Investors Relations

Delivering nature's goodness to everyone.

Executive Chairman's Statement

Extracted from Annual Report 2016/17

Dear Shareholders

I am pleased to present our annual report for the 15 months ended 31 March 2017 (FY2016/2017).

This year marks my tenth year on the Board of SunMoon and it is gratifying to see how the company has transformed over the last decade.

AN EVENTFUL FY2016/2017

FY2016/2017 has been most eventful for SunMoon in more ways than one.

We continued to make strides in our asset-light, consumer-centric, brand-focused business strategy with the sale of our dehydrated produce business in China. We implemented our new Enterprise Resource Planning (ERP) system powered by NetSuite and continued to strengthen the SunMoon brand and grow the business based on the Network x Geography x Product (N x G x P) model.

The sale of the dehydrated produce business sharpens the SunMoon brand as a fresh produce and consumer products business. The new ERP system has transformed our back-end from an antiquated system into a technology-based platform driven by big data.

When I first invested in SunMoon in 2007, then known as FHTK, the company had over S$50 million in loans and its share price had fallen to 1.5 cents. It would have been easier for me to privatise SunMoon but that would have been at the expense of over 13,000 retail investors. Instead, I stayed on not only as an investor but also to lead the company, guided by a singular vision: SunMoon will be the AirBnB or Uber of the fruit trading and distribution business, by being asset-light, customer-centric and technologically-driven.

In 2016, SunMoon caught the attention of Alibaba-KKR-backed Shanghai YIGUO E-commerce Co. Ltd (YiGuo), who is now the largest SunMoon shareholder post-placement of new shares at 4.5 cents per share. This was approved on 16 June 2017 at the Extraordinary General Meeting.

The YiGuo investment serves to validate my vision for SunMoon, my conviction of the company's potential, and it also affirms the strategy that we have put in place, since I took charge of SunMoon in 2007.

STRONG GROWTH MOMENTUM

We have established three key pillars as a foundation of our growth strategy.

First, we want to establish the company as the leader in healthy eating and living. SunMoon's brand narrative "Spreading Positivity in Bite-Sizes through Healthy Living" encapsulates the purpose of the company, which is to empower health-conscious consumers the world over to eat right.

Second, branding. For SunMoon to be recognised on the global platform and compete with international fruit brand companies, branding is key. We believe SunMoon has a strong brand equity and we are relentless in our efforts to build up the brand equity.

Third, the N x G x P model. The entry of YiGuo presents immense opportunities for SunMoon and will boost the N, G and P components. As part of the YiGuo-Alibaba Group, SunMoon can tap on Alibaba's click and mortar network, including their online presence via Tmall, Taobao and offline stores via Lianhua Supermarket and Suning. The relationship not only allows us to have a strong brand presence in China, but also enhances our sourcing capability and gives us greater economies of scale.

Through YiGuo, SunMoon has access to its logistics capability in China from port to cold room to point of sales nationwide. This is a critical differentiator for SunMoon. The access to last-mile logistics coupled with its strong brand equity provides SunMoon with a significant lead over its competitors.

But SunMoon's vision is not just all about China. We have a strategy in place that will make the SunMoon brand a ubiquitous consumer and lifestyle brand globally.

Today, SunMoon is a stronger company and is well-positioned for growth. The company sells and distributes over 100 product types and has a network of over 11,000 point of sales globally, across nine geographies.

FINANCIAL HIGHLIGHTS

The Group reported revenue of S$20.1 million and net profit of S$132,000 for the 15 months ended 31 March 2017, as compared to revenue of S$14.1 million and net loss of S$2.1 million for the 12 months ended 31 December 2015. The Group changed its financial year end in January 2017.

Revenue increased by 42.6% in FY2016/2017 mainly due to increased sales to China and additional 3 months sales arising from the change in financial year. Net profit improved on disposal gains of S$5.0 million and decrease in depreciation largely due to the cessation of depreciation and disposal of subsidiaries.

SunMoon is in a sound financial position, with positive equity of S$7.4 million and net cash of S$557,000 as at 31 March 2017.

GOOD CORPORATE GOVERNANCE

SunMoon is committed to good corporate governance and advocates transparency in managing issues and matters raised by minority shareholders and all stakeholders as demonstrated by our 27 page response to queries raised by the Securities Investors Association (Singapore) (SIAS) last year and the regular engagement with the media, analysts and investors to enhance their understanding of our strategy and plans. In FY2016/2017, we had two investor and analyst meetings and two meetings with SIAS.

LOOKING AHEAD

With strong partnership, injection of fresh capital, a stronger and wider network, and wider product range, SunMoon is poised to become a global lifestyle and consumer brand that caters to health-conscious consumers worldwide. We are on track to deliver on our mission to bring nature's goodness to consumers, from farm to fork. We have no doubt that with your continued support and trust, we will get there.

APPRECIATION

Finally, we would like to take this opportunity to thank the staff and the Board of Directors for their steadfast support and determination to bring the company to where it is today. The team effort and hard work has paid off and we look forward to your continued support as we move forward together to achieve the vision of SunMoon to be a global market leader in the distribution and marketing of fruits and vegetables.

We would also like to welcome Mr James Prideaux, who joined us as an independent director in April 2017. We believe his international executive management experience is a strategic fit for SunMoon.

With YiGuo as our major shareholder, we are also pleased to welcome Mr Yu Liang, Mr Wang Yaobin and Mr Shum Ka Shat who were appointed as non-independent directors of SunMoon on 5 July 2017.

We are also grateful to our Shareholders for their continued patience and support, even as we strive to achieve greater success in the years to come. It has been a very difficult journey but we are proud to say that our perseverance has prevailed. It is a cliché to say that the "Sun, Moon and Stars" are aligned but we do believe that SunMoon's efforts are all aligned and focused on delivering nature's goodness globally.

Thank you!

Mr Gary Loh
Executive Chairman