figures are subject to adjustment upon the final approval of the relevant authorities in China.

   Part II: Timetable for the two projects: Main Certificates Estimated Completion Time Inno Park Inno City 2017 2018 2019 2020 2021

3. Land Use Permit Obtained Jun 4,2015

4. Land Certificate Obtained Sep 21, 2015

5. Mar. 2018

   Jun. 2018

   C

   Planning Permit for Construction

   Engineering Aug. 2017 Jul. 2018

   D1

   Early Construction Permit for Pile

   Foundation May. 2017 -----

   D D2 Construction Permit for Project Nov. 2017 Nov. 2018

   D3 Main Construction Acceptance May. 2019 Sep. 2020 D4 Completion Time Sep. 2019 Jan. 2021 E Real Estate Certificate Mar. 2020 Jul. 2021 Remark

6. Triangles represent "Inno Park", while stars are for "Inno City".

7. The construction of "Inno Park" has commenced from April 2017.

8. The construction of "Inno City" is expected to commence before December 2018.

Part III: Budgetary Estimate for the two projects: Total Cost Inno Park Inno City

(In millions of US dollars)

$ 312

$ 415

Construction Cost

Operation Cost 69 43

Total $ 381 $ 458

The $839 million Schematic Design Estimation was prepared by our quantity surveyor, Currie & Brown, based on a schematic design originally prepared by our architectural design firm. This estimate will be used by us for cost control purposes

Remark

to monitor the costs of design, construction, and other operations.

This estimation does not include the costs of marketing and interior furnishing. If the developed properties are offered for sale, the costs would also have to include payment for land appreciation tax.

As for our Wuxi plant, the factory building continues to be listed for sale and we still expect it to be sold sometime within 2017. An auction is under preparation and we are currently looking for potential buyers. This auction is scheduled to complete in September 2017.

Potential Risks in our business

We currently derive a majority of our income from rental and interest income but please note that our rental income will cease after October 2017. Since 2016, we have seen a stabilizing trend on the benchmark interest rates in China. However, due to the current economic conditions in China, we expect the People's Bank of China ("PBOC") to keep Renminbi-denominated official time deposit interest rates in China at a low level throughout 2017. With this lower interest rate and rental income, we expect to continue to incur operating losses in 2017 and beyond.

We have only become a real estate developer, after our electronic manufacturing businesses ceased in 2014. To ensure our successful transformation, we have engaged external advisors and sought potential strategic partners and investors to support our projects. We cannot assure you our efforts are sufficient in carrying out a transformation of this magnitude. Our Chairman, Mr. Koo, is 74 years old. Mr. Koo has begun his transition towards retirement in anticipation of age and health issues. We cannot assure you that our transition planning can be carried out smoothly, or that any successor will be able to manage our Company as effectively.

As the majority of our assets are denominated in Renminbi, the translation of Renminbi-denominated assets to US dollars for our reporting purposes has resulted in foreign exchange gain in this quarter. As such, we do expect to see fluctuations in the reporting of foreign exchange loss/gain in the financial statements due to the movement of Renminbi against the US dollar. Nevertheless, as a majority of our payments are in Renminbi, we also do not expect the movement of Renminbi against the US dollar to adversely impact our business.

In order for the projects to proceed smoothly and start ahead of the schedule, it is necessary for the Company to negotiate with banks for the implementation of funds needed to assist in future development of the projects.