Frequently Asked Questions

Frequently Asked Questions:

 

Future Metal Holdings Ltd (the “Quarry”) is operating at only 10% of capacity. When will Jade Road ramp up production?

The current production capacity of the Quarry, as governed by the Mining Licence, is 300k tonnes per annum. Presently, the asset is operating at the full 300k tonnes per annum, which is 100% capacity. 

With further investment and a revision to the Mining Licence, the production capacity could potentially be expanded to 3MM tonnes per annum, which is supported by the Competent Person’s Report prepared by SRK Consulting. Given our focus is to divest portfolio positions such as the Quarry, we are unlikely to increase production beyond current levels. The fact that production capacity can be expanded by c.10x, is an attractive feature for potential buyers who will look to unlock the future expansion value of this asset post-acquisition.

There seems to be a long way to go to a pathway to peak levels at the Quarry and therefore the current valuation could be interpreted as very forward-looking?

The current valuation was independently conducted by SRK Consulting (“SRK”), which is based on a Discounted Cash Flow valuation methodology with conservative assumptions. This methodology for valuing assets is widely accepted in relation to resource assets in particular.

We believe the estimated timeline to reach the full expansion capacity is within a relatively short period. According to SRK, the construction period for the expansion of the mine is 2 years. Due to a large number of reserves identified, the life of our mining asset is over 40 years (over 100 years at current production levels), which gives us or another owner the ability to monetise the asset over a longer period of time. We believe this is a key selling point of the asset particularly when presenting it to potential acquirers.

If you sell the Quarry, will you realise book value in your NPV?

Our efforts will be directed at realising or exceeding our current carrying value of the asset. However, there can be no assurances on the realised value until a firm bid is received.

Is there any colour you can give on progress to make an exit?

In 2021, JADE shifted its focus on the divestment of part of its legacy portfolio. Our expectation is to realise partial or full exits for some of these assets in the remainder of 2021 and/or 2022.

If cash burn is in line with last year, does the starting balance for 2021 cover more than running costs and fees, in other words is there cash left to deploy into new investments?

JADE has more than adequate cash resources to cover its running costs. New investments will be funded by existing cash resources as well as from proceeds generated through exits.

Can you tell us more about the large shareholder Elypsis?

Elypsis is controlled by a major sovereign wealth fund located in the Arabian Gulf Region.

Does DocDoc have any revenue?

DocDoc does generate revenue. The financial statements for DocDoc are not a matter of public record as it is a private company.

How many successful exits have you had since inception, and what progress is being made to realise cash from the current portfolio?

Since the inception of JADE, we have successfully realised six exits on our investments. To illustrate an example, JADE invested USD0.8MM as a Limited Partner in the BRJ China Credit Fund in 2014 and exited this LP stake in 2016, which generated JADE c. 8% p.a. Our current portfolio is also embedded with positions that generate cash flow. In 2020, the revenue from our income producing assets was USD2.5MM. In addition, JADE is in the process of further divesting assets within the portfolio to raise additional cash.

What is the total value lost from negative exits/impairments?

Since the appointment of Harmony Capital, the total value lost from negative exits or impairment is c.USD14MM, resulting from one significant divestment of one legacy project, Global Pharm Holdings Group Inc.

Do you see any portfolio assets at risk of further impairment?

With reference to the going concern statement in JADE’s 2020 Annual Report, no risk of further impairment was identified.

How much of your NAV is determined by cash exits/fundraises with external co-investors versus industry reports such as CPRs?

JADE’s portfolio is evaluated pursuant to its Valuation Policy with the link provided below. The Valuation Policy is constructed based on the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines, which is the internationally accepted best practice for the valuation of private assets. The adopted valuation methodology for each project is also independently reviewed by its Board and its Auditor, PKF Littlejohn LLP.

https://jaderoadinvestments.com/investors/valuation-policy

What is the benefit to owning Jade versus getting exposure through more established Asia investment trusts?

JADE is the only company quoted on the London Stock Exchange that has direct exposure to small and medium-sized enterprises (“SMEs”) financing opportunities within the Asia Pacific region - the fastest growing economic region in the world. Unlike other Asian Investment Trusts, which invest in public equities, JADE targets investment opportunities in private SMEs. This provides a unique channel for investors to participate in the Asian primary investment market.

What are your best portfolio revaluations and how have they been calculated?

Future Metal Holdings Ltd has incurred positive revaluations in the past, which were purely derived by the use of external independent valuation advisors and fundamentally driven by improvements and enhancements of the Quarry funded by investments from JADE. The revaluation of Future Metal Holdings Ltd is presented below:

 

2016

2017*

2018**

2019

2020

Holding Percentage

10.9%

79.3%

84.8%

84.8%

84.8%

Total Valuation

USD8.8MM

USD39.4MM

USD42.5MM

USD44.7MM

USD50.4MM

* SRK Consulting was engaged to evaluate the asset.

** The valuation includes USD40.6MM as the equity value and the remainder as Shareholders’ Loans.

Who are your major co-investors that we would know?

JADE has partnered with Hong Kong-based family offices that operate on a private basis.

UK investors have been burnt by a lot of fraudulent/poorly run companies from China; can we be assured that your portfolio companies are run differently?

JADE currently has a diversified portfolio that is domiciled in a variety of jurisdictions, including Mainland China, Hong Kong, Japan, Singapore and others. Our mining asset in Mainland China is the largest exposure we have within that jurisdiction. We have adopted a stringent methodology to monitor the operations of this asset. For example, BDO China, a globally recognized accounting firm, has been engaged as an independent financial controller for bank account management and bookkeeping and holds the Company Chops. In addition, JADE sends investment professionals to visit the Quarry on monthly basis, travel restrictions permitting, to monitor operations. Finally, unlike historical frauds from the region, Future Metal is completely owned and controlled by JADE and its Investment Manager – this level of control provides us with the flexibility to implement a number of internal controls which did not exist in AIM-listed companies from China historically.

How confident are you in Fook Lam Moon’s capability of servicing or redeeming the $26.5m convertible bond?

We are confident that Fook Lam Moon (“FLM”) can continue to service its outstanding obligations. FLM is a very well-established Chinese restaurant chain that has over 70 years of dining operations. Despite the social unrest and the COVID-19 pandemic during the last two years, FLM has recovered its business operations swiftly from these adverse events. 

There remains significant value in the legacy portfolio Greater China Credit Fund LP at US$2.8m and Changtai Jinhongbang Real Estate Development at US$1.8m. What are the prospects for realising these non-core assets?

The team has been monitoring the progress on the two investments closely to ensure successful exits in due course.

Your Annual Report mentions a number of SPVs (special purpose vehicles) in the portfolio. What is their total value and are there any underlying assets to support this?

JADE utilises the SPVs to segregate the portfolio risk of each investment. The SPVs are simply holding vehicles for specific investments in the Portfolio and do not inherently have any value themselves.

What is your current investment horizon? Does the recent expansion into pre-IPO investments change that?

JADE is still dedicated to finance small and medium-sized enterprises within the Asia Pacific region. These investments typically have an investment horizon of 3-5 years. We decided to expand our focus to invest in Asian High Growth Companies via equity (in listed companies and/or Pre-IPO investments) to provide additional diversification to our investors and to enhance returns. These investments would likely have shorter investment horizons of 6 months to 2 years.

Which Asian economies do you think have the most attractive risk/return profiles?

JADE has created a diversified investment portfolio for its shareholders to generate attractive risk-adjusted returns. Currently, JADE has a preference for potential investment opportunities in key areas of the Asia Pacific region. These include developed economies like Australia, Japan and Singapore and developing nations like Vietnam and other countries in the Association of Southeast Asian Nations. Given the jurisdiction composition of the current portfolio, JADE will be focusing on investment opportunities outside of China in the short term.

Asia is huge as is the opportunity in SMEs. How as a small company yourselves do you ensure your time is effectively spent and do you have the bandwidth to support the deal flow?

JADE, through its Investment Manager, has decades of investment experience in a number of Asian markets with an extensive network of contacts in key jurisdictions across the region. By utilising its local presence, JADE can access high-quality transactions with ease. JADE also remains selective on sector exposure and allocation jurisdictions based on its market acumen to ensure a good allocation of its time and effort to maximize returns for its shareholders/investors.