HK brokerage KVB Kunlun issues profit warning for Q1 2019

Maria Nikolova

The broker anticipates it would incur a substantial loss in the three months ended March 31, 2019.

Hong Kong-focused retail Forex broker KVB Kunlun Financial Group Ltd (HKG:6877) has just issued a profit warning for the first three months of 2019.

After a preliminary review of the latest unaudited consolidated management accounts of the Group for the three months ended March 31, 2019, it is expected that the broker would incur a substantial loss for the three-month period.

The loss is blamed on the fair value loss on the embedded derivative portion of the convertible bonds issued in February 2018. In addition, based on the information currently available, the Board considers that such substantial loss may be explained via the following factors:

  • a reduction in leveraged foreign exchange and other trading income earned from external customers due to reduced volatility which led to decrease in trading volume of the Group’s customers in the first quarter of 2019; and
  • increase in finance costs on the convertible bonds issued in February 2018.

Furthermore, if the market volatility and trading volume do not improve during the second quarter, the Group may suffer a loss for the six months ending June 30, 2019 as compared to net profit for the six months ended June 30, 2018.

KVB Kunlun marked a net profit of about HK$34.2 million during the year ended December 31, 2018 compared with the net profit of about HK$27.4 million for the year ended December 31, 2017. The net profit margin for 2018 was approximately 7.3% (2017: 5.3%).

On the downside, the total income decreased by 8.5% to HK$471.1 million in 2018, down from HK$514.9 million for 2017. The leveraged foreign exchange and other trading income fell 6.1% to HK$372.9 million. This was mainly due to the decreased trading volume in 2018 as compared to the preceding year.

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