Superland Group to raise a maximum of approximately HK$138 million by way of Hong Kong Public Offer and International Placing

Highlights

• An established contractor based in Hong Kong with over 15 years of operating history providing fitting-out services and repair and maintenance services
• According to the Frost & Sullivan Report, the Group ranked third among fitting-out contractors in Hong Kong market with a market share of approximately 1.2% in 2018 in terms of revenue
• During the period comprising the years ended 31 December 2017, 2018 and 2019 (the "Track Record Period"), customers of the Group were from the private sector and mainly included property developers and contractors
• The Group has provided services for a number of prominent property projects of established property developers in Hong Kong, including Victoria Harbour Residence, Phase IV of LOHAS Park, St. Martin, Victoria Dockside, Fleur Pavilia, Mount Pavilia and The Spectra
• The Group had completed 20 fitting-out projects with an aggregate total contract sum amounting to approximately HK$1,093.5 million during the Track Record Period and up to 21 June 2020 (the "Latest Practicable Date")
• As at the Latest Practicable Date, the Group had a total of 39 fitting-out projects on hand, with an aggregate total contract sum of HK$2,932.6 million
• For the years ended 31 December 2017, 2018 and 2019, revenue of the Group was approximately HK$552.7 million, HK$768.1 million and HK$879.4 million, respectively, and adjusted profit and total comprehensive income for the year was approximately HK$30.6 million, HK$40.2 million and HK$42.7 million, respectively.

Financial Highlights

HONG KONG, June 30, 2020 /PRNewswire/ -- Superland Group Holdings Limited ("Superland Group" or the "Company", together with its subsidiaries, the "Group", together with its subsidiaries, the "Group"; stock code: 0368.HK), a leading established contractor based 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 200,000,000 shares (subject to the Over-allotment Option) will be offered under the Share Offer, of which 90%, or 180,00,000 shares (subject to reallocation and the Over-allotment Option), will be offered by way of International Placing; while the remaining 10%, or 20,000,000 Shares (subject to reallocation) will be offered under the Hong Kong Public Offer. The Offer Price per Offer Share is expected to be not less than HK$0.63 and not more than HK$0.69. The Hong Kong Public Offer will commence at 9:00 a.m. on 30 June 2020 (Tuesday) and close at 12:00 noon on 6 July 2020 (Monday). The final offer price and allotment results are expected to be announced on 16 July 2020 (Thursday). Dealings in shares of Superland Group on the Main Board of the SEHK are expected to commence on 17 July 2020 (Friday).

Assuming an Offer Price of HK$0.66 per Offer Share (being the mid-point of the Offer Price range), the aggregated net proceeds from the Share Offer, after deducting related expenses and assuming the Over-allotment Option is not exercised, will be approximately HK$84.2 million. Superland Group intends to use these net proceeds for the following purposes: 1) approximately 36.7% for payment of upfront costs such as payment of costs of materials and sub-contracting charges for new projects; 2) approximately 53.3% for obtaining surety bonds; and 3) approximately 10.0% for general working capital of the Group.

Lego Corporate Finance Limited is the Sole Sponsor. Lego Securities Limited and Business Securities Limited are the Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers. HK Monkey Securities Limited is a Joint Bookrunner and Joint Lead Manager. China Tonghai Securities Limited, Orient Securities Limited, Realord Asia Pacific Securities Limited, Lee Go Securities Limited, Giraffe Capital Limited and Maxa Capital Limited are the Joint Lead Managers.

Business Overview

The Group is an established contractor based in Hong Kong with over 15 years of operating history providing 1) fitting-out services mainly cover ceiling, flooring, wall, lighting, glass, metal, wood, stone and plastering works conducted on new buildings and property projects, as well as sourcing and installing doors, furniture and accessories tailor-made according to the specifications of customers as part of the fitting-out services; and 2) repair and maintenance services mainly cover upgrade, restoration and improvement, and repair, replacement or installation of interior decorative parts conducted on existing premises.

According to the Frost & Sullivan Report, the Group ranked third among fitting-out contractors in Hong Kong market with a market share of approximately 1.2% in 2018 in terms of revenue. During the Track Record Period, customers of the Group were from the private sector and mainly included property developers and contractors. It has provided services for a number of prominent property projects of established property developers in Hong Kong, including Victoria Harbour Residence, Phase IV of LOHAS Park, St. Martin, Victoria Dockside, Fleur Pavilia, Mount Pavilia and The Spectra.

During the Track Record Period and up to the Latest Practicable Date, it had completed 20 fitting-out projects with an aggregate total contract sum amounting to approximately HK$1,093.5 million. As at the Latest Practicable Date, it had a total of 39 fitting-out projects on hand, with an aggregate total contract sum of HK$2,932.6 million. Among these projects on hand, 21 projects were with total contract sum of HK$50.0 million or above. The aggregate total contract sum of these 21 projects amounted to approximately HK$2,566.4 million.

For the years ended 31 December 2017, 2018 and 2019, revenue of the Group was approximately HK$552.7 million, HK$768.1 million and HK$879.4 million, respectively, of which 98.8%, 98.9% and 99.4% came from fitting-out services and1.2%, 1.1% and 0.6% were from repair and maintenance services. For the years ended 31 December 2017, 2018 and 2019, adjusted profit and total comprehensive income for the year was approximately HK$30.6 million, HK$40.2 million and HK$42.7 million, respectively.

Competitive Strengths

1.      An established contractor in Hong Kong that is capable to deliver cost-effective fitting-out services and maintains favourable relationships with both local and PRC property developers

It is believed that one of the competitive edges of the Group is the capabilities to deliver cost-effective fitting-out services, and the Group has provided services for a number of prominent property projects of established property developers in Hong Kong. Management and business development personnel of the Group maintained favourable relationships with both local and PRC prominent property developers, as evidenced by a large number of tender invitations it received during the Track Record Period. The Group received 165, 220 and 210 tender invitations in the years ended 31 December 2017, 2018 and 2019, respectively. Directors of the Group believe that such large number of tender invitations from both new and existing customers shows that the Group experienced a strong demand for its services during the Track Record Period primarily attributable to reputation of delivering quality work in the fitting-out industry. During the Track Record Period, the Group was able to secure contracts with new customers, such as a contract with contract sum over HK$300.0 million in 2019 from a leading PRC property developer based in the Guangdong Province for a residential project in Tuen Mun.

2.       Capable to provide consistent work quality through adoption of systematic approach in management and operation and to manage costs and profit margins effectively and provide insights and refinements on customer's proposals through maintenance of a comprehensive information database

In view that different projects are normally overseen by different project managers and to ensure the consistency of service quality, the Group has formulated an objective quality control system that consists of various checklists and policies derived from the past experience and know-how of the management to be implemented by project managers to evaluate and control the project progress and quality. Such systematic approach allows the Group to attain desired quality without relying on the ability, experience or subjective judgment of particular project managers.

Meanwhile, the Group differs from competitors who may, to a large extent, rely on their sub-contractors to complete the works, as the Group ensures that on-site project team consists of its direct labour to carry out part of the works to demonstrate the standard required for the sub-contractors to adopt for the remaining works, so as to ensure that services provided are of consistent quality. In addition, the Group maintains a comprehensive information database which stores statistics and data collected from previous projects for staff to make reference to from time to time in order to make a more accurate estimation on project costs plus an appropriate profit margin.

3.       The Group has strong manufacturing capabilities with in-depth industry knowledge and a high commitment to quality

To maintain competitive edge, the Group applies the up-to-date technologies to aid business operation. In particular, make use of three-dimensional laser scanning and electronic measurement technologies to perform work in a more accurate and cost-effective manner with a view to minimise human errors and prevent incurring additional cost to rectify defects.

4.       Maintain stable relationships with major customers, suppliers and sub-contractors

With over 15 years of operating history, the Group has established stable relationships with major customers including long term working relationships with some prominent property developers in Hong Kong. As at the Latest Practicable Date, it has maintained stable business relationships with its five largest customers. In particular, the Group has been serving SHK Group since 2004, and has been an approved contractor of SHK Group since 2009. The Group has also been serving NW Group since 2012. It is often invited to submit tenders for fitting-out projects, and it has from time to time been selected or nominated by property developers to provide fitting-out works for their property projects. The Group has 19, 10 and 11 recurring customers in each year of the Track Record Period.

It has established stable relationships with its suppliers and sub-contractors. As at the Latest Practicable Date, it had over 168 suppliers and sub-contractors on its internal lists of approved suppliers and sub-contractors.

5.       Led by experienced management team with in-depth knowledge and experience of the fitting-out industry

It is believed that the in-depth knowledge and experience of the Group's executive Directors and senior management in the fitting-out industry, have led, and will continue to lead the Group to capture market opportunities and formulate and implement development strategies effectively.

BUSINESS STRATEGIES

1.    Expand market share through undertaking more large-scale fitting-out projects for different customers to diversify customer base

The Group was inclined to undertake fitting-out projects with existing customers such as NW Group as property developer and SHK Group during the Track Record Period due to limited available capital and financial resources. However, Directors of the Group consider that such tendency in the past might limit its customer portfolio. Directors are also in view of that techniques and experience of the Group in serving NW Group and SHK Group in these large-scale fitting-out projects are transferable and can be applied to serving other customers. The Group therefore plans to expand market share through undertaking more large-scale fitting-out projects with contract sum of HK$50.0 million or above per project for other customers to diversify customer base so as to reduce customer concentration risk.

2.    Strengthen financial position to satisfy upfront costs and surety bonds requirements

The Group may experience net cash outflow at the early stage of a project as it is generally required to bear upfront costs before receive progress payments from customers. Meanwhile, during the Track Record Period, if the Group worked on fitting-out projects of other customers (excluding NW Group and SHK Group), in line with the industry norm, it was often required to provide surety bonds in the amount of certain percentage, usually equivalent to 10%, of the original contract sum, in favour of customers to ensure its due performance.

Directors of the Group are of the view that the number and size of projects we are able to undertake, and for different customers, may be restricted by our capital and financial resources. During the Track Record Period, there were instances that the Group elected not to proceed with tender submission nor formulate any tender price when management, based on their experience, considered that the Group had insufficient capital and financial resources to undertake the projects. Also, during the Track Record Period, due to insufficient capital and financial resources, management believe that the Group has set a higher profit margin for the tender prices for some tender submissions, which might have made its price less competitive than industry peers. To implement strategy to undertake more large-scale fitting-out projects for different customers with contract sum of HK$50.0 million or above per project in order to diversify customer base and to expand market share, the Group intends to utilise approximately HK$30.9 million and HK$44.9 million of the net proceeds from the Share Offer to strengthen financial position in order to fund upfront costs and issuance of surety bonds, respectively, for such projects.

About the Superland Group Holdings Limited

Superland Group Holdings Limited is an established contractor based in Hong Kong with over 15 years of operating history providing fitting-out services and repair and maintenance services. It has provided services for a number of prominent property projects of established property developers in Hong Kong, including Victoria Harbour Residence, Phase IV of LOHAS Park, St. Martin, Victoria Dockside, Fleur Pavilia, Mount Pavilia and The Spectra. According to the Frost & Sullivan Report, the Group ranked third among fitting-out contractors in Hong Kong market with a market share of approximately 1.2% in 2018 in terms of revenue.