Yuk Wing Group Holdings Limited to Raise a Maximum of Approximately HK$120 Million from Public Offering

HONG KONG--()--Highlights

  • The leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong, which provides technical rockdrilling solutions for customers.
  • A majority of the tools are self-designed, with other equipment and machinery sourced from third parties for customers depending on their rockdrilling needs.
  • During the Track Record Period, whilst a substantial portion of the Group’s revenue has been generated from direct sales of its products to customers in Hong Kong and Macau, an increasing portion of revenue has been generated from exports of DTH rockdrilling tools through overseas distributors in Finland and Japan.
  • For the three years ended March 31, 2016 and the three months ended June 30, 2016, revenue of the Group amounted to HK$150.6 million, HK$126.6 million, HK$141.7 million and HK$27.8 million, while profit for the year attributable to owners of the Company amounted to HK$18.9 million, HK$21.1 million and HK$27.0 million, respectively and loss attributable to owners of the Company for the three months ended June 30, 2016 amounted to HK$3.0 million.
  • According to the Frost & Sullivan Report, the Group is a leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong, with a market share in Hong Kong by revenue of 59.2% in 2015.

Financial Highlights

 

Year ended March 31

 

3 months ended June 30

 
HK$’000   2014   2015   2016   2016
Revenue 150,571   126,620   141,744 27,778
Gross Profit 51,764 54,352 63,221 12,673
Profit (loss) before tax 29,864 31,691 42,906 (823)
Profit (loss) for the year attributable to owners of the Company

18,887

21,141

26,974

(2,969)

Gross Profit Margin (%) 34.4% 42.9% 44.6% 45.6%
Net Profit Margin (%) 16.7% 20.8% 25.6%* 25.5%*

*Adjusted for listing expenses

Yuk Wing Group Holdings Limited (“Yuk Wing”, together with its subsidiaries, the “Group”; stock code: 1536), a leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong, announces the details of its plan to list on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”) today.

A total of 100,000,000 shares will be offered under the Public Offer. The offer price per offer share is expected to be not less than HK$1.0 and not more than HK$1.2. The Public Offer will commence on December 30, 2016 (Friday) and close at 12:00 noon on January 5, 2017 (Thursday). The allotment result is expected to be announced on January 10, 2017 (Tuesday). Dealings of Shares on the Main Board of the SEHK is expected to commence on January 11, 2017 (Wednesday).

Assuming an Offer Price of HK$1.1 per Offer Share (being the mid-point of the indicative Offer Price range), the aggregated net proceeds from the Public Offer will be approximately HK$83.6 million. Yuk Wing intends to apply the net proceeds as follows: 1) approximately 57% will be invested in a new manufacturing facility, including (i) the installation of additional new production lines consisting of machinery and equipment for the manufacturing of new products; (ii) the installation of heat treatment facilities; (iii) the rental of new premises for new factory and installation of necessary fittings and leasehold improvements; and (iv) the increase of manpower to operate the new machinery and equipment at our new factory; 2) approximately 5% will be used for research and development activities; 3) approximately 11% will be used for participation in overseas exhibition and promotions; 4) approximately 10%, will be used for the purchase of brand new drilling machineries for demonstration and showcasing to our customers; 5) approximately 5% will be used for increasing manpower in Hong Kong; 6) approximately 4%, will be used for renting a new office space for Hong Kong headquarters; and 7) the remaining amount of approximately 8% of the net proceeds, will be used to provide funding for working capital and other general corporate purposes.

Octal Capital Limited is the Sole Sponsor. Opus Capital Limited, Supreme China Securities Limited and Octal Capital Limited are the Joint Bookrunners and Joint Lead Managers of the Public Offer.

Business Overview

Yuk Wing is the leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong. The Group provides technical rockdrilling solutions for use in building foundation and piling on construction sites, mining and quarrying, water well drilling, utility linings, micro-tunneling and overburden drilling in a variety of geological formations and at considerable depths. A majority of the equipment and machinery which the Group supplies to customers are self-designed DTH rockdrilling tools which the Group manufactures, and the rest are sourced from third parties for the customers depending on their rockdrilling needs.

During the Track Record Period, whilst a substantial portion of the Group’s revenue has been generated from direct sales of its products to customers in Hong Kong and Macau, an increasing portion of the Group’s revenue has been generated from exports of DTH rockdrilling tools through overseas distributors in Finland and Japan.

For the three years ended March 31, 2016 and the three months ended June 30, 2016, revenue of the Group amounted to HK$150.6 million, HK$126.6 million, HK$141.7 million and HK$27.8 million, while profit for the year attributable to owners of the Company amounted to HK$18.9 million, HK$21.1 million and HK$27.0 million, respectively and loss attributable to owners of the Company for the three months ended June 30, 2016 amounted to HK$3.0 million.

According to the Frost & Sullivan Report, the Group is the leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong, with a market share in Hong Kong by revenue of 59.2% in 2015. The Group has a diversified customer base of over 130 customers, including certain foundation companies listed on the Hong Kong Stock Exchange.

Competitive Strengths

Followings are the competitive strengths of the Group:

1) A wide range of quality and tailor made products

The Group’s Directors believe that the ability to provide tailor made designs and solutions as well as a wide range of quality products is the key to retaining long-term customers. Apart from offering the Group’s customers with technical proposals, the Group also controls and monitors each step in the production process to ensure adherence to the Group’s inhouse quality standards. Along with the Group’s facilities and equipment, the Group’s Directors believe that the Group’s advanced technological know-how, research and development efforts in developing new products technologies, flexible production processes, experienced labor, and inhouse quality control and test procedures ensure quality assurance and flexibility to produce tailor made DTH rockdrilling tools to meet the diversified requirements of its customers.

2) One-stop technical solutions and support

The Group offers its customers one-stop technical solutions for their rockdrilling projects by providing them with the Group’s self-designed and manufactured DTH rockdrilling tools, and depending on their project requirements, by assisting them to source piling and drilling machineries and rockdrilling equipment from suitable suppliers. The Group also offers aftersales support to its customers. In Hong Kong and Macau, the Group’s experienced aftersales team offer their customers onsite training and suggestions on selection of suitable components to supplement the Group’s products. In the Group’s overseas markets, whilst relying on its overseas distributors in Finland, Japan and India to provide the end users with aftersales technical support, the Group also provides related assistance to its overseas distributors where necessary.

3) Relatively short production and delivery lead times

The Group has short lead times for production and delivery, which the Group believes is crucial for its success in the competitive business environment which the Group operates in Hong Kong. The Group’s customers in Hong Kong are mainly foundation companies and contractors which normally operate under tight construction schedules and timetables. The Group’s senior management team’s strong technical knowledge enables the Group to respond nimbly to make suggestions on relevant DTH rockdrilling tools required or produce a feasible proposal for its customers. The Group utilizes technologically advanced production equipment and implement regular repair and maintenance programs to ensure production efficiency, thereby reducing production lead times. In addition, the Group regularly assesses the business requirements of its major customers and monitors the Group’s inventory of raw materials and completed products and components to maintain a certain level of inventory for future production or to meet future demand. Amongst the Group’s competitors in Hong Kong, it has the shortest production lead time and the shortest average shipment time for self-manufactured products, according to the Frost & Sullivan Report.

4) Market leader in the DTH rockdrilling industry in Hong Kong with a loyal customer base

In Hong Kong, the Group maintained its leading market position in the DTH rockdrilling tool industry with a market share by revenue of approximately 59.2% in the year of 2015 according to the Frost & Sullivan Report. During the Track Record Period, the Group had over 130 customers, including certain foundation companies listed on the Hong Kong Stock Exchange. The Group’s major customers in Hong Kong and Macau are foundation companies and contractors with whom it has established long-term and stable relationships.

5) Experienced and dedicated management team

The Directors believe that the Group’s past success and future prospects depend on the Group’s experienced management team and their expertise. The Group’s management team has extensive technical and managerial experience in the DTH rockdrilling tool industry in Hong Kong. The Group’s Executive Directors, Mr. Kenneth Chan, Mr. Alan Chan and Mr. Eric Chan, with more than 16 years of experience in the industry, have in-depth knowledge of and insight into market development, corporate management and trend analysis of the DTH rockdrilling tool industry in Hong Kong. Mr. Kenneth Chan is responsible for overall strategy planning and management of the Group’s business and Mr. Alan Chan is responsible for overall management of business operations and management of the engineering and technical processes of the Group. Mr. Eric Chan is responsible for management of the sales and marketing operations of the Group.

In addition, Dr. Alberto Barbera, the Group’s head of research and development and export manager, and a member of the Group’s senior management, who was registered as an engineer in Italy in 1975 and has more than 40 years of experience in the engineering and rockdrilling industries, joined the Group in 2015 to help spearhead its international sales efforts and to lead the Group’s research and development team.

Business Strategies

Looking forward, the Group intends to pursue the following strategies:

1) Deepen penetration of the Hong Kong DTH rockdrilling tool industry

Hong Kong is the Group’s home market and forms the foundation for further growing its business and the springboard from which the Group expands its operations internationally. According to the Frost & Sullivan Report, the DTH rockdrilling tool industry in Hong Kong is expected to grow at a CAGR of 10.1% from 2015 to 2020. The Group will continue to focus on solidifying its leading market position by deepening the Group’s penetration of Hong Kong’s growing DTH rockdrilling tool industry, through the selling of a wider range of products to its customers to service their different rockdrilling demands.

2) Extend international platform through partnering with local distributors to develop new markets and increase overseas sales

The Group plans to take advantage of increasing global demand for DTH rockdrilling tools. According to the Frost & Sullivan Report, the growing trend for the global DTH rockdrilling tool industry size is expected to continue at a CAGR of 16.4% from 2015 to 2020 and reach USD1,037.4 million in 2020. The Group aims to strengthen and/or extend its presence in several key international markets, including Scandinavia, Japan, India and Canada. To increase the Group’s sales in these markets, the Group intends to expand its distribution networks through partnerships with local distributors who are established in their respective markets with long operating history and, in the Group’s opinion, have demonstrated strong marketing, direct sales, logistics management and aftersales technical support capabilities. In addition, the Group also intends to increase its international sales and marketing efforts by expanding its international sales team and through further participation in international exhibitions and events to promote the Group’s products.

3) Invest in new manufacturing facility to introduce new self-designed and manufactured products and enhance manufacturing capabilities

The Group plans to allocate a portion of the proceeds from the Public Offer towards the investment in its new manufacturing facility. The Group plans to invest in a new manufacturing facility to house new production lines and machinery and equipment targeted at the following improvements: 1) introducing new self-designed and manufactured products; and 2) enhancing the Group’s manufacturing capabilities.

4) Expand research and development team

The Group’s research and development team is responsible for increasing its production efficiency and effectiveness in order to improve the quality of the Group’s existing products and thereby increasing its profit margin. Further, it is responsible for advising on and improving product design for our customers after the Group receives their orders for its DTH rockdrilling tools, in order to better achieve its customers’ objectives, improve the performance of its products and/or reduce production costs. The Group is also committed to developing new technologies and to providing a broader range of products, which the Group believes could increase sales and margins and help the Group expands its market share in key target markets both locally and overseas. The Group’s research and development team also studies and considers the rockdrilling conditions of different countries and customizes its DTH rockdrilling tools to match such conditions. The Group believes that this is a key element in its efforts to expand our international markets.

About Yuk Wing Group Holdings Limited

Yuk Wing is the leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong. It provides technical rockdrilling solutions for use in building foundation and piling on construction sites, mining and quarrying, water well drilling, utility linings, micro-tunneling and overburden drilling in a variety of geological formations and at considerable depths. A majority of the equipment and machinery which the Group supplies to its customers are its self-designed DTH rockdrilling tools which its manufactures, and the rest are sourced from third parties for customers depending on their rockdrilling needs.

According to the Frost & Sullivan Report, the Group is the leading manufacturer and supplier of DTH rockdrilling tools in Hong Kong, with a market share in Hong Kong by revenue of 59.2% in 2015. During the Track Record Period, the Group had over 130 customers, including certain foundation companies listed on the Hong Kong Stock Exchange.

Contacts

Stimulus Investor Relations Ltd.
Ms. Hill Ho, +852 3159 2944
hill.ho@stimulus-ir.com
or
Ms. Jessica Choi, +852 3159 2916
jessica.choi@stimulus-ir.com

Contacts

Stimulus Investor Relations Ltd.
Ms. Hill Ho, +852 3159 2944
hill.ho@stimulus-ir.com
or
Ms. Jessica Choi, +852 3159 2916
jessica.choi@stimulus-ir.com