Stock Commentary                                                           Date:17 /11/2017

Stock:                                                      LINGBAO GOLD GROUP LTD. (3330.HK)

Closing price:                                           $1.54 (17/11/2017)

52 weeks range:                                       $1.50 – 2.02

Shares outstanding (H shares):                 297,274,000

Market Capitalization (H Shares):             HK$ 463,747,440 (17/11/2017)

Target Price (12 months):                         Neutral

Summary :

Lingbao Gold Group Company Ltd. is engaged in the mining, processing, smelting and sales of gold and other metallic products in the People’s Republic of China (the PRC). The Company operates its business through four segments. The Mining-PRC segment is engaged in gold mining and mineral ores processing operations. The Mining-KR (Korea Republic) segment is engaged in gold mining and mineral ores processing operations in the KR. The Smelting segment is engaged in gold and other metal smelting and refinery operations carried out. The Copper Processing segment is engaged in copper processing operation carried out. The group’s revenue in the first half of 2017 dropped 22%. On the other hand, because of the re-valuation of the financial instrument, the group’s profits improved and recorded a net gain of RMB 26,450,000 in the first half of 2017 (net loss was RMB 104,959,000 in the same period last year).

Overview – Half Yearly 2017 :

1. The group’s revenue dropped 22%. Nevertheless, the group managed to turn the business around in first half of 2017 by making profit of approximately RMB 26,450,000 comparing to a net loss of RMB 104,959,000 in the same period last year.
2. The group attributed the profit mainly from price increase with copper foil price and gold price. Also, the loss of fair value of the financial instruments which the company holds declined substantially in the first half of 2017.
3. Mining segment, one of group’s major businesses. This segment comprises the sales of gold concentrates and compound gold. These are mainly sold to the group’s smelting plant.
4. Smelting segment, another major segment of the group’s revenue. The group’s existing smelting plant is located in Henan Province and it is capable of processing gold, silver, copper and sulphuric acid. Main products coming out from the plant include gold bullion, silver, copper products and sulphuric acid. The decrease in the smelting segment was substantial and it was mainly attributed to the decrease in the sales of gold bullion, the volume dropped 49.7% over the same period of last year.

SWOT ANALYSIS:

Strength :

1. The group is one of the major gold producers of Henan province.
2. The group’s existing plant is capable of producing gold, silver, copper products and sulphuric acid.

Weakness :

1. The group’s revenue is correlated with the international gold price. The price of gold had been stagnant for the past year due to drop in demand in gold bullion
2. Environmental law and strict production requirement put pressure on the group’s production cost.

Opportunities :

1. Through internal management upgrade, new technology upgrade to achieve efficient production while minimize the pollution problem that may incur.

Threat :

1. Continue weakness in the demand of gold bullion.
2. Stricter law on environmental protection may further curtail the group’s production and putting more pressure on production cost.

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” I, Ni Kwok Kuen Alex, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto. “