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WK Group (Holdings) Limited
泓基集團（控股） 有限公司
SHARE
OFFER
Sponsor Overall Coordinators, Joint Bookrunners and Joint Lead Managers
(incorporated in the Cayman Islands with limited liability)
Stock Code: 2535
Joint Bookrunners and Joint Lead Managers
Co-Managers


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If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
WK Group (Holdings) Limited
ʮ̡
(incorporated in the Cayman Islands with limited liability)
SHARE OFFER
Total number of Offer Shares : 500,000,000 Shares (subject to the
Over-allotment Option)
Number of Public Offer Shares : 50,000,000 Shares (subject to re-allocation)
Number of Placing Shares : 450,000,000 Shares (subject to re-allocation and
the Over-allotment Option)
Offer Price : Not more than HK$0.27 per Offer Share and
expected to be not less than HK$0.25 per
Offer Share, plus brokerage of 1.0%, SFC
transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and Stock
Exchange trading fee of 0.00565% (payable in
full on application and subject to refund)
Nominal value : HK$0.01 per Share
Stock code : 2535
Sponsor
Overall Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Co-Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the
contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss h owsoever arising from or in
reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents delivered to the Registrar of Companie s in Hong Kong” in
Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required under section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Ho ng Kong take no
responsibility as to the contents of this prospectus or any other documents referred to above.
The Offer Price is expected to be determined by agreement between our Company and the Overall Coordinators (for themselves and on behalf of the Underwr iters) on the Price
Determination Date. The Price Determination Date is expected to be on or before 12:00 noon on Wednesday, 6 March 2024. The Offer Price will be not more th an HK$0.27 per
Offer Share and is expected to be not less than HK$0.25 per Offer Share, unless otherwise announced. If, for any reason, the Offer Price is not agreed bet ween the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company by 12:00 noon on Wednesday, 6 March 2024, the Share Offer will not becom e unconditional
and will lapse immediately.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, with the consent of our Company, reduce the number of Offer Shares and /or the indicative
Offer Price range stated in this prospectus at any time prior to the morning of the last day for lodging applications under the Public Offer. In such a cas e, a notice of the
reduction in the number of Offer Shares and/or the indicative Offer Price range will be published on our website at www.wing-kei.com.hk and the Stock Exchange’s website at
www.hkexnews.hk not later than the morning of the last day for lodging applications under the Public Offer. Further details are set forth in the sections headed “Struct ure and
conditions of the Share Offer” and “How to Apply for Public Offer Shares” in this prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act and may not be offered, sold, pledged or transferred, except purs uant to the exemption
from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in accordance with any applicable United States securities laws. The Offer
Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S.
Prior to making an investment decision, prospective investors should consider carefully all the information set out in this prospectus, including r isk factors set out in the section
headed “Risk factors”. Pursuant to the Public Offer Underwriting Agreement, the Overall Coordinators (for themselves and on behalf of the Underwrit ers) have the right in
certain circumstances to terminate the obligations of the Public Offer Underwriters at any time prior to 8:00 a.m. (Hong Kong time) on the Listing Date . Further details of such
circumstances are set out in the section headed “Underwriting – Underwriting arrangements and expenses – The Public Offer – Grounds for Termination” .
ATTENTION
We have adopted a fully electronic application process for the Share Offer. We will not provide printed copies of this prospectus to the public in relat ion to the Share
Offer.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk and our website at www.wing-kei.com.hk. If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
IMPORTANT
29 February 2024


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IMPORTANT NOTICE TO INVESTORS
OF PUBLIC OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Public Offer and
below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews> New Listings> New Listing Information”
section, and our website at www.wing-kei.com.hk.
To apply for Public Offer Shares, you may use one of the following application channels:
Application
Channel Platform Target Investors Application Time
eWhite
Form service
www.ewhiteform.com.hk
Enquiries:
+852 2153 1688
Investors who would like to
receive a physical Share
certificate. Public Offer Shares
successfully applied for will be
allotted and issued in your own
name.
From 9:00 a.m. on
Thursday, 29 February 2024
to 11:30 a.m. on Tuesday,
5 March 2024, Hong Kong
time.
The latest time for
completing full payment of
application monies will be
12:00 noon on Tuesday,
5 March 2024, Hong Kong
time.
HKSCC
EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit
an EIPO application on
your behalf through
HKSCC’s FINI system in
accordance with your
instruction
Investors who would not like to
receive a physical Share
certificate. Public Offer Shares
successfully applied for will be
allotted and issued in the name of
HKSCC Nominees, deposited
directly into CCASS and credited
to your designated HKSCC
Participant’s stock account.
Contact your broker or
custodian for the earliest
and latest time for giving
such instructions, as this
may vary by broker or
custodian.
We will not provide any physical channels to accept any application for the Public Offer
Shares by the public. The contents of this prospectus are identical to the prospectus as
registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses
above.
Please refer to the section headed “How to apply for Public Offer Shares” for further
details of the procedures through which you can apply for the Public Offer Shares
electronically.
IMPORTANT


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Y our application through the eWhite Form service or the HKSCC EIPO channel must
be for a minimum of 10,000 Public Offer Shares and in one of the numbers set out in the
table. Y ou are required to pay the amount next to the number you select.
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
HK$ HK$ HK$
10,000 2,727.22 300,000 81,816.89 5,000,000 1,363,614.76
20,000 5,454.47 350,000 95,453.03 6,000,000 1,636,337.70
30,000 8,181.69 400,000 109,089.18 7,000,000 1,909,060.66
40,000 10,908.92 450,000 122,725.32 8,000,000 2,181,783.60
50,000 13,636.14 500,000 136,361.48 9,000,000 2,454,506.56
60,000 16,363.38 1,000,000 272,722.96 10,000,000 2,727,229.50
70,000 19,090.61 1,500,000 409,084.43 12,500,000 3,409,036.88
80,000 21,817.83 2,000,000 545,445.90 15,000,000 4,090,844.26
90,000 24,545.07 2,500,000 681,807.38 17,500,000 4,772,651.63
100,000 27,272.30 3,000,000 818,168.86 20,000,000 5,454,459.00
150,000 40,908.44 3,500,000 954,530.33 22,500,000 6,136,266.38
200,000 54,544.59 4,000,000 1,090,891.80 25,000,000
(1) 6,818,073.76
250,000 68,180.73 4,500,000 1,227,253.28
(1) Maximum number of Public Offer Shares you may apply for.
(2) This is 50% of the Public Offer Shares initially offered, and the amount payable is
inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to
the Exchange Participants (as defined in the Listing Rules) or to the Hong Kong
Branch Share Registrar (for applications made through the eWhite Form service)
while the SFC transaction levy, the Stock Exchange trading fee and the AFRC
transaction levy will be paid to the SFC, the Stock Exchange and the AFRC,
respectively.
No application for any other number of Public Offer Shares will be considered and any
such application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable, our Company will issue a
separate announcement to be published on the websites of the Stock Exchange
(www.hkexnews.hk ) and of our Company ( www.wing-kei.com.hk ).
(Note 1)
Public Offer commences ........................................ 9:00 a.m. on
Thursday, 29 February 2024
Latest time for completing electronic applications
under eWhite Form service through the designated
website www.ewhiteform.com.hk (Note 9) ......................... 1 1:30 a.m. on
Tuesday, 5 March 2024
Application lists for Public Offer open (Note 2) ....................... 1 1:45 a.m. on
Tuesday, 5 March 2024
Latest time for completing payment for eWhite Form applications
by effecting PPS payment transfer(s) ............................. 12:00 noon on
Tuesday, 5 March 2024
Latest time for giving electronic application instructions
to HKSCC (Note 3) .......................................... 12:00 noon on
Tuesday, 5 March 2024
If you are instructing your broker or custodian who is a HKSCC Participant to give
electronic application instructions via FINI to apply for the Public Offer Shares on your
behalf, you are advised to contact your broker or custodian for the latest time for giving
such instructions which may be different from the latest time as stated above.
Application lists for Public Offer close (Note 2) ....................... 12:00 noon on
Tuesday, 5 March 2024
Expected Price Determination Date on or before (Note 4) ................ 12:00 noon on
Wednesday, 6 March 2024
Announcement of the final Offer Price, the level of indication of
interest in the Placing, the level of applications of the Public Offer,
the basis of allotment and the results of the Public Offer to be
published on the website of the Stock Exchange at www.hkexnews.hk
and our Company’s website at www.wing-kei.com.hk on
or before ......................................... Thursday, 7 March 2024
EXPECTED TIMETABLE
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Announcement of results of allocation in the Public Offer (with
successful applicants’ identification document numbers, where
appropriate) to be available through a variety of channels
including:
 in the announcement to be posted on the Stock
Exchange’s website at www.hkexnews.hk and
our Company’s website at www.wing-kei.com.hk .... Thursday, 7 March 2024
 from the designated results of allocations
website at www.ewhiteform.com.hk/results with
a “search by ID” function from .......................... 1 1:00 p.m. on
Thursday, 7 March 2024 to
12:00 midnight on
Thursday, 14 March 2024
 by telephone enquiry line by calling
+852 2153 1688 between 9:00 a.m. and
6:00 p.m. from ............................... Friday, 8 March 2024 to
Thursday, 14 March 2024
Despatch of Share certificates or deposit of Share
certificates into CCASS in respect of wholly or partially
successful applications pursuant to the Public Offer on
or before
(Notes 5, 7) .................................. Thursday, 7 March 2024
e-Refund payment instructions/refund cheques in respect of wholly or
partially unsuccessful applications and wholly or partially successful
applications in case the final Offer Price is less than the maximum
Offer Price paid for the applications pursuant to the
Public Offer on or before
(Notes 6 to 8) ...................... Friday, 8 March 2024
Dealings in the Shares on the Stock Exchange expected
to commence at ............................................. 9:00 a.m. on
Friday, 8 March 2024
The application for the Public Offer Shares will commence on Thursday, 29 February
2024 through Tuesday, 5 March 2024, being longer than normal market practice of three
and a half days. Investors should be aware that the dealings in Shares on the Stock
Exchange are expected to commence on Friday, 8 March 2024.
Notes:
1 All times and dates refer to Hong Kong local time, except as otherwise stated. Details of the structure of
the Share Offer, including its conditions, are set out in the section headed “Structure and conditions of the
Share Offer” of this prospectus.
EXPECTED TIMETABLE
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2 If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force an
announcement of “Extreme Conditions” in Hong Kong at any time between 9:00 a.m. and 12:00 noon on
Tuesday, 5 March 2024, the application lists will not open on that day. For further details, please refer to
the section headed ”How to apply for Public Offer Shares – E. Severe Weather Arrangements” of this
prospectus.
3 Applicants who apply for Public Offer Shares by giving electronic application instructions to HKSCC
should refer to the paragraph headed “How to apply for Public Offer Shares – A. Application for Public
Offer Shares” of this prospectus.
4 The Price Determination Date is expected to be on or before 12:00 noon on Wednesday, 6 March 2024. If,
for any reason, the Offer Price is not agreed by 12:00 noon on Wednesday, 6 March 2024 between our
Company and the Overall Coordinators (for themselves and on behalf of the Underwriters), the Share Offer
will not proceed and will lapse accordingly.
5 Share certificates for the Offer Shares allotted and issued to the placees are expected to be deposited
directly into CCASS for credit to the relevant HKSCC Participants’ stock accounts designated by the
Overall Coordinators (for themselves and on behalf of the Underwriters), the placees or their agents (as the
case may be). No temporary documents or certificates of title will be issued by our Company.
Share certificates will only become valid evidence of title to which they relate at 8:00 a.m. (Hong Kong
time) on the Listing Date provided that (i) the Share Offer has become unconditional in all respects; and (ii)
the right of termination described in the section headed “Underwriting — Underwriting arrangements and
expenses — Grounds for termination” in this prospectus has not been exercised and has lapsed. Investors
who trade Shares prior to the receipt of share certificates or the share certificates becoming valid evidence
of title do so entirely at their own risk.
6 e-Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful
applications pursuant to the Public Offer and also in respect of wholly or partially successful applications in
the event that the final Offer Price is less than the price payable per Offer Share on application. Part of the
applicant’s Hong Kong identity card number/national identification document number/passport number, or,
if the application is made by joint applicants, part of the Hong Kong identity card number/national
identification document number/passport number of the first-named applicant, provided by the applicant(s)
may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund
purposes. Banks may require verification of an applicant’s Hong Kong identity card number/national
identification document number/passport number before encashment of the refund cheque. Inaccurate
completion of an applicant’s Hong Kong identity card number/national identification document number/
passport number may invalidate or delay encashment of the refund cheque.
7 Applicants who have applied for Public Offer Shares through HKSCC EIPO channel should refer to the
paragraph headed “How to Apply for Public Offer Shares – D. Despatch of share certificates and refund of
application monies” for details.
Applicants who have applied through the eWhite Form service and paid their applications monies through
single bank accounts may have refund monies (if any) despatched to the bank account in the form of
e-Refund payment instructions. Applicants who have applied through the eWhite Form service and paid
their application monies through multiple bank accounts may have refund monies (if any) despatched to the
address as specified in their application instructions in the form of refund cheques by ordinary post at their
own risk.
Share certificates and/or refund cheques for applicants who have applied Public Offer Shares will be
despatched by ordinary post, at the applicants’ risk, to the addresses specified in the relevant applications.
Further information is set out in “How to apply for Public Offer Shares – D. Despatch of share certificates
and refund of application monies”.
8 e-Refund payment instructions/refund cheques will be despatched in respect of wholly or partially
unsuccessful applications and in respect of successful applications if the final Offer Price is less than the
maximum Offer Price of HK$0.27 per Offer Share.
EXPECTED TIMETABLE
– iii –


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9 Y ou will not be permitted to submit your application through the designated website at
www.ewhiteform.com.hk after 11:30 a.m. on the last day for submitting applications. If you have already
submitted your application and obtained an application reference number from the designated website at or
before 11:30 a.m., you will be permitted to continue the application process (by completing payment of
application monies) until 12:00 noon on the last day for submitting applications, when the application lists
close.
In the event of any change to the above expected timetable after the date of this
prospectus, an announcement will be made on the Stock Exchange’s website at
www.hkexnews.hk and our Company’s website at www.wing-kei.com.hk accordingly. All
Share certificates will only become valid evidence of title of the Shares which they relate
provided that the Share Offer has become unconditional in all respects and the Underwriting
Agreements have not been terminated in accordance with its terms at or before 8:00 a.m.
(Hong Kong time) on the Listing Date.
For further details of the structure and conditions of the Share Offer, you should refer
to the section headed “Structure and conditions of the Share Offer” of this prospectus.
EXPECTED TIMETABLE
–i v–


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You should rely only on the information contained in this prospectus to make your
investment decision. Our Company has not authorised anyone to provide you with
information that is different from what is contained in this prospectus. Any information or
representation not contained or made in this prospectus must not be relied on by you as
having been authorised by our Company, the Sponsor , the Joint Bookrunners, the Joint
Lead Managers, the Co-Managers, the Overall Coordinators, any of the Underwriters,
any of their respective directors, affiliates, employees or representatives or any other
person or party involved in the Share Offer .
Page
EXPECTED TIMETABLE ............................................ i
CONTENTS ....................................................... v
SUMMARY ........................................................ 1
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS ................. 1 8
FORW ARD-LOOKING STATEMENTS .................................. 3 0
RISK FACTORS .................................................... 3 1
W AIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE ....... 6 1
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER ..... 6 5
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER ........... 6 9
CORPORATE INFORMATION ........................................ 7 5
INDUSTRY OVERVIEW ............................................. 7 7
REGULATORY OVERVIEW .......................................... 9 1
HISTORY, DEVELOPMENT AND REORGANISATION .................... 1 1 4
BUSINESS ......................................................... 1 2 4
DIRECTORS AND SENIOR MANAGEMENT ............................ 2 5 8
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS ........... 2 7 2
SUBSTANTIAL SHAREHOLDERS ..................................... 2 7 7
SHARE CAPITAL ................................................... 2 7 9
FINANCIAL INFORMATION ......................................... 2 8 3
FUTURE PLANS AND USE OF PROCEEDS ............................. 3 4 3
CONTENTS
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Page
UNDERWRITING ................................................... 3 5 1
STRUCTURE AND CONDITIONS OF THE SHARE OFFER ................ 3 5 9
HOW TO APPLY FOR PUBLIC OFFER SHARES ......................... 3 7 0
APPENDIX I – ACCOUNTANT’S REPORT ........................... I - 1
APPENDIX II – UNAUDITED PRO FORMA FINANCIAL INFORMATION . . II-1
APPENDIX III – PROFIT ESTIMATE ................................. III-1
APPENDIX IV – SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LA W ............ I V - 1
APPENDIX V – STATUTORY AND GENERAL INFORMATION ........... V - 1
APPENDIX VI – DOCUMENTS DELIVERED TO THE
REGISTRAR OF COMPANIES AND
A V AILABLE ON DISPLAY ......................... VI-1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you. You should read this prospectus in its entirety before you decide to invest in
the Offer Shares. There are risks associated with any investment. Some of the particular risks
in investing in the Offer Shares are set out in the section headed “Risk factors” in this
prospectus. You should read that section carefully before you decide to invest in the Offer
Shares. V arious expressions used in this summary are defined in the section headed
“Definitions and glossary of technical terms” in this prospectus.
BUSINESS OVERVIEW
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel for construction projects in Hong Kong. We were
established in 1999 and have since undertaken structural steelwork in the role of subcontractor.
With two production facilities in Dongguan, the PRC, we possess our in-house capacity to
process and fabricate structural steel tailored to the specifications of our customers. All of our
structural steel production capacity is currently used to cater to our own project needs. According
to the Industry Report, our Group ranked third in the Hong Kong structural steelwork industry in
terms of revenue in 2022, and accounted for approximately 3.4% of the market share in 2022.
Structural steelwork refers to the fabrication and forming of steel structures, typically
serving as the backbone of buildings and infrastructure during initial construction stage.
Essentially, structural steelwork involves columns and beams which are riveted, bolted or welded
together. Structural steelwork providers supply, cut, bend, weld and assemble structural steel
frames, trusses and other components into structures in accordance with the specifications
provided in the building plans and designs.
We mainly focused on the role of project management and supervision in carrying out our
projects, and we have engaged subcontractors to perform a substantial part of the construction
site works under our supervision. Typically, our major responsibilities in a project include (i)
arranging site preparatory and preliminary works; (ii) engaging and supervising our
subcontractors; (iii) maintaining regular communication with our customers; (iv) monitoring the
implementation of construction site works; (v) conducting site safety supervision and quality
control; and (vi) developing detailed work schedule and work allocation plan. For FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, we incurred subcontracting
fees of approximately HK$71.0 million, HK$48.9 million, HK$91.6 million and HK$57.2 million
for our construction site works, representing approximately 29.3%, 32.9%, 39.8% and 34.9% of
our total purchases, respectively.
Projects undertaken during the Track Record Period
During the Track Record Period, we were mainly engaged in public sector projects in Hong
Kong. Our public sector projects mainly involved infrastructure and public facilities as well as
public residential developments. The customers of our public sector projects were generally main
contractors engaged by different Hong Kong government departments, authorities and statutory
bodies. To a lesser extent, we were also engaged in private sector projects in Hong Kong. Our
private sector projects mainly involved private commercial, residential and industrial
developments. The project owners of our private sector projects were generally property
developers, and our customers were main contractors engaged under such projects.
During the Track Record Period, the majority of our revenue was derived from structural
steelwork for infrastructure and public facilities. The following table sets forth a breakdown of
our revenue during the Track Record Period by reference to project sectors and the types of
development involved:
SUMMARY
–1–


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FY2020 FY2021 FY2022
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
HK$’000 % HK$’000 % HK$’000 %
Public sector
– Infrastructure and public
facilities 17 117,650 36.2 10 142,717 62.4 18 273,912 81.4
– Residential 5 25,476 7.9 4 8,936 3.9 3 10,721 3.2
Sub-total 22 143,126 44.1 14 151,653 66.3 21 284,633 84.6
Private sector
– Commercial 12 169,410 52.2 13 76,850 33.6 13 51,741 15.4
– Residential 2 560 0.2 3 237 0.1 1 10 negligible
– Industrial 2 11,196 3.5 1 36 negligibl e–––
Sub-total 16 181,166 55.9 17 77,123 33.7 14 51,751 15.4
Total 38 324,292 100.0 31 228,776 100.0 35 336,384 100.0
For the nine months ended 30 September
2022 2023
No. of
projects Revenue
% of total
revenue
No. of
projects Revenue
% of total
revenue
HK$’000 % HK$’000 %
(Unaudited)
Public sector
– Infrastructure
and public
facilities 16 202,523 80.5 19 191,720 81.5
– Residential 3 6,207 2.5 2 3,915 1.7
Sub-total 19 208,730 83.0 21 195,635 83.2
Private sector
– Commercial 10 42,828 17.0 8 37,053 15.8
– Residential 1 3 negligible 1 2,350 1.0
– Industrial ––––––
Sub-total 11 42,831 17.0 9 39,403 16.8
Total 30 251,561 100.0 30 235,038 100.0
Reasons for the decrease in our revenue for FY2021
Our Group’s revenue decreased by approximately 29.5% from approximately HK$324.3 million for
FY2020 to approximately HK$228.8 million for FY2021, which was mainly attributable to:
(i) Project No. #01, being our top project for FY2020 involving a private sector commercial
development located at the Hong Kong International Airport with an estimated contract sum of
approximately HK$191.4 million. Project No. #01 contributed revenue of approximately
HK$120.7 million to our Group for FY2020, representing approximately 37.2% of our total
revenue for the corresponding year. Project No. #01 was completed at the end of FY2020, and
no revenue was derived from Project No. #01 for FY2021; and
(ii) the unexpected change to our works schedule of Project No. #02, which involved a public
infrastructure development located at Kai Tak with an estimated contract sum of approximately
HK$380.2 million. Our Group secured Project No. #02 from Hip Hing Group in late 2019 and
started generating revenue from Project No. #02 by October 2019. For FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023, our Group recognised revenue of
approximately HK$71.3 million, HK$69.5 million, HK$193.2 million and HK$40.9 million,
from Project No. #02, respectively. According to the original project schedule, our contract
works were supposed to commence in or around late 2019 and complete by mid-2021. In
SUMMARY
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anticipation of the tight project schedule and scale of works under Project No. #02, our Group
had started procuring materials and commenced part of the structural steel fabrication works
shortly after we secured this project.
By mid-2020, we were informed that our works schedule of Project No. #02 would be revised
primarily due to changes in design and drawings of structural steelwork by the project owner
and that the substantial part of our construction site works would be rescheduled to 2021.
Being mindful of the revised project schedule of Project No. #02 and in light of the constraint
in our available resources, during the second half of 2020, our executive Directors considered
that it was vital to temporarily refrain from tendering for sizeable projects which may
substantially overlap with the revised project schedule of Project No. #02. Our Group also
decided to reserve a substantial amount of our then available resources, including the capacity
at our production facilities and manpower of our project management staff, for Project No. #02,
taking into consideration (a) the substantial part of our construction site works under Project
No. #02 would be rescheduled to 2021; (b) the sizeable scale and amount of works involved
under such project; (c) the expected workloads for other ongoing projects; (d) the uncertainty
arising from the COVID-19 outbreak and the associated risks of labour shortage and disruption
to the transportation between Hong Kong and the PRC; and (e) the need to preserve our
industry reputation and business relationship with Hip Hing Group via the satisfactory
completion of Project No. #02, which is a landmark sports infrastructure development in Hong
Kong.
Later in mid-2021, our Group was informed that the substantial part of our construction site
works under Project No. #02 would be further rescheduled due to the late handover of the
relevant work sites to us. While pending instruction from Hip Hing Group for proceeding with
our construction site works, we had continued to perform fabrication works in 2021 to ensure
we could meet the revised project schedule of Project No. #02. The fabricated items have
occupied significant storage space at our production facilities, thereby reducing our production
capacity for undertaking other projects in 2021.
Amid the repeated rescheduling of Project No. #02, during the second half of FY2021, we
attempted to recoup the expected revenue which would otherwise be generated from Project No.
#02 in the absence of such rescheduling. We did this by tendering for new projects that have
relatively shorter duration and could readily commence in the near term. Despite our efforts, the
revenue generated from the projects we obtained during the second half of 2021 was not
sufficient to compensate for the decrease in our revenue due to the lower amount of works
performed under Project No. #02. In addition, as mentioned above, during the second half of
2020, we had temporarily refrained from tendering for sizeable projects which may substantially
overlap with the revised project schedule of Project No. #02, resulting in lower amount of
works performed by us in FY2021. After mid-2021, our Group did not receive any further
notice in relation to the rescheduling of Project No. #02 and a substantial part of our
construction site works were carried out in 2022 in accordance with the last revised schedule.
Pursuant to the contract terms of the service agreement for Project No. #02, in the event our
contract works under Project No. #02 was not completed within the original schedule due to
reason(s) other than our default, our Group shall be entitled to apply in writing to Hip Hing
Group for an extension to project duration and claim for any additional costs reasonably
incurred by us arising from the delay. Based on (i) our negotiation with Hip Hing Group; and
(ii) the aggregate payment certification certified by Hip Hing Group exceeds the original
contract sum of this project, the Directors are of the view that our Group was able to claim for
substantial part of the increase in costs incurred by us arising from the rescheduling of Project
No. #02 to Hip Hing Group.
Reasons for our relatively lower gross profit margin for FY2021
Our Group recorded a relatively lower gross profit margin of approximately 15.5% for FY2021 as
compared to approximately 17.0% and 19.9% for FY2020 and FY2022, respectively, which was mainly due
to the unforeseen rescheduling of our construction site works for Project No. #02 in mid-2021 as
aforementioned. Due to the unanticipated rescheduling of Project No. #02, a substantial amount of the then
available resources of our Group originally reserved for Project No. #02 such as direct labour and structural
steel production capacity were rendered idle or not fully utilised during FY2021, resulting in certain direct
labour costs, manufacturing overheads and project administrative costs incurred, which amounted to
approximately HK$1.9 million during FY2021 (the “ Idle Cost ”). In accordance with the relevant accounting
standard, as the Idle Cost did not contribute to our Group’s progress in satisfying our performance
obligations amid the rescheduling of Project No. #02, our Group did not recognise the corresponding
SUMMARY
–3–


--- page 14 ---
revenue for the Idle Cost by the time they were incurred, and such Idle Cost was not allocated to Project
No. #02 or any particular project undertaken by our Group, but were recognised as unallocated costs in our
Group’s cost of services for FY2021. As a result, our Group’s overall gross profit margin for FY2021 was
lower as compared to that of FY2020 and FY2022.
Our strategy on public and private sector projects
During the Track Record Period, we identified business opportunities mainly through invitation for
tender from customers. As we undertake structural steelwork in the role of subcontractor, all of our revenue
generated was derived from projects awarded by construction contractors during the Track Record Period.
Therefore, to a significant extent, our tender exposure depends on the types of projects obtained by our
construction contractor customers. Our Group has all along remained open to, and possesses substantial
track record in undertaking both public sector and private sector projects. Based on our past experience, as
far as structural steelwork is concerned, our executive Directors consider that there is no material difference
in the expertise and know-how required for public sector and private sector projects. Our Group generally
determines whether we should proceed with the preparation of tender based on, amongst others, the scope
of services, our capability, the expected complexity, our production capacity of structural steel, the available
space at our production facilities for the fabrication process and storage of materials, our available financial
and human resources and feasibility and profitability of the project. As long as our capacity and available
resources allow, our Group will endeavor to respond to tender invitations received from customers, with
little regard to the sector that the relevant projects belong to. Therefore, the proportion of our revenue
derived from private and public sector projects may vary from period to period, largely affected by the
projects obtained and undertaken by our construction contractor customers at the relevant times, rather than
caused by any change in our business focus or strategy.
Private sector projects contributed approximately 55.9%, 33.7%, 15.4% and 16.8% of our total
revenue for FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, respectively. Our
Group recorded a relatively higher percentage of revenue contribution from private sector projects for
FY2020 mainly because we performed a substantial amount of works for Project No. #01 in the same year.
Project No. #01 involved a private sector commercial development located at the Hong Kong International
Airport with an estimated contract sum of approximately HK$191.4 million. Project No. #01 contributed
revenue of approximately HK$120.7 million to our Group for FY2020, representing approximately 37.2% of
our total revenue for the corresponding year. Project No. #01 was completed at the end of FY2020 and no
revenue was generated therefrom since FY2021.
Gross profit and gross profit margin
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %
(Unaudited)
Public sector
projects 25,205 17.6 25,989 17.1 59,738 21.0 42,971 20.6 40,989 21.0
Private sector
projects 29,833 16.5 9,429 12.2 7,201 13.9 6,311 14.7 6,005 15.2
55,038 17.0 35,417 15.5 66,939 19.9 49,282 19.6 46,994 20.0
Our gross profit margin for public sector projects remained relatively stable at
approximately 17.6% and 17.1% for FY2020 and FY2021, respectively. Our gross profit margin
for public sector projects increased to approximately 21.0% for FY2022. The relatively higher
gross profit margin for public sector projects for FY2022 was mainly attributable to a substantial
amount of works was performed for projects with relatively higher gross profit margin during
FY2022, namely (i) Project No. #09; (ii) Project No. #11; and (iii) a public sector project with
an estimated contract sum of approximately HK$18.6 million, involving a residential
development in Diamond Hill, from Sun Fook Kong Construction Limited. Please refer to the
paragraph headed “Financial information – Period-to-period comparison of results of operations –
SUMMARY
–4–


--- page 15 ---
FY2022 compared with FY2021 – Gross profit and gross profit margin” in this prospectus for
further details. Our gross profit margin for public sector projects for the nine months ended 30
September 2022 and 2023 remained relatively stable at approximately 20.6% and 21.0%,
respectively.
Our gross profit margin for private sector projects decreased from approximately 16.5% for
FY2020 to approximately 12.2% for FY2021 and increased to approximately 13.9% for FY2022.
The relatively lower gross profit margin for private sector projects for FY2021 and FY2022 was
mainly attributable t o a a substantial amount of works was performed for a project with
relatively lower gross profit margin during FY2021 and FY2022, namely Project No. #07, being
a private sector commercial development project located at Quarry Bay and one of our Group’s
top five projects for FY2021 and FY2022. Subsequent to the commencement of Project No. #07,
our Group was informed by Hip Hing Group, being our customer for Project No. #07, that the
installation works involved thereunder required steel plates with thinner thickness measurement.
Such thinner thickness measurement specifications of the steel plates required higher standards of
workmanship as well as more complicated fabrication and installation processes. As a result, to
the best estimation of our Directors, our Group had incurred additional costs of approximately
HK$3.5 million in aggregate for FY2021 and FY2022 owing to the unexpected complexity
encountered from the fabrication and installation of structural steel works involved under Project
No. #07. Project No. #07 contributed gross profit of approximately HK$2.0 million and HK$1.9
million to our Group for FY2021 and FY2022, respectively. We prepare our tender price based
on a certain percentage of mark-up over our estimated costs and there is no assurance that the
actual amount of time and costs incurred during the performance of our projects would not
exceed our estimation. Any material inaccurate cost estimation or cost overruns may adversely
affect our financial results. For further details, please refer to the paragraph headed “Risk factors
– Any material inaccurate cost estimation or cost overruns may adversely affect our financial
results” in this prospectus.
Our gross profit margin for private sector projects for the nine months ended 30 September
2022 and 2023 remained relatively stable at approximately 14.7% and 15.2%, respectively.
Backlog
The following table sets out movement in the number of our projects during the Track
Record Period and up to the Latest Practicable Date:
FY2020 FY2021 FY2022
For the nine
months
ended 30
September
2023
From
1 October
2023
up to the
Latest
Practicable
Date
Opening number of
projects (Note 1) 43 33 39 28 21
Add: Number of new
projects awarded
to us
(Note 2) 8 7 10 10 2
Less: Number of projects
completed
(Note 3)
(18) (1) (21) (17) (1)
Ending number
of projects (Note 4) 33 39 28 21 22
Notes:
1. Opening number of projects means the number of awarded projects which were not completed as of
the beginning of the relevant year/period indicated.
2. Number of new projects means the number of new projects awarded to us during the relevant year/
period indicated.
SUMMARY
–5–


--- page 16 ---
3. Number of projects completed means the number of projects which are practically regarded as
completed.
4. Ending number of projects is equal to the opening number of projects plus number of new projects
minus number of projects completed during the relevant year/period indicated.
The following table sets out the movement in the value of backlog of our projects during
the Track Record Period and up to the Latest Practicable Date:
FY2020 FY2021 FY2022
For the nine
months
ended 30
September
2023
From 1
October
2023 up
to the
Latest
Practicable
Date
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Opening value of backlog as
at the beginning of the
relevant year/period 749,039 505,333 425,866 253,464 668,926
Add: Total value of original
estimated contract
sum of projects
awarded and actual
work orders received
on re-measurement
basis
(Note 1) 66,081 118,450 108,049 621,552 41,259
Total value of variation
orders 14,505 30,859 55,933 28,948 19,814
Less: Total revenue
recognised during the
relevant year/period (324,292) (228,776) (336,384) (235,038) (155,514)
Ending value of backlog to be
carried forward to next
year/period
(Note 2) 505,333 425,866 253,464 668,926 574,485
Notes:
1. Total value of original estimated contract sum of projects awarded means the original estimated
contract sum of new projects awarded, or where applicable, the amount of actual work orders
received by our Group on re-measurement basis.
2. Ending value of backlog means the portion of the total estimated revenue that has not been
recognised with respect to our projects which had not been completed as at the end of the relevant
year/period indicated.
PRODUCTION FACILITIES AND CAPACITY
Wing Kei Dongguan, our PRC operating subsidiary, operates two production facilities
located in Dongguan, the PRC, which process and fabricate structural steel required by our
structural steelwork projects. Our Dapianmei Production Facility has a gross floor area of
approximately 7,000 sq.m. and our Xinlong Production Facility has a gross floor area of
approximately 8,700 sq.m.. For FY2020, FY2021, FY2022 and the nine months ended 30
September 2023, the utilisation rate of our Dapianmei Production Facility was approximately
96.8%, 80.1%, 85.8% and 86.2%, respectively; whereas the utilisation rate of our Xinlong
Production Facility was approximately 85.3%, 76.2%, 77.6% and 78.3%, respectively.
Our Group recorded a relatively higher utilisation rate for FY2020 mainly because the
production capacity of the Dapianmei Production Facility during its suspension between January
to April 2020 in response to the lockdown measures imposed by the PRC Government as a result
SUMMARY
–6–


--- page 17 ---
of the emergence of the COVID-19 pandemic was not taken into account in the calculation of its
maximum production capacity for FY2020. Subsequent to the resumption of works at our
Dapianmei Production Facility, our Group had optimised our machinery usage and manpower
deployment in order to increase our production volume to keep pace with the original production
schedule, thereby contributing to the relatively higher utilisation rate for FY2020. For details in
relation to the fluctuation of the utilisation rates of our production facilities during the Track
Record Period, please refer to the paragraph headed “Business – Production facilities and
capacity – Utilisation rate” in this prospectus.
Our principal machinery includes cranes, cutting machines, drilling machines, grinding
machines and welding machines. Our machinery is well-equipped to be used for fabricating steel
plates into different size and shapes. For further details, please refer to the paragraph headed
“Business – Production facilities and capacity” in this prospectus.
As at the Latest Practicable Date, we have entered into agreements in the PRC in relation
to (i) a lease of land (the “ Leased Land ”) and the property for the Dapianmei Production
Facility (“ Leased Property No. 1 ”) for a term of 50 years from 13 July 1999 to 12 July 2049;
and (ii) a lease of the property for the Xinlong Production Facility (“ Leased Property No. 2 ”,
together with the Leased Land and Leased Property No. 1, collectively the “ Leased Properties ”)
for a term of two years from 23 October 2022 to 22 October 2024.
To the best of our Directors’ knowledge and as advised by our PRC Legal Advisers, owing
to historical reasons, (i) the landlords of the Leased Land and Leased Property No. 1 failed to
obtain the land use right certificate
for the Leased Land, and the construction
planning permitணʈ೻஝ྌ஢̙ᗇ and property ownership certificateϞᛆᗇ for
Leased Property No. 1; whereas (ii) the landlord of Leased Property No. 2 failed to obtain the
construction planning permit
ணʈ೻஝ྌ஢̙ᗇand property ownership certificateϞᛆ
ᗇfor Leased Property No. 2. In addition, both landlords failed to obtain the consent of over
two-thirds of the members or over two-thirds of the representatives of villagers at the villagers’
meetings of the relevant collective economic organisations in respect of the leases for the Leased
Properties.
In the unlikely event of forced relocation due to the title defects in our leased properties as
abovementioned, we would migrate our operations to other leased property(ies) in phases to
mitigate the risks of complete suspension in our fabrication works and to minimise any potential
adverse impact brought by the relocation.
Please refer to the paragraph headed “Business – Properties – Leased land and leased
properties which are subject to title defects” in this prospectus.
Our customers
During the Track Record Period, our customers mainly included construction contractors in
Hong Kong, being the main contractors engaged by project owners. The number of customers
with revenue contribution to our Group was 17, 17, 17 and nine for FY2020, FY2021, FY2022
and the nine months ended 30 September 2023, respectively. During the nine months ended 30
September 2023, our Group secured Project No. #13 from Hip Hing Group with an estimated
contract sum of approximately HK$388.0 million, which represents the largest project obtained
by us in terms of estimated contract sum during the Track Record Period. Based on our then
negotiation with Hip Hing Group prior to the award of Project No. #13, our Directors were
positive that we would be able to obtain Project No. #13. Hence, in anticipation of the proposed
award of Project No. #13 and taking into consideration the scale and the expected workload
involved in Project No. #13 and other ongoing projects, our Group had reserved our resources
and capacity for fulfilling the project schedule required by our customers during the nine months
ended 30 September 2023. As a result, notwithstanding the number of customers with revenue
contribution to our Group decreased from 17 for FY2022 to nine for the nine months ended 30
September 2023, our Group recorded significant increase in backlog value from approximately
HK$253.5 million as at 31 December 2022 to approximately HK$668.9 million as at 30
September 2023.
SUMMARY
–7–


--- page 18 ---
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the revenue
derived from our top customer for each year/period during the Track Record Period amounted to
approximately HK$126.6 million, HK$151.6 million, HK$237.7 million and HK$118.3 million,
respectively, while the revenue derived from our top five customers for each year/period during
the Track Record Period amounted to approximately HK$296.6 million, HK$216.4 million,
HK$315.6 million and HK$229.9 million in aggregate, respectively. For FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023, the percentage of our total revenue
attributable to our top customer for each year/period during the Track Record Period amounted to
approximately 39.0%, 66.3%, 70.7% and 50.3% respectively, while the percentage of our total
revenue attributable to our top five customers for each year/period during the Track Record
Period combined amounted to approximately 91.5%, 94.6%, 93.8% and 97.8%, respectively.
Hip Hing Group was our top customer for each year/period during the Track Record Period.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, Hip Hing Group
contributed revenue of approximately HK$126.6 million, HK$151.6 million, HK$237.7 million
and HK$118.3 million to our Group, respectively, which accounted for approximately 39.0%,
66.3%, 70.7% and 50.3% of our total revenue for the relevant year/period. According to the
Industry Report, customer concentration is an industry norm in the structural steelwork industry
in Hong Kong. As at the Latest Practicable Date, there were in total 50 structural steelwork
contractors registered on the List of Approved Specialist Contractors for Public Works and our
customers would generally select their structural steelwork subcontractor among the list.
According to the Industry Report, a sizeable structural steelwork project would normally
have a contract sum of HK$100 million or above. The top five structural steelwork contractors in
Hong Kong had an estimated revenue ranging from approximately HK$200 million to HK$475.5
million for the year of 2022. As such, where a structural steelwork contractor obtains any
sizeable projects with contract sum of HK$100 million or above, such projects would likely
contribute a significant portion of its revenue in the forthcoming years. Given the fragmented
nature of the structural steelwork industry in Hong Kong as well as the business scale of the
existing top market players, those structural steelwork contractors who are able to participate in
one or more of the sizeable developments would inevitably end up being heavily reliant on the
relevant main contractors and hence this may result in customer concentration for such structural
steelwork contractor in the relevant periods.
Notwithstanding Hip Hing Group was our top customer in terms of revenue contribution to
our Group for each year/period during the Track Record Period, there is no assurance that Hip
Hing Group will continue to award projects to us as we undertake structural steelwork on a
project-by-project basis.
When we undertake projects for our customers, there may be occasions where our
customers procure materials and other services on our behalf and subsequently deduct such
amounts in the relevant progress payments to us. The procurement made by our customers on our
behalf mainly included materials such as steel and services such as machinery services and
subcontracting services. For further details, please refer to the paragraph headed “Business – Top
customers who were also our suppliers” in this prospectus.
Our suppliers
Steel is the major material used for structural steel fabrication. For FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023, our Group purchased steel material in
the amount of approximately HK$150.6 million, HK$62.3 million, HK$73.7 million and HK$85.9
million, representing approximately 55.9%, 32.2%, 27.3% and 45.7% of our cost of services for
the corresponding year/period, respectively.
According to the Industry Report, the market price of steel experienced certain level of
fluctuation during the Track Record Period. Particularly, the price index of steel plates in Hong
Kong increased from 123.1 in 2020 to 196.3 in 2022, which was mainly attributable to the
decrease in steel production in the PRC and the impact from the fifth wave outbreak of
COVID-19. The price index of steel plates in Hong Kong is expected to decrease to 171.0 in
SUMMARY
–8–


--- page 19 ---
2023. For further details, please refer to the paragraph headed “Risk factors – Any price
fluctuations of materials used for our structural steel fabrication may increase our production
costs” in this prospectus. Notwithstanding the increase in market steel price would generally lead
to an increase in our Group’s costs of materials, we were generally able to mitigate any financial
impact brought by the increase in market steel price because we generally obtain pre-bid
quotations from our steel suppliers during the tender phase and factor in the price trend of steel
when determining our tender price. We may negotiate on the pricing and contract terms with
them after we are awarded with the projects. Our Directors consider that we are generally able to
pass on the increase in purchase costs to our customers because we generally take into account
our overall costs of providing our services to customers when determining our tender price.
Suppliers of goods and services which are specific to our business and are required on a
regular basis to enable us to continue carrying on our business mainly include (i) suppliers of
materials such as steel; (ii) subcontractors of construction site works; (iii) subcontractors of
structural steel fabrication works; and (iv) suppliers of other miscellaneous services such as
testing, machinery services, transportation and technical engineering services.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, we incurred
subcontracting fees for construction site works and structural steel fabrication works of
approximately HK$75.9 million, HK$61.9 million, HK$105.3 million and HK$62.8 million in
aggregate, respectively.
Licences, registrations and permits
Our principal operating subsidiary in Hong Kong, Wing Kei Hong Kong, is currently a
registered subcontractor under the category of structural steelwork on the Register of
Subcontractors maintained by the Construction Industry Council. Wing Kei Hong Kong is also
registered on the List of Approved Specialist Contractors for Public Works maintained by the
Development Bureau under the category of structural steelwork. For further details, please refer
to the paragraph headed “Business – Licences, registrations and permits” in this prospectus.
COMPETITIVE LANDSCAPE AND COMPETITIVE STRENGTHS
According to the Industry Report, the market size of structural steelwork in Hong Kong
increased from HK$9,411.0 million in 2018 to approximately HK$9,913.6 million in 2022,
representing a CAGR of approximately 1.3%. Driven by various growth drivers including (i) the
demand for structural steelwork generated from the planned and ongoing infrastructural and
property developments in both public and private sectors in Hong Kong such as the Three
Runway System development, Kwu Tung North, Hung Shui Kiu/Ha Tsuen and Y uen Long South
New Development Areas, New Central Harbourfront development and the Caroline Hill Road
Causeway Bay commercial project; (ii) the increasingly common adoption of structural steelwork
for construction in Hong Kong owing to its eco-friendliness nature, flexibility of use and better
performance in achieving space efficiency; and (iii) the growing emphasis and continuous
support from the Hong Kong government for the development of the structural steelwork
industry, including the increase in use of steel structures by the Hong Kong government in major
infrastructure projects and the establishment of the Chinese National Engineering Research
Centre for Steel Construction at the Hong Kong Polytechnic University (“ PolyU ”), which is
likely to improve applied research and technology in structural steel engineering and
infrastructure sustainability, as well as strengthen the structural steel engineering industry’s
productivity, capability and competitiveness. The market size of structural steelwork in Hong
Kong is expected to continue to grow from approximately HK$10,409.2 million in 2023 to
approximately HK$12,580.1 million in 2027, at a CAGR of approximately 4.8%.
According to the Industry Report, the structural steelwork market in Hong Kong is highly
competitive. According to the Development Bureau, there are 50 contractors registered on the
List of Approved Specialist Contractors for Public Works maintained by the Development Bureau
under the category of structural steelwork, as of February 2024. As estimated, there are more
than 500 market participants in the structural steelwork industry in Hong Kong. The top five
players in the structural steelwork market in Hong Kong contributed 17.0% of the entire market
SUMMARY
–9–


--- page 20 ---
in terms of revenue for the year ended 31 December 2022. Our Group recorded revenue of
approximately HK$336.4 million for the provision of structural steelwork for the year ended 31
December 2022, which accounted for about 3.4% of the total industry revenue in Hong Kong.
We believe that our competitive strengths include: (i) we provide tailored solutions in
relation to structural steelwork to our customers; (ii) we have an established track record in the
structural steelwork industry in Hong Kong; (iii) our management team is experienced and
dedicated; and (iv) we impose stringent quality control systems.
BUSINESS STRATEGIES
We intend to pursue the following key business strategies: (i) competing for structural
steelwork projects and expanding our market share; (ii) expanding our production capacity of
structural steel; (iii) adhering to prudent financial management to ensure optimal finance costs
and capital sufficiency; and (iv) expanding our workforce. For further details, please refer to the
paragraph headed “Business – Business strategies” in this prospectus.
SALES AND MARKETING AND PRICING STRATEGY
During the Track Record Period, we secured new business through invitations for tender by
customers. Our Directors consider that due to our proven track record and our relationship with
existing customers, we are able to leverage our existing customer base and our reputation in the
structural steelwork industry in Hong Kong such that we do not rely heavily on marketing
activities other than promoting our Group through our corporate website as well as liaising with
existing and potential customers from time to time for relationship building and management.
Our pricing is generally determined based on certain mark-up over our estimated costs.
Pricing of our services is determined on a case-by-case basis having regard to various factors,
which generally include (i) the scope of services; (ii) the complexity of the project; (iii) the
estimated number and types of machinery required; (iv) the price trend of the types of materials,
manufacturing overheads in the PRC, subcontracting services and machinery services required;
(v) our available production capacity of structural steel; (vi) the completion time requested by
customers; and (vii) the availability of our labour and financial resources.
RISK FACTORS
Potential investors are advised to carefully read the section headed “Risk factors” in this
prospectus before making any investment decision in the Offer Shares. Some of the more
particular risk factors include the following: (i) most of our revenue during the Track Record
Period was derived from projects awarded by our major customers and any significant decrease
in the number of projects with our major customers may materially and adversely affect our
financial performance; (ii) reduction or termination of public and private sector projects in Hong
Kong may adversely affect our revenue and results of operations; (iii) there is no guarantee that
our customers will provide us with new businesses; and (iv) our projects may not proceed
according to the original project schedule or budget, which may result in delay in recognition of
our revenue and therefore adversely affect our cash flows, financial performance and results of
operation.
KEY OPERATIONAL AND FINANCIAL DATA
The following tables set forth our key operational and financial data during the Track
Record Period.
SUMMARY
–1 0–


--- page 21 ---
Consolidated statements of comprehensive income
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Revenue 324,292 228,776 336,384 251,561 235,038
Cost of services (269,254) (193,359) (269,445) (202,279) (188,044)
Gross profit 55,038 35,417 66,939 49,282 46,994
Profit before income tax expense 43,427 20,935 46,456 34,485 20,771
Income tax expense (6,721) (3,599) (7,191) (5,629) (5,656)
Profit for the year/period
attributable to owners of
the Company 36,706 17,336 39,265 28,856 15,115
Other comprehensive (losses)/income (1,149) (636) 1,482 1,829 826
Total comprehensive income
for the year/ period
attributable to owners of
the Company 35,557 16,700 40,747 30,685 15,941
Our revenue decreased by approximately HK$95.5 million or 29.5% from approximately
HK$324.3 million for FY2020 to approximately HK$228.8 million for FY2021 which was mainly
attributable to: (i) Project No. #01, with substantial amount of works performed during FY2020
and was completed at the end of FY2020. Project No. #01 contributed revenue of approximately
HK$120.7 million for FY2020 while no revenue was derived from Project No. #01 for FY2021;
and (ii) the rescheduling of our construction site works for Project No. #02. For details, please
refer to the paragraph headed “Financial information – Period-to-period comparison of results of
operations – FY2021 compared with FY2020” in this prospectus.
Our revenue increased by approximately HK$107.6 million or 47.0%, from approximately
HK$228.8 million for FY2021 to approximately HK$336.4 million for FY2022 which was mainly
attributable to the unexpected change to our works schedule of Project No. #02, which
contributed revenue of approximately HK$193.2 million for FY2022 and approximately HK$69.5
million for FY2021. For details, please refer to the paragraph headed “Financial information –
Period-to-period comparison of results of operations – FY2022 compared with FY2021” in this
prospectus.
Our revenue decreased by approximately HK$16.5 million or 6.6%, from approximately
HK$251.6 million for the nine months ended 30 September 2022 to approximately HK$235.0
million for the nine months ended 30 September 2023 which was mainly due to the combined
effect of: (i) Project No. #02 contributed a relatively lower revenue of approximately HK$40.9
million for the nine months ended 30 September 2023 as compared to approximately HK$153.0
million for the nine months ended 30 September 2022, as substantial amount of construction site
works was performed by our Group under the project in FY2022; (ii) Project No. #12
commenced works in April 2023 and contributed revenue of approximately HK$37.5 million for
the nine months ended 30 September 2023 while no revenue was recognised for the nine months
ended 30 September 2022; (iii) Project No. #11 contributed revenue of approximately HK$34.3
million for the nine months ended 30 September 2023 while revenue of approximately HK$1.4
million was recognised for the nine months ended 30 September 2022; (iv) Project No. #13
commenced works in September 2023 which contributed revenue of approximately HK$20.8
million for the nine months ended 30 September 2023 while no revenue was recognised for the
nine months ended 30 September 2022; and (v) some new projects were awarded in 2023 while
the purchase of materials, fabrication works and/or substantial site works are expected to be
performed in or after the third quarter of 2023. For details, please refer to the paragraph headed
“Financial information – Period-to-period comparison of results of operations – For the nine
months ended 30 September 2023 compared with the nine months ended 30 September 2022” in
this prospectus.
SUMMARY
–1 1–


--- page 22 ---
Our profit for the year attributable to owners of our Company decreased by approximately
HK$19.4 million or 52.8%, from approximately HK$36.7 million for FY2020 to approximately
HK$17.3 million for FY2021, which was mainly attributable to (i) the decrease in gross profit by
approximately HK$19.6 million resulting from the decrease in revenue as discussed above; (ii)
decrease in other income and other gain/(loss), net by approximately HK$1.1 million resulting
from the decrease in government grants received by our Group from the Employment Support
Scheme under Anti-Epidemic Fund; and (iii) increase in administrative expenses by
approximately HK$2.0 million owing to the increase in staff costs and decrease in exchange gain
recognised in relation to our PRC operation; and partially offset by (iv) the decrease in our
income tax expense by approximately HK$3.1 million.
Our profit for the year attributable to owners of our Company increased by approximately
HK$21.9 million or 126.5%, from approximately HK$17.3 million for FY2021 to approximately
HK$39.3 million for FY2022 which was mainly attributable to (i) the increase in gross profit by
approximately HK$31.5 million resulting from the increase in revenue as discussed above; (ii)
increase in other income and other gain/(loss), net by approximately HK$2.4 million resulting
from the increase in government grants received by our Group from the Employment Support
Scheme in 2022 under Anti-Epidemic Fund; and partially offset by the (iii) increase in
administrative expenses by approximately HK$4.4 million due to exchange losses in relation to
our PRC operation; (iv) increase in income tax expense by approximately HK$3.6 million; and
(v) recognition of impairment losses on financial assets and contract assets of approximately
HK$3.8 million for FY2022. For further details, please refer to the paragraph headed “Financial
information - Period-to-period comparison of results of operations” in this prospectus.
Our profit for the period attributable to owners of our Company decreased from
approximately HK$28.9 million for the nine months ended 30 September 2022 to approximately
HK$15.1 million for the nine months ended 30 September 2023 which was mainly attributable to
the listing expenses of approximately HK$12.2 million incurred during the nine months ended 30
September 2023. For further details, please refer to the paragraph headed “Financial information
- Period-to-period comparison of results of operations” in this prospectus.
Highlights of our consolidated statements of financial position
As at 31 December
As at 30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Non-current assets 22,268 17,521 22,653 20,093
Current assets 141,269 135,123 174,800 203,504
Non-current liabilities 2,575 501 4,192 458
Current liabilities 79,821 54,302 62,673 96,610
Net current assets 61,448 80,821 112,127 106,894
Net assets 81,141 97,841 130,588 126,529
Our net current assets increased from approximately HK$61.4 million as at 31 December 2020
to approximately HK$80.8 million as at 31 December 2021. The increase in our net current assets was
mainly due to the decrease in current liabilities by approximately HK$25.5 million or 32.0%, in
particular, the decrease in trade and retention payables of approximately HK$12.4 million and the
decrease in bank borrowings of approximately HK$6.5 million for the repayments of bank borrowings
by our Group for FY2020. Such increase was partially offset by the decrease in current assets by
approximately HK$6.1 million or 4.4%.
Our net current assets further increased to approximately HK$112.1 million as at 31 December
2022. The increase in our net current assets was mainly due to the increase in current assets by
approximately HK$39.7 million or 29.4%, in particular, the increase in cash and cash equivalents by
approximately HK$59.2 million mainly attributable to our profitable operation. Our cash generated
from operations amounted to approximately HK$82.2 million for FY2022. Such increase was partially
offset by the increase in current liabilities by approximately HK$8.4 million or 15.4%.
SUMMARY
–1 2–


--- page 23 ---
Our net current assets decreased to approximately HK$106.9 million as at 30 September 2023.
In particular, the increase in trade and retention payables by approximately HK$32.4 million outweigh
the increase in current assets by approximately HK$28.7 million. Such difference was due to the
difference in timing between the procurement of materials and services from our suppliers and
subcontractors and the certification of our Group’s payment application by the respective customers as
at 30 September 2023. In addition, our Group recorded the decrease in cash and cash equivalents by
approximately HK$51.8 million, which was mainly attributable to HK$20.0 million dividend paid.
Our net assets increased from approximately HK$81.1 million as at 31 December 2020 to
approximately HK$97.8 million as at 31 December 2021, which was mainly attributable to the
recognition of the profit for the year attributable to owners of our Company of approximately
HK$17.3 million for FY2021.
Our net assets increased from approximately HK$97.8 million as at 31 December 2021 to
approximately HK$130.6 million as at 31 December 2022, which was mainly attributable to the net
effect of the recognition of the profit for the year attributable to owners of our Company of
approximately HK$39.3 million for FY2022 and our dividends declared of approximately HK$8.0
million during FY2022.
Our net assets decreased from approximately HK$130.6 million as at 31 December 2022 to
approximately HK$126.5 million as at 30 September 2023, which was mainly attributable to the net
effect of the recognition of the profit for the period attributable to owners of our Company of
approximately HK$15.1 million for the nine months ended 30 September 2023 and our dividends
declared of approximately HK$20.0 million during the nine months ended 30 September 2023.
Highlights of consolidated statements of cash flows
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Net cash generated from/
(used in) operating activities 8,475 11,455 79,007 68,650 (14,773)
Net cash used in investing
activities (4,200) (1,157) (6,549) (6,580) (3,931)
Net cash used in financing
activities (7,919) (13,129) (15,414) (10,754) (30,786)
Net (decrease)/increase in
cash and cash equivalents (3,644) (2,831) 57,044 51,316 (49,490)
Cash and cash equivalents at
beginning of the year/period 18,148 14,536 11,729 11,729 68,696
Exchange difference on cash
and cash equivalents 32 24 (77) (115) (85)
Cash and cash equivalents at
end of the year/period 14,536 11,729 68,696 62,930 19,121
For the nine months ended 30 September 2023, we recorded net cash flows used in operating
activities of approximately HK$14.8 million, which was mainly resulted from the negative adjustment
to our profit before income tax expense due to (i) increase in contract assets by approximately
HK$69.1 million; (ii) increase in trade and other receivables, deposits and prepayments by
approximately HK$10.5 million; and partly offset by the positive adjustment due to (i) increase in
trade payables, accruals and other payables by approximately HK$36.7 million; and (ii) the
depreciation of right-of-use assets of approximately HK$3.1 million.
SUMMARY
–1 3–


--- page 24 ---
Key financial ratio
FY2020
or as at
31 December
2020
FY2021
or as at
31 December
2021
FY2022
or as at
31 December
2022
Nine months
ended
30 September
2023 or as at
30 September
2023
Gross profit margin 17.0% 15.5% 19.9% 20.0%
Net profit margin 11.3% 7.6% 11.7% 6.4%
Return on equity 45.2% 17.7% 30.1% 11.9%
Return on total assets 22.4% 11.4% 19.9% 6.8%
Current ratio 1.8 times 2.5 times 2.8 times 2.1 times
Quick ratio 1.8 times 2.5 times 2.8 times 2.1 times
Trade receivables turnover days 25.0 days 26.3 days 19.8 days 19.9 days
Trade payables turnover days 49.0 days 48.0 days 26.2 days 53.6 days
Gearing ratio 41.3% 21.7% 19.3% 10.7%
Net debt to equity ratio 23.4% 9.7% (35.0%) (4.4%)
Interest coverage 92.8 times 44.0 times 138.0 times 58.4 times
Our gearing ratio decreased from approximately 41.3% as at 31 December 2020 to
approximately 21.7% as at 31 December 2021, which was mainly due to the repayment of bank
borrowings during FY2021. Our gearing ratio subsequently decreased to approximately 19.3% as at 31
December 2022. Such decrease was mainly because of the increase in total equity during FY2022. Our
gearing ratio further decreased to approximately 10.7% as at 30 September 2023. Such decrease was
mainly due to the decrease in total borrowings.
For further details of the key financial ratio, please refer to the paragraph headed “Financial
information – Key financial ratio” in this prospectus.
CONTROLLING SHAREHOLDERS
Immediately after the completion of the Capitalisation Issue and the Share Offer (without
taking into account any Share that may be allotted and issued upon the exercise of the
Over-allotment Option or any option which may be granted under the Share Option Scheme), our
Company will be owned as to 75% by WK (BVI). WK (BVI) is an investment holding company
incorporated in BVI and is owned as to 30% by Mr. Kelvin Chan, 30% by Mr. Eddie Chan, 15%
by Mr. WH Chan, 15% by Ms. Choi and 10% by Ms. Karen Chan. On the basis that Mr. Kelvin
Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan hold their respective
interests in our Company through a common investment holding company, i.e. WK (BVI), which
in turn will be entitled to exercise 30% or more of the voting power at general meetings of our
Company. WK (BVI), Mr. Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms.
Karen Chan are regarded as a group of Controlling Shareholders under the Listing Rules.
LEGAL COMPLIANCE
During the Track Record Period, we had certain non-compliance incidents relating to the
laws and regulations in the PRC. We failed to make adequate social insurance and housing
provident fund contributions for all our employees in accordance with certain legal and statutory
requirements in the PRC during the Track Record Period. For further details, please refer to the
paragraph headed “Business – Legal compliance – The PRC” in this prospectus.
LITIGATIONS AND CLAIMS
During the Track Record Period and up to the Latest Practicable Date, our Group had been
involved in certain claims, litigations and potential claim against our Group in the ordinary and
usual course of our business. During the Track Record Period and up to the Latest Practicable
Date, our Group was involved in certain settled or discontinued litigations including two
duplicated contractual dispute claims, one employees’ compensation claim, nine personal injury
claims and three labour tribunal claims. As at the Latest Practicable Date, there was one ongoing
civil litigation involving our Group in relation to a winding-up petition filed by us against a
customer on insolvency grounds relying on its debts owed to our Group arising from balance of
SUMMARY
–1 4–


--- page 25 ---
unpaid contract price under a subcontract entered into between our Group and the customer. For
further details, please refer to the paragraph headed “Business – Litigations and claims” in this
prospectus.
OFFERING STATISTICS
Number of the Offer Shares : 500,000,000 Shares (subject to the Over-allotment
Option)
Offer Price : Not more than HK$0.27 per Offer Share and expected
to be not less than HK$0.25 per Offer Share
(excluding brokerage, Stock Exchange trading fee,
SFC transaction levy and AFRC transaction levy)
Based on an Offer
Price of HK$0.25
per Share
Based on an Offer
Price of HK$0.27
per Share
HK$ HK$
Market capitalisation
(Note 1) 500,000,000 540,000,000
Unaudited pro forma adjusted consolidated
net tangible assets per Shares (Note 2) 0.12 0.12
Notes:
1. The calculation of the market capitalisation of the Shares is based on 2,000,000,000 Shares in issue
and to be issued immediately after completion of the Share Offer and taking no account of any
Shares which may be issued pursuant to the exercise of the Over-allotment Option or any options
which may be granted under the Share Option Scheme or Shares which may be allotted and issued or
repurchased by our Company pursuant to the general mandate and the repurchase mandate.
2. The unaudited pro forma adjusted net tangible assets have not been adjusted for dividends of
HK$26,586,000 declared in January 2024. Had the dividends, totaling HK$26,586,000, been taken
into account, the unaudited pro forma adjusted net tangible asset per Share would have been reduced
to HK$0.10 and HK$0.11 based on the Offer Price of HK$0.25 and HK$0.27 per Share respectively.
Please refer to Appendix II to this prospectus for the bases and assumptions in calculating the
figures.
LISTING EXPENSES
Our Directors estimate that the total amount of expenses in relation to the Listing is
approximately HK$34.0 million, comprising (i) underwriting-related expenses, including
underwriting commission, of approximately HK$7.8 million; and (ii) non-underwriting-related
expenses of approximately HK$26.2 million, including (a) fees paid and payable to legal advisers
and reporting accountant of approximately HK$14.7 million; and (b) other fees and expenses,
including sponsor fees, of approximately HK$11.5 million. Out of the amount of approximately
HK$34.0 million, approximately HK$13.5 million is directly attributable to the issue of the
Shares and is expected to be accounted for as a deduction from equity upon Listing. The
remaining amount of approximately HK$20.5 million, which cannot be so deducted, shall be
charged to profit or loss. Of the approximately HK$20.5 million that shall be charged to profit or
loss, nil, nil, nil and approximately HK$12.2 million has been charged for FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023. The listing expenses are expected to
represent approximately 26.2% of the gross proceeds of the Share Offer, assuming an Offer Price
of HK$0.26 per Offer Share (being the mid-point of the indicative Offer Price range) and the
Over-allotment Option is not exercised. Our Group’s financial performance and results of
operations for FY2023 and FY2024 will be adversely affected by the estimated expenses in
relation to the Listing.
SUMMARY
–1 5–


--- page 26 ---
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR OPERATIONS
Our operations in the PRC
Due to the emergence of the COVID-19 pandemic in the PRC in early 2020, the PRC
Government imposed lockdown measures in Dongguan, the PRC in the first quarter of 2020.
Transport was restricted, major roads and highways were closed and factories were ordered to
suspend operations. In response to the requirements of the local government authorities, our
production facilities suspended from operations during the lockdown period.
Our Directors consider that impact of the lockdown on our business and financial
performance for FY2020 was mitigated taking into consideration the suspension was only
temporary and the operations of our production facilities resumed normal since May 2020; while
the temporary suspension in our PRC production facilities hindered the progress of our
fabrication works, the overall impact on us was partly mitigated as the structural steel required in
some projects were already delivered to Hong Kong by the end of 2019 in view of the
forthcoming Chinese New Y ear holiday in early 2020, and hence we were able to continue with
our installation works for such projects during the first quarter of 2020. Once our production
facilities resumed normal operations in May 2020, our Group had made efforts to fulfil the
project schedule required by our customers. During the Track Record Period and up to the Latest
Practicable Date, our Group did not experience any material delay in fulfilling the project
schedule required by our customers. As at the Latest Practicable Date, our Group also did not
experience any material delay requested by our customers in relation to our projects on hand.
Subsequent to the withdrawal of the “zero-COVID-19” policy by late 2022, a number of
our staff based in the PRC experienced infection which resulted in temporary loss of manpower
for our structural steel fabrication and temporary disruption to the operation of our production
facilities between November to December 2022. Our business operations in the PRC had resumed
to normal by early 2023.
Our operations in Hong Kong
From January 2022 and up to April 2022, Hong Kong recorded the fifth wave of the
outbreak of COVID-19 attributable to the SARS-CoV-2 Omicron variant (the “ Fifth Wave
Outbreak ”), as the daily number of confirmed cases increased significantly during the period.
Our Group experienced temporary disruption to the transportation of materials from Hong Kong
to the PRC and finished products from the PRC to Hong Kong during 2022 since cross-border
transportation was significantly disrupted. Our Directors consider that the temporary disruption to
the transportation of materials and finished products did not have long-lasting adverse impact on
our operation, taking into consideration that (i) cross-border transportation have gradually
resumed to normal level as the pandemic came under control in 2022; and (ii) as contingency
measures, our Group had engaged third party logistics services providers to deliver materials and
finished products between Hong Kong and the PRC by sea instead of by road at that time to
minimise the impact of such disruption on the supply of raw materials to our production facilities
and structural steel to our work sites; and (iii) we were generally able to pass on part of the
increase in logistics costs incurred by us from the delivery of materials and finished products
between Hong Kong and the PRC by sea to our customers.
Save as disclosed above and based on information available as at the Latest Practicable
Date, our Directors confirm that the COVID-19 pandemic did not and will not have material
adverse impact on our business operations and financial performance.
FUTURE PLANS AND USE OF PROCEEDS
The net proceeds to be received by us from the Share Offer (assuming the Over-allotment
Option is not exercised) based on the Offer Price of HK$0.26 per Offer Share, being the
mid-point of the indicative Offer Price range of HK$0.25 per Offer Share to HK$0.27 per Offer
Share, after deducting related expenses in connection with the Share Offer, are estimated to be
approximately HK$96.0 million. Our Directors presently intend that the net proceeds will be
applied as follows: (i) approximately HK$59.0 million, representing approximately 61.5% of the
estimated net proceeds, will be used for financing the up-front costs of our projects; (ii)
approximately HK$35.0 million, representing approximately 36.4% of the estimated net proceeds,
SUMMARY
–1 6–


--- page 27 ---
will be used for acquiring a piece of land within or in proximity to Dongguan, the PRC and
setting up a new production facility; and (iii) approximately HK$2.0 million, representing
approximately 2.1% of the estimated net proceeds, will be used for further expanding and
strengthening our manpower by recruiting three project managers and one engineer.
DIVIDEND
No dividend has been paid or declared by our Company for the Track Record Period.
Dividends of HK$8.2 million, nil, HK$8.0 million and HK$20.0 million were declared and
settled by the companies now comprising our Group to their then shareholders, during each of
FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, respectively. In
January 2024, the Company declared dividends of approximately HK$26.6 million of which
approximately HK$10.0 million will be settled by cash before the Listing and approximately
HK$16.6 million was offset against the aggregate amounts due from the Directors and the related
company.
Any decision to pay dividends will be made having regard to factors such as the results of
operation, financial condition and position, and other factors deemed relevant by our Board. Any
distributable profits that are not distributed in any given year may be retained and available for
distribution in subsequent years. To the extent profits are distributed as dividends, such portion
of profits will not be available to be reinvested in our operation. There can be no assurance that
we will be able to declare or distribute any dividend. Our future declarations of dividends will be
at the absolute discretion of our Board. We do not have any pre-determined dividend payout
ratio.
PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2023
Our Directors estimate, on the bases as set out in Appendix III to this prospectus and in the
absence of unforeseen circumstances, that our estimated consolidated profit attributable to owners
of our Company for the year ended 31 December 2023 to be as follows:
Estimated consolidated profit attributable to owners of
our Company for the year ended 31 December 2023 ..... n o t less than approximately
HK$23.0 million
Note: The estimated consolidated profit attributable to owners of our Company for the year ended 31
December 2023 has taken into account of our estimated listing expenses of approximately HK$16.0
million incurred during the year ended 31 December 2023.
The profit estimate, for which our Directors are solely responsible, has been prepared by
them based on the audited consolidated results of our Group for the nine months ended 30
September 2023 as set out in the Accountant’s Report in Appendix I to this prospectus and the
unaudited consolidated results based on the management accounts of our Group for the three
months ended 31 December 2023.
RECENT DEVELOPMENT
As at the Latest Practicable Date, we had 22 projects on hand with an aggregate of
approximately HK$574.5 million yet to be recognised as revenue. For further details, please refer
to the paragraph headed “Business – Projects on hand” in this prospectus.
Our Directors confirm that, save for the expenses in connection with the Listing, up to the
date of this prospectus, there has been no material adverse change in our financial or trading
position or prospects since 30 September 2023, and there had been no events since 30 September
2023 which would materially affect the information shown in our consolidated financial
statements included in the Accountant’s Report. It is expected that our Group’s net profit will
decrease for FY2023 primarily attributable to the incurrence of listing expenses which is
non-recurring in nature in FY2023.
SUMMARY
–1 7–


--- page 28 ---
In this prospectus, unless the context otherwise requires, the following expressions
have the following meanings.
“Accountant’s Report” the accountant’s report of our Company, the text of
which is set forth in Appendix I to this prospectus
“AFRC” the Accounting and Financial Reporting Council
“Articles” or “Articles of
Association”
the amended and restated articles of association of our
Company adopted on 5 February 2024, a summary of
which is set out in Appendix IV to this prospectus, as
supplemented, amended or otherwise modified from
time to time
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Audit Committee” the audit committee of the Board
“Board” the board of Directors
“Business Day” or “business day” any day (other than a Saturday, Sunday or public
holiday in Hong Kong) on which banks in Hong Kong
are generally open for normal banking business
“BVI” the British Virgin Islands
“CAGR” compounded annual growth rate
“Capitalisation Issue” the allotment and issue of 1,499,999,999 new Shares to be
made upon capitalisation of certain sums standing to the
credit of the share premium account of our Company as
referred to in the paragraph headed “A. Further
Information about our Group – 5. Written resolutions of
our sole Shareholder passed on 5 February 2024” in
Appendix V to this prospectus
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“Chairman” the chairman of our Board, Mr. WH Chan
“close associate(s)” has the meaning ascribed to it under the Listing Rules
“Co-Managers” Fortune Origin Securities Limited, Lee Go Securities
Limited, Victory Securities Company Limited, Grand
China Securities Limited and SBI China Capital Financial
Services Limited
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–1 8–


--- page 29 ---
“Companies Act” the Companies Act (as revised) of the Cayman Islands, as
amended, modified and supplemented from time to time
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, modified and supplemented
from time to time
“Companies (WUMP) Ordinance”
or “Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong), as amended, modified and supplemented from
time to time
“Company” WK Group (Holdings) Limited
ʮ̡,
an exempted company incorporated in the Cayman
Islands with limited liability on 28 June 2023
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Construction Industry Council” the Construction Industry Council, a body corporate
established under the Construction Industry Council
Ordinance (Chapter 587 of the Laws of Hong Kong)
“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules
and unless the context otherwise requires, means Mr.
Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan,
Ms. Choi, Ms. Karen Chan and WK (BVI)
“core connected person(s)” has the meaning ascribed to it under the Listing Rules
“Corporate Governance Code” the Corporate Governance Code as set out in Appendix
C1 to the Listing Rules
“COVID-19” the coronavirus pandemic, a global pandemic of
coronavirus disease 2019 (COVID-19) caused by severe
acute respiratory syndrome coronavirus 2 (SARS-CoV-2)
“CSRC” the China Securities Regulatory Commission (
ʕ਷ᗇՎ္
ึ), a regulatory body responsible for the
supervision and regulation of the Chinese national
securities markets
“Dapianmei Production Facility” our leased production facility located at Dapianmei
Village, Dalingshan Town, Dongguan City, Guangdong
Province, the PRC
Ӏ
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–1 9–


--- page 30 ---
“Deed of Indemnity” the deed of indemnity dated 5 February 2024 given by
our Controlling Shareholders in favour of our Company
(for ourselves and as trustee for and on behalf of each of
our subsidiaries) regarding certain indemnities, details of
which are set out in the paragraph headed “E. Other
information – 1. Tax and other indemnities” in Appendix
V to this prospectus
“Development Bureau” the Development Bureau of the Government
“Director(s)” the director(s) of our Company
“EIT Law” the Enterprise Income Tax Law of the PRC (
ʕശɛ͏΍
)
“eWhite Form ” the application for Public Offer Shares to be issued in
the applicant’s own name by submitting applications
online through the designated website of the eWhite
Form Service Provider at www.ewhiteform.com.hk
“eWhite Form Service Provider” the eWhite Form Service Provider designated by our
Company, as specified on the designated website at
www.ewhiteform.com.hk
“Extreme Conditions” the extreme conditions the Government may announce in
the event of, for example, serious disruption of public
transport services, extensive flooding, major landslides,
or large-scale power outage caused by super typhoons
according to the revised “Code of Practice in Times of
Typhoons and Rainstorms” issued by the Labour
Department
“F&S” or “Frost & Sullivan” Frost & Sullivan Limited, an independent market
research agency, which is an independent third party
“FINI” “Fast Interface for New Issuance”, an online platform
operated by HKSCC that is mandatory for admission to
trading and, where applicable, the collection and
processing of specified information on subscription in
and settlement for all new listings on the Stock
Exchange
“FY2020” the financial year ended 31 December 2020
“FY2021” the financial year ended 31 December 2021
“FY2022” the financial year ended 31 December 2022
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 0–


--- page 31 ---
“FY2023” the financial year ending 31 December 2023
“FY2024” the financial year ending 31 December 2024
“FY2025” the financial year ending 31 December 2025
“Government” the Government of the Hong Kong Special
Administrative Region
“Grande Capital” or “Sponsor” Grande Capital Limited, the sponsor to our Company’s
application for the Listing and a licensed corporation
under the SFO to engage in type 1 (dealing in securities)
and type 6 (advising on corporate finance) regulated
activities
“Group”, “we”, “us” or “our
Group”
our Company and our subsidiaries at the relevant time
or, where the context otherwise requires, in respect of
the period prior to our Company becoming the holding
company of our present subsidiaries, our present
subsidiaries and the businesses operated by such
subsidiaries or their predecessors (as the case may be)
“Hip Hing Group” Hip Hing Group consists of two private limited liability
companies and a joint venture, namely (i) Hip Hing
Engineering Company Limited; (ii) Hip Hing
Construction Company Limited; and (iii) Hip Hing Joint
V enture (SPX1). Hip Hing Group is one of our top
customers and suppliers during the Track Record Period
and an independent third party
“HKD” or “HK$” and “cents” Hong Kong dollars and cents respectively, the lawful
currency of Hong Kong
“HKFRS(s)” Hong Kong Financial Reporting Standards (including
Hong Kong Financial Reporting Standards, Hong Kong
Accounting Standards and Interpretations) issued by the
Hong Kong Institute of Certified Public Accountants
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 1–


--- page 32 ---
“HKSCC EIPO channel” the application for the Public Offer Shares to be issued
in the name of HKSCC Nominees and deposited directly
into CCASS to be credited to your or a designated
HKSCC Participant’s stock account through causing
HKSCC Nominees to apply on your behalf, instructing
your broker or custodian who is a HKSCC Participant to
submit an EIPO application on your behalf through FINI
in accordance with your instruction
“HKSCC Nominees” HKSCC Nominees Limited
“HKSCC Operational Procedures” the operational procedures of the HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of the systems established,
operated and/or otherwise provided by or through
HKSCC (including FINI and CCASS) as from time to
time in force
“HKSCC Participant” a participant admitted to participate in CCASS as a
direct clearing participant, a general clearing participant
or a custodian participant
“Hong Kong”, “HKSAR” or “HK” the Hong Kong Special Administrative Region of the
PRC
“Hong Kong Branch Share
Registrar”
Boardroom Share Registrars (HK) Limited, the Hong
Kong branch share registrar of our Company
“Hong Kong Legal Counsel” Ms. Queenie W.S. Ng, barrister-at-law of Hong Kong
“independent third party(ies)” an individual(s) or a company(ies) who or which is/are
independent and not connected with (within the meaning
of the Listing Rules) any of our Directors, chief
executive, substantial shareholders of our Company or
any of its subsidiaries, or any of their respective
associates
“Industry Report” a market research report commissioned by us and
prepared by F&S on the overview of the industry in
which our Group operates
“ISO” an acronym for a series of quality management and
quality assurance standards published by International
Organisation for Standardization, a non-government
organization based in Geneva, Switzerland, for assessing
the quality systems of business organisations
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 2–


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“ISO 14001” an environmental management system standard that
maps out a framework that a company or organisation
can follow to set up an effective environmental
management system, to provide assurance to company
management and employees as well as external
stakeholders that environmental impact is being
measured and improved
“ISO 14001:2015” the 2015 version of the ISO 14001 standard
“ISO 45001” an international standard setting out requirements for an
occupational health and safety management system
developed for managing the occupational health and
safety risks associated with a business
“ISO 45001:2018” the 2018 version of the ISO 45001 standard
“ISO 9001” a quality management system standard that is based on a
number of quality management principles including a
strong customer focus, the motivation and implication of
top management, the process approach and continual
improvement
“ISO 9001:2015” the 2015 version of the ISO 9001 standard
“Joint Bookrunners” and “Joint
Lead Managers”
Grande Capital Limited, Quam Securities Limited, Y uen
Meta (International) Securities Limited, Eddid Securities
and Futures Limited and Livermore Holdings Limited
“Labour Department” the Labour Department of the Government
“Latest Practicable Date” 20 February 2024, being the latest practicable date prior
to the printing of this prospectus for the purpose of
ascertaining certain information in this prospectus prior
to its publication
“List of Approved Specialist
Contractors for Public Works”
the “List of Approved Suppliers of Materials and
Specialist Contractors for Public Works” maintained by
the Development Bureau
“Listing” listing of the Shares on the Main Board of the Stock
Exchange
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be on or about Friday, 8 March
2024, on which dealings in the Shares first commence
on the Main Board
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 3–


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“Listing Rules” the Rules Governing the Listing of Securities on the
Stock Exchange, as amended, modified and
supplemented from time to time
“Memorandum of Association” or
“Memorandum”
the amended and restated memorandum of association of
our Company approved and adopted on 5 February 2024,
a summary of which is set out in Appendix IV to this
prospectus, as supplemented, amended or otherwise
modified from time to time
“MOFCOM” the Ministry of Commerce of the PRC (
ʕശɛ͏΍ձ਷ਠ
ਕ௅) or its predecessor, the Ministry of Foreign Trade
and Economic Cooperation, as appropriate to the context
“Mr. Eddie Chan” Mr. Chan Kam Kong ( ௓㒥Ϫ), the chief operating officer
of our Group, an executive Director and one of our
Controlling Shareholders. Mr. Eddie Chan is the son of
Mr. WH Chan and Ms. Choi, and the brother of Mr.
Kelvin Chan and Ms. Karen Chan
“Mr. Kelvin Chan” Mr. Chan Kam Kei (
௓㒥ਿ), the chief executive officer
of our Group, an executive Director and one of our
Controlling Shareholders. Mr. Kelvin Chan is the son of
Mr. WH Chan and Ms. Choi, and the brother of Mr.
Eddie Chan and Ms. Karen Chan
“Mr. WH Chan” Mr. Chan Wing Hong (
௓͑ੰ), the chairman of the
Board, a non-executive Director and one of our
Controlling Shareholders. Mr. WH Chan is the spouse of
Ms. Choi, and the father of Mr. Kelvin Chan, Mr. Eddie
Chan and Ms. Karen Chan
“Ms. Choi” Ms. Choi Chick Cheong (
׹a non-executive
Director and one of our Controlling Shareholders.
Ms. Choi is the spouse of Mr. WH Chan, and the mother
of Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen
Chan
“Ms. Karen Chan” Ms. Chan Suk Man (
௓ૺත), an executive Director and
one of our Controlling Shareholders. Ms. Karen Chan is
the daughter of Mr. WH Chan and Ms. Choi, and the
sister of Mr. Eddie Chan and Mr. Kelvin Chan
“Nomination Committee” the nomination committee of the Board
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 4–


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“Offer Price” the final price per Offer Share in Hong Kong dollars
(exclusive of brokerage of 1.0%, SFC transaction levy of
0.0027%, AFRC transaction levy of 0.00015% and the
Stock Exchange trading fee of 0.00565%) at which the
Offer Shares are to be subscribed for or issued pursuant
to the Share Offer
“Offer Share(s)” the Public Offer Shares and the Placing Shares
“Over-allotment Option” the option expected to be granted by our Company under
the Placing Underwriting Agreement to the Placing
Underwriters, which is exercisable in full or in part by
the Overall Coordinators (on behalf of the Placing
Underwriters), pursuant to which our Company may be
required to allot and issue up to an aggregate of
75,000,000 Shares, representing approximately 15% of
the initial number of Offer Shares offered under the
Share Offer, at the Offer Price to cover over-allocations
in the Placing, if any
“Overall Coordinators” Grande Capital Limited, Quam Securities Limited and
Y uen Meta (International) Securities Limited
“Placing” the conditional placing of the Placing Shares by the
Placing Underwriters at the Offer Price to selected
professional, institutional and other investors as set out
in the section headed “Structure and conditions of the
Share Offer” in this prospectus
“Placing Shares” the 450,000,000 Shares being initially offered by our
Company for subscription at Offer Price pursuant to the
Placing, subject to re-allocation as described in the
section headed “Structure and conditions of the Share
Offer” in this prospectus
“Placing Underwriter(s)” the underwriters of the Placing, who are expected to
enter into the Placing Underwriting Agreement to
underwrite the Placing
“Placing Underwriting Agreement” the conditional underwriting and placing agreement
relating to the Placing expected to be entered into on or
about 6 March 2024 by, among others, our Company,
our Controlling Shareholders, our executive Directors,
the Sponsor, the Overall Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Co-Managers
and the Placing Underwriters, particulars of which are
summarised in the section headed “Underwriting” in this
prospectus
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 5–


--- page 36 ---
“PRC” or “China” the People’s Republic of China, which for the purpose
of this prospectus, shall exclude Hong Kong, the Macau
Special Administrative Region of the PRC and Taiwan,
the PRC
“PRC Government” the government of the PRC, including all political
subdivisions (including provincial, municipal, and other
local or regional government entities) and organisations
of such government or, as the context requires, any of
them
“PRC Legal Advisers” China Commercial Law Firm, the legal advisers of our
Company as to PRC law
“Price Determination Agreement” the agreement to be entered into by the Overall
Coordinators (for themselves and on behalf of the
Underwriters) and our Company on the Price
Determination Date to record and fix the Offer Price
“Price Determination Date” the date, expected to be on or before 12:00 noon on
Wednesday, 6 March 2024 on which the Price
Determination Agreement is entered into
“Project No. #01 to #13” our top five projects for each of FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023
in terms of revenue contribution to our Group
“Project No. O01 to O09” some of our projects on hand (representing projects that
have commenced but not completed as well as projects
that have been awarded to us but not yet commenced)
with estimated revenue of over HK$5 million to be
recognised after the Track Record Period
“Public Offer” the offer of the Public Offer Shares for subscription by
the members of the public in Hong Kong for cash at the
Offer Price (plus brokerage of 1.0%, SFC transaction
levy of 0.0027%, AFRC transaction levy of 0.00015%
and Stock Exchange trading fee of 0.00565%), payable
in full on application, and subject to the terms and
conditions described in this prospectus
“Public Offer Shares” the 50,000,000 Shares initially being offered for
subscription under the Public Offer, subject to
re-allocation as described in the section headed
“Structure and conditions of the Share Offer” in this
prospectus
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 6–


--- page 37 ---
“Public Offer Underwriters” the underwriters of the Public Offer whose names are set
out in the section headed “Underwriting – Public Offer
Underwriters” in this prospectus
“Public Offer Underwriting
Agreement”
the conditional underwriting agreement dated 28
February 2024 relating to the Public Offer entered into
by, among others, our Company, our executive Directors,
our Controlling Shareholders, the Sponsor, the Overall
Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Co-Managers and the Public Offer
Underwriters, particulars of which are summarised in the
section headed “Underwriting” in this prospectus
“Register of Subcontractors” the Register of Subcontractors maintained by the
Construction Industry Council
“Regulation S” Regulation S under the U.S. Securities Act
“Remuneration Committee” the remuneration committee of the Board
“Reorganisation” the corporate reorganisation of our Group in preparation
for the Listing as described in the paragraph headed
“History, development and Reorganisation –
Reorganisation” in this prospectus
“RMB” Renminbi, the lawful currency of the PRC
“SAFE” the State Administration of Foreign Exchange of the
PRC (
̮ි၍ଣ҅), which is the PRC
government agency responsible for matters relating to
foreign exchange administration
“SA T” the State Administration of Taxation of the PRC (
ʕശɛ
೼ਕᐼ҅)
“SFC” the Securities and Futures Commission
“SFO” the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Share(s)” ordinary share(s) with par value of HK$0.01 each in the
share capital of our Company
“Shareholder(s)” holder(s) of the Share(s)
“Share Offer” the Public Offer and the Placing
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 7–


--- page 38 ---
“Share Option Scheme” the share option scheme conditionally approved and
adopted by our Company on 5 February 2024, the
principal terms of which are summarised in the
paragraph headed “D. Share Option Scheme” in
Appendix V to this prospectus
“sq.ft.” square foot
“sq.m.” square metre
“Stabilising Manager” Y uen Meta (International) Securities Limited
“Stock Borrowing Agreement” the stock borrowing agreement to be entered into
between WK (BVI) and the Stabilising Manager,
pursuant to which the Stabilising Manager may borrow
up to 75,000,000 Shares to cover any over-allocations in
the Share Offer
“State Council” the State Council of the PRC
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subcontractor Registration
Scheme”
the Subcontractor Registration Scheme of the
Construction Industry Council, which was substituted by
the Registered Specialist Trade Contractors Scheme
since 1 April 2019
“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules
“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules and
details of our substantial shareholders are set out in the
section headed “Substantial Shareholders” in this
prospectus
“Takeovers Code” The Codes on Takeovers and Mergers and Share
Buy-backs issued by the SFC, as amended, supplemented
or otherwise modified from time to time
“Track Record Period” FY2020, FY2021, FY2022 and the nine months ended
30 September 2023
“Underwriters” the Public Offer Underwriters and the Placing
Underwriters, details of which are set out in the section
headed “Underwriting” in this prospectus
“Underwriting Agreements” the Public Offer Underwriting Agreement and the Placing
Underwriting Agreement
“United States” or “U.S.” the United States of America
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 8–


--- page 39 ---
“U.S. Securities Act” the Securities Act of 1933 of the United States, as
amended, modified and supplemented from time to time
“US$” United States dollars, the lawful currency of the United
States of America
“Wing Kei Dongguan” Dongguan Y ongji Metal Component Manufacturing Co.,
Ltd.* (ʮ̡), a company
established in the PRC with limited liability on 6 July
2015, and an indirect wholly-owned subsidiary of our
Company
“Wing Kei Hong Kong” Wing Kei Structural Metalworks Company Limited (
͑ਿ
ʮ̡), a company incorporated in Hong
Kong with limited liability on 28 July 1999, and an
indirect wholly-owned subsidiary of our Company
“Wing Kei Management” Wing Kei Management Limited, a company incorporated
in Hong Kong with limited liability on 28 March 2023,
and an indirect wholly-owned subsidiary of our Company
“WK (BVI)” WK (BVI) Limited, a company incorporated in the BVI
with limited liability on 26 June 2023, and one of our
Controlling Shareholders
“WK Development” WK Development Group Limited, a company incorporated
in the BVI with limited liability on 4 July 2023, and a
direct wholly-owned subsidiary of our Company
“Wo Lee Group” Wo Lee Group consists of two private limited liability
companies, namely Wo Lee Steel Company Limited and
Qianhai Helida (Shenzhen) Supply Chain Management
Company Limited*
ʮ
̡. Wo Lee Group is one of our top suppliers during the
Track Record Period and an independent third party
“Xinlong Production Facility” our leased production facility located at 1/F, building no.
3-4, Xinlong Technology Park, 1 Lingchuang Street,
Y ongjun Road, Dalingshan Town, Dongguan City,
Guangdong Province, the PRC (
୷̹ɽᏊʆᕄ
༩Ꮚ௴൑1Ҧ෤ୋ3-4ಊɓᅽ)
“%” per cent
The English translation of the PRC entities, enterprises, nationals, facilities,
regulations, in Chinese or another language included in this prospectus which are marked
with “*” is for identification purpose only. To the extent that there is any inconsistency
between the Chinese names of the PRC entities, enterprises, nationals, facilities, regulations
and their English translations, the Chinese names shall prevail.
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
–2 9–


--- page 40 ---
This prospectus contains forward-looking statements that are, by their nature, subject to
significant risks and uncertainties. In some cases the words such as “aim”, “anticipate”,
“believe”, “expect”, “going forward”, “intend”, “may”, “plan”, “potential”, “predict”,
“propose”, “seek”, “should”, “will”, “would” and other similar expressions are used to
identify forward-looking statements. These forward-looking statements include, without
limitation, statements relating to:
/L50188our Group’s business and operating strategies and plans of operation;
/L50188the amount and nature of, and potential for, future development of our Group’s
business;
/L50188our Company’s dividend distribution plans;
/L50188the regulatory environment as well as the general industry outlook for the industry
in which our Group operates;
/L50188future developments in the industry in which our Group operates; and
/L50188the trend of the economy of Hong Kong, the PRC and the world in general.
These statements are based on various assumptions, including those regarding our
Group’s present and future business strategy and the environment in which our Group will
operate in the future.
Our Group’s future results could differ materially from those expressed or implied by
such forward-looking statements. In addition, our Group’s future performance may be
affected by various factors including, without limitation, those discussed in the sections
headed “Risk Factors” and “Financial Information” of this prospectus.
Should one or more risks or uncertainties stated in the aforesaid sections materialise, or
should any underlying assumptions prove to be incorrect, actual outcomes may vary
materially from those indicated. Prospective investors should therefore not place undue
reliance on any of the forward-looking statements. All forward-looking statements contained
in this prospectus are qualified by reference to the cautionary statements as set out in this
section.
In this prospectus, statements of, or references to, our Group’s intentions or those of
any of our Directors are made as at the date of this prospectus. Any such intentions may
change in light of future developments.
FORW ARD-LOOKING STATEMENTS
–3 0–


--- page 41 ---
Potential investors should carefully consider all of the information set out in this
prospectus and, in particular , should consider the following risks and special
consideration associated with an investment in our Company before making any
investment decision in relation to the Offer Shares. If any of the possible events as
described below materialises, our Group’s business, financial position and prospects
could be materially and adversely affected and the trading prices of the Shares could
decline due to any of these risks, and you may lose all or part of your investments.
This prospectus contains certain forward-looking statements relating to our Group’s
plans, objectives, expectations and intentions which involve risks and uncertainties. Our
Group’s actual results may differ materially from those as discussed in this prospectus.
Factors that could contribute to such differences are set out below as well as in other
parts in this prospectus.
RISKS RELATING TO OUR BUSINESS
Most of our revenue during the Track Record Period was derived from projects
awarded by our major customers and any significant decrease in the number of
projects with our major customers may materially and adversely affect our financial
performance
A significant portion of our revenue was derived from our Group’s major customers
during the Track Record Period. For FY2020, FY2021, FY2022 and the nine months ended
30 September 2023, our top five customers for each year/period contributed revenue of
approximately HK$296.6 million, HK$216.4 million, HK$315.6 million and HK$229.9
million to our Group, respectively, which accounted for approximately 91.5%, 94.6%, 93.8%
and 97.8% of our total revenue for the corresponding year/period, respectively. In particular,
Hip Hing Group contributed revenue of approximately HK$126.6 million, HK$151.6 million,
HK$237.7 million and HK$118.3 million to our Group, respectively, which accounted for
approximately 39.0%, 66.3%, 70.7% and 50.3% of our total revenue for each year/period
during the Track Record Period, respectively. Save for Hip Hing Group, being our top
customer for each year/period during the Track Record Period, the ranking and composition
of our top five customers for each of FY2020, FY2021, FY2022 and the nine months ended
30 September 2023 were substantially different.
We undertake structural steelwork on a project-by-project basis during the Track
Record Period. There is no assurance that we will continue to obtain contracts from our
major customers in the future. If there is a significant decrease in the number of projects
awarded by our major customers, and we are unable to secure suitable projects of a
comparable size and quantity as replacements from other customers, our financial condition
and operating results would be materially and adversely affected.
Reduction or termination of public and private sector projects in Hong Kong may
adversely affect our revenue and results of operations
During the Track Record Period, we were mainly engaged in public sector projects in
Hong Kong. Our public sector projects mainly involved infrastructure and public facilities as
well as public residential developments. For FY2020, FY2021, FY2022 and the nine months
RISK FACTORS
–3 1–


--- page 42 ---
ended 30 September 2023, we derived approximately 44.1%, 66.3%, 84.6% and 83.2% of
our revenue from public sector projects. The nature, extent and timing of available public
sector structural steelwork projects is determined by an interplay of a variety of factors,
including the Hong Kong government’s policies on the infrastructure and public facilities
development, its land supply and public housing policy and the general conditions and
prospects of the Hong Kong’s economy. In the event the Hong Kong government reduces its
expenditure on or changes its policy in relation to public residential and/or infrastructure and
public facilities developments, the number of available public sector structural steelwork
projects may decrease and our business, financial condition and results of operations may be
materially and adversely affected.
In the face of the challenges of fiscal deficits and a declining reserve, the government’s
ability to allocate funds for infrastructure development may be limited. According to the
Hong Kong Budget 2023 to 2024, the financial secretary of Hong Kong had forecasted a
budget deficit of HK$139.8 billion for the 2022-23 fiscal year, more than double its original
estimate of HK$56.3 billion. The financial secretary of Hong Kong expected that the budget
deficit for the fiscal year ending 31 March 2024 will further increase from the previous
estimation of approximately HK$54.4 billion. According to Article 107 of the Basic Law, the
Hong Kong government should follow the principle of keeping the expenditure within the
limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid
deficits and keep the budget commensurate with the growth rate of its gross domestic
product. As governments may need to prioritize spending, namely in education and
healthcare, and reduce overall expenditure, infrastructure projects may face budget cuts or
delays. This can impact the construction, maintenance, and expansion of infrastructure such
as roads, bridges, ports, and public transportation systems.
Whilst the Hong Kong government had allocated budget for infrastructural
development, it is expected that part of it may be financed by the issuance of government
bonds and/or other sources of fund. According to the 2023-24 Budget, it is planned to issue
no less than HK$50 billion of Silver Bond and HK$15 billion of retail green bonds in the
2024 financial year, and to earmark a certain proportion of the future issuances of
Government green bonds and infrastructure bonds for priority investment by MPF funds.
Going forward, the scope of the Government Green Bond Programme would be further
expanded to cover sustainable finance projects, and set up an Infrastructure Bond Scheme to
better manage the cash flow needs of major infrastructure projects.
Further, the persisting property market downturn in Hong Kong, delay in infrastructure
works, slowdown in economic growth and surging interest rates have resulted in weaker
sentiment of property buyers as well as the wait-and-see sentiment of commercial property
developers, thereby resulting in a decrease in demand for private construction projects of
residential buildings, commercial complexes and offices. In the event there is a significant
decrease in the number of available private construction projects, resulting in a decrease in
demand for structural steelworks associated therefrom, our business, financial condition and
results of operations may be materially and adversely affected.
RISK FACTORS
–3 2–


--- page 43 ---
There is no guarantee that our customers will provide us with new businesses
Our customers are under no obligation to award projects to us. During the Track
Record Period, we secured new businesses mainly through invitation for tender by
customers. There is no assurance that we will be able to secure new contracts in the future.
Accordingly, the number and scale of projects and the amount of revenue we are able to
derive therefrom may vary significantly from period to period, and it may be difficult to
forecast the volume of future business. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, we recorded a tender success rate of approximately 16.7%, 8.9%,
10.1% and 11.5%, respectively. Our Directors consider that our success rate on project
tendering depends on a range of factors, which primarily include our pricing and tender
strategy, competitors’ tender and pricing strategies, the availability of our resources and
subcontractors, level of competition and our customers’ evaluation standards. Furthermore,
so far as our Directors are aware, some of our customers have maintained an evaluation
system to ensure that the service providers meet certain standards of management, industrial
expertise, financial capability, reputation and regulatory compliance which may change from
time to time. There is no assurance that our Group could achieve the same or higher tender
success rate in the future as we did during the Track Record Period. In the event that our
Group fails to secure new contracts or there is a significant decrease in the number of tender
invitations or contracts available for bidding in the future, the business, financial position
and prospects of our Group could be materially and adversely affected.
Our projects may not proceed according to the original project schedule or budget,
which may result in delay in recognition of our revenue and therefore adversely affect
our cash flows, financial performance and results of operation
The progress of our project schedule could be adversely affected by factors beyond our
control, including (i) unforeseen changes in engineering and design by the main contractor
or project owner; (ii) changes in market conditions or economic downturn; (iii) shortages of
materials, subcontracting services and/or machinery services; (iv) labour disputes; (v)
workplace accidents; (vi) natural disasters; (vii) acts of God or occurrence of epidemics;
(viii) adverse weather conditions; or (ix) other unforeseen circumstances. Any changes to our
project schedule or budget may affect our cash flows, financial performance and results of
operations. Our customers generally make progress payments to us according to our work
progress, and such payments are required to be certified by our customers before we issue
an invoice to our customers. Project delay or rescheduling may result in delay in our
recognition of revenue, which may in turn adversely affect our cash flows, financial
performance and results of operation. During the Track Record Period, our Group
experienced unexpected change to our project schedule for one of our major projects,
namely Project No. #02. The unexpected delay of Project No. #02 resulted in a decrease in
our revenue for FY2021 and a substantial amount of the then available resources of our
Group originally reserved for Project No. #02 such as direct labour and structural steel
production capacity remaining idle or not fully utilised during FY2021, thereby resulting in
our Group’s lower gross profit margin for FY2021. For further details, please refer to the
paragraph headed “Business – Projects undertaken during the Track Record Period” in this
prospectus.
RISK FACTORS
–3 3–


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We depend on our suppliers for materials, and any shortage or delay in supply or
deterioration in quality may materially and adversely affect our operations
We rely on our suppliers for the stable and timely delivery of steel, which represents
our major type of material, on commercially acceptable terms to enable us to carry out
structural steel fabrication. If there is any shortage of such materials or supplies or in the
event of material delay in delivery by our suppliers, we may fail to fabricate our structural
steel products and hence complete our projects on time or at all. There is no guarantee that
we would be able to identify suitable alternative sources of supply at acceptable prices or
with the required quantity and quality, or at all. Further, if there is any deterioration in the
quality of materials from our suppliers, and we are unable to identify suitable alternative
sources or detect the defective materials, the progress and quality of our works may be
materially and adversely affected, thereby damaging our reputation and adversely affecting
our financial results.
Any price fluctuations of materials used for our structural steel fabrication may
increase our production costs
Steel is the principal type of material used for our structural steel fabrication. Key
factors affecting the purchase price of materials include supply and demand in the market
and market competition, many of which are beyond our control. According to the Industry
Report, the price index of steel plates increased from 117.7 in 2018 to 196.3 in 2022, at a
CAGR of approximately 13.6%. Specifically, the price index of steel plates in Hong Kong
recorded a significant increase from 123.1 in 2020 to 184.3 in 2021, representing an annual
growth rate of approximately 49.7%, primarily due to the decrease in steel production, the
cancellation of export tax rebates of exported steel and the increase in export tariffs on
major components of steel in the PRC. The price index of steel plates in Hong Kong further
increased to 196.3 in 2022, representing an increase of approximately 6.5% as compared to
184.3 in 2021. Such increase in price of steel was primarily due to further decrease in steel
production in the PRC in 2022 and the impact from the fifth wave outbreak of COVID-19.
The price index of steel plates in Hong Kong is expected to decrease from 196.3 in 2022 to
171.0 in 2023 as a result of the relaxation of measures imposed by the PRC Government on
containing the outbreak of COVID-19 which contributed to an increase in the supply of steel
from the PRC. For further details on the historical price trend of our materials, please refer
to the paragraph headed “Industry overview – Cost structure analysis” in this prospectus.
We purchase materials from our suppliers on an order-by-order basis. We did not enter
into any long-term supply agreement with our suppliers and we did not engage in any
hedging activities to minimise the risk of price fluctuation of materials. Price fluctuations of
our principal types of materials will affect our structural steel fabrication costs. We cannot
assure you that we will be able to transfer any increase in cost of materials to our customers
in a timely manner or at all. There is no guarantee that the cost of materials will remain
stable in the future, or that any increase in price of materials will not lead to unexpected
and potentially significant increase in our production costs. If we are unable to transfer the
increase in cost of materials to our customers in a timely manner or at all, our profitability
and profit margins may be adversely affected.
RISK FACTORS
–3 4–


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Disruptions, damages or destructions to our production facilities and machinery may
materially and adversely affect our business, results of operations and financial
condition
As at the Latest Practicable Date, our Group operates two production facilities located
in Dongguan, the PRC, for structural steel fabrication, namely (i) the Dapianmei Production
Facility with a gross floor area of approximately 7,000 sq.m.; and (ii) the Xinlong
Production Facility with a gross floor area of approximately 8,700 sq.m..
Our ability to fabricate structural steel is dependent on the continued operation of our
production facilities. Our production facilities are subject to inspection, maintenance and
replacement of our machinery during which production capacity may be affected. Our
production facilities are also subject to operation risks and disruptions such as interruptions
of utilities supplies including water and electricity, labour disputes and industrial accidents.
A power surge or outage could disrupt or even result in the halt of our structural steel
fabrication process. There is no assurance that our machinery will not be damaged or lost as
a result of, among others, improper operation, fire, adverse weather conditions, theft or
robbery. We may also need to incur additional cost to repair or replace any damaged
machinery or equipment. Machinery may also break down or fail to function normally due
to wear and tear or mechanical or other issues. If any failed or damaged machinery cannot
be repaired or replaced, or if any lost machinery cannot be replaced in a timely manner, our
operations and financial performance could be adversely affected.
In addition, our structural steel fabrication process may be disrupted due to (i) natural
disasters such as typhoons and floods; (ii) political instability, riots, civil unrest and terrorist
attacks; (iii) epidemics such as the Severe Acute Respiratory Syndrome (SARS), the H5N1
avian flu, the human swine flu, also known as Influenza A (H1N1), or, most recently,
COVID-19, since it could require our employees to be quarantined and/or our production
facilities to be disinfected; and (iv) other events that are beyond our control in the regions
where we operate.
We recorded certain non-compliances with the PRC laws and regulations. Any
enforcement action against us may adversely affect our business and reputation
Our Group failed to make adequate social insurance and housing provident fund
contributions for all our employees in accordance with certain legal and statutory
requirements in the PRC during the Track Record Period. Pursuant to the relevant PRC laws
and regulations, the possible legal consequences in respect of our failure to make adequate
social insurance and housing provident fund contributions for all our employees include
payment of all outstanding contributions and fines and compulsory enforcement by the
relevant authority. As advised by the PRC Legal Advisers, Wing Kei Dongguan might be
demanded to pay the outstanding social insurance contributions for a period of two years
prior to the Latest Practicable Date of approximately RMB1.3 million and a late payment fee
of approximately RMB0.3 million within a prescribed time limit. If Wing Kei Dongguan
fails to make such payment within the prescribed time limit, the relevant authority may
impose a further fine of one to three times of the abovementioned outstanding social
insurance contributions. In respect of the outstanding housing provident fund contributions
during the Track Record Period, the maximum amount that Wing Kei Dongguan might be
RISK FACTORS
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ordered to pay would be approximately RMB1.5 million. For further details on the
non-compliance incidents, please refer to the paragraph headed “Business – Legal
compliance” in this prospectus. If any of the PRC Government authorities takes enforcement
action against us in relation to the non-compliance incidents, we may be ordered to pay
fines and/or other penalties, which could adversely affect our business and reputation.
We may be required to relocate our production facilities as a result of title defects in
our leased properties
We leased two production facilities, namely the Dapianmei Production Facility and
Xinlong Production Facility, to fabricate structural steel for the structural steelwork projects
in Hong Kong undertaken by Wing Kei Hong Kong. Dapianmei Production Facility is
located at Dapianmei Village, Dalingshan Town, Dongguan City, Guangdong Province, the
PRC
Ӏwith gross floor area of approximately 7,000 sq.m.,
while the Xinlong Production Facility is located at 1/F, building no. 3-4, Xinlong
Technology Park, 1 Lingchuang Street, Y ongjun Road, Dalingshan Town, Dongguan City,
Guangdong Province, the PRC
༩Ꮚ௴൑1Ҧ෤3-4ಊɓ
ᅽ with gross floor area of approximately 8,700 sq.m. As advised by our PRC Legal
Advisers, the Dapianmei Production Facility and Xinlong Production Facility have certain
title defects, details of which are set out in the paragraph headed ‘‘Business — Properties —
Leased land and leased properties which are subject to title defects” in this prospectus.
In case of forced relocation of our production facilities in our Dapianmei Production
Facility and/or Xinlong Production Facility, we may suffer production interruption and loss
and damage including relocation costs, additional rental expenses and operating losses. In
the event of forced relocation from the Xinlong Production Facility, we would likely incur
logistics and setup costs of approximately RMB0.2 million for the relocation. If we were
forced to relocate from our Dapianmei Production Facility to another property of similar
features, it is estimated that we would incur additional monthly rental expenses of
approximately RMB200,000 to RMB220,000 as well as logistics and setup costs of
approximately RMB0.2 million for the relocation. In addition, we might temporarily
outsource some of our steel fabrication works to subcontractors in the event of forced
relocation of our production facilities. To the best estimation of our Directors, we might
have to incur additional subcontracting fees of approximately RMB2.0 million during the
relocation. For details, please refer to the paragraph headed “Business – Leased Land and
leased properties which are subject to title defects – Contingent relocation plan” in this
prospectus. As a result, our business operations and financial results may be materially and
adversely affected.
If we are forced to relocate our operations from Dapianmei Production Facility and/or
Xinlong Production Facility, we may need to lease an alternative premises for relocation. If
we cannot identify alternative production facilities in a timely manner, we may experience
delays before resuming production at full capacity or at all, and we may incur higher than
expected loss of revenue and profits as well as further claims and/or liquidated damages due
to delay and/or failure to deliver our structural steel for our projects. As such, our business,
operating results and financial condition may be materially and adversely affected.
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Potential mismatch in time between receipt of progress payments from our customers,
payment of project up-front costs, and payments to our suppliers may adversely affect
our cash flows
We may experience net cash outflows as project up-front costs at the preliminary stage
of a project. The up-front costs of our projects generally include payment made to suppliers
for materials, subcontracting fees for our construction site works subcontractors in Hong
Kong and structural steel fabrication works subcontractors in the PRC, manufacturing
overheads in the PRC and machinery service fees. Based on our operation history during the
Track Record Period and depending on the scale of the projects, the average timeframe
between (i) the time when we first incur project up-front costs; and (ii) the time when our
accumulated net cash outflows in respect of a project starts to decrease from its peak is on
average 11 months from the commencement of the project (the “ Up-front Period ”). In
respect of our top projects for each year/period during the Track Record Period, we
generally received the first progress payment from the relevant customer five months after
commencement of the project. Depending on our terms of engagement with different
customers, in respect of the top projects undertaken during the Track Record Period, the
total amount of up-front costs incurred by our Group during the Up-front Period represented
on average 12% of the contract sum of the project. The specific amount of up-front costs
incurred may vary from project to project, depending on the scale of the project, the party
being responsible for the procurement of materials, the schedule of project implementation
and the length of our business relationships with the relevant customers. In addition, we may
experience cash flow mismatch from time to time as our projects progress, which largely
depend on (i) the certification process of our customers; (ii) our customers’ internal process
for approving our invoices; (iii) the required settlement time to our suppliers; and (iv) the
number and scale of our projects in progress. The liquidity needs of our projects would
therefore impose a constraint on the number and/or scale of the projects which we could
undertake concurrently if we solely rely on our operating cash flow to support our
expansion.
Our customers generally make progress payments according to our work progress, and
such payments are required to be certified by our customers before we issue an invoice to
our customers. In addition, our customers may withhold up to 10% of each of our progress
payment as retention monies and subject to a cap of 5% of the total contract sum.
Depending on the contract terms, half of the retention monies are generally released upon
completion of our works to the satisfaction of our customers or project owners. The
remaining half are generally released upon expiry of the defects liability period of the
relevant contracts or a pre-agreed time period. As at 31 December 2020, 2021, 2022 and 30
September 2023, gross retention receivables of approximately HK$50.5 million, HK$53.4
million, HK$55.9 million and HK$63.0 million, respectively, were retained by our customers
as retention monies. For further information, please refer to the paragraph headed “Business
– Our customers – Principal terms of engagement” in this prospectus.
Accordingly, our cash flow typically turns from net outflows at the early stage of a
project into accumulative net inflows gradually as the project progresses. This results in a
cash flow gap and in the event that we have more projects at the initial stage or that a
substantial amount of retention monies from various projects are being withheld by our
customers at any given point of time, our liquidity may be materially and adversely affected.
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We are subject to credit risk in relation to the collectability of our trade receivables
and contract assets
A contract asset represents our Group’s right to consideration from customers in
exchange for the provision of structural steelwork that our Group has transferred to the
customers that is not yet unconditional. Contract assets arise when our Group has provided
the structural steelwork under the relevant contracts but the works have yet to be certified
by architects, quantity surveyors or other representatives appointed by the customers and/or
our Group’s right to payment is still conditional on factors other than passage of time. Any
amount previously recognised as a contract asset is reclassified to trade receivable at the
point when our Group’s right to payment becomes unconditional other than passage of time.
Our Group recorded contract assets (net of provision for impairment) of approximately
HK$97.1 million, HK$82.0 million, HK$73.8 million and HK$141.8 million as at 31
December 2020, 2021, 2022 and 30 September 2023, respectively. Our Group’s contract
assets comprised (i) unbilled revenue; and (ii) retention receivables for structural steelwork.
Our Group recorded unbilled revenue of approximately HK$48.6 million, HK$29.7
million, HK$20.7 million and HK$82.6 million as at 31 December 2020, 2021, 2022 and 30
September 2023, respectively. In addition, our customers may withhold up to 10% of each of
our progress payment as retention monies and subject to a cap of 5% of the total contract
sum. Depending on the contract terms, half of the retention monies are generally released
upon completion of our works to the satisfaction of our customers or project owners. The
remaining half are generally released upon expiry of the defects liability period of the
relevant contracts or a pre-agreed time period. As at 31 December 2020, 2021, 2022 and 30
September 2023, our gross retention receivables amounted to approximately HK$50.5
million, HK$53.4 million, HK$55.9 million and HK$63.0 million, respectively. Please refer
to the paragraph headed “Financial information – Discussion of selected statement of
financial position items – Contract assets and contract liabilities” in this prospectus for a
further discussion and analysis regarding our unbilled revenue and retention receivables.
For details of the subsequent settlement of these contract assets, please refer to the
paragraph headed “Financial information – Discussion of selected statement of financial
position items – Contract assets and contract liabilities – Subsequent billing and settlement”
in this prospectus. There is no assurance that we will be able to bill all or any part of the
contract assets for our services completed according to the payment terms of the contracts
and there is no assurance that the retention monies will be released by our customers to us
on a timely basis and in full accordingly.
Further, there can be no assurance that our customers will settle our invoices on time
and in full. As at 31 December 2020, 2021, 2022 and 30 September 2023, we recorded trade
receivables (net of provision for impairment) of approximately HK$10.9 million, HK$22.1
million, HK$14.5 million and HK$19.8 million, respectively. In the event that we are unable
to collect a substantial portion of our trade receivables within the payment terms or at all,
our cash flows and financial positions will be adversely affected.
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For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
Group recognised (reversal of impairment losses)/impairment losses on financial assets and
contract assets of approximately HK$0.2 million (reversal), HK$0.4 million (reversal),
HK$3.8 million and HK$1.1 million, respectively. During FY2021, impairment losses of
approximately HK$0.5 million and HK$0.3 million was made on the gross carrying amounts
of trade receivables and retention receivables of a customer, respectively. For further details,
please refer to the paragraph headed “Financial information – FY2021 compared with
FY2020 – Reversal of impairment losses on financial assets and contract assets” in this
prospectus. During the nine months ended 30 September 2022, the cheques issued by the
abovementioned customer were dishonoured. In April 2022, our executive Directors became
aware that there was a winding-up petition against such customer. Our executive Directors
considered that the chance of collecting the remaining outstanding receivables balance from
the said customer was low. Therefore, impairment losses were made on the remaining gross
carrying amounts of such trade receivables and retention receivables of approximately
HK$2.1 million and HK$1.2 million, respectively. In 2022, our Group petitioned for the
winding-up of the said customer on insolvency grounds. For further details, please refer to
the paragraph headed “Business – Litigations and claims – (i) Ongoing civil litigation
involving our Group as at the Latest Practicable Date” in this prospectus.
Unsatisfactory performance by or unavailability of our subcontractors of construction
site works may adversely affect our operation and profitability
We mainly focused on the role of project management and supervision in carrying out
our projects, and we have engaged subcontractors to perform a substantial part of the
construction site works under our supervision. For further details, please refer to the
paragraph headed “Business – Our suppliers – Reasons for subcontracting arrangement” in
this prospectus. In order to control and ensure the quality and progress of the works of our
subcontractors, our Group selects subcontractors based on their quality of services, skills and
technique, reputation, prevailing market price, delivery time and availability of resources in
accommodating our requests.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
subcontracting fees for construction site works amounted to approximately HK$71.0 million,
HK$48.9 million, HK$91.6 million and HK$57.2 million, respectively, representing
approximately 29.3%, 32.9%, 39.8% and 34.9% of our total purchase for the corresponding
year/period, respectively. There is no assurance that the work quality of our subcontractors
can always meet the requirements and specifications of our Group and our customers. We
may be affected by the non-performance, inappropriate or poor quality of works rendered by
our subcontractors. Such events could materially and adversely affect our profitability,
financial performance and reputation. In addition, there is no assurance that our Group will
always be able to secure services from suitable subcontractors when required, or be able to
negotiate acceptable fees and terms of service with subcontractors. In such event, our
operation and financial position may be adversely affected.
In the event that our subcontractors of construction site works fail to follow the safety
guidelines and other requirements imposed by our customers, we may be liable to pay to our
customers the expenses and penalties incurred by them. In such circumstances, we generally
do not claim our subcontractors for the costs and penalties incurred by us owing to our
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subcontractors’ failure in complying with the safety procedures and other requirements
imposed by our customers in order to maintain a stable relationship with our subcontractors.
In such event, we may be subject to additional costs and penalties incurred by our
subcontractors in relation to their failure to comply with the safety procedures and other
requirements imposed by our customers.
In the event that employees of our subcontractors suffer personal injuries as a result of
accidents arising out of and in the course of employment of the injured workers and/or
involve in labour disputes, we may be involved in claims and litigations. During the Track
Record Period and up to the Latest Practicable Date, we were involved in a number of
claims and litigations with employees of our subcontractors which arose in the ordinary
course of our business. Please refer to the paragraph headed “Business – Litigations and
claims” in this prospectus for further information. Such claims and litigations may adversely
affect our industry reputation, which may in turn have a material and adverse impact on our
business operations.
Unsatisfactory performance by or unavailability of our subcontractors of structural
steel fabrication works may adversely affect our operation and profitability
During the Track Record Period, we outsourced all required galvanising works for
structural steel to our subcontractors in the PRC. Apart from this, depending on our
production capacity, we may also subcontract other parts of structural steel fabrication works
to our subcontractors in the PRC. For FY2020, FY2021, FY2022 and the nine months ended
30 September 2023, we incurred subcontracting fees for structural steel fabrication works of
approximately HK$4.9 million, HK$13.0 million, HK$13.7 million and HK$5.6 million,
respectively, representing approximately 2.0%, 8.8%, 6.0% and 3.4% of our total purchases
for the corresponding year/period, respectively. There is no assurance that the work quality
of our subcontractors can always meet the requirements and specifications of our Group and
our customers. We may be affected by the non-performance, inappropriate or poor quality of
works rendered by our subcontractors. Such events could materially and adversely affect our
profitability, financial performance and reputation. In addition, there is no assurance that our
Group will always be able to secure services from suitable subcontractors when required, or
be able to negotiate acceptable fees and terms of service with subcontractors. In such event,
our operation and financial position may be adversely affected.
Any material inaccurate cost estimation or cost overruns may adversely affect our
financial results
We prepare our tender price based on a certain percentage of mark-up over our
estimated costs. The percentage of mark-up may vary from project to project due to factors
such as (i) the size, duration and sector of the project; (ii) years of business relationship
with the customer; (iii) credit history and financial track record of the customer; (iv) the
prospect of obtaining future contracts from the customer; (v) any possible positive effect of
our Group’s reputation in the structural steelwork industry; (vi) the likelihood of any
material deviation of the actual cost from our estimation having regard to the price trend of
key cost components; and (vii) the prevailing market conditions. For further details on our
pricing strategy, please refer to the paragraph headed “Business – Pricing strategy” in this
prospectus.
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There is no assurance that the actual amount of time and costs incurred during the
performance of our projects would not exceed our estimation. The actual amount of time and
costs incurred in completing a project may be adversely affected by many factors, including
unforeseen site conditions, adverse weather conditions, accidents, non-performance by our
subcontractors, unexpected significant increase in costs of materials agreed to be borne by
us, unexpected increase in the amount of rectification works requested by our customers and
other unforeseen problems and circumstances. Any material inaccurate estimation in the time
and costs involved in a project may give rise to delays in completion of works and/or cost
overruns, which in turn may materially and adversely affect our Group’s financial condition,
profitability and liquidity.
The total actual value of work done may differ from the original estimated contract
sum stated in our contracts with customers
During the Track Record Period, our contracts with customers are generally on
re-measurement basis. The actual amount of works to be carried out by us under our
contract is subject to our customer’s instructions or orders placed during the contract period
and the total actual value of work done may be different from the original estimated contract
sum stated in the contract. Our customers may request additional or alteration of works
beyond the scope of the contract during project implementation. Where the works under the
variation order are the same or similar to the works prescribed in the contract, the rate of
the works under the variation order usually accords with that of the contract. If there are no
equivalent or similar items under the contract for reference, we will further agree on the
rates with our customers. During the Track Record Period, our customers generally requested
additional or alteration of works by issuing additional work orders stating the scope of
works to our Group. Therefore, the scope of works for variation orders performed by our
Group are properly agreed and accepted by the relevant customers prior to performing such
variation orders. Our customers will measure the actual quantities of works executed on site
and our Group will be paid based on the actual work done.
As such, there is no assurance that the amount of fees and charges as finally agreed
with our customers would be sufficient to recover our costs incurred or provide us with a
reasonable profit margin or the amount of revenue derived from our projects will not be
substantially different from the original estimated contract sum as specified in the relevant
contracts and our financial condition may be adversely affected by any decrease in our
revenue as a result of variation orders. As a result, there is no assurance that our revenue
and profit margin in the future will remain at a level comparable to those recorded during
the Track Record Period.
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Failure to maintain safe construction sites and/or implement our safety management
system may lead to the occurrence of personal injuries, property damages, fatal
accidents or suspension or non-renewal of our registration as a registered subcontractor
on the Register of Subcontractors maintained by the Construction Industry Council or
our registration on the List of Approved Specialist Contractors for Public Works
maintained by the Development Bureau
Due to the nature of works in construction sites, risks of accidents or injuries to
workers are inherent. Notwithstanding our occupational health and safety measures that are
required to be followed by employees of our Group and our subcontractors, accidents
leading to personal injuries, property damages and/or fatal accidents remain an inherent risk
at work sites. There is no assurance that there will not be any violation of our safety
measures or other related rules and regulations by the employees of our Group or our
subcontractors. Any such violation may lead to higher probability of occurrences, and/or
increased seriousness, of personal injuries, property damages and/or fatal accidents at work
sites, which may materially and adversely affect our business operations as well as our
financial position to the extent not covered by insurance policies. Also, failure to maintain
safe construction sites and/or to implement safety management measures resulting in the
occurrence of serious personal injuries or fatal accidents may lead to negative publicity and/
or suspension or non-renewal of our registration as a registered subcontractor on the
Register of Subcontractors maintained by the Construction Industry Council or our
registration on the List of Approved Specialist Contractors for Public Works maintained by
the Development Bureau, which in turn adversely affect our reputation, financial position
and results of operation.
In addition, any personal injuries and/or fatal accidents to the employees of our Group
and our subcontractors may lead to claims or other legal proceedings against our Group.
Any such claims or legal proceedings could adversely and materially affect our financial
position to the extent not covered by insurance policies. Also, notwithstanding the merits of
any such claims or legal proceedings, we need to divert management resources and incur
extra costs to handle these matters. Any such claims or legal proceedings could therefore
have a material and adverse impact on our business operations.
During the Track Record Period and up to the Latest Practicable Date, we recorded one
accident involving our employee which arose in the ordinary course of our business. For
further details, please refer to the paragraph headed “Business – Occupational health and
work safety” in this prospectus. Such accident record may adversely affect our industry
reputation, which may in turn affect our prospect of receiving tender invitations from
potential new customers or being awarded with future tenders from both our existing and
potential new customers. Furthermore, we may have to incur additional costs to strengthen
our safety management measures, such as recruiting additional safety supervision staff,
which may have an adverse impact on our profitability.
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We recorded net cash used in operating activities for the nine months ended 30
September 2023
We recorded net cash used in operating activities of approximately HK$14.8 million for
the nine months ended 30 September 2023; whilst we recorded net cash generated from
operating activities of approximately HK$8.5 million, HK$11.5 million and HK$79.0 million
for FY2020, FY2021 and FY2022, respectively. Please refer to the paragraph headed
“Financial information – Liquidity and capital resources – Cash flows” in this prospectus for
further information. We cannot guarantee that we will be able to generate positive cash
flows from operating activities in the future. Net cash used in operating activities may
materially and adversely affect our liquidity and financial conditions, and hence may require
us to obtain sufficient external financing to meet our financial needs and obligations. If we
rely on external financing to generate additional cash, we will incur financing costs and we
cannot assure you that we will be able to obtain external financing on terms acceptable to
us, or at all.
There is no assurance that we will be able to renew our registration under the
Registered Specialist Trade Contractors Scheme of the Construction Industry Council
Our principal operating subsidiary in Hong Kong, Wing Kei Hong Kong, is currently a
registered subcontractor under the category of structural steelwork on the Register of
Subcontractors maintained by the Construction Industry Council. Subcontractors engaged
under public sector projects initiated by the Hong Kong government for carrying out
structural steelwork are generally required to be registered on the Register of Subcontractors
of the Construction Industry Council. Renewal of registration as a registered subcontractor
on the Register of Subcontractors is required every three or five years and is generally
subject to certain technical and relevant industry experience requirements. There is no
assurance that we will be able to renew such registration every time in the future. In the
event of non-renewal of such registration, our reputation, our ability to obtain future
businesses, and our business and financial position and prospects could be materially and
adversely affected.
Failure to remain on the List of Approved Specialist Contractors for Public Works may
result in a decrease in business opportunities and significantly hinder our business and
affect our future financial results
Wing Kei Hong Kong, our principal operating subsidiary in Hong Kong, is registered
on the List of Approved Specialist Contractors for Public Works under the category of
structural steelwork. According to the Industry Report, as part of the tender conditions and
to ensure quality assurance, main contractors would generally select structural steelwork
contractors registered on the List of Approved Specialist Contractors for Public Works to
carry out the structural steelwork in a construction project.
The retention on the List of Approved Specialist Contractors for Public Works is
subject to certain financial, technical and management criteria as stipulated in the Contractor
Management Handbook revised and published by the Development Bureau in January 2024.
For further details, please refer to the paragraph headed “Regulatory overview – Hong Kong
– Laws and regulations in relation to contractor licensing regime and operation” in this
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prospectus. The Secretary for Development of the Hong Kong government reserves the right
to remove any contractor from the List of Approved Specialist Contractors for Public Works
or take other regulatory actions against a contractor such as suspension, or where applicable,
downgrading from confirmed status to probationary status if doubts arise as to the ability of
a contractor to meet such criteria. Circumstances which may lead to the taking of regulating
actions include unsatisfactory performance, failure to submit accounts or meet the financial
criteria, poor site safety record, poor environmental performance, failure to submit a valid
competitive tender for a period of three years, failure or refusal to implement an accepted
tender, misconduct, violation of laws, etc.
In the event that Wing Kei Hong Kong fails to remain on the List of Approved
Specialist Contractors for Public Works under the category of structural steelwork or if any
of the aforesaid regulatory actions is taken against it such as suspension, main contractors
may be less inclined to select our Group to carry out the structural steelwork in their
construction projects, thereby materially and adversely affect our prospect, business and
financial condition.
We may be a party to legal proceedings from time to time and we cannot assure you
that such legal proceedings will not have a material adverse impact on our business. In
particular, there may be potential employees’ compensation claims and personal injury
claims
We may be involved in claims and litigations in respect of various matters from our
customers, subcontractors, workers and other parties concerned with our works from time to
time. Such claims may include in particular employees’ compensation claims and personal
injury claims in relation to personal injuries suffered by workers as a result of accidents
arising out of and in the course of employment of the injured workers. During the Track
Record Period and up to the Latest Practicable Date, we were involved in certain contractual
dispute claims, labour disputes, employees’ compensation claims and personal injury claims
which arose in the ordinary course of our business. Please refer to the paragraph headed
“Business – Litigations and claims” in this prospectus for further information.
There is no assurance that we will not be involved in any claims or legal proceedings,
nor can we assure you that any such claims or legal proceedings would not have a material
adverse impact on our business. Should any claims against us fall outside the scope and/or
limit of insurance coverage, our financial position may be adversely affected. Regardless of
the merits of any outstanding and potential claims, we need to divert management resources
and incur extra costs to handle these claims, which could affect our corporate image and
reputation if they were published by the press. If the aforesaid claims were successfully
made against our Group and are not covered by insurance policies, we may need to pay
damages and legal costs, which in turn could adversely affect our results of operations and
financial position.
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Our historical revenue, gross profit and gross profit margin may not be indicative of
our future performance
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
gross profit amounted to approximately HK$55.0 million, HK$35.4 million, HK$66.9 million
and HK$47.0 million, respectively; while our gross profit margin was approximately 17.0%,
15.5%, 19.9% and 20.0%, respectively. However, such trend of historical financial
information of our Group is a mere analysis of our past performance only and does not have
any positive implication or may not necessarily reflect our financial performance in the
future which will depend on our capability to secure new business opportunities and to
control our costs. There is no assurance that our operating and financial performance in the
future will remain at a level comparable to those recorded during the Track Record Period.
There is an inherent risk in using our historical financial information to project our
future financial performance, as they do not have any positive implication or may only
reflect on our past performance under certain conditions. Our future performance will
depend on, among others, our ability to secure new contracts, control our costs, market
conditions in Hong Kong, and competition among contractors. All these may reduce the
number of projects awarded to us and/or limit the profit margin of our projects.
In addition, our profit margin may also fluctuate from period to period due to factors
such as (i) our ability to accurately estimate our costs when submitting a tender; (ii) the
complexity and size of the project; (iii) subcontracting fees; (iv) prices of materials; and (v)
our pricing strategy. There is no assurance that our profit margin will remain stable in the
future and that we can maintain our current level of performance.
Our Group is exposed to foreign exchange risks, and any fluctuation in the exchange
rates of RMB may affect our Group’s financial performance
During the Track Record Period, most of our Group’s sales are denominated in Hong
Kong dollars while our Group’s PRC operations are denominated in RMB. For FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, approximately 12.3%,
24.1%, 16.5% and 35.9% of our total cost of services were denominated in RMB,
respectively. There can be no assurance that the exchange rate of RMB will remain stable
against Hong Kong dollars. Appreciation of RMB against Hong Kong dollars may lead to an
increase in costs of our operations. Our Group does not maintain any hedging policy or
engage in any hedging activity. Hence any fluctuation in the exchange rate between Hong
Kong dollars and RMB may adversely affect the financial performance and profitability of
our Group.
Our Group is dependent on key personnel and there is no assurance that our Group
can retain them
Our Directors believe that our success, to a large extent, is attributable to, among other
things, the contribution of Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan, each
being our executive Director. Details of their expertise and experience are set out in the
section headed “Directors and senior management” in this prospectus. Our key personnel as
well as their management experience in the structural steelwork industry in Hong Kong are
RISK FACTORS
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crucial to our operation and financial performance. Although we have entered into a service
agreement with our executive Directors, there could be an adverse impact on our operation
should any of our executive Directors terminate his/her service agreement with us or
otherwise cease to serve our Group and appropriate persons could not be found to replace
them. There is no assurance that we will be able to attract and retain capable staff in the
future. In such event, the business and financial position and prospects of our Group could
be materially and adversely affected.
Our ability to successfully tender for and undertake new projects is limited by the
availability of our project management staff and subcontractors of construction site
works
During the Track Record Period, we have focused on the role of project management
and supervision in carrying out our projects. Therefore, our services capacity in undertaking
several and sizeable structural steelwork projects is largely limited by the availability of our
in-house project management staff and our subcontractors. According to the Industry Report,
the Hong Kong structural steelwork industry has been facing a severe shortage of
experienced and skilled labour. In view of the aforesaid, we may encounter difficulties in
maintaining and recruiting sufficient number of project management staff or engaging
suitable subcontractors for undertaking additional projects in the future.
During the Track Record Period, our Group had from time to time received invitations
for tenders when our available resources were occupied by other projects on hand. On
occasion, in order to (i) maintain our business relationship with customers; (ii) maintain our
presence in the market; and (iii) be informed of the latest market development and pricing
trends which are useful for tendering projects in the future, it was our strategy to respond to
our customers’ invitations by submitting tenders to the extent our resources allow. In such
circumstances, our executive Directors would take a more prudent approach in costs
estimation by factoring a higher profit margin even though it may cause our tender price to
become less competitive than those submitted by our competitors.
Therefore, our ability to successfully tender for new projects may be affected by the
availability of our project management staff and subcontractors of construction site works.
There is a risk that we may not be awarded with new contracts by our customers as our
tenders may become relatively less competitive due to limitation in our service capacity.
Failure to complete our projects on a reliable and timely basis could materially affect
our reputation, our financial performance or may subject us to claim
The contracts with our customers generally contain a liquidated damages clause under
which we are liable to pay liquidated damages to our customers if we are unable to deliver
or perform the contractual works within the time specified in the contract. Liquidated
damages are generally determined on the basis of a fixed sum per day.
Delay in a project may occur from time to time due to various unforeseen factors such
as shortage of manpower, delays by subcontractors, industrial accidents, and delay in
delivery of materials. If there is any delay on our part in completion of a project, we may be
liable to pay liquidated damages under the contract. There is no assurance that there will not
RISK FACTORS
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be any delay in our existing and future projects resulting in claims in relation to liquidated
damages, which in turn will have adverse impact on our reputation, business, financial
condition and results of operations.
We are exposed to claims arising from latent defects liability
We do not maintain any defects liability insurance and we may face claims arising
from latent defects that are existing but not yet active, developed or visible, found in the
works which are constructed by us or our subcontractors. If there is any significant claim
against us for latent defects liability of any default or failure of our services by our
customers or other party, our profitability may be adversely affected.
If so requested by our customers, our contracts may include a defects liability period
following the terms of the main contracts on back-to-back basis. During the defects liability
period, we are typically required to rectify any defect without delay at our own cost if the
defect is due to our non-conformance of works performed, or due to our negligence or
failure to comply with our contractual obligation. Such obligation will be recognised as
liability in the statement of financial position if the obligation is considered highly probable
and the obliged amount can be reliably measured. Otherwise, such claim will be disclosed as
contingent liability.
Our insurance coverage may not be adequate to cover potential liabilities
Certain risks disclosed elsewhere in this section such as risks in relation to customer
concentration, our ability to obtain new contracts, our ability to retain and attract personnel,
availability and performance of subcontractors, project and cost management, our ability to
maintain and renew our registrations, credit risk and liquidity risk, are generally not covered
by insurance because they are either uninsurable or it is not cost justifiable to insure against
such risks. Insurance policies covering losses from acts of war, terrorism, or natural
catastrophes are also either unavailable or cost prohibitive.
Further, we may be subject to liabilities against which we are not insured adequately or
at all or liabilities against which cannot be insured. Should any significant liabilities arise
due to accidents, natural disasters, or other events which are not covered or are inadequately
covered by our insurance, our business may be adversely affected, potentially lead to a loss
of assets, lawsuits, employee compensation obligations, or other forms of economic loss.
We cannot guarantee that our current levels of insurance are sufficient to cover all
potential risks and losses. In addition, we cannot guarantee that we can renew our policies
or can renew our policies on similar or other acceptable terms. If we suffer from severe
unexpected losses or losses that far exceed the policy limits, it could have a material and
adverse effect on our business, financial position, results of operations and prospect.
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Any significant resurgence of COVID-19 may adversely affect our operation and
financial condition
Due to the emergence of the COVID-19 pandemic in the PRC in early 2020, the PRC
Government imposed lockdown measures in Dongguan, the PRC in the first quarter of 2020.
Transport was restricted, major roads and highways were closed and factories were ordered
to suspend operations. In response to the requirements of the local government authorities,
our production facilities suspended from operations during the lockdown period.
Besides, from January 2022 and up to April 2022, Hong Kong recorded the fifth wave
of outbreak of COVID-19 attributable to the SARS-CoV-2 Omicron variant (the “ Fifth
Wave Outbreak ”), as the daily number of confirmed cases increased significantly during the
period. Our Group experienced temporary disruption to the transportation of materials from
Hong Kong to the PRC and finished products from the PRC to Hong Kong during 2022
since cross-border transportation was disrupted.
Any significant resurgence of COVID-19 in the PRC could have a material adverse
impact on our business operations, including further suspension of our structural steel
fabrication activities and restrictions on the delivery of our materials and structural steel
products due to travel restrictions. There is also no assurance that any recurrence of
COVID-19 outbreak in the PRC and/or Hong Kong can be effectively controlled and
government authorities will not re-impose stringent measures such as closure of physical
workplace premises, full-scale suspension of all business, social and other activities as well
as other lockdown policy to control the spread of COVID-19.
Further, any recurrence of COVID-19 pandemic in Hong Kong may have a material
adverse impact on Hong Kong economy, which may result in a slowdown in the construction
market and lower the availability of structural steelwork projects in Hong Kong. Any
deterioration in the outbreak of COVID-19 may also lead to labour shortage, increase in
wages of the workers and/or interruption of our business operations, temporary suspension
or delay in the work progress of our projects. We cannot assure you that we will not
experience any project delays or failure to complete our project according to the planned
specifications, schedule and budget as a result of the outbreak of COVID-19, which may
expose us to potential claims from customers for liquidated damages and result in adverse
impact on our reputation, business, financial condition and results of operations.
In addition, if the Hong Kong and/or PRC Government re-launch measures to combat
the spread of COVID-19 including import controls or lockdown policy on a city-wide scale,
there is no assurance that our suppliers would be able to (a) maintain their normal business
operation without disruptions; and/or (b) deliver the services, materials or subcontracting
services to us without delay, and there is no guarantee that we would be able to source the
services, materials or subcontracting services from alternative suppliers in time if such
measures persist for a substantial period.
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Events such as epidemics, natural disasters, adverse weather conditions, political unrest
and terrorist attacks could significantly delay, or even prevent us from completing, our
projects
Our operations are subject to uncertainties and contingencies beyond our control that
could result in material disruptions in our operations and adversely affect our business.
These include epidemics, natural disasters, fire, adverse weather conditions, political unrest,
wars and terrorist attacks. Any such events could cause us to reduce or halt our operation,
adversely affect our business operation, increase our costs and/or prevent us from
completing our projects, any one of which could materially and adversely affect our
business, financial condition and results of operations.
In such event, our business operations may also be severely disrupted due to a negative
impact on investor confidence and risk appetites, the fund-raising activities of issuers and
proposed listing applicants, the macroeconomic condition as well as the financial conditions
in Hong Kong. Our business operations, financial condition as well as our fund-raising
activities as contemplated by this prospectus may be materially and adversely affected as a
result.
We received government grants, which are non-recurring in nature, and there is no
guarantee that we will continue to receive government grant at a similar level or at all
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
Group received government grants of approximately HK$1.3 million, HK$0.1 million,
HK$2.6 million and HK$40,000, respectively. Such government grants mainly represented
wage subsidy granted under the Employment Support Scheme under the Anti-Epidemic
Fund. These subsidies are offered to employers who have employed regular employees and
paid mandatory provident fund (“ MPF”) for them. Wage subsidies were granted to our
Group for the use of paying wages and MPF of regular employees from June 2020 to
November 2020 and from May 2022 to July 2022. For further details on the government
grants received by our Group, please refer to the paragraph headed “Financial information –
Principal components of results of operations – Other income and other gain/(loss), net” in
this prospectus.
As those Hong Kong government’s relief measures on COVID-19 pandemic are
non-recurring in nature, we cannot guarantee that we will continue to receive the aforesaid
government grants at a similar level or at all. In the event of any changes in government
measures or policies, resulting in any suspension, material reduction or termination of
government grants received by our Group, our profitability, financial conditions and results
of operations may be materially and adversely affected.
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Our profitability may be affected by the potential increase in depreciation expenses and
staff costs upon (i) our planned expansion in production capacity of structural steel
fabrication by acquiring a piece of land within or in proximity to Dongguan, the PRC
and setup of new production facility; and (ii) our planned recruitment of additional
staff
It is one of our business strategies to expand our production capacity of structural steel
fabrication by acquiring a piece of land within or in proximity to Dongguan, the PRC and
setting up a new production facility by utilising a portion of the net proceeds from the Share
Offer so as to cope with our business development. Please refer to the section headed
“Future plans and use of proceeds” in this prospectus for further details.
As a result of the acquisition of land and construction of a new production facility, it is
expected that additional depreciation will be charged to our profit and loss account and may
therefore affect our financial performance and operating results. Based on the accounting
policies adopted by our Group, depreciation of property, plant and equipment is calculated
using the straight-line method. Therefore, it is estimated that additional depreciation
expenses on property, plant and equipment of approximately RMB1.5 million (equivalent to
approximately HK$1.6 million) will be incurred per annum upon completion of the
acquisition of land and construction of the new production facility.
Besides, our business strategies also include the recruitment of additional staff by
utilising a portion of the net proceeds from the Share Offer so as to cope with our business
development. Please refer to the section headed “Future plans and use of proceeds” in this
prospectus for details of the additional staff that we plan to employ by functions. Based on
the intended timing of deployment of the net proceeds for recruitment and retention of all
the additional staff, it is estimated that additional staff costs of approximately HK$2.0
million will be incurred per annum.
Our planned investments in property, plant and equipment and labour resources will
increase our costs (including depreciation expenses and staff costs) but there is no assurance
that there will be a satisfactory increase in our operational and financial performance as a
result. Should we be unable to obtain more projects and increase our profitability after such
planned investments, our business and financial position and prospects may be adversely
affected.
Possible difficulty in recruiting sufficient labour may hinder our future business
strategies
It is one of our business strategies to expand our labour resources by recruiting
additional staff in order to cope with our business development. Please refer to the section
headed “Future plans and use of proceeds” in this prospectus for details of the additional
staff that we plan to employ by functions. However, the structural steelwork industry in
Hong Kong has been facing the problem of labour shortage and ageing workforce, as further
discussed in the paragraph headed “Risks relating to the industry in which we operate – The
structural steelwork industry in Hong Kong has been facing the problem of labour shortage
and ageing workforce” in this section. As a result, there may be potential difficulties for us
to recruit sufficient labour for the implementation of our future business strategies. Any
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material difficulties in recruiting sufficient labour for the implementation of our future
business strategies may adversely affect our Group’s ability to successfully grow our
business, which may in turn adversely affect our business, financial position and prospects.
Our business plans and strategies may not be successful or be achieved within the
expected time frame or within the estimated budget
We intend to further increase our capital reserve for acquiring a piece of land in
Dongguan, the PRC and setting up a new production facility, financing our project up-front
costs, and strengthening our manpower, in order to cope with the expected increase in
demand for our services. However, our plans and strategies may be hindered by risks
including but not limited to those mentioned elsewhere in this section. There is no assurance
that we will be able to successfully maintain or increase our market share or grow our
business successfully after deploying our management and financial resources. Any failure in
maintaining our current market position or implementing our plans could materially and
adversely affect our business, financial condition and results of operations.
RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE
We operate in a competitive industry
Some of our competitors may have certain advantages, including but not limited to
having long operating history, better financing capabilities and well developed technical
expertise. New participants may wish to enter the industry provided that they have the
appropriate skills, local experience, necessary machinery, capital and they are granted the
requisite licences or approvals by the relevant regulatory bodies. Any significant increase in
competition may result in lower operating margins and loss of market share, which may
adversely affect our profitability and operating results.
The structural steelwork industry in Hong Kong has been facing the problem of labour
shortage and ageing workforce
According to the Industry Report, owing to Hong Kong’s ageing population and
increasingly stringent requirements on workers’ skills and qualifications, the structural
steelwork industry has been facing a severe shortage of experienced and skilled labour.
According to the Construction Industry Council, structural steel welder who aged 50 and
above accounted for 60.6% of the workforce by the end of 2022. For further information
regarding the problem of labour shortage and ageing workforce faced by the structural
steelwork industry in Hong Kong, please refer to the paragraph headed “Industry overview –
Market challenges and threats” in this prospectus.
The supply and cost of labour in Hong Kong are affected by the availability of labour
in the market as well as economic factors in Hong Kong including the inflation rate and
standard of living. There is no guarantee that the supply of labour and labour costs will be
stable. In addition, the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)
requires that an employee is entitled to be paid wages in respect of any wage period of not
RISK FACTORS
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less than the minimum wage, which shall be derived by reference to the prescribed
minimum hourly wage rate (currently set at HK$40 per hour). There is no assurance that the
statutory minimum wage will not increase in the future.
In the event that we or our subcontractors fail to retain existing labour and/or recruit
sufficient labour in a timely manner to cope with the demand of our existing or future jobs
and/or there is a significant increase in the costs of labour, we may not be able to complete
our jobs on schedule and/or within budget and our operations and profitability may be
adversely affected.
Rising construction costs, including the costs of construction workers and construction
materials, may increase our costs of operation
According to the Industry Report, the structural steelwork industry in Hong Kong has
been facing the problem of increasing operating costs. The increase in operating costs is
mainly attributable to the increasing wage trend of structural steelwork welders as well as
the prices of steel plates, which are typically required in carrying out structural steelwork.
For further details of the past price trend of such construction materials, please refer to the
paragraph headed “Industry overview – Cost structure analysis” in this prospectus. Any
substantial increase in our costs of operation may materially and adversely affect our
business and financial positions and prospects.
Construction works are usually divided into various different trades. Each trade
requires specialised labour of its own and cannot be easily replaced by labour of another
trade. The fees charged by our subcontractors depend on a number of factors, which
generally include their own costs of operation. Industrial action of any trade may disrupt our
operation and/or the operation of our customers and/or subcontractors and thus the work
progress of projects undertaken by us. There is no assurance that trade unions will not
launch any industrial actions or strikes to demand for higher wages and/or shorter working
hours in the future. If their demands are to be met, we may incur additional direct staff
costs, subcontracting fees and/or experience delay in the completion of our projects where
our customers may in turn claim against us for not being able to meet the time schedule
requirements of the contracts. Therefore, if labour costs and costs of construction materials
in Hong Kong keep increasing, our staff costs and subcontracting fees may increase in the
future, which could materially and adversely affect our business operation and financial
condition.
Any future changes in existing Hong Kong laws, regulations and government policies,
including but not limited to the introduction of more stringent laws and regulations on
licensing, environmental protection, labour safety, etc. may cause us to incur substantial
additional expenditure
Many aspects of our business operation are governed by various Hong Kong laws and
regulations and government policies. There is no assurance that we will be able to respond
to any such changes in a timely manner. Such changes may also increase our costs and
burden in complying with them, which may materially and adversely affect our business,
financial condition and results of operation. If there are any changes to and/or imposition of
RISK FACTORS
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the requirements for qualification in the structural steelwork industry in relation to
environmental protection and labour safety, and we fail to meet the new requirements in a
timely manner or at all, our business operation will be materially and adversely affected.
RISKS RELATING TO OUR OPERATIONS IN THE PRC
The economic, political and social conditions in the PRC, as well as government
policies, laws and regulations, could adversely affect our business, results of operations
and financial condition
Wing Kei Dongguan, being our PRC operating subsidiary, operates two production
facilities located in Dongguan, the PRC, which process and fabricate structural steel required
by our steelwork projects. Accordingly, our business, financial condition, results of
operations and prospects may be materially affected by the economic, political and social
conditions in the PRC.
The PRC’s economy has been transitioning from a planned economy to a more
market-oriented economy. In recent years, the PRC Government has implemented measures
emphasising market forces for economic reform, the reduction of state ownership of
productive assets and the establishment of sound corporate governance in business
enterprises. However, a portion of productive assets in the PRC is still owned by the PRC
government. The PRC Government continues to play a significant role in regulating and
supporting industrial development. It also exercises influence over PRC’s economic growth
through the allocation of resources, setting monetary policies and providing preferential
treatments to particular industries or companies. All of these factors could affect the
economic conditions in the PRC and, in turn, our business. While the PRC economy has
experienced significant growth in the past 30 years, such growth has been uneven across
both geographic regions and the various sectors of the economy. The PRC Government has
implemented various measures to influence growth rates and to guide the allocation of
resources. Some of these measures benefit the overall PRC economy but may have a
negative effect on us. For example, our results of operations and financial condition could
be adversely affected by governmental monetary policies, changes in interest rate policies,
tax regulations or policies and regulations affecting the development of our industry.
The PRC Government’s control of foreign currency conversions and restrictions on the
remittance of RMB into and out of the PRC may limit our ability to utilise our cash
effectively
During the Track Record Period, all of our revenue was derived in Hong Kong; whilst
part of our cost of services were incurred in the PRC, mainly for the operation of our two
production facilities in the PRC under Wing Kei Dongguan, being our PRC operating
subsidiary. As a general practice, we remit cash into our bank accounts in the PRC by bank
transfer to support our PRC operations. The cash remitted into the PRC is generally used for
settling, amongst others, (i) our Group’s trade payables due to suppliers of materials and
subcontractors for structural steel fabrication works in the PRC; (ii) direct labour costs
attributable to our employees in the PRC; and (iii) costs incurred for transportation and
other miscellaneous services procured in the PRC.
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Any future restrictions on currency exchanges and restrictions on the remittance of
currency into the PRC may limit our ability in settling the costs and expenses incurred by us
in the PRC; whilst any future restrictions on currency exchanges and restrictions on the
remittance of currency out of the PRC may restrict our ability to convert our bank balances
from RMB into HKD and remit our cash deposited into our PRC bank accounts out of the
PRC.
Although the PRC Government introduced regulations in 1996 to allow greater
convertibility of RMB for current account transactions, significant restrictions still remain,
including primarily the restriction that enterprises may only buy, sell and/or remit foreign
currencies at those banks authorised to conduct foreign exchange business after providing
valid commercial documents. In addition, remittance of foreign currencies abroad and
conversion of RMB for capital account items, including direct investment and loans, is
subject to government approval in the PRC, and companies are required to open and
maintain separate foreign exchange accounts for capital account items. On 19 November
2012, SAFE promulgated the Notice on Further Improve and Adjust the Direct Investment
Foreign Exchange Administration Policies
ટҳ༟̮ි
(the “ Circular 59 ”) according to which, certain administrative approval
procedures were simplified, or abolished to approve the direct investment foreign exchange
administration. For example, foreign-invested enterprises, like our PRC subsidiary, may
increase its registered capital by using its legal earnings including capital reserves, surplus
reserves or accumulated profits or re-invest them without obtaining prior foreign exchange
approvals from SAFE. On 30 March 2015, SAFE promulgated the Circular on Reforming the
Management Approach Regarding the Foreign Exchange Capital Settlement of
Foreign-Invested Enterprises
 the
“Circular 19 ”. Circular 19 launched a nationwide reform of the administration of the
settlement of the foreign exchange capitals of foreign investment enterprises and allowed
foreign investment enterprises to settle their foreign exchange capital at their discretion, but
continued to prohibit foreign investment enterprises from using funds denominated in RMB
converted from any foreign currency for expenditures beyond their business scopes,
providing entrusted loans or repaying loans between non-financial enterprises. Furthermore,
the Circular of the State Administration of Foreign Exchange on Further Simplifying and
Improving the Direct Investment-related Foreign Exchange Administration Policies
̮
, which came into effect on 1 June
2015 and was amended on 30 December 2019, cancels certain administrative approval
procedures relating to the domestic and overseas direct investment in certain districts, and
the foreign exchange registration for domestic direct investment shall be directly reviewed
and handled by qualified banks. On 9 June 2016, SAFE promulgated the Notice of the SAFE
on Reforming and Standardising the Foreign Exchange Settlement Management Policy of
Capital Account
, (the
“Circular 16 ”) effective on 9 June 2016, which reiterates some rules set forth in Circular
19, but changes the prohibition against using RMB capital converted from foreign
currency-denominated registered capital of a foreign-invested company to issue RMB
entrusted loans to a prohibition against using such capital to issue loans to non-affiliated
enterprises. On 23 October 2019, SAFE issued the Notice of SAFE on Further Facilitating
Cross-border Trade and Investment
ٝ
, which, among other things, expanded the use of foreign exchange capital to domestic
equity investment area. Foreign invested enterprises that are not classified as investment
RISK FACTORS
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companies are allowed to make domestic equity investments by using their capital, provided
that they are not in violation of the prevailing special administrative measures for access to
foreign investments (negative list), and provided that the relevant domestic investment
projects are authentic and in compliance with the relevant regulations. However, we cannot
assure you the regulatory authorities of the PRC will continue or further lift the restrictions
on foreign exchange administration or will not impose more stringent restrictions on the
convertibility of RMB, especially with respect to foreign exchange transactions. Further,
there is no assurance that new regulations will not be promulgated in the future that would
have the effect of further restricting the remittance of RMB out of the PRC.
Uncertainties in the interpretation and application of PRC laws could adversely affect
our business, results of operations and financial conditions
The PRC legal system is a civil law system based on written statutes. Unlike common
law systems, it is a system in which decided legal cases are for reference only. In 1979, the
PRC Government began to promulgate a comprehensive system of laws and regulations
governing economic matters in general. The overall effect of legislation over the past four
decades has significantly enhanced the protections afforded to various forms of foreign
investment in the PRC. Our PRC subsidiary is subject to laws and regulations applicable to
foreign investment in the PRC in general and laws and regulations applicable to
foreign-invested enterprises in particular.
However, there are uncertainties in the interpretation and application of these laws and
regulations. For example, we may have to resort to administrative and court proceedings to
enforce the legal protection that we enjoy either by law or contract. However, it may be
more difficult to evaluate the outcome of administrative and court proceedings. In addition,
such uncertainties, including the inability to enforce our contracts, could adversely affect our
business and operations. Furthermore, the PRC legal system is based in part on government
policies and internal rules, some of which are not published in a timely manner, if any. As a
result, we may not be aware of our violation of these policies and rules until some time
after the violation, or we may have to go through further approval, registration or filing
procedures as required by the relevant PRC governmental authorities. In addition, any
litigation in the PRC may be protracted and result in substantial costs and diversion of
resources and management attention. Furthermore, we cannot predict the effect of future
developments in the PRC legal system, including the promulgation of new laws, changes to
existing laws or the interpretation or enforcement thereof, or the preemption of local
regulations by national laws. These uncertainties could limit the legal protections available
to us and our foreign investors.
The heightened scrutiny over acquisition transactions by the PRC tax authorities may
have a negative impact on our business operations, our acquisition or restructuring
strategy or the value of your investment
On 3 February 2015, the SA T issued the Announcement on Several Issues Concerning
the Enterprise Income Tax Deriving from the Indirect Transfers of Properties among
Non-Resident Enterprises (
ʮѓ) (the
“Announcement 7 ”) which was amended on 17 October 2017 and 29 December 2017. The
Announcement 7 repealed certain provisions in the Notice on Strengthening the
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Administration of Enterprise Income Tax on Income From Transfers of Equity Interests by
Non-resident Enterprises () (the
“Circular 698 ”), issued by the SA T on 10 December 2009 with retroactive effect from 1
January 2008, and the Announcement on the Administration of Enterprise Income Tax on
Income of Non-resident Enterprises (
ʮѓ), issued by
the SA T on 28 March 2011, with respect to a non-resident enterprise transferring the equity
interests of a PRC resident enterprise indirectly through disposing of the equity interests of
an overseas holding company, or indirect transfer, and stipulates more detailed rules for tax
treatment of indirect transfer of equity interest in PRC resident enterprises and other assets
situated in the PRC. Announcement 7 has broadened the scope of the indirect transfer under
Circular 698 to non-resident enterprises’ indirect transfer of (i) the assets of an
“establishment or place” situated in the PRC; (ii) real estate/immovable property situated in
the PRC; and (iii) equity interest in Chinese resident enterprises. The Announcement 7 has
also elaborated on how to determine that an indirect transfer has “a reasonable commercial
purpose” and specified the legal consequences for failing to withhold and pay tax. We may
conduct acquisitions involving changes in corporate structures in the future and
Announcement 7 may be interpreted by the relevant tax authorities to be applicable. As a
result, we may be required to expend valuable resources to comply with the Announcement
7 and other related tax rules, which could adversely affect our business, results of operations
and financial conditions in the future.
Inflation in the PRC could increase our production costs
Inflation rates in the PRC have been volatile in recent years. Increasing inflation in the
PRC could cause a rise in the rental costs, wages, materials and other expenses, which will
in turn increase our structural steel fabrication costs. We cannot assure you that the volatility
in inflation rates will not continue in the future and/or we will be able to transfer any
increase in structural steel fabrication costs resulting from inflation in the PRC to our
customers in a timely manner or at all. If we are unable to transfer the increase in structural
steel fabrication costs to our customers in a timely manner or at all, our profitability and
profit margins may be adversely affected.
RISKS RELATING TO THE SHARE OFFER
Investors will experience immediate dilution
Given the Offer Price of our Shares is higher than the consolidated net tangible assets
per Share immediately prior to the Share Offer, investors of our Shares in the Share Offer
will experience an immediate dilution in the unaudited pro forma adjusted consolidated net
tangible assets value to approximately HK$0.12 per Share and HK$0.12 per Share,
respectively, based on the indicative Offer Price range of HK$0.25 per Offer Share to
HK$0.27 per Offer Share.
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There has been no prior public market for the Share and the liquidity, market price
and trading volume of the Share may be volatile
Prior to the Listing, there is no public market for the Shares. The listing of, and the
permission to deal in, the Shares on the Stock Exchange do not guarantee the development
of an active public market or the sustainability thereof following completion of the Share
Offer. Factors such as variations in our Group’s revenues, earnings and cash flows,
acquisitions made by our Group or our competitors, industrial or environmental accidents
suffered by our Group, loss of key personnel, litigation or fluctuations in the market prices
for the services provided or supplies required by our Group, the liquidity of the market for
the Shares, and the general market sentiment regarding the construction industry in Hong
Kong could cause the market price and trading volume of the Shares to change substantially.
In addition, both the market price and liquidity of the Shares could be adversely affected by
factors beyond our Group’s control and unrelated to the performance of our Group’s
business, especially if the financial market in Hong Kong experiences a significant price and
volume fluctuation. In such cases, investors may not be able to sell their Shares at or above
the Offer Price or at all.
Granting options under the Share Option Scheme may affect our Group’s result of
operation and dilute Shareholders’ percentage of ownership
Our Company may grant share options under the Share Option Scheme in the future.
The fair value of the options on the date on which they are granted with reference to the
valuer’s valuation will be charged as share-based compensation, which may adversely affect
our Group’s results of operation. Issuance of Shares for the purpose of satisfying any award
made under the Share Option Scheme will also increase the number of Shares in issue after
such issuance and thus may result in the dilution to the percentage of ownership of the
Shareholders and the net asset value per Share. No option has been granted pursuant to the
Share Option Scheme as at the Latest Practicable Date. For a summary of the terms of the
Share Option Scheme, please see the paragraph headed “D. Share Option Scheme” in
Appendix V to this prospectus.
Any disposal by our Controlling Shareholders of a substantial number of Shares in the
public market could materially and adversely affect the market price of the Shares
There is no guarantee that our Controlling Shareholders will not dispose of their Shares
following the expiration of their respective lock-up periods after the Listing. Our Group
cannot predict the effect, if any, of any future sales of the Shares by any Controlling
Shareholders, or that the availability of the Shares for sale by any Controlling Shareholders
may have on the market price of the Shares. Sales of a substantial number of Shares by any
Controlling Shareholders or the market perception that such sales may occur could
materially and adversely affect the prevailing market price of the Shares.
The Overall Coordinators are entitled to terminate the Underwriting Agreements
Prospective investors should note that the Overall Coordinators (for themselves and on
behalf of the Underwriters) are entitled to terminate their obligations under the Underwriting
Agreements by giving notice in writing to us upon the occurrence of any of the events set
RISK FACTORS
–5 7–


--- page 68 ---
out in the paragraph headed “Underwriting – Underwriting arrangements and expenses – The
Public Offer – Grounds for termination” in this prospectus at any time prior to 8:00 a.m.
(Hong Kong time) on the Listing Date. Such event may include, without limitation, any act
of God, military action, riot, public disorder, civil commotion, fire, flood, tsunami,
explosion, epidemic, terrorism, strike or lock-out.
The interest of our Controlling Shareholders may not always coincide with the interest
of our Group and those of our other Shareholders
Immediately after the completion of the Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the exercise of
the Over-allotment Option or any option which may be granted under the Share Option
Scheme), our Controlling Shareholders will be interested in 75% of our Shares. Our
Controlling Shareholders will therefore, have a significant influence over the operations and
business strategies of our Group, and may have the ability to require our Group to effect
corporation actions according to their own desires. The interests of our Controlling
Shareholders may not always coincide with the best interests of other Shareholders. If the
interests of any of our Controlling Shareholders conflict with the interests of other
Shareholders, or if any of our Controlling Shareholders chooses to cause our Group’s
business to pursue strategic objectives that conflict with the interests of other Shareholders,
our Group or those other Shareholders may be adversely affected as a result.
Future issues, offers or sales of Shares may adversely affect the prevailing market price
of the Shares
Future issue of Shares by our Company or the disposal of Shares by any of the
Shareholders or the perception that such issue or sale may occur, may negatively impact the
prevailing market price of the Shares. We cannot give any assurance that such event will not
occur in the future.
There can be no assurance that we will declare or distribute any dividend in the future
Dividends of HK$8.2 million, nil, HK$8.0 million and HK$20.0 million were declared
and settled by the companies now comprising our Group to their then shareholders during
each of FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
respectively. In January 2024, the Company declared dividends of approximately HK$26.6
million of which approximately HK$10.0 million will be settled by cash before the Listing
and approximately HK$16.6 million was offset against the aggregate amounts due from the
Directors and the related company.
Subject to the Companies Act and the Articles, our Company in general meeting may
declare dividends in any currency but no dividends shall exceed the amount recommended
by our Board. Our Board may also from time to time pay to our Shareholders such interim
dividends as appear to our Board to be justified by the financial conditions and the profits
of our Company, and may in addition from time to time declare and pay special dividends of
such amounts and on such dates and out of such distributable funds of our Company as it
thinks fit. Any decision to pay dividends will be made having regard to factors such as the
results of operation, financial condition and position, and other factors deemed relevant by
RISK FACTORS
–5 8–


--- page 69 ---
our Board. Any distributable profits that are not distributed in any given year may be
retained and available for distribution in subsequent years. To the extent profits are
distributed as dividends, such portion of profits will not be available to be reinvested in our
operation. There can be no assurance that we will be able to declare or distribute any
dividend. Our future declarations of dividends will be at the absolute discretion of our
Board.
RISKS RELATING TO THIS PROSPECTUS
No representation is given as to the accuracy of the information from official
government sources
The information and statistics set out in the section headed “Industry overview” and
other sections of this prospectus were extracted from the report prepared by Frost &
Sullivan, which was commissioned by us, and from various official government publications
and other publicly available publications. We engaged Frost & Sullivan to prepare the
Industry Report, an independent industry report, in connection with the Share Offer.
However, the information from official government sources has not been independently
verified by us, the Sponsor, the Overall Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Co-Managers, the Underwriters, any of their respective directors and advisers,
or any other persons or parties involved in the Share Offer, and no representation is given as
to its accuracy.
Y ou should read the entire prospectus and we strongly caution you not to place any
reliance on any information contained in press articles or media regarding us or the
Share Offer
There may be press and media coverage regarding us or the Share Offer, which may
include certain events, financial information, financial projections and other information
about us and the Share Offer. We have not authorised the disclosure of any such information
in the press or other media and do not accept responsibility for the accuracy and
completeness of such press and media coverage and we make no representation as to the
appropriateness, accuracy, completeness or reliability of any such information or publication.
To the extent that any such information appearing in publications other than this prospectus
is inconsistent or conflicts with the information contained in this prospectus, we disclaim
responsibility for them. Accordingly, prospective investors should not rely on any such
information. In making your decision as to whether to subscribe for and/or purchase our
Shares, you should rely only on the information included in this prospectus in making your
investment decision regarding our Shares. By applying to purchase our Shares in the Share
Offer, you will be deemed to have agreed that you will not rely on any information other
than that contained in this prospectus.
Our Group’s future results could differ materially from those expressed or implied by
the forward-looking statements
Included in this prospectus are various forward-looking statements that are based on
various assumptions. Our Group’s future results could differ materially from those expressed
or implied by such forward-looking statements. For details of these statements and the
associated risks, please refer to the section headed “Forward-looking statements” in this
RISK FACTORS
–5 9–


--- page 70 ---
prospectus. Investors should read this entire prospectus carefully and we strongly caution
you not to place any reliance on any information (if any) contained in press articles or other
media regarding us and the Share Offer including, in particular, any financial projections,
valuations or other forward-looking statements.
Prior to the publication of this prospectus, there may be press or other media which
contains information referring to us and the Share Offer that is not set out in this prospectus.
We wish to emphasise to potential investors that neither we nor any of the Sponsor, the
Overall Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Co-Managers and
the Underwriters, or the directors, officers, employees, advisers, agents or representatives of
any of them, or any other parties (collectively, the “ Professional Parties ”) involved in the
Share Offer has authorised the disclosure of such information in any press or media, and
neither the press reports, any future press reports nor any repetition, elaboration or
derivative work were prepared by, sourced from, or authorised by us or any of the
Professional Parties. Neither we nor any Professional Parties accept any responsibility for
any such press or media coverage or the accuracy or completeness of any such information.
We make no representation as to the appropriateness, accuracy, completeness or reliability of
any such information or publication. To the extent that any such information is not contained
in this prospectus or is inconsistent or conflicts with the information contained in this
prospectus, we disclaim any responsibility and liability whatsoever in connection therewith
or resulting therefrom. Accordingly, prospective investors should not rely on any such
information in making your decision as to whether to invest in the Offer Shares. Y ou should
rely only on the information contained in this prospectus.
RISK FACTORS
–6 0–


--- page 71 ---
In preparation for the Listing, our Company has sought and has been granted the
following waiver from strict compliance with the relevant provisions of the Listing Rules
and certificates of exemption from strict compliance with the relevant provisions of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance:
W AIVER FROM STRICT COMPLIANCE WITH RULE 4.04(1) OF THE LISTING
RULES AND EXEMPTION FROM STRICT COMPLIANCE WITH PARAGRAPH 27
OF PART I AND PARAGRAPH 31 OF PART II OF THE THIRD SCHEDULE TO THE
COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
Rule 4.04(1) of the Listing Rules requires our Company to include in the prospectus an
accountant’s report covering the consolidated results of our Group in respect of each of the
three financial years immediately preceding the issue of the prospectus or such shorter
period as may be acceptable to the Stock Exchange.
Section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance requires all prospectuses to include an accountant’s report which contains matters
specified in the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
Paragraph 27 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance requires us to include in the prospectus a statement as
to the gross trading income or sales turnover (as may be appropriate) of our Group during
each of the three financial years immediately preceding the issue of the prospectus.
Paragraphs 31(1) and (3) of Part II of the Third Schedule to the Companies (Winding
Up and Miscellaneous Provisions) Ordinance require us to include in the prospectus a report
by auditors of our Company with respect to the financial results of our Group for each of
the three financial years immediately preceding the issue of the prospectus.
Pursuant to section 342A(1) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the SFC may issue, subject to such conditions (if any) as the SFC
thinks fit, a certificate of exemption from compliance with the relevant requirements under
the Companies (Winding Up and Miscellaneous Provisions) Ordinance if, having regard to
the circumstances, the SFC considers that the exemption will not prejudice the interests of
the investing public and compliance with any or all of such requirements would be irrelevant
or unduly burdensome, or is otherwise unnecessary or inappropriate.
Appendix II to Chapter 1.1A of the Guide For New Listing Applicants issued by the
Stock Exchange has provided the conditions for granting a waiver from strict compliance
with Rule 4.04(1) of the Listing Rules as follows:
(a) the applicant must list on the Stock Exchange within three months after the latest
year end;
W AIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 1–


--- page 72 ---
(b) the applicant must obtain a certificate of exemption from the SFC on compliance
with the relevant Companies (Winding Up and Miscellaneous Provisions)
Ordinance requirements;
(c) a profit estimate for the latest financial year (which must comply with Rules
11.17 to 11.19 of the Listing Rules) must be included in the prospectus or the
applicant must provide justification why a profit estimate cannot be included in
the prospectus; and
(d) there must be a directors’ statement in the prospectus that there is no material
adverse change to its financial and trading position or prospects with specific
reference to the trading results from the end of the stub period to the latest
financial year end.
The Accountant’s Report for each of the three financial years ended 31 December
2020, 2021 and 2022 and the nine months ended 30 September 2023 has been prepared and
set out in Appendix I to this prospectus.
Pursuant to the relevant requirements set forth above, our Company is required to
include three full years of audited accounts for the years ended 31 December 2021, 2022
and 2023 in this prospectus. However, an application was made to the Stock Exchange for a
waiver from strict compliance with Rule 4.04(1) of the Listing Rules, and such waiver has
been granted by the Stock Exchange on the conditions that:
(a) this prospectus will be issued on or before 29 February 2024 and the Shares will
be listed on the Stock Exchange on or before 31 March 2024;
(b) our Company will obtain a certificate of exemption from the SFC on exemption
from strict compliance with the relevant Companies (Winding Up and
Miscellaneous Provisions) Ordinance requirements;
(c) a profit estimate for the financial year ended 31 December 2023 will be included
in this prospectus; and
(d) there will be a directors’ statement in this prospectus that there is no material
adverse change to our financial and trading positions or prospect with specific
reference from 1 October 2023 to 31 December 2023.
An application has also been made to the SFC for a certificate of exemption from strict
compliance with the requirements under section 342(1) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in relation to paragraph 27 of Part I and paragraph 31
of Part II of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance and a certificate of exemption has been granted by the SFC under
section 342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance on
the conditions that:
W AIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 2–


--- page 73 ---
(a) the particulars of the exemption are disclosed in this prospectus;
(b) the issuance of the prospectus on or before 29 February 2024; and
(c) our Company shall be listed on the Stock Exchange on or before 31 March 2024.
The applications to the Stock Exchange for a waiver from strict compliance with Rule
4.04(1) of the Listing Rules and the SFC for a certificate of exemption from strict
compliance with the requirements under section 342(1) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in relation to paragraph 27 of Part I and paragraph 31
of Part II of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance were made on the grounds, among others, that the waiver and
exemption from the above requirements will not prejudice the interest of the investing public
and strict compliance with the above requirements would be unduly burdensome given the
following:
(a) there will not be sufficient time for our Company and the reporting accountant of
our Company to finalise the audited consolidated financial statements for the year
ended 31 December 2023 for inclusion in this prospectus. If the consolidated
financial information is required to be audited up to 31 December 2023, our
Company and our reporting accountant would have to undertake a considerable
amount of work to prepare, update and finalise the consolidated financial
information to be included in this prospectus and to update the relevant
disclosures in this prospectus to cover such additional period within a short period
of time;
(b) our Directors and the Sponsor, after conducted sufficient due diligence, confirmed
that, except to the extent disclosed in the paragraph headed “Summary – Recent
Development” in this prospectus, there had not been any material adverse change
to our financial and trading positions or prospect with specific reference to the
trading results since 30 September 2023 and up to the date of this prospectus
which will materially affect the information shown in the Accountant’s Report, the
profit estimate for the year ended 31 December 2023, the section headed
“Financial Information” and other parts of this prospectus;
(c) our Company has included in this prospectus (i) the Accountant’s Report covering
the three financial years ended 31 December 2020, 2021 and 2022 and the nine
months ended 30 September 2023 as set out in Appendix I to this prospectus; (ii)
a profit estimate for the year ended 31 December 2023 (in compliance with Rules
11.17 to 11.19 of the Listing Rules) as set out in Appendix III to this prospectus;
and (iii) information regarding our Group’s recent developments subsequent to the
Track Record Period and up to the Latest Practicable Date. As such, our Company
is of the view that all material information that is necessary for the Shareholders
and the potential investors to make an informed assessment of the activities,
assets and liabilities, financial position, trading position, management and
prospects of our Group has been disclosed in this prospectus; and
W AIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 3–


--- page 74 ---
(d) we will comply with the requirements under Rules 13.46(2) and 13.49(1) of the
Listing Rules in respect of the publication of our annual results and annual report.
Our Company currently expects to issue our annual results and annual report for
the financial year ended 31 December 2023 on or before 31 March 2024 and 30
April 2024, respectively. In this regard, our Directors consider that the
Shareholders, the investing public as well as potential investors of our Company
will be kept informed of the financial results of our Group for the financial year
ended 31 December 2023.
W AIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 4–


--- page 75 ---
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed director who is
named as such in this prospectus) collectively and individually accept full responsibility,
includes particulars given in compliance with the Companies (WUMP) Ordinance, the
Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong
Kong) and the Listing Rules for the purpose of giving information with regard to our
Company. Our Directors, having made all reasonable enquiries, confirm that to the best of
their knowledge and belief, the information contained in this prospectus is accurate and
complete in all material respects and not misleading or deceptive and there are no other
matters the omission of which would make any statement in this prospectus misleading.
UNDERWRITING
This prospectus is published solely in connection with the Share Offer. Details of the
terms of the Share Offer are described in the section headed “Structure and conditions of the
Share Offer”.
The Listing is sponsored by the Sponsor. The Public Offer is fully underwritten by the
Public Offer Underwriters and the Placing is expected to be fully underwritten by the
Placing Underwriters.
RESTRICTIONS ON SALE OF THE OFFER SHARES
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than in Hong Kong, or the distribution of this prospectus in any
jurisdiction other than Hong Kong. Accordingly, and without limitation to the following, this
prospectus may not be used for the purpose of, and does not constitute, an offer or invitation
in any jurisdiction or in any circumstances in which such offer or invitation is not authorised
or to any person to whom it is unlawful to make such an offer or invitation.
The distribution of this prospectus and the offering and sale of the Offer Shares in
other jurisdictions are subject to restrictions and may not be made except as permitted under
the applicable securities laws of such jurisdictions pursuant to registration with or
authorisation by the relevant securities regulatory authorities or an exemption therefrom. In
particular, the Offer Shares have not been offered and sold, and will not be offered or sold,
directly or indirectly, in the PRC or the United States, except in compliance with the
relevant laws and regulations of each of such jurisdictions.
The Offer Shares are offered solely on the basis of the information contained and the
representations made in this prospectus. No person is authorised in connection with the
Share Offer to give any information or to make any representation not contained in this
prospectus, and any information or representation not contained in this prospectus must not
be relied upon as having been authorised by our Company, any of its respective directors,
agents or advisers or any other person or party involved in the Share Offer.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 5–


--- page 76 ---
No action has been taken to register or qualify the Offer Shares or the Share Offer, or
otherwise to permit a public offering of the Offer Shares, in any jurisdiction outside Hong
Kong. The distribution of this prospectus in jurisdictions outside Hong Kong may be
restricted by law and therefore persons who come into possession of this prospectus should
inform themselves about, and observe, any such restrictions. Any failure to comply with
these restrictions may constitute a violation of the applicable securities laws.
Each person or body corporate acquiring the Offer Shares will be required to confirm,
or be deemed by his or her or its acquisition of the Offer Shares to have confirmed,
that he or she or it is aware of the restrictions on offer of the Offer Shares described in
this prospectus.
Prospective applicants for the Offer Shares should consult their financial advisers and
seek legal advice, as appropriate, to inform themselves of, and to observe, all applicable
laws, rules and regulations of any relevant jurisdiction. Prospective applicants for the Offer
Shares should also inform themselves as to the relevant legal requirements and any
applicable exchange control regulations and applicable taxes in the countries of their
respective citizenship, residence or domicile.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
Our Company has applied to the Stock Exchange for the listing of, and permission to
deal in, the Shares in issue and to be issued pursuant to the Share Offer (including any
Shares which may be issued pursuant to the exercise of the Over-allotment Option and any
option which may be granted under the Share Option Scheme).
No part of the share or loan capital of our Company is listed, traded or dealt in on any
stock exchange and save as disclosed herein, no such listing or permission to deal is being
or proposed to be sought.
Under Section 44B(1) of the Companies (WUMP) Ordinance, any allotment made in
respect of any application will be invalid if the listing of, and permission to deal in, the
Offer Shares on the Stock Exchange is refused before the expiration of three weeks from the
date of the closing of the application lists, or such longer period (not exceeding six weeks)
as may, within the said three weeks, be notified to our Company by the Stock Exchange.
SHARE REGISTRARS AND STAMP DUTY
All the Offer Shares will be registered on the Hong Kong branch register of members
to be maintained by Boardroom Share Registrars (HK) Limited. Dealings in the Offer Shares
registered on our Company’s branch register of members maintained in Hong Kong will be
subject to Hong Kong stamp duty. Dealings in the Shares registered on the principal share
register of our Company maintained by Appleby Global Services (Cayman) Limited in the
Cayman Islands will not be subject to the Cayman Islands stamp duty.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 6–


--- page 77 ---
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential applicants for the Share Offer are recommended to consult their professional
advisers if they are in doubt as to the taxation implications of the subscription for, holding,
purchase, disposal of or dealing in the Shares or exercising their rights thereunder. It is
emphasised that none of our Company, our Directors, the Sponsor, the Underwriters, the
Overall Coordinators, their respective directors or any other person or party involved in the
Share Offer accepts responsibility for any tax effects on, or liabilities of, holders of Shares
resulting from the subscription for, holding, purchase, disposal of or dealing in the Offer
Shares or the exercise of their rights thereunder.
STABILISATION AND OVER-ALLOTMENT OPTION
In connection with the Share Offer, the Stabilising Manager, or any person acting for
it, may over-allot Shares or effect any other transactions with a view to stabilising and
maintaining the market price of the Offer Shares at a level higher than that which might
otherwise prevail for a limited period after the date of Listing. However, there is no
obligation on the Stabilising Manager or any person acting for it to conduct any such
stabilising action.
In connection with the Share Offer, our Company is expected to grant to the Placing
Underwriters the Over-allotment Option, which is exercisable in full or in part by the
Overall Coordinators (on behalf of the Placing Underwriters) up to (and including) the date
which is the 30th day after the last day for lodging applications under the Public Offer
(being Thursday, 4 April 2024). Pursuant to the Over-allotment Option, our Company may
be required to issue at the Offer Price up to an aggregate of 75,000,000 Shares, representing
15% of the total number of Offer Shares initially available under the Share Offer, to cover
over-allocations in the Placing, if any.
For further details on the stabilisation and the Over-allotment Option, please refer to
the section headed “Structure and conditions of the Share Offer – Stabilisation and
over-allotment” in this prospectus.
ROUNDING
Any discrepancies in any table between totals and sum of amounts listed therein are
due to rounding.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
Details of the structure of the Share Offer are set out in the section headed “Structure
and conditions of the Share Offer” in this prospectus.
PROCEDURES FOR APPLICATION FOR PUBLIC OFFER SHARES
The procedure for applying for the Public Offer Shares is set out in the section headed
“How to apply for Public Offer Shares”.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 7–


--- page 78 ---
OFFER SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the approval of the listing of, and permission to deal in, the Shares on the
Stock Exchange and the Company’s compliance with the stock admission requirements of
HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance
and settlement in CCASS with effect from the Listing Date or, under contingent situation,
any other date as determined by HKSCC. Settlement of transactions between participants of
the Stock Exchange is required to take place in CCASS on the second settlement day after
any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made for the Shares to be admitted into CCASS.
If investors are unsure about the details of CCASS settlement arrangement and how such
arrangements will affect their rights and interests, they should seek the advice of their
stockbroker or other professional adviser.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence on or about
Friday, 8 March 2024. The Shares will be traded in board lots of 10,000 Shares each.
LANGUAGE
If there is any inconsistency between the English version of this prospectus and the
Chinese translation of this prospectus, the English version of this prospectus shall prevail.
CURRENCY TRANSLATIONS
Unless otherwise specified, conversion of US$ into HK$ (or vice versa) and RMB into
HK$ (or vice versa) in this prospectus is based on the exchange rate set out below (for
illustration purposes only):
US$1.00: HK$7.80
HK$1.00: RMB0.920
No representation is made that any amounts in US$, RMB and HK$ can be or could
have been converted at the relevant dates at the above exchange rate or any other rate or at
all.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 8–


--- page 79 ---
DIRECTORS
Name Residential address Nationality
Executive Directors
Mr. Chan Kam Kei
௓㒥ਿ
Flat D, 19/F, Block 9
The Cairnhill
108 Route Twisk
Tsuen Wan, New Territories
Hong Kong
Chinese
Mr. Chan Kam Kong
௓㒥Ϫ
Room A, 12/F
The Ultimate
170 Boundary Street
Kowloon
Hong Kong
Chinese
Ms. Chan Suk Man
௓ૺත
Flat F, 27th Floor, Block 3
Villa Esplanada
8 Nga Ying Chau Street
Tsing Yi, New Territories
Hong Kong
Chinese
Non-executive Directors
Mr. Chan Wing Hong
௓͑ੰ
Flat A, 36th Floor, Block 3
Villa Esplanada
8 Nga Ying Chau Street
Tsing Yi, New Territories
Hong Kong
Chinese
Ms. Choi Chick Cheong

Flat A, 36th Floor, Block 3
Villa Esplanada
8 Nga Ying Chau Street
Tsing Yi, New Territories
Hong Kong
Chinese
Independent non-executive Directors
Mr. Cha Ho Wa
ԓ㒊ശ
Flat D, 4th Floor
Wai Sing Mansion
Taikoo Shing
12 Taikoo Shing Road
Hong Kong
Chinese
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–6 9–


--- page 80 ---
Name Residential address Nationality
Mr. Y u Chun Kit
௫
Flat A, 4th Floor, Block 1
Kam Lung Mansion
22 Fung Kam Street
Y uen Long, New Territories
Hong Kong
Chinese
Mr. Liu Chi Kwun Albert
࿋қ੤
Flat B, 11th Floor, No. 212
Harvest Court
212-216 Argyle Street
Kowloon City, Kowloon
Hong Kong
Chinese
Please refer to the section headed “Directors and senior management” in this
prospectus for further details of our Directors.
PARTIES INVOLVED
Sponsor Grande Capital Limited
A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated activities
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road, Admiralty
Hong Kong
Sponsor-Overall Coordinator Grande Capital Limited
A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated activities
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road, Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
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Overall Coordinators Grande Capital Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) and type 6 (advising on
corporate finance) regulated activities
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road, Admiralty
Hong Kong
Quam Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities), type 2 (dealing in futures
contracts), type 4 (advising on securities), type 6
(advising on corporate finance) and type 9 (asset
management) regulated activities
5/F and 24/F (Rooms 2401 and 2412)
Wing On Centre
111 Connaught Road Central
Hong Kong
Yuen Meta (International) Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) regulated activity
Rooms 1101-4, 11/F
Harcourt House
39 Gloucester Road
Wanchai, Hong Kong
Joint Bookrunners and
Joint Lead Managers
Grande Capital Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) and type 6 (advising on
corporate finance) regulated activities
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road, Admiralty
Hong Kong
Quam Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities), type 2 (dealing in futures
contracts), type 4 (advising on securities), type 6
(advising on corporate finance) and type 9 (asset
management) regulated activities
5/F and 24/F (Rooms 2401 and 2412)
Wing On Centre
111 Connaught Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
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Yuen Meta (International) Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) regulated activity
Rooms 1101-4, 11/F
Harcourt House
39 Gloucester Road
Wanchai, Hong Kong
Eddid Securities and Futures Limited
A licensed corporation under the SFO to engage in type
1 (dealing in securities), type 2 (dealing in futures
contracts), type 3 (leveraged foreign exchange trading),
type 4 (advising on securities), type 5 (advising on
futures contracts) and type 9 (asset management)
regulated activities
21/F, CITIC Tower
1 Tim Mei Avenue
Central, Hong Kong
Livermore Holdings Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) and type 4 (advising on
securities) regulated activities
Unit 1214A, 12/F
Tower II, Cheung Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon, Hong Kong
Co-Managers Fortune Origin Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities), type 4 (advising on
securities), type 6 (advising on corporate finance) and
type 9 (asset management) regulated activities
404-405, 4/F, Nan Fung Tower
88 Connaught Road Central
Central, Hong Kong
Lee Go Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities) regulated activity
Unit 02, 12/F
West Exchange Tower
322 Des V oeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
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Victory Securities Company Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities), type 2 (dealing in futures
contracts), type 4 (advising on securities) and type 9
(asset management) regulated activities
Room 1101-3, 11/F.
Y ardley Commercial Building
3 Connaught Road West
Sheung Wan, Hong Kong
Grand China Securities Limited
A licensed corporation under the SFO to engage in
type 1 (dealing in securities), type 2 (dealing in futures
contracts), type 4 (advising on securities) and type 9
(asset management) regulated activities
Room 503, 5/F
Loke Y ew Building
50-52 Queen’s Road Central
Central, Hong Kong
SBI China Capital Financial Services Limited
A licensed corporation under the SFO to engage in type 1
(dealing in securities), type 4 (advising on securities) and
type 9 (asset management) regulated activities
4/F, Henley Building
No. 5 Queen’s Road Central
Hong Kong
Legal advisers to our Company As to Hong Kong law
ONC Lawyers
19/F, Three Exchange Square
8 Connaught Place
Central
Hong Kong
Ms. Queenie W.S. Ng
Barrister-at-law
Rooms 2203 A&B
Fairmont House
8 Cotton Tree Drive
Central
Hong Kong
As to PRC law
China Commercial Law Firm
21-26/F, Hong Kong CTS Tower
No. 4011 Shennan Boulevard
Futian District, Shenzhen
PRC
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
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--- page 84 ---
As to Cayman Islands law
Appleby
Suites 4201-03 & 12, 42/F
One Island East, Taikoo Place
18 Westlands Road, Quarry Bay
Hong Kong
Legal advisers to the Sponsor, the
Overall Coordinators, the Joint
Lead Managers, the Joint
Bookrunners and the
Underwriters
As to Hong Kong law
David Fong & Co.
Unit A, 12th Floor
China Overseas Building
139 Hennessy Road
Wanchai
Hong Kong
As to PRC law
Commerce & Finance Law Offices
23/F, Building A, CASC Plaza
No. 168 Haide 3rd Road
Nanshan District
Shenzhen, 518067
PRC
Reporting accountant and auditor PricewaterhouseCoopers
Certified Public Accountants
Registered Public Interest Entity Auditor
22/F, Prince’s Building
Central
Hong Kong
Compliance adviser Grande Capital Limited
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road, Admiralty
Hong Kong
Industry consultant Frost & Sullivan Limited
Unit 3006, 30/F
Two Exchange Square
8 Connaught Place
Central
Hong Kong
Receiving bank Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
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Registered office Suite 102, Cannon Place
P .O. Box 712
North Sound Rd.
George Town
Grand Cayman KY1-9006
Cayman Islands
Headquarters and principal
place of business in Hong
Kong registered under Part
16 of the Companies
Ordinance
Room 1510-1511, 15th Floor
Fortune Commercial Building
362 Sha Tsui Road
Tsuen Wan, New Territories
Hong Kong
Company’s website www.wing-kei.com.hk
(Note: information contained in this website does not
form part of this prospectus)
Company secretary Mr. Tam Hon Fai
Certified Public Accountant
Room 1510-1511, 15th Floor
Fortune Commercial Building
362 Sha Tsui Road
Tsuen Wan, New Territories
Hong Kong
Authorised representative(s)
(for the purposes of the
Listing Rules)
Ms. Chan Suk Man
Flat F, 27th Floor, Block 3
Villa Esplanada
8 Nga Ying Chau Street
Tsing Yi, New Territories
Hong Kong
Mr. Tam Hon Fai
Certified Public Accountant
Room 1510-1511, 15th Floor
Fortune Commercial Building
362 Sha Tsui Road
Tsuen Wan, New Territories
Hong Kong
Audit committee Mr. Y u Chun Kit (Chairperson)
Mr. Cha Ho Wa
Mr. Liu Chi Kwun Albert
Remuneration committee Mr. Cha Ho Wa (Chairperson)
Mr. Chan Kam Kei
Mr. Y u Chun Kit
CORPORATE INFORMATION
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Nomination committee Mr. Chan Kam Kei (Chairperson)
Mr. Liu Chi Kwun Albert
Mr. Y u Chun Kit
Principal share registrar Appleby Global Services (Cayman) Limited
71 Fort Street
PO Box 500
George Town
Grand Cayman KY1-1106
Cayman Islands
Hong Kong branch share
registrar and transfer office
Boardroom Share Registrars (HK) Limited
2103B, 21/F
148 Electric Road
North Point
Hong Kong
Principal banker The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
CORPORATE INFORMATION
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The information and statistics set out in this section and other sections of this
prospectus were extracted from the report prepared by Frost & Sullivan, which was
commissioned by us, and from various official government publications and other
publicly available publications. We engaged Frost & Sullivan to prepare the Industry
Report, an independent industry report, in connection with the Share Offer . The
information from official government sources has not been independently verified by us,
the Sponsor , the Overall Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Co-Managers, the Underwriters, or any of our or their respective directors and
advisers or any other persons or parties involved in the Share Offer , and no
representation is given as to its accuracy.
SOURCE OF INFORMATION
We have commissioned Frost & Sullivan, an independent market research and
consulting company, to conduct an analysis of, and to prepare a report on the Hong Kong
structural steelwork market. The report prepared by Frost & Sullivan for us is referred to in
this prospectus as Industry Report. We agreed to pay Frost & Sullivan a fee of HK$400,000
which we believe reflects market rates for reports of this type.
Founded in 1961, Frost & Sullivan has 40 offices with more than 2,000 industry
consultants, market research analysts, technology analysts and economists globally. Frost &
Sullivan’s services include technology research, independent market research, economic
research, corporate best practices advising, training, client research, competitive intelligence,
and corporate strategy.
We have included certain information from the Industry Report in this prospectus
because we believe this information facilitates an understanding of the Hong Kong structural
steelwork market for the prospective investors. The Industry Report includes information of
the Hong Kong structural steelwork market as well as other economic data, which have been
quoted in the prospectus. Frost & Sullivan’s independent research consists of both primary
and secondary research obtained from various sources in respect of the Hong Kong
structural steelwork market. Primary research involved in-depth interviews with leading
industry participants and industry experts. Secondary research involved reviewing company
reports, independent research reports and data based on Frost & Sullivan’s own research
database. Projected data were obtained from historical data analysis plotted against
macroeconomic data with reference to specific industry-related factors. Except as otherwise
noted, all the data and forecasts contained in this section are derived from the Industry
Report, various official government publications and other publications.
In compiling and preparing the research, F&S assumed that the social, economic, and
political environments in the relevant markets are likely to remain stable in the forecast
period, which ensures the steady development of the Hong Kong structural steelwork
market.
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OVERVIEW OF HONG KONG STRUCTURAL STEELWORK MARKET
Definition and Classification
Structural steelwork refers to the fabrication and forming of steel structures, typically
serving as the backbone of buildings and infrastructure during initial construction stage.
Essentially, structural steelwork involves columns and beams which are riveted, bolted or
welded together. Structural steelwork providers supply, cut, bend, weld and assemble
structural steel frames, trusses and other components into structures in accordance with the
specifications provided in the building plans and designs.
Due to the strength, durability, availability, and ease of pre-fabrication of steel,
structural steelwork also allows for flexibility in design, reducing the time required for
on-site assembly and can help to speed up the entire construction process. The use of
pre-fabricated steel structures reduces on-site construction time and provides an efficient,
precise and quality-controlled method of building. Structural steelwork requires high levels
of technical skill, expertise and certification to meet strict safety and building standards. The
scope of structural steelwork include:
➣ Steel Structure Fabrication: Cutting, bending and welding steel members into
frames, trusses, columns, beams, etc. as required for the construction project. This
is done in a fabrication workshop.
➣ Steel Formation: Transporting the fabricated steel members to the construction
site and assembling them into the required structural steel framework. This
involves lifting, placing and joining the steel pieces together using bolts or welds.
➣ Additional Finishing Works: Installing additional components like floor beams,
metal decking, stairs, handrails, etc. to the basic steel structure. This is done to
complete the structural skeleton and reinforcement.
Value Chain
Upstream raw material and equipment suppliers provide relevant steel plates, bars,
beams, columns, etc. from steel mills and suppliers, as well as machineries such as cutting,
bending and welding machines. Main contractors in the midstream focus on pre-fabrication,
where raw steel materials are cut, welded and pre-assembled into structural sections at
fabrication plants according to the building plans and designs. This pre-fabrication process
aims to minimise on-site construction work. Subsequently, pre-fabricated steel sections are
erected and assembled on site, connected to the building’s concrete foundations, and
subsequently concrete floor slabs, beams and columns are then added to support the weight
of the building.
Typically, main contractors in the midstream are responsible for supervising the overall
progress and quality of the construction project, monitoring the daily operation of the
construction site and coordinating subcontractors to carry out construction works. Main
contractors would generally subcontract some of the construction works to subcontractors
with specialist licenses or capabilities in certain areas based on their track records, business
INDUSTRY OVERVIEW
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relationship and capital requirements because (i) subcontractors often possess the necessary
experience and expertise in performing specific areas of tasks and it is generally more cost
effective to subcontract different parts of construction works to different subcontractors
which are specialised in the field of expertise; and (ii) labour intensive works such as
structural steelwork are subcontracted to subcontractors for the supply of sufficient direct
labour as main contractors generally only hire a small number of direct labour on a
permanent basis to control cost. As part of the tender conditions and to ensure quality
assurance, main contractors would generally select structural steelwork contractors registered
on the List of Approved Specialist Contractors for Public Works maintained by the
Development Bureau to carry out the structural steelwork in a construction project.
Structural steelwork subcontractors in the midstream generally work with main
contractors and are mainly responsible for managing structural steelwork workers,
coordinating subcontractors and supervising the progress and quality of structural steelwork.
Some of the structural steelwork subcontractors, such as our Group, possess in-house
capacity to fabricate structural steel. During the fabrication process of structural steel, raw
steel materials are cut, welded and pre-assembled into structural sections at fabrication
plants according to the building plans and designs. The pre-fabrication process aims to
minimise on-site construction work. Where structural steelwork subcontractors do not
possess in-house capacity to fabricate structural steel, they would generally outsource the
structural steel fabrication process to third party structural steel suppliers. Subsequently,
pre-fabricated steel sections are erected and assembled on site, connected to the building’s
concrete foundations, and subsequently concrete floor slabs, beams and columns are then
added to support the weight of the building. It is a common practice for structural steelwork
contractors in Hong Kong to engage subcontractors to perform site works.
Value Chain of Structural Steelwork
Upstream – Suppliers Midstream – Contractors Downstream
Main contractor
Sub-contractorRaw material and
equipment supplier
Client (e.g. property
developer,government
institutions)
Engineering consultancy
Source: Frost & Sullivan
Market size of Hong Kong Structural Steelwork Market
Structural steelwork is an integral part of construction industry and are integrated into
construction projects due to the material’s robustness, resilience, and adaptability.
Attributable to the completion of large-scale infrastructure projects in 2018, such as Hong
Kong-Zhuhai-Macau Bridge and Express Rail Link (Hong Kong section), the civil
engineering industry in Hong Kong has become temporarily sluggish in 2019 and 2020,
which led to the decline of structural steelwork. The decrease in market size of structural
steel works in Hong Kong from 2019 to 2020 was mainly attributable to the outbreak of
COVID-19, resulting in delay to the progress of the then ongoing construction projects and
delay in commencement of new construction projects in Hong Kong. The market size of
INDUSTRY OVERVIEW
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structural steel works subsequently recovered in 2022 because the COVID-19 pandemic has
gradually been contained. Overall, the market size of structural steelwork increased from
HK$9,411.0 million in 2018 to HK$9,913.6 million in 2022, at a CAGR of 1.3%.
The rollout and commencement of projects such as Tung Chung New Town Extension
which was commenced in 2018 and expected to complete by 2030, Three Runway System
development which was commenced in 2016 and expected to complete by 2024, Site 3 of
the New Central Harbourfront development which was commenced in 2022 and expected to
complete by 2027, Caroline Hill Road Causeway Bay commercial project which was
commenced in 2022 and expected to complete by 2026, Kwu Tung North New Development
Area which was commenced in 2019 and expected to complete by 2026 and Y uen Long
South New Development Areas which was commenced in 2022 and expected to complete by
2038, shall create the needs for construction of bridges, stadiums and arenas, commercial
buildings, other social amenities and residential buildings, which in turn drive the demand
for structural steelwork in Hong Kong. The market size of structural steelwork in Hong
Kong is expected to increase at a CAGR of 4.8% from 2023 to 2027. Driven by various
growth drivers including:
(i) the demand for structural steelwork generated from the planned and ongoing
infrastructural and property developments in both public and private sectors in
Hong Kong such as the Three Runway System development, Kwu Tung North,
Hung Shui Kiu/Ha Tsuen and Y uen Long South New Development Areas, New
Central Harbourfront development and the Caroline Hill Road Causeway Bay
commercial project;
(ii) the increasingly common adoption of structural steelwork for construction in
Hong Kong owing to its eco-friendliness nature, flexibility of use and better
performance in achieving space efficiency; and
(iii) the growing emphasis and continuous support from the Hong Kong government
for the development of the structural steelwork industry, including the
establishment of the Chinese National Engineering Research Centre for Steel
Construction at the Hong Kong Polytechnic University (“ PolyU ”), which is likely
to improve applied research and technology in structural steel engineering and
infrastructure sustainability, as well as strengthen the structural steel engineering
industry’s productivity, capability and competitiveness. In the meantime, PolyU
has been granted HK$9.75 million, representing the largest amount granted under
the Research Impact Fund 2022/23, for a research project on innovative building
technologies focusing on the demolition and reuse of steel and composite
structures. In addition, the Hong Kong Government has in recent years promoted
the use of steel structures in major infrastructure projects, such as the steel
structure erection projects for the concourse and apron of the Hong Kong
International Airport third runway program, which has a contract value exceeding
HK$1.2 billion, and 2,400 tonnes of structural steel were used for the construction
of Hong Kong’s West Kowloon Xiqu Centre. Moreover, 425,000 tonnes of steel
were utilised in the construction of the Hong Kong-Zhuhai-Macao Bridge, which
is currently the longest steel-structured bridge in the world. The Traffic Center of
the Zhuhai Border Crossing of the Hong Kong-Zhuhai-Macao Bridge adopts a
INDUSTRY OVERVIEW
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large-span spatial lattice steel structure system, with a building height of 23.9
meters, a floor area of 138,000 square meters, and a steel structure dosage of
more than 8,000 tonnes, with a total of about 50,000 components. The gross value
of structural steelwork in Hong Kong is expected to maintain a steady growth.
Market Size of Structural Steelwork (Hong Kong), 2018 – 2027E
0
3,000
6,000
9,000
12,000
15,000
Million (HK$)
2018
9,411.0
2019
8,257.7
2020
8,039.6
2021
8,284.9
2022
9,913.6
2023E
10,409.2
2024E
10,888.1
2025E
11,432.5
2026E
12,038.4
2027E
12,580.1CAGR: 1.3%
CAGR: 4.8%
Source: Census and Statistics Department of Hong Kong, Frost & Sullivan
Key Growth Drivers
Demand for Public and Private Sectors Development – Outlined in the Hong Kong
government’s Budget 2023-24, the total spending on public infrastructure is expected to
reach approximately HK$89,027 million in the 2023 to 2024 fiscal year. According to the
Hong Kong Budget 2023 to 2024, the financial secretary of Hong Kong had forecasted a
budget deficit of HK$139.8 billion for the 2022-23 fiscal year, more than double its original
estimate of HK$56.3 billion. The financial secretary of Hong Kong expected that the budget
deficit for the fiscal year ending 31 March 2024 will further increase from the previous
estimation of approximately HK$54.4 billion. Whilst the Hong Kong government had
allocated budget for infrastructural development, it is expected that part of it may be
financed by the issuance of government bonds and/or other sources of fund. Some of the
sizeable public sector infrastructural projects include the New Development Areas in Kwu
Tung North, Hung Shui Kiu/Ha Tsuen and Y uen Long South, Kau Yi Chau Artificial Islands
in Lantau Islands, and expansion works of the Science Park and Cyberport. Meanwhile,
private sector developments are also expected to subsist and an example of which is the
commercial project in Caroline Hill Road Causeway Bay co-developed by Hysan
Development and Chinachem Group, which is expected to complete by 2026. Taking into
consideration structural steel is increasingly used in construction due to its strength,
durability, high strength-to-weight ratio and its flexibility in design to meet specific load
requirements, it is expected that the increase in demand for construction works will translate
into growth opportunities for the structural steelwork in Hong Kong.
Benefits Brought by Pre-fabrication of Structural Steelwork – In the pre-fabrication
model of structural steelwork, pre-fabricated steel components are fabricated in a controlled
factory using precision tools and then transported to the construction site for assembly.
Pre-fabricating structural steel elements off-site in controlled factory can significantly reduce
on-site construction time where pre-fabricated pieces can just be lifted and connected
on-site, eliminating the need for fabrication on-site and hence the related labour cost
incurred. Besides, factory pre-fabrication allows for tighter quality control and minimises
defects as the work is done in a controlled environment using precision machinery and
welding equipment. Overall, the pre-fabrication process streamlines the construction process,
accelerates the schedule, reduces labour cost, improves quality and safety and results in
higher quality finished products.
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Government and Academia Supporting Industry Growth – The construction industry
in Hong Kong faces significant challenges such as labour shortage and an ageing workforce.
To address these issues, the Hong Kong government has stepped up efforts to provide
financial support for improving industry standards. In the Hong Kong Budget 2022 to 2023,
the Government has proposed allocating HK$1 billion to the Construction Industry Council
to support manpower training. This includes increasing training opportunities and allowance
amounts for trades facing labour shortages, with a view to attracting new entrants and job
changers to the construction industry. The structural steelwork industry, as a key subsegment
of Hong Kong’s construction industry, is expected to benefit substantially from the
Government’s efforts, especially through the Construction Industry Council. The Council
will use the budget to expand steel fabrication and erection training programs, which will
help produce more skilled steel workers to meet increasing demands for steel structures in
building and infrastructure projects. Allowances for steel workers will also be raised, making
careers in structural steel more appealing and compensated. With more extensive training
and higher pay, the structural steelwork industry can overcome its own long-standing labour
challenges. Besides, universities and research regarding structural steelwork are playing an
increasingly important role in supporting the long-term strength and competitiveness of the
structural steelwork industry. For instance, the establishment of the Chinese National
Engineering Research Centre for Steel Construction at the Hong Kong Polytechnic
University signifies a trend towards greater support for the structural steelwork industry
from academia and education in Hong Kong. As structural steelwork sector continues
advancing into more complex areas like high-rises towers and long-span structures, skilled
professionals with expertise in specialised steel technologies and design are in demand, the
establishment of related platform would be tailored to the needs of the industry. In turn, an
expanded, well-trained and motivated workforce will strengthen the industry’s capabilities,
productivity and competitiveness, and will ultimately boost steel fabrication and construction
activities that are crucial for Hong Kong’s development goals.
Eco-friendliness of adopting Structural Steelwork – According to the China Steel
Construction Society
ʕ਷፻ഐ࿴՘ึ, the production process of steel structures are 3%
more energy-efficient and emit 10% less carbon dioxide than the production process of
concrete structures. Moreover, during the construction process, steel structures are more
eco-friendly than concrete structures with energy savings of 13% and a reduction in carbon
dioxide emissions of 15%. In addition, once steel structures reach the end of their lifespan
or usage, the steel materials can be dismantled, collected and remelted to manufacture new
products. Recycling steel requires only a fraction of the energy needed to produce new steel
from raw materials. As such, steel recycling has significant environmental benefits like
reducing landfill waste, lowering emissions from mining and manufacturing operations, and
conserving natural resources required for new steel production. In contrast, concrete from
demolished structures typically ends up as landfill waste because it cannot be recycled in the
same way as steel. The raw materials used to produce concrete like sand, gravel and
limestone also require heavy mining operations which result in damages to the environment.
While new concrete mixes are being developed using recycled materials, the current
recycling rate remains low compared to steel. Driven by the increasing awareness of
eco-friendliness and sustainable property development by property developers and
construction contractors, structural steelwork has been increasingly used for construction in
Hong Kong. According to Trade Map, an online trade analysis and information tool
developed by the International Trade Centre, a joint organisation of the World Trade
Organisation and the United Nations Conference on Trade and Development, the import
INDUSTRY OVERVIEW
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quantity by tonnes of structures and components made of iron or steel in Hong Kong
increased from 256.0 thousand tonnes in 2018 to 346.1 thousand tonnes in 2022, at a CAGR
of 7.8%, which indicates an increasing demand for structural steelwork in Hong Kong.
Positive Impact on Gross Floor Area through Structural Steelwork – Steel structures
provide an opportunity to gain usable floor space due to material properties that allow for
more open floor plans and efficient spaces. With smaller column diameters, greater spanning
distances between columns, thinner slabs, and simpler foundations, steel construction
minimises the amount of space required for structural and load-bearing elements. Compared
to concrete alternatives, steel can achieve the same load-bearing capacity with a smaller
physical footprint by enabling more slender and open structural designs. With optimisation,
these inherent efficiencies of steel translate into increased usable floor area and more return
on space. For multi-level buildings where added floor area means added revenue or
occupancy potential, the space-saving qualities of steel become a compelling benefit and
serve as an impetus to the structural steelwork market in Hong Kong.
Market Trends and Opportunities
Advocacy of construction waste sorting and recycling – Construction waste sorting
and recycling has become an important trend that benefits the structural steelwork industry
in Hong Kong. Steel fabrication and erection generate scrap metal, used bolts and other
waste materials that can be recycled. Recycling steel minimises the amount of waste sent to
landfills from construction projects. Widespread recycling will yield more waste steel and
increase the scale of recycling operations. This can boost efficiency for structural steelwork
companies by providing a steady supply of recycled material to reuse. It enhances the
sustainability credentials of the structural steelwork industry, which is an important
consideration for environmentally-conscious clients and is therefore becoming a prevailing
trend.
Growing sophistication in architectural design – Growing sophistication in Hong
Kong’s architectural design can largely spur the opportunities for collaboration, technical
innovation, prestige, and sustainable construction within the structural steel industry. In
particular, sophisticated architectural designs nowadays frequently incorporate curved forms,
angular shapes and intricate details and structural steel is ideal for achieving these
geometries with its ability to be rolled, cut and welded into any form. Steel providers with
advanced fabrication capabilities are well-placed to deliver customised and unique
components. Close collaboration among architects, engineers and structural steelwork
contractors is continuously fostered where they work together to contribute ideas, address
constructability issues, and gain a shared understanding of design intent. Steel companies
that invest in advanced capabilities, flexible design solutions and partnerships with visionary
architects will be at the forefront of progress.
Adoption of structural steel in urban renewal project – Structural steelwork offers
significant advantages for urban renewal projects in Hong Kong being one of the densest
cities where buildable space and time are constrained. Steel construction allows for taller
buildings on compact sites due to lighter materials and smaller foundations that occupy less
area, saving on costs. The light-weight property of steel also permits additional height within
INDUSTRY OVERVIEW
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existing foundations, maximising floor space. With on-going urban redevelopment in Hong
Kong, structural steelwork unlocks substantially higher and faster skyward potential where
foundations cannot be expanded and projects cannot be prolonged.
Market Challenges and Threats
Shortage of Labour – Due to Hong Kong’s ageing population and more stringent
requirements on workers’ skills and qualifications, the structural steelwork industry has been
facing a severe shortage of experienced and skilled labour. According to the Construction
Industry Council, there will be a shortfall of 5,000 to 10,000 skilled construction workers in
Hong Kong until 2023. Among structural steel welder, the workers aged 50 and above
accounted for 60.6% of the workforce by the end of 2022. Lack of sufficient suitable labour
may cause delays in project completion as well as potential quality issues and reworks,
which can lead to cost overruns and declining profitability. Some companies may not be able
to take up new projects or expand their operations due to lack of manpower, which can also
lead to loss of potential business opportunities and slower growth. Overall, the shortage of
labour would pose further cost of operation to industry players and may lead to operational
pressure.
Higher material cost – Over the past five years, prices of major raw materials used in
structural steelwork have experienced significant increase. For example, the price indexes of
steel plates increased from 117.7 in 2018 to 196.3 in 2022. Such increases in material cost
will result in higher expenditures of structural steelwork, which may further negatively
impact their profit margin.
Rising project requirements – In Hong Kong, the structural steelwork industry is
encountering a trend of rising project requirements in respect of sustainability and
compliance. There is a growing focus on sustainability in construction projects in Hong
Kong, which can add complexity to the design and construction process. For example,
incorporating energy-efficient features or green spaces into a building design may require
additional planning and expertise. Hong Kong also has strict building codes and regulations
in place to ensure the safety and quality of construction projects. Compliance with these
regulations can add complexity to the design and construction process of structural steelwork
industry, particularly for large and complex projects.
Hong Kong Government’s Fiscal Deficit - In the face of the challenges of fiscal
deficits and a declining reserve, the government’s ability to allocate funds for infrastructure
development may be limited. According to the Hong Kong Budget 2023 to 2024, the
financial secretary of Hong Kong had forecasted a budget deficit of HK$139.8 billion for
the 2022-23 fiscal year, more than double its original estimate of HK$56.3 billion. The
financial secretary of Hong Kong expected that the budget deficit for the fiscal year ending
31 March 2024 will further increase from the previous estimation of approximately HK$54.4
billion. According to Article 107 of the Basic Law, the Hong Kong government should
follow the principle of keeping the expenditure within the limits of revenues in drawing up
its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget
commensurate with the growth rate of its gross domestic product. As governments may need
to prioritize spending, namely in education and healthcare, and reduce overall expenditure,
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infrastructure projects may face budget cuts or delays. This can impact the construction,
maintenance, and expansion of infrastructure such as roads, bridges, ports, and public
transportation systems.
Whilst the Hong Kong government had allocated budget for infrastructural
development, it is expected that part of it may be financed by the issuance of government
bonds and/or other sources of fund. According to the 2023-24 Budget, it is planned to issue
no less than HK$50 billion of Silver Bond and HK$15 billion of retail green bonds in the
2024 financial year, and to earmark a certain proportion of the future issuances of
Government green bonds and infrastructure bonds for priority investment by MPF funds.
Going forward, the scope of the Government Green Bond Programme would be further
expanded to cover sustainable finance projects, and set up an Infrastructure Bond Scheme to
better manage the cash flow needs of major infrastructure projects.
Public infrastructure works, such as the construction of roads, bridges, and
transportation systems, play a significant role in urban development and act as catalysts for
private construction of buildings, as they enhance connectivity, accessibility, and the overall
attractiveness of an area. The delay in infrastructure works can lead to decrease in demand
for private construction projects such as residential buildings, commercial complexes, and
offices.
Property Market Downturn - The property market downturn in Hong Kong persists,
amidst a falling property demand caused by the slowdown in economic growth and surging
interest rates. According to the Ratings and V aluation Department, the price index of private
residential units in Hong Kong fell by 8.7% in 2023 compared to 2022 and fell by 14.0% in
2023 compared to 2021. The demand for overall property market is still falling. In the first
ten months of 2023, the number of property transactions in Hong Kong dropped by 5.8% on
a year-over-year basis to 37,519 units, with sales volume declining by 4.3% on a
year-over-year basis to HK$345.3 billion over the same period. During a property market
downturn, there is typically a decrease in demand for new construction projects, both in the
residential and commercial sectors, which lead to a slowdown in private construction works
as developers may postpone or cancel planned projects due to decreased market demand.
Cost Structure Analysis
Structural steel welder is one of the general labour types in the structural steelwork
industry. Labour types of the structural steelwork industry also include structural steel
erectors and general workers and labourers. The average daily wage of these workers has
decreased from HK$1,380.2 in 2018 to HK$1,317.2 in 2022 at a CAGR of -1.2%. With the
waning of the COVID-19 epidemic and the gradual resumption of construction work, the
average labour wages in the first half of 2023 has demonstrated an upward trend. With the
positive growth of the structural steelwork industry in Hong Kong, the demand for structural
steelwork workers would continue to grow. Going forward, it is anticipated that between
2023 and 2027, the average daily wages of structural steelwork workers will increase at a
CAGR of approximately 1.5%, reaching HK$1,531.6 by 2027.
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1,380.2 1,371.0
1,406.2 1,379.1 1,317.2 1,443.0 1,464.7 1,488.1 1,508.9 1,531.6
0
500
1,000
1,500
2,000
2,500
HK$
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR 2018-2022 2023E-2027E
Structural Steelwork
Workers -1.2% 1.5%
Structural Steelwork Workers
Average Daily Wage of Workers Engaged in Structural Steelwork Market
(Hong Kong), 2018-2027E
Source: Census and Statistics Department, Frost & Sullivan
Note: The above data refers to the average salary of general workers and labourers, structural steel welders and
structural steel erectors engaged in public sector construction projects.
According to the Census and Statistics Department, the price index of steel plates
increased from 117.7 in 2018 to 196.3 in 2022, at a CAGR of approximately 13.6%.
Specifically, the price index of steel plates in Hong Kong recorded a significant increase
from 123.1 in 2020 to 184.3 in 2021, representing an annual growth rate of approximately
49.7%, primarily due to the decrease in steel production, the cancellation of export tax
rebates of exported steel and the increase in export tariffs on major components of steel in
the PRC. The decrease in steel production in 2021 was mainly due to the restriction on
heavy industry production, including steel sectors, imposed by the PRC Government in order
to reduce carbon emission since 2021. In addition, the PRC Government cancelled the
export tax rebates on 146 kinds of steel products in May 2021, resulting in an increase in
the price of exported steel, including steel plates. From 1 August 2021 onward, the export
tariffs on major components of steel such as high-purity pig iron are adjusted from 15% to
20% and ferrochrome are adjusted from 20% to 40%.
In 2022, the price index of steel plates in Hong Kong further increased to 196.3,
representing an increase of approximately 6.5% as compared to 184.3 in 2021. Such increase
in price of steel was primarily due to further decrease in steel production in the PRC in
2022 and the impact from the fifth wave outbreak of COVID-19. The decrease in steel
production in the PRC in 2022 was mainly due to the abovementioned restrictions imposed
by the PRC Government since 2021. In addition, in response to the fifth wave outbreak of
COVID-19, there were temporary disruptions and partial suspension of the supply and
transportation of construction materials from the PRC to Hong Kong during 2022, resulting
in an increase in price of construction materials, including steel plates.
In 2023, the PRC Government relaxed the measures imposed on containing the
outbreak of COVID-19 which contributed to an increase in the supply of steel from the
PRC. The price index of steel plates in Hong Kong is expected to decrease from 196.3 in
2022 to 171.0 in 2023. Going forward, the price index of steel plates in Hong Kong is
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forecasted to grow at a CAGR of approximately 2.8% from 2023 to 2027 mainly attributable
to work resumption as well as increase in demand from continued infrastructure
development in Hong Kong and automobile manufacturing in the PRC.
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Steel Plates
2017=100
2018-2022 2023E-2027E
CAGR 13.6% 2.8%
Price Trends of Steel Plates (Hong Kong), 2018-2027E
0
100
150
200
117.7
130.3
184.3
123.1
196.3
171.0 176.3 180.3 185.2 191.3
Source: Census and Statistics Department, Frost & Sullivan
COMPETITIVE LANDSCAPE
Overall, the structural steelwork market in Hong Kong is highly competitive with
service providers focusing on both private and public sectors specialising in certain
segments, such as bridges, stadiums and arenas, commercial buildings, other social amenities
and residential buildings. According to the Development Bureau, there are 50 contractors
registered on the List of Approved Specialist Contractors for Public Works maintained by
the Development Bureau under the category of structural steelwork, as of February 2024. As
estimated, there are more than 500 market participants in the structural steelwork industry in
Hong Kong.
With increasing complexity of construction projects, the structural steel contractors
extend their service scope to fulfill the rising client’s expectations. As the market develops
into a mature stage, leading market participants are seeking expansion opportunities through
vertical integration and product portfolio diversification. Some structural steelwork
contractors acquire production or process facilities to leverage operational flexibility by
consolidating all the key segments in the value chain from materials and components
sourcing, manufacturing, processing, to supply and installation of structural steel products.
With the vertically integrated business model, the leading market participants usually
have own processing or manufacturing facilities, which enable them to control production
costs and product quality more effectively and to respond to market demand more quickly.
With their own processing facilities, they are able to ensure a consistent supply of products
for customers and enjoy greater flexibility in adjusting the supply and installation schedules
to meet supplemental orders and tight timeline from unforeseen demand. Specifically, this
strength offers the market participants unparalleled capabilities to drive revenue growth and
expand market shares. Within the pool of over 500 structural steelwork contractors in Hong
Kong, only around 2% of them have possessed in-house capacity to fabricate structural steel.
Our Group is one of the few structural steelwork contractors in Hong Kong who have own
processing or manufacturing facilities.
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The top five players in the structural steelwork market in Hong Kong contributed
17.0% of the entire market in terms of revenue for the year ended 31 December 2022. Our
Group recorded revenue of approximately HK$336.4 million for the provision of structural
steelwork for the year ended 31 December 2022, which accounted for about 3.4% of the
total industry revenue in Hong Kong.
Ranking and Market Share of Structural Steelwork by Revenue (Hong Kong),
year ended 31 December 2022
Rank Companies
Listing
Status
Estimated Revenue
in Y ear ended
31 December 2022 Market Share
(HK$ million) (%)
1 TTE Federal
Construction Limited
Private 475.5 4.8%
2 KPa-BM Holdings
Limited
Listed 426.4 4.3%
3 Our Group Private 336.4 3.4%
4 Goldfield N&W
Construction Company
Limited
Private 250.3 2.5%
5 Goldford Engineering
(HK) Limited
Private 200.0 2.0%
Top five subtotal 1,688.6 17.0%
Others 8,225.0 83.0%
Total 9,913.6 100.0%
1. TTE Federal Construction Limited is a private company engaging in the provision of structural
steelwork in Hong Kong. It has a registered capital of HK$63.3 million.
2. KPa-BM Holdings Limited is a company listed on the Main Board of the Stock Exchange (stock
code: 2663) which is principally engaged in the provision of structural engineering works with a
focus on design and build projects and trading of building material products in Hong Kong. It has a
market capitalisation of approximately HK$155.9 million as at 20 February 2024.
3. Goldfield N&W Construction Company Limited is a private company focusing on civil engineering
and maintenance work including structural steelwork in Hong Kong. It has a registered capital of
HK$30.0 million.
4. Goldford Engineering (HK) Limited is a private company specialising in metal works in Hong Kong.
It has a registered capital of HK$2.5 million.
5. The revenues of the market participants are estimated revenues derived from the provision of
structural steelwork in Hong Kong for the year ended 31 December 2022, based on the published
annual reports, trade interviews and other publicly available information. Actual revenues of the
private companies incorporated in Hong Kong are not available in the public domain.
6. The market shares of the market participants are the ratio of their estimated revenue to the market
size of structural steelwork, which are the estimated figures based on the gross value of construction
works published by the Census and Statistics Department of Hong Kong.
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Factors of Competition
Comprehensive Offering with In-house Capacity – The market for structural steelwork
products is highly competitive and fragmented. To differentiate themselves from other
market participants, structural steelwork providers who offer comprehensive engineering
contracting services are typically preferred by downstream clients, including property
developers and government agencies. In particular, structural steelwork contractors which
possess in-house capacity to process and fabricate structural steel and operate its own
processing or manufacturing facilities are generally able to control production costs and
product quality more effectively, respond to market demand more quickly, ensure a
consistent supply of products for customers and enjoy greater flexibility in adjusting the
supply and installation schedules to meet supplemental orders and tight timeline from
unforeseen demand, thereby facilitating them in improving their profitability and negotiation
power and increasing their market presence.
Established Relationship with stakeholders – Established contractors with stable
relationships with clients are preferred as they have a better understanding of client
requirements. Most importantly, attributable to their abundant construction experience, they
are more capable of providing customised services for clients, including main contractors
and property developers, by saving time and costs in negotiation and coordination and
ensuring that steel structures meet the design and construction requirements accurately. In
addition, maintaining long-term relationships with acknowledged suppliers of raw materials
can help structural steelwork providers maintain competitive pricing and a stable supply of
high-quality materials. It is also crucial for structural steelwork providers to maintain good
relationships with government agencies, as this can help them better understand government
policies and regulations, ensuring that their products and services meet relevant standards
and requirements, and gain trust and support from the Government. Overall, maintaining
good relationships with stakeholders may lead to more opportunities for continued
cooperation and referrals.
Recognition and qualification – Qualification serves as a key factor of competition in
the industry. In particular, the Development Bureau publishes and regularly updates the List
of Approved Suppliers of Materials and Specialist Contractors for Public Works, including
works categories and contract value of public works for tendering, which are accessible by
the public and potential clients. Being recognised by the authority and granted the
qualification to tender for public sector projects with no limitation on the contract value for
structural steelwork suppliers, giving them more business opportunities and increasing the
chance to be considered favourably by construction contractors. Furthermore, structural
steelwork contractors obtaining certain widely recognised certificates including ISO 9001,
ISO 45001, and ISO 14001 in the area of quality system management, occupational health,
and environmental management are more competitive in the market.
Entry Barriers
Proven Track Record – In general, structural steelwork encompasses various
infrastructure and facilities such as bridges, public venues and contractors are required to
deliver high-quality of works within the prescribed timeframe and budget. Defective
designed structural steelwork can lead to damage to existing facilities or utilities, such as
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structural fractures leading to prolonged construction periods, greater property damage and
safety hazards. In addition, clients of structural steelwork (e.g. Hong Kong government,
large property developers) would evaluate contractors in different aspects such as quality of
works, timeliness of project delivery as well as capability of meeting safety and
environmental requirements as part of their assessment criteria for tender awards. New
entrants without sound reputation founded on the past collaboration with the industry
stakeholders and experience in delivering structural steelwork would hurdle its market
presence.
Initial Capital Requirements – As a significant amount of capital is required for the
recruitment and training of workers, the procurement of raw materials and equipment, as
well as the establishment of on-site warehousing and factory for fabrication, the capital
demand poses an obstacle to new entrants to the structural steelwork industry. Structural
steelwork contractors generally experience net cash outflows as project up-front costs at the
early stage of a project. The up-front costs generally include payment made to suppliers for
materials, subcontracting fees for construction site works subcontractors and structural steel
fabrication works subcontractors, manufacturing overheads and machinery service fees. In
addition, large amount of capital may be required for the issuance of performance guarantee
for sizable construction projects as requested by new customers, which is usually equivalent
to 10% of the contract sum. Failure to make timely payments for production or construction
costs and/or issuance of performance guarantee may delay project schedules and/or affect the
credibility of the structural steelwork contractor. Additionally, given that payments are
usually settled based on the completion of the construction work, it is more common for
contractors to advance funds early. In addition, sufficient capital reserves could demonstrate
the capacity to cope with risks like material shortages, equipment failures, etc., which is
equally beneficial for contractors to bid and engage in sizeable construction projects.
Technical Know-how – Technical knowledge is one of the key barriers for new market
entrants to structural steelwork industry. Existing market participants generally have a strong
understanding of the design, fabrication, and installation of steel components and module
units in order to deliver quality services. Specifically, steel structures are usually used for
high-rise, long-span, complex architectural shapes which require the capacity of heavy loads
or crane lifting, and high-temperature durability and so on, therefore the contractors need to
consider the steel properties to select steel structures, such as frames, grids, and cables
which vary according to the application. And only expertise with sufficient construction
experience and mechanical knowledge can conduct layout design in consideration of the
system characteristics, load distribution and properties from a comprehensive perspective.
With such technical know-how, the quality of work can be assured and the diversified
demand of customers can be met.
COMPETITIVE STRENGTHS OF OUR GROUP
Please refer to the paragraph headed “Business – Competitive strengths” in this
prospectus for a detailed discussion of the competitive strengths of our Group.
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OVERVIEW
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel for construction projects in Hong Kong. We
also have a subsidiary in the PRC, namely Wing Kei Dongguan, which leased the Dapianmei
Production Facility and the Xinlong Production Facility to fabricate structural steel for the
structural steelwork projects in Hong Kong undertaken by Wing Kei Hong Kong. This
section sets out a summary of certain aspects of Hong Kong and PRC laws, rules and
regulations that are relevant to our operations and business.
HONG KONG
Laws and Regulations in relation to Labour, Health and Safety
Construction Workers Registration Ordinance (Chapter 583 of the Laws of Hong Kong)
Construction Workers Registration Ordinance requires construction workers to be
registered for carrying out construction work on a construction site. Under section 40 of the
Construction Workers Registration Ordinance, no person shall be registered as a registered
construction worker unless the Registrar of Construction Workers is satisfied, among other
things, that the person has attended the relevant construction work-related safety training
course. Further, under section 44 of the Construction Workers Registration Ordinance, the
Registrar of Construction Workers shall not renew the registration of a person unless the
Registrar of Construction Workers is satisfied that, among other things, (i) the person has
attended the relevant construction work-related safety training course; and (ii) if the
registration will, on the date of expiry, have been in effect for not less than two years, the
person has attended and completed, during the period of one year immediately before the
date of application for renewal of the registration, such development courses applicable to
his registration as the Construction Industry Council may specify.
The Construction Workers Registration Ordinance also contains a “designated workers
for designated skills” provision, which provides that only registered skilled or semi-skilled
workers of designated trade divisions are permitted to carry out construction works on
construction sites relating to those trade divisions independently. Unregistered skilled or
semi-skilled workers are only allowed to carry out construction works of designated trade
divisions (i) under the instruction and supervision of registered skilled or semi-skilled
workers of relevant designated trade division(s); (ii) in proposed emergency works (i.e.
construction works which are made or maintained consequential upon the occurrence of
emergency incidents); or (iii) in small-scale construction works (e.g. value of works not
exceeding HK$100,000). Registered skilled and semi-skilled workers for designated trade
divisions shall be included as registered construction workers of the Register of Construction
Workers, and accordingly, subcontractors of construction sites are required to employ only
registered skilled and semi-skilled workers for designated trade divisions to carry out
construction works on construction sites in relation to those trade divisions independently.
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Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of Hong Kong)
Under the Factories and Industrial Undertakings Ordinance, it is the duty of a
proprietor of an industrial undertaking to take care of, so far as is reasonably practicable,
the health and safety at work of all persons employed by him at the industrial undertaking.
The duties of a proprietor extend to include (1) providing and maintaining plant and work
systems that do not endanger safety or health; (2) making arrangements for ensuring safety
and health in connection with the use, handling, storage and transport of articles and
substances; (3) providing all necessary information, instructions, training and supervision for
ensuring safety and health; (4) providing and maintaining safe access to and egress from the
workplaces; and (5) providing and maintaining a safe and healthy working environment.
Matters regulated under the subsidiary regulations of the Factories and Industrial
Undertakings Ordinance, including the Construction Sites (Safety) Regulations (Chapter 59I
of the Laws of Hong Kong), include (i) the prohibition of employment of persons under 18
years of age (save for certain exceptions); (ii) the maintenance and operation of hoists; (iii)
the duty to ensure safety of places of work; (iv) prevention of falls; (v) safety of
excavations; (vi) the duty to comply with miscellaneous safety requirements; and (vii)
provision of first aid facilities. Non-compliance with any of these rules commits an offence.
In addition, under the Factories and Industrial Undertakings (Safety Management)
Regulation (Chapter 59AF of the Laws of Hong Kong), any contractor (i) in relation to
construction work with a contract value of HK$100 million or more; or (ii) in relation to
construction work having an aggregate of 100 or more workers in a day working in a single
construction site; or (iii) in relation to construction work having an aggregate of 100 or
more workers in a day working in two or more construction sites is obliged to appoint a
safety auditor to conduct a safety audit to collect, assess and verify information on the
efficiency, effectiveness and reliability of its safety management system and consider
improvements to the system at least once in every six months. Further, any contractor (i) in
relation to construction work having an aggregate of 50 or more but less than 100 workers
in a day working in a single construction site; or (ii) in relation to construction work having
an aggregate of 50 or more but less than 100 workers in a day working in two or more
construction sites is obliged to appoint a person, being a person who is capable of
competently carrying out a safety review, to be the safety review officer to conduct a safety
review to review the effectiveness of its safety management system and consider
improvements to the effectiveness of the system at least once in every six months.
According to the Factories and Industrial Undertakings (Safety Management)
Regulation, the safety auditor shall (i) be a registered safety officer under the Factories and
Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations (Chapter 59Z
of the Laws of Hong Kong); (ii) have not less than three years’ full-time experience, in the
five years period immediately preceding the application for registration with the Labour
Department, in a managerial post responsible for industrial safety and health matters in
respect of an industrial undertaking; (iii) occupy, at the time of the application for
registration with the Labour Department, the managerial post or a like post; (iv) have
successfully completed a scheme conducted by a registered scheme operator; and (v)
understand the requirements under legislation in Hong Kong relating to industrial safety and
health matters. Pursuant to the Code of Practice on Safety Management issued by the Labour
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Department, a safety auditor should (i) understand his task and be competent to carry it out;
(ii) be familiar with the industry and the processes being carried out in the relevant
industrial undertaking; (iii) have a good knowledge of the safety management practices in
the industry; and (iv) have the necessary experience and knowledge to enable him to
evaluate performance and identify deficiencies effectively, while a safety review officer
should (i) have a good understanding of the operation of the relevant industrial undertaking
in respect of which he conducts the safety review; (ii) have a good understanding of the
legal requirements in force in Hong Kong relating to industrial safety and health; and (iii)
have received appropriate training in how to review the effectiveness of a safety
management system with a view to improving it.
Factories and Industrial Undertakings (Loadshifting Machinery) Regulation (Chapter
59AG of the Laws of Hong Kong) (the “Loadshifting Machinery Regulations”)
Under regulation 3 of the Loadshifting Machinery Regulations, the responsible person
of a loadshifting machine shall ensure that the machine is only operated by a person who (i)
has attained the age of 18 years; and (ii) holds a valid certificate applicable to the type of
loadshifting machine to which that machine belongs. Under the Loadshifting Machinery
Regulations, loadshifting machines used in industrial undertakings refer to forklift trucks,
while loadshifting machines used on construction sites refer to a bulldozer, a loader, an
excavator, a truck, a lorry, a compactor, a dumper, a grader, a locomotive and a scraper. For
the purpose of the Loadshifting Machinery Regulations, the responsible person means a
person who is having the management or in charge of the machine but does not include a
person who operates the machine, and the contractor who has control over the way any
construction work which involves the use of the machine is carried out and, in the case of a
loadshifting machine situated on or used in connection with work on a construction site, also
means the contractor responsible for the construction site.
Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)
Under the Occupational Safety and Health Ordinance, employers must as far as
reasonably practicable ensure the safety and health in their workplaces by:
 providing and maintaining plant and systems of work that are safe and without
risks to health;
 making arrangements for ensuring safety and absence of risks to health in
connection with the use, handling, storage or transport of plant or substances;
 as regards any workplace under the employer’s control:
– maintenance of the workplace in a condition that is safe and without risks to
health; and
– provision and maintenance of means of access to and egress from the
workplace that are safe and without any such risks;
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 providing all necessary information, instructions, training and supervision for
ensuring safety and health; and
 providing and maintaining a working environment for the employer’s employees
that is safe and without risks to health.
Failure to comply with any of the above provisions constitutes an offence. The
Commission for Labour may also issue an improvement notice against non-compliance of
the Occupational Safety and Health Ordinance or the Factories and Industrial Undertakings
Ordinance or suspension notice against activity in or condition of the workplace which may
create imminent risk of death or serious bodily injury. Failure to comply with such notice
without reasonable excuse constitutes an offence.
Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)
Under the Employees’ Compensation Ordinance, if an employee sustains an injury or
dies as a result of an accident arising out of and in the course of his employment, his
employer is in general liable to pay compensation even if the employee might have
committed acts of faults or negligence when the accident occurred. Similarly, an employee
who suffers incapacity arising from an occupational disease is entitled to receive the same
compensation as that payable to employees injured in occupational accidents.
According to section 15(1A) of the Employees’ Compensation Ordinance, employer
shall report work injuries of its employee to the Commissioner of Labour not later than 14
days after the accident, irrespective of whether the accident gives rise to any liability to pay
compensation. According to section 24 of the Employees’ Compensation Ordinance, a
principal contractor shall be liable to pay compensation to subcontractors’ employees who
are injured in the course of their employment to the subcontractor. The principal contractor
is, nonetheless, entitled to be indemnified by the subcontractor who would have been liable
to pay compensation to the injured employee. The employees in question are required to
serve a notice in writing on the principal contractor before making any claim or application
against such principal contractor.
Pursuant to section 40 of the Employees’ Compensation Ordinance, all employers
(including contractors and subcontractors) are required to take out insurance policies to
cover their liabilities both under the Employees’ Compensation Ordinance and at common
law for injuries at work in respect of all their employees (including full-time and part-time
employees). Under section 40(1B) of the Employees’ Compensation Ordinance, where a
principal contractor has undertaken to perform any construction work, it may take out an
insurance policy for an amount not less than HK$200 million per event to cover his liability
and that of his subcontractor(s) under the Employees’ Compensation Ordinance and at
common law. Where a principal contractor has taken out a policy of insurance under section
40(1B) of the Employees’ Compensation Ordinance, the principal contractor and a
subcontractor insured under the policy shall be regarded as having complied with section
40(1) of the Employees’ Compensation Ordinance.
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An employer who fails to comply with the Employees’ Compensation Ordinance to
secure an insurance cover is liable on conviction upon indictment to a fine at level 6
(currently at HK$100,000) and to imprisonment for two years.
Limitation Ordinance (Chapter 347 of the Laws of Hong Kong)
Under the Limitation Ordinance, the time limit for an applicant to commence
employees’ compensation claims in two years, while that for common law claims for
personal injuries is three years, from the date on which the cause of action accrued.
Employment Ordinance (Chapter 57 of the Laws of Hong Kong)
A principal contractor shall be subject to the provisions on subcontractor’s employees’
wages in the Employment Ordinance. According to section 43C of the Employment
Ordinance, a principal contractor or a principal contractor and every superior subcontractor
jointly and severally is/are liable to pay any wages that become due to an employee who is
employed by a subcontractor on any work which the subcontractor has contracted to
perform, and such wages are not paid within the period specified in the Employment
Ordinance. The liability of a principal contractor and superior subcontractor (where
applicable) shall be limited to (a) the wages of an employee whose employment relates
wholly to the work which the principal contractor has contracted to perform and whose
place of employment is wholly on the site of the building works; and (b) the wages due to
such an employee for two months (such months shall be the first two months of the period
in respect of which the wages are due).
An employee who has outstanding wage payments from subcontractor must serve a
notice in writing on the principal contractor within 60 days after the wage due date. A
principal contractor and superior subcontractor (where applicable) shall not be liable to pay
any wages to the employee of the subcontractor if that employee fails to serve a notice on
the principal contractor.
Upon receipt of such notice from the relevant employee, a principal contractor shall,
within 14 days after receipt of the notice, serve a copy of the notice on every superior
subcontractor to that subcontractor (where applicable) of whom he is aware. A principal
contractor who without reasonable excuse fails to serve notice on the superior
subcontractor(s) shall be guilty of an offence and shall be liable on conviction to a fine at
level 5 (currently at HK$50,000). Pursuant to section 43F of the Employment Ordinance, if
a principal contractor or superior subcontractor pays to an employee any wages under
section 43C of the Employment Ordinance, the wages so paid shall be a debt due by the
employer of that employee to the principal contractor or superior subcontractor, as the case
may be. The principal contractor or superior subcontractor who pays an employee any wages
under section 43C of the Employment Ordinance may either (i) claim contribution from
every superior subcontractor to the employee’s employer or from the principal contractor
and every other such superior subcontractor as the case may be, or (ii) deduct by way of
set-off the amount paid by him from any sum due or may become due to the subcontractor
in respect of the work that he has subcontracted.
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Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong)
The Occupiers Liability Ordinance imposes a common duty of care on an occupier of
premises to take such care as in all the circumstances of the case is reasonable to see that
the visitor will be reasonably safe in using the premises for the purposes for which he is
invited or permitted by the occupier to be there.
Immigration Ordinance (Chapter 115 of the Laws of Hong Kong)
According to section 38A of the Immigration Ordinance, a construction site controller
(i.e. the principal or main contractor and includes a subcontractor, owner, occupier or other
person who has control over or is in charge of a construction site) shall take all practicable
steps to (i) prevent having illegal immigrants from being on site or (ii) prevent illegal
workers who are not lawfully employable from taking employment on site.
Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)
The Minimum Wage Ordinance provides for a prescribed minimum hourly wage rate
(set at HK$40 per hour as at the Latest Practicable Date) during the wage period for every
employee engaged under a contract of employment under the Employment Ordinance.
Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong)
(“MPF Schemes Ordinance”)
Employers are required to enroll their regular employees (except for certain exempt
persons) aged between at least 18 but under 65 years of age and employed for 60 days or
more in a Mandatory Provident Fund (“ MPF”) scheme within the first 60 days of
employment.
For both employees and employers, it is mandatory to make regular contributions into a
MPF scheme. For an employee, subject to the maximum and minimum levels of income (set
at HK$30,000 and HK$7,100 per month, respectively, as at the Latest Practicable Date), an
employer will deduct 5% of the relevant income on behalf of an employee as mandatory
contributions to a registered MPF scheme with a ceiling (set at HK$1,500 as at the Latest
Practicable Date). Employer will also be required to contribute an amount equivalent to 5%
of an employee’s relevant income to the MPF scheme, subject only to the maximum level of
income (set at HK$30,000 as at the Latest Practicable Date).
Laws and Regulations in relation to Environmental Protection
Air Pollution Control Ordinance (Chapter 311 of the Laws of Hong Kong)
A contractor shall observe and comply with the Air Pollution Control Ordinance and its
subsidiary regulations, including the Air Pollution Control (Construction Dust) Regulation
(Chapter 311R of the Laws of Hong Kong). The contractor responsible for a construction
site shall devise, arrange methods of working and carry out the works in such a manner so
as to minimise dust impacts on the surrounding environment, and shall provide experienced
personnel with suitable training to ensure that these methods are implemented.
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Air Pollution Control (Construction Dust) Regulation (Chapter 311R of the Laws of Hong
Kong)
Under section 3 of the Air Pollution Control (Construction Dust) Regulation, the
contractor responsible for a construction site where any notifiable work is proposed to be
carried out shall give notice to the public officer appointed under the Air Pollution Control
Ordinance of the proposal to carry out the work. Such “notifiable work” includes site
formation, reclamation, demolition of a building, work carried out in any part of a tunnel
that is within 100 metres of any exit to the open air, construction of the foundation of a
building, construction of the superstructure of a building or road construction work.
Noise Control Ordinance (Chapter 400 of the Laws of Hong Kong)
The Noise Control Ordinance controls, among others, the noise from construction,
industrial and commercial activities. For construction activities that are to be carried out
during the restricted hours and for percussive piling during the daytime, not being a general
holiday, construction noise permits are required from the Director of the Environmental
Protection Department in advance. Under the Noise Control Ordinance, construction works
that produce noises and the use of powered mechanical equipment (other than percussive
piling) are not allowed between 7:00 p.m. and 7:00 a.m. or at any time on general holidays,
unless prior approval has been granted by the Director of the Environmental Protection
Department through the construction noise permit system.
Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong)
A contractor shall observe and comply with the Waste Disposal Ordinance and its
subsidiary regulations, including the Waste Disposal (Charges for Disposal of Construction
Waste) Regulation (Chapter 354N of the Laws of Hong Kong). Under the Waste Disposal
(Charges for Disposal of Construction Waste) Regulation, construction waste can only be
disposed at designated prescribed facilities and a main contractor who undertakes
construction work with a value of HK$1 million or above will be required, within 21 days
after being awarded the contract, to establish a billing account in respect of that particular
contract with the Director of the Environmental Protection Department to pay any disposal
charges for the construction waste generated from the construction work under that contract.
Public Health and Municipal Services Ordinance (Chapter 132 of the Laws of Hong
Kong)
Pursuant to section 127 of the Public Health and Municipal Services Ordinance, where
a nuisance notice is served on the person by reason of whose act, default or sufferance the
nuisance arose or continues, or if that person cannot be found, on the occupier or owner of
the premises or vessel on which the nuisance exists, then if either the nuisance to which the
notice relates arose by reason of the wilful act or default of that person; or that person fails
to comply with any of the requirements of the notice within the period specified therein, that
person shall be guilty of an offence. (1) Emission of dust from any building under
construction or demolition in such manner as to be a nuisance; (2) any accumulation of
water on any premises found to contain mosquito larvae or pupae; (3) any accumulation or
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deposit which is a nuisance or injurious to health; and (4) any premises in such a state as to
be a nuisance or injurious to health are actionable under the Public Health and Municipal
Services Ordinance.
Laws and Regulations in relation to Construction Works
Buildings Ordinance (Chapter 123 of the Laws of Hong Kong)
The Buildings Ordinance provides that before the commencement of any building
works: (i) prior approval and consent from the Building Authority must be obtained; (ii)
authorised persons, such as architects, engineers and surveyors registered under the
Buildings Ordinance, must be appointed to coordinate the works, prepare and submit plans
for the approval from the Building Authority; (iii) registered professionals must be appointed
to design and supervise the works; and (iv) registered contractors must be appointed to carry
out the works. Section 14(1) of the Buildings Ordinance provides that no person shall
commence or carry out any building works without having obtained such prior approval and
consent from the Building Authority and such proper appointments. According to section
41(3) of the Buildings Ordinance, building works (other than drainage works, ground
investigation in the scheduled areas, site formation works and minor works) in any building
are exempt from the requirement for approval and consent from the Building Authority if the
works do not involve the structure of the building.
If the building works are within the purview of section 41(3) of the Buildings
Ordinance, the works must further comply with the building standards specified in the
relevant Building Regulations empowered under the Buildings Ordinance. The Buildings
Ordinance further requires that any authorised person of the buildings works must be
appointed by the ultimate beneficiary of the works, the employer of the works or the
contractor.
Laws and Regulations in relation to Contractor Licensing Regime and Operation
Registered Specialist Trade Contractors Scheme
As at the Latest Practicable Date, Wing Kei Hong Kong was registered as a registered
subcontractor in the Registered Specialist Trade Contractors Scheme of the Construction
Industry Council under the trade category of 01.08 Structural Steelwork.
Subcontractors which are involved in, among others, structural steelwork trades in
Hong Kong may apply for registration under the Registered Specialist Trade Contractors
Scheme managed by the Construction Industry Council. The Subcontractor Registration
Scheme (replaced by the Registered Specialist Trade Contractors Scheme on 1 April 2019)
was formerly known as the V oluntary Subcontractor Registration Scheme (the “ VSRS”),
which was introduced by the Provisional Construction Industry Co-ordination Board (the
“PCICB ”). The PCICB was formed in September 2001 to spearhead industry reform and to
pave way for the early formation of the statutory industry coordinating body.
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A technical circular issued by the Works Branch of the Development Bureau (then the
Environment, Transport and Works Bureau) (“ WBDB”) on 14 June 2004 (now subsumed
into the Project Administration Handbook for Civil Engineering Works by the Civil
Engineering and Development Department) requires that all public works contractors with
tenders to be invited on or after 15 August 2004 to employ all subcontractors (whether
nominated, specialist or domestic) registered from the respective trades available under the
VSRS. After the Construction Industry Council took over the work of the PCICB in
February 2007 and the VSRS in January 2010, the Construction Industry Council launched
stage two of the VSRS in January 2013. VSRS was also then renamed Subcontractor
Registration Scheme. All subcontractors registered under the VSRS have automatically
become registered subcontractors under the Subcontractor Registration Scheme.
With effect from 1 April 2019, the Registered Specialist Trade Contractors Scheme
replaced the Subcontractor Registration Scheme. The Registered Specialist Trade Contractors
Scheme comprises of two registers: the Register of Specialist Trade Contractors (“ RSTC”)
and the Register of Subcontractors (“ RS”). All subcontractors who are registered under the
seven trades namely demolition, concreting formwork, reinforcement bar fixing, concreting,
scaffolding, curtain wall and erection of concrete precast component of the Subcontractor
Registration Scheme have automatically become Registered Specialist Trade Contractors and
no application is required. All subcontractors who are registered under the remaining trades
of the Subcontractor Registration Scheme have been retained as registered subcontractors
and no application is required.
Categories of registration
Subcontractors may apply for registration on the Subcontractor Registration Scheme in
one or more of 52 trades covering common structural, civil, finishing, electrical and
mechanical works and supporting services. The 52 trades further branch out into around 94
specialties, including general demolition, and others (concrete coring and saw cutting) etc.
Since 1 April 2019, subcontractors may apply for registration on the RSTC in one or more
of the seven designated trades including demolition, reinforcement bar fixing, erection of
concrete precast component, concreting formwork, concreting, scaffolding and curtain wall
and on the RS in other common civil, building, electrical and mechanical trades.
Where a contractor is to subcontract/sub-let part of the public works involving trades
available under the Primary Register (a list of companies registered in accordance with the
Rules and Procedures for the Primary Register of the Registered Specialist Trade Contractors
Scheme) of the Registered Specialist Trade Contractors Scheme, it shall engage all
subcontractors (whether nominated, specialist or domestic) who are registered under the
relevant trades in the Primary Register of the Registered Specialist Trade Contractors
Scheme. Should the subcontractors further subcontract (irrespective of any tier) any part of
the public works subcontracted to them involving trades available under the Primary
Register of the Registered Specialist Trade Contractors Scheme, the contractor shall ensure
that all subcontractors (irrespective of any tier) are registered under the relevant trades in
the Primary Register of the Registered Specialist Trade Contractors Scheme.
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Applications for registration under the RSTC are subject to a number of requirements
based on the relevant trade category and tender limits as detailed in Schedule 2 of the Rules
and Procedures for the Register of Specialist Trade Contractors and the Rules and
Procedures for the Register of Subcontractors both issued by the Construction Industry
Council in January 2024.
Both registered subcontractor and the registered specialist trade contractor shall apply
for renewal not earlier than six months but not later than three months before the expiry
date of its registration by submitting an application to the Construction Industry Council in a
specified form and accompanied by the prescribed fees and documents. The committee on
Registered Specialist Trade Contractors Scheme which oversees the Registered Specialist
Trade Contractors Scheme (the “ RSTC Committee ”) may not renew the registration of any
registered subcontractor or registered specialist trade contractor unless the RSTC Committee
at its sole discretion is satisfied that (i) the registered subcontractor or registered specialist
trade contractor meets all the relevant renewal requirements; and (ii) the registered
subcontractor or registered specialist trade contractor is suitable for renewal. The RSTC
Committee may impose additional conditions for the renewal of registration of any
registered subcontractor or registered specialist trade contractor as it thinks fit. Having
regard to needs of the designated trades and groupings, the RSTC Committee may approve
and renew the registration of a registered specialist trade contractor despite the registered
specialist trade contractor does not fully satisfy the registration requirements. An approved
renewal for a registered subcontractor and a registered specialist trade contractor shall be
valid for not less than 36 months after the decision date for that application for renewal.
Codes of Conduct
A registered subcontractor and a registered specialist trade contractor shall establish
and promulgate its integrity policy and code of conduct with reference to the Integrity
Policy and Code of Conduct Guidance Document (Schedule 3 of the Rules and Procedures
for the Register of Specialist Trade Contractors and the Rules and Procedures for the
Register of Subcontractors).
The circumstances that may lead to regulatory actions be taken against a registered
specialist trade contractor or a registered subcontractor include, but are not limited to (a) a
petition for winding-up or bankruptcy has been filed against the registered specialist trade
contractor or the registered subcontractor or other financial problems; (b) failure of the
registered specialist trade contractor or the registered subcontractor to answer queries or
provide information relevant to the registration within the prescribed time specified by the
RSTC Committee; (c) misconduct or suspected misconduct of the registered specialist trade
contractor or the registered subcontractor; (d) court conviction or violation of any law by the
registered specialist trade contractor or the registered subcontractor, including but not limited
to the Factories and Industrial Undertakings Ordinance, Occupational Safety and Health
Ordinance, Employment Ordinance, Mandatory Provident Fund Schemes Ordinance,
Immigration Ordinance, Prevention of Bribery Ordinance, Construction Industry Council
Ordinance, Construction Workers Registration Ordinance; (e) matters of public interest; (f)
causing or contributing to the occurrence of a serious incident taking place in any public or
private construction site resulting in one or more of the following circumstances (i) loss of
life; (ii) serious bodily injury resulting in a loss or an amputation of a limb or permanent
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total disablement to the injured or (iii) dangerous occurrence or incident leading to or
resulting in injuries that are considered serious or damage to works or property that posed a
potential threat to public safety; (g) serious or suspected serious poor performance in any
public or private sector works contract; and (h) failure of the registered specialist trade
contractor or the registered subcontractor to comply with any provisions of the rules and
procedures for the Registered Specialist Trade Contractors Scheme.
Regulatory actions
The RSTC Committee may instigate regulatory actions against a registered specialist
trade contractor or a registered subcontractor (where applicable) by directing that:
(a) written warning be given to the registered specialist trade contractor or the
registered subcontractor;
(b) the registered specialist trade contractor or the registered subcontractor be
suspended from registration for a specified period;
(c) the grouping of a registered specialist trade contractor be changed; or
(d) the registration of the registered specialist trade contractor or the registered
subcontractor be revoked.
Proposed Security of Payment Legislation (“SOPL”)
The Government has conducted a public consultation on the SOPL for the construction
industry to promote fair payment and help main contractors, subcontractors, consultants,
sub-consultants and suppliers to receive payment on time for work done and services
provided, so as to improve payment practices and provide rapid dispute resolution. It is
expected that the bill of the SOPL will be submitted to the Legislative Council of Hong
Kong in 2024 for consideration for enactment.
The SOPL will, among others:
 prohibit “pay when paid” and similar terms in contracts, which refer to provisions
in contracts that make payment contingent or conditional on the operation of other
contracts or agreements, meaning that payment is conditional on the payer
receiving payment from a third party;
 prohibit payment periods of more than 60 calendar days for interim payments and
120 calendar days for final payments;
 enable parties who are entitled to progress payments under the terms of a contract
covered by the SOPL to claim such payments as statutory payment claims, upon
receipt of which the payer has 30 calendar days to serve a payment response, and
parties who are entitled to payments under statutory payment claims will be
entitled to pursue adjudication if the statutory payment claims are disputed or
ignored; and
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 grant parties the right to suspend or reduce the rate of progress of works after
either non-payment of an adjudicator’s decision or non-payment of amounts
admitted as due.
All contracts and sub-contracts, whether in written or oral form, for (i) government
works, under which the Government and specified public entities procure construction and
maintenance activities or related services, materials or plant; and (ii) private sector works,
under which private entities procure construction activities for new buildings (as defined in
the Buildings Ordinance) with a main contract value of over HK$5 million or procure
related services, material or plant or supply-only contracts with a contract value of over
HK$500,000, will be governed by the SOPL. Where the main contract is covered by the
SOPL, all subcontracts (irrespective of tier) will be covered by the SOPL regardless of
value. The legislation will not apply to private sector construction works relating to new
buildings with a main contract value of less than HK$5 million or related services, material
or plant supply-only contracts with a contract value of less than HK$500,000.
The proposed legislation will not apply retrospectively but will apply only to contracts
entered on or after a date to be set by or pursuant to the legislation.
The SOPL is designed to assist contractors throughout the contractual chain to ensure
cash-flow and access to a swift dispute resolution process. However, there are still
uncertainties on the final legislative framework to be submitted to the Legislative Council
for consideration and approval.
List of Approved Suppliers of Materials and Specialist Contractors for Public Works
If a contractor wishes to carry out structural steelwork projects of the Development
Bureau, it must be included in the List of Approved Suppliers of Materials and Specialist
Contractors for Public Works (the “ Approved Specialist List ”) which is administered by the
Works Branch of the Development Bureau. The Approved Specialist List comprises
suppliers/specialist contractors who are approved for carrying out works in one or more of
the 46 categories of specialist works, including “Structural Steelwork”.
Generally, contractors are required to meet the financial, technical, management,
personal and safety criteria applicable to their appropriate category and group for admission
and retention on the approved lists and for the award of public work contracts. For retention
on the Approved Specialist List, a contractor should generally possess at least a positive
capital value. In addition, a contractor is required to maintain minimum levels of paid-up
share capital, employed capital and working capital applicable to the appropriate category
and group.
The minimum levels of paid-up share capital, employed capital and working capital for
“Structural Steelwork” is currently HK$1,800,000. In terms of experience, satisfactory
completion of at least three projects in the fabrication and erection of structural steelworks
for permanent civil engineering or building structures in the past three years is required,
each with a value of HK$0.8 million or more. In terms of top management, at least one
member of the top management shall have a minimum experience of five years, out of
which three years shall be local experience, in managing a construction firm obtained in the
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past eight years. In terms of technical staff, there should be (i) at least one professional staff
experienced in the design, fabrication and erection of structural steelworks; (ii) at least two
technical staff at supervisory level experienced in the fabrication and erection of structural
steelworks; and (iii) skilled workers from local workforce for erection of structural
steelwork including at least three registered skilled workers of trade division “Metal-steel
Worker (Master)” or “Structural Steel Erector” in the trade “Metal-steel Worker” under the
Construction Workers Registration Ordinance (Chapter 583 of the Laws of Hong Kong) and
at least three qualified welders to BS 4570, BS EN 287-1 or BS 4872:Part 1 as appropriate.
In terms of plant and equipment, the appropriate plant and equipment include welding plant,
lifting crane, drilling machine, bending machine, lathe, shearing machine, flame cutting
machine, plate rolling machine, grit blasting equipment, grinder, planing, shaping and
slotting machine, milling machine, boring and surfacing machines, oven/cabinet with drying
facilities for storing electrodes.
Laws and Regulations in relation to Competition
Competition Ordinance (Chapter 619 of the Laws of Hong Kong)
The Competition Ordinance prohibits and deters undertakings in all sectors from
adopting anti-competitive conduct which prevents, restricts or distorts competition in Hong
Kong. The Competition Ordinance establishes the first conduct rule and the second conduct
rule, which prohibit anti-competitive agreements and abuse of market power, respectively.
The first conduct rule prohibits businesses from making or giving effect to an
agreement, engaging in a concerted practice, or making or giving effect to a decision of an
association, if the agreement concerned has the object or effect to harm competition in Hong
Kong. The second conduct rule prohibits businesses with a substantial degree of market
power from abusing its power through engaging in conduct that has the object or effect to
harm competition in Hong Kong.
Serious anti-competitive conduct is defined under section 2(1) of the Competition
Ordinance as any conduct that comprises any one or combination of the following: (i)
fixing, maintaining, increasing or controlling the price for the supply of goods or services;
(ii) allocating sales, territories, customers or markets for the production or supply of goods
and services; (iii) fixing, maintaining, controlling, preventing, limiting or eliminating the
production or supply of goods and services; and (iv) bid-rigging.
Section 82 of the Competition Ordinance provides that if the Competition Commission
has any reasonable cause to believe that a contravention of the first conduct rule has
occurred and the contravention does not involve serious anti-competitive conduct, it shall
issue a warning notice to the undertaking, before bringing proceedings in the Competition
Tribunal against the undertaking.
Section 67 of the Competition Ordinance provides that where a contravention of the
first conduct rule has occurred and such contravention involves serious anti-competitive
conduct or a contravention of the second conduct rule has occurred, the Competition
Commission may, instead of commencing proceedings against the person concerned, issue an
infringement notice offering not to bring proceedings on the condition that the person
commits to comply with the requirements of the infringement notice.
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In the event of the breaches of the Competition Ordinance, the Competition Tribunal
may make orders including, among others: (i) imposing a pecuniary penalty if satisfied that
an entity has contravened a competition rule; (ii) disqualifying a person from acting as a
director of a company or taking part in the management of a company; (iii) prohibiting an
entity from making or giving effect to an agreement; (iv) modifying or terminating an
agreement; and (v) requiring the payment of damages to a person who has suffered loss or
damage.
Laws and Regulations in relation to Tax and Transfer Pricing
Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the “IRO”)
As our Group carries out business in Hong Kong, we are subject to the profits tax
regime under the IRO. As at the Latest Practicable Date, the standard profits tax rate for
corporations was at 8.25% on assessable profits up to HK$2,000,000; and 16.5% on any part
of assessable profits over HK$2,000,000 (namely, two-tiered tax rates). The application of
the two-tiered rates is restricted to only one entity nominated among group entities for a
year of assessment. The standard profits tax rate for corporations not applying two-tiered tax
rates was 16.5% on assessable profits.
In July 2018, the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (the
“Amendment Ordinance ”) was enacted to introduce a legislative framework to codify how
the pricing for the supply of goods and services between associated parties should be
determined and implemented. Codified international transfer pricing principles include,
amongst others, the arm’s length principle for provision between associated persons, the
separate enterprises principle for attributing income or loss of non-Hong Kong resident
person, and the three-tier transfer pricing documentation relating to the master file, local file
and country-by-country reporting.
Based on the Amendment Ordinance, a person who has a Hong Kong tax advantage if
taxed on the basis of a non-arm’s length provision (the “ Advantaged Person ”) will have
income adjusted upwards or loss adjusted downwards. The Advantaged Person’s income or
loss is to be computed as if arm’s length provision had been made or imposed instead of the
actual provision. If the Advantaged Person fails to prove to the satisfaction of the assessor
of the Inland Revenue Department that the amount of the person’s income or loss as stated
in the person’s tax return is an arm’s length amount, the assessor of the Inland Revenue
Department must estimate an amount as the arm’s length amount and, taking into account
the estimated amount (a) make an assessment or additional assessment on the person; or (b)
issue a computation of loss, or revise a computation of loss resulting in a smaller amount of
computed loss, in respect of that person pursuant to section 50AAF of the IRO. In July
2019, the Inland Revenue Department further issued the Departmental Interpretation and
Practice Notes No. 58, No. 59 and No. 60 to set out interpretations to the Amendment
Ordinance.
The Amendment Ordinance introduces a mandatory “three-tiered” transfer pricing
documentation requirement in Hong Kong consisting of (a) Master File; (b) Local File; and
(c) Country-by-country Report. The Amendment Ordinance provides two types of
exemptions to entities that engage in transactions with associated enterprises from preparing
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Master File and Local File. In terms of size-based business exemption thresholds, a Hong
Kong taxpayer meeting any two of the following three size-based business exemption
thresholds for an accounting period is exempted from preparing the Master File and Local
File for that accounting period: (a) Total annual revenue not exceeding HK$400 million; (b)
Total value of assets not exceeding HK$300 million; or (c) Average number of employees
not exceeding 100. In terms of volume-based related party transactions exemption
thresholds, the threshold per accounting period for transfer of property (whether movable or
immovable but excluding financial assets and intangible assets) is HK$220 million. Our
Group did not meet the threshold for preparing transfer pricing documentation in Hong
Kong. As advised by our Hong Kong Legal Counsel, save as disclosed above, our Group is
not subject to any applicable laws and regulations in Hong Kong in respect of transfer
pricing. For details of our transfer pricing arrangement, please refer to the paragraph headed
“Business – Production facilities and capacity – Transfer pricing arrangement” in this
prospectus.
THE PRC
Laws and Regulations in relation to Foreign Investment
Foreign Investment Law
On 15 March 2019, the National People’s Congress promulgated the Foreign
Investment Law of the PRC
, or the Foreign Investment Law,
which came into effect on 1 January 2020 and replaced the three major existing laws
regulating foreign investment in PRC, namely, the Sino-foreign Equity Joint V enture
Enterprise Law of the PRC
, the Sino-foreign
Cooperative Joint V enture Enterprise Law of the PRC
and the Wholly Foreign-owned Enterprises Law of the PRC,
together with their implementation rules and ancillary regulations. Meanwhile, the
Regulations for the Implementation of the Foreign Investment Law
ʕശɛ͏΍ձ਷̮ਠҳ༟
ૢԷwas promulgated by the State Council on 26 December 2019 and came into
force as of 1 January 2020, which provided clarification and elaboration for the relevant
provisions of the Foreign Investment Law. The organisation form, organisation and activities
of foreign-invested enterprises shall be governed, among others, by the Company Law of the
PRC
and the Partnership Enterprise Law of the PRC ʕശɛ͏΍
. Foreign-invested enterprises set up prior to the implementation of the
Foreign Investment Law may retain the original business organisation and so on within five
years after the implementation of this Law.
According to the Foreign Investment Law, foreign investments are entitled to pre-entry
national treatment and are subject to negative list management system. The pre-entry
national treatment refers to the treatment given to foreign investors and their investments at
the stage of investment access shall not be less favorable than that of domestic investors and
their investments. The negative list management system means that the state implements
special administrative measures for access of foreign investment in specific fields.
Foreign investors’ investment, earnings and other legitimate rights and interests in PRC
shall be protected in accordance with the law, and all national policies on supporting the
development of enterprises shall equally apply to foreign-invested enterprises. Among
others, the state ensures that foreign-invested enterprises participate in the formulation of
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standards in an equal manner and that foreign-invested enterprises participate in government
procurement activities through fair competition according to the law. Further, the state shall
not expropriate any foreign investment except under special circumstances. In special
circumstances, the state may levy or expropriate the investment of foreign investors under
the law for the need of the public interest. The expropriation and requisition shall be
conducted in accordance with legal procedures and timely and reasonable compensation shall
be provided. In carrying out business activities, foreign-invested enterprises shall comply
with relevant laws and regulations on labour protection.
Foreign Investment Industrial Policy
Investment activities in the PRC by foreign investors are principally governed by the
Catalog of Industries for Encouraging Foreign Investment
ོᎸ̮ਠҳ༟ପุͦ፽,o rt h e
Encouraging Catalog, and the Special Administrative Measures for Access of Foreign
Investments
૶ఊ, or the Negative List, and together with
the Foreign Investment Law and their respective implementation rules and ancillary
regulations. The Encouraging Catalog and the Negative List provide the basic regulatory
framework for foreign investment in the PRC, classifying businesses into three categories
regarding foreign investment: “encouraged,” “restricted,” and “prohibited.” On 26 October
2022, the MOFCOM and the NDRC released the Catalog of Industries for Encouraging
Foreign Investment (2022 Edition)
ོᎸ̮ਠҳ༟ପุͦ፽2022, which became
effective on 1 January 2023, to substitute the previous one. On 27 December 2021, the
MOFCOM and the NDRC promulgated the Special Administrative Measures for Access of
Foreign Investments (Negative List) (2021 Edition)
૶ఊ
2021, or the Negative List 2021, which came into force on 1 January 2022, to
replace the previous Negative List.
Under the current regulations, any industry not listed in the Negative List 2021 is a
permitted industry and generally open to foreign investment unless specifically prohibited or
restricted by PRC laws and regulations.
Our current business, which is the supply, fabrication and installation of structural
steel, is not otherwise restricted to foreign investment by PRC laws and regulations. We
made this conclusion by considering the nature of our business and the fact that Wing Kei
Dongguan, a wholly foreign owned enterprise, has been approved by the relevant authorities
to conduct such business without being subject to restrictions on foreign investment.
However, as the Negative List is amended from time to time, and other PRC laws and
regulations on foreign investment restrictions are subject to change as well, we cannot
guarantee that our business will not become subject to restrictions on foreign investment in
the future.
Laws and Regulations in relation to Workplace Safety and Special Equipment
Production Safety Law
In accordance with the Production Safety Law of the PRC
,
production enterprises shall strengthen work safety management, enhance work safety
conditions, promote work safety standardization and improve work safety levels. The entity
which does not meet safety conditions prescribed by this law and other relevant laws,
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administrative regulations, and national or industry standards should not engage in
production and the other business activities. To assure work safety rules being observed in
production process, business entities should establish and improve work safety responsibility
systems and work safety policies which specify the responsible person for each position, the
scope of duties and the evaluation criteria. Business entities shall provide their employees
with labour protection products and work safety training. Where the primary person in
charge of a business entity fails to perform his or her duties in work safety as provided for
in the Production Safety Law, he or she would be subject to legal liabilities regarding the
seriousness of work safety accident.
We have set up an occupational health and safety system to promote work safety and to
prevent occurrence of accident in our daily operation. For details, please refer to the
paragraph headed “Business - Occupational health and work safety” in this prospectus.
Use of Special Equipment
Pursuant to the Law of the PRC on the Safety of Special Equipment
ʕശɛ͏΍ձ਷
, special equipment refers to boilers, pressure vessels (including gas
cylinders), pressure pipelines, elevators, cranes, passenger cable-ways, large entertainment
facilities and in-plant (in-factory) special motor vehicles that involve great danger to the
personal and property safety, as well as other special equipment applicable to the law
according to relevant laws and administrative regulations. Special equipment producers shall
be licensed by the relevant department in charge of the safety supervision and administration
of special equipment before engaging in relevant production activities. Special equipment
users shall use special equipment produced with a permit and passing inspection, and such
users shall, before or within 30 days after putting special equipment to use, register the use
with the department responsible for special equipment safety supervision and administration,
obtain a use registration certificate. The entities using special equipment shall have special
equipment safety management personnel, testing personnel and operating personnel with
corresponding qualifications in accordance with the relevant state provisions. They shall
conduct routine maintenance and regular self-check of the special equipment used by them
and conduct regularly check and repair the safety accessories and safety protection devices,
and keep records thereof.
In addition to the regulations above, according to the Regulations on Safety
Supervision over Special Equipment
त၇ண௪τΌ္࿀ૢԷ, special equipment users shall
make a request for the periodic inspection to a special equipment inspection and testing
institution as required by the safety technical codes for the periodic inspection.
Laws and Regulations in relation to Social Security and Housing Provident Funds
Employment
The Labour Law of the PRC
, the Labour Contract Law of
the PRC, and the Implementation Regulations of the Labour
Contract Law of the PRCૢԷ, are the principal
regulations that govern employment and labour matters in the PRC. According to the
aforementioned laws and regulations, labour contracts shall be concluded in writing if labour
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relationships are to be or have been established between employers and the employees.
Employers are prohibited from forcing employees to work above certain time limit and
employers shall pay employees for overtime work in accordance with national regulations. In
addition, wages shall not be lower than the local minimum wage standard. Employers shall
establish a system for labour safety and sanitation, strictly comply with national standards,
and provide relevant education to its employees. Employees are also required to work under
safe and sanitary conditions.
Social Insurance and Housing Provident Fund
Under the Social Insurance Law of the PRC
, together
with other laws and regulations, employers are required to pay basic pension insurance,
unemployment insurance, basic medical insurance, employment injury insurance, maternity
insurance, and other social insurance for its employees at specified percentages of the
salaries of the employees, up to a maximum amount specified by the local government
regulations from time to time. When an employer fails to pay social insurance premiums in
full, relevant social insurance collection agency shall order it to make up the shortfall within
the prescribed period and may impose a late payment fee of 0.05% per day of the
outstanding amount from the due date. If such employer still fails to make up for the
shortfalls within the prescribed time limit, the relevant administrative authorities shall
impose a fine of one to three times the outstanding amount upon such employer.
In accordance with the Regulations on the Management of Housing Provident Fund
၍ଣૢԷ, employers shall register at the designated administrative centers and
open bank accounts for depositing employees’ housing funds. Employer and employee are
also required to pay and deposit housing provident funds, with an amount no less than 5%
of the monthly average salary of the employee in the preceding year in full and on time.
When an employer fails to pay the housing provident fund in full, the designated
administrative centers shall order it to make the payment and deposit within a prescribed
time limit. If the payment and deposit have not been made by the expiration of the time
limit, an application for enforcement may be made to a people’s court.
Laws and Regulations in relation to Environmental Protection
Environmental Protection
Pursuant to the Environmental Protection Law of the PRC
,
any entity which discharges or will discharge pollutants in the course of its operations or
other activities shall implement effective environmental protection safeguards and procedures
to control and properly dispose of exhaust gases, waste water, waste residue, dust,
malodorous gases, radioactive substances, noise, vibrations, electromagnetic radiation, and
other hazards produced during such activities.
Environmental protection authorities impose various administrative penalties on
individuals or enterprises that violate the Environmental Protection Law. Such penalties
include warnings, fines, orders to rectify within a prescribed period, orders to cease
construction, orders to restrict or suspend production, orders to make recovery, orders to
disclose relevant information or make an announcement, imposition of administrative action
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against relevant responsible persons, and orders to shut down enterprises. Any person or
entity that pollutes the environment resulting in damage could also be held liable under the
Civil Code of the PRC
Պ. In addition, environmental organizations
may also bring lawsuits against any entity that discharges pollutants detrimental to the
public welfare.
Our Group has established an environmental management system and also formulated
an environmental policy to provide guidance, support and adequate resources for effective
implementation of our environmental protection measures.
Laws and Regulations in relation to Taxation
Enterprise Income Tax
According to the Enterprise Income Tax Law of the PRC
,
or the EIT Law, which was promulgated on 16 March 2007, became effective from 1 January
2008 and amended on 24 February 2017 and 29 December 2018, respectively, an enterprise
established outside the PRC with de facto management bodies within the PRC is considered a
resident enterprise for PRC enterprise income tax purposes and is generally subject to a uniform
25% enterprise income tax rate on its worldwide income. The Implementing Rules of the
Enterprise Income Law of the PRC
ૢԷ,o rt h e
Implementing Rules of the EIT Law defines a de facto management body as a managing body
that in practice exercises “substantial and overall management and control over the production
and operations, personnel, accounting, and properties” of the enterprise. Non-PRC resident
enterprises without any branches in the PRC pay an enterprise income tax in connection with
their income originating from the PRC at the tax rate of 10%.
Tax on Related Party Transactions
According to the EIT Law and the Implementation Regulations for the EIT Law
ʕ ശ
ૢԷ, for the transactions between the enterprise and its related
parties, if not meeting the arm’s length principle, or if done by the enterprise for
unreasonable commercial purpose, the tax authority may adjust the taxable revenue or
income incompliance with reasonable methods (including comparable uncontrolled price
method, resale price method, cost-plus method, transactional net profit method, profit split
method and other methods that meet the arm’s length principle. According to the
Implementation Measures for Special Tax Adjustment (Trial Implementation)
तйॶ೼ሜ዆
༊Бpromulgated by the SA T on 8 January 2009 and became effective on 1
January 2008, and was amended on 16 June 2015, 29 June 2016, 17 March 2017, 15 June
2018, 26 May 2023 and 7 September 2023 respectively, related party transactions between
an enterprise and its related parties shall follow the arm’s length principle.
Pursuant to the EIT Law and its implementation rules and the Law of the PRC on the
Administration of Tax Collection
, which was first
promulgated on 4 September 1992 by the Standing Committee of the NPC (the “ SCNPC ”)
and amended on 28 February 1995, 28 April 2001, 29 June 2013 and 24 April 2015, related
party transactions should comply with the arm’s length principle. In the event that the
related party transactions fail to comply with the arm’s length principle resulting in the
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reduction of the enterprise’s taxable income, the tax authority has power to make
adjustments with reasonable methods within ten years from the tax paying year that the
non-compliant related party transaction had occurred. Pursuant to such laws and regulations,
any company entering into related party transactions with another company shall submit an
annual related party transactions reporting form
 to the tax
authority.
On 29 June 2016, the State Tax Administration (“ STA”) issued the Public Notice
regarding Refining the Reporting of Related Party Transactions and Administration of
Transfer Pricing Documentation
ٙ
ʮѓ (“PN 42 ”). PN 42 provides new transfer pricing compliance requirements in the
PRC, including Annual Reporting Forms for Related Party Transaction (“ RPT Forms ”),
Country-by-Country Reporting Form (“ CbC Reporting Form ”) and Transfer Pricing
Documentation (“ TPD”), all of which are substantial changes to the previous rules. The CbC
Reporting Forms are required for the Chinese resident enterprise if: (i) it is the ultimate
holding company of a multinational enterprise’s (“ MNE”) group with combined revenue
over RMB5.5 billion, or (ii) it is nominated by the MNE group as the CbC Reporting Entity.
PN 42 adopts a three-tiered approach for TPD, including master file, local file and special
issue file, and sets different thresholds for each file and type of transaction. If the company
meets either of the following criteria, a master file should be prepared: (i) have cross-border
related party transactions and belong to a group to which has prepared the master file; or (ii)
the total amount of related party transactions exceeds RMB1 billion. The threshold for the
local file is dependent on the type of related party transactions, which are listed below: (i)
RMB200 million for tangible assets transfer (in the case of toll process, the amount in the
annual customs record for toll processing should be included); (ii) RMB100 million for
financial assets transfer; (iii) RMB100 million for intangible assets transfer; or (iv) RMB40
million for other related party transactions in total.
On 17 March 2017, the STA issued the Public Notice of the State Taxation
Administration Regarding the Release of the “Administrative Measure for Special Tax
Investigation Adjustments and Mutual Agreement Procedures”
೯бतйॶ
ʮѓ (“PN 6 ”). PN 6 provides rules on risk
management, investigations and adjustments, administrative review and mutual agreement
procedures regarding the special tax adjustment and other relevant issues. PN 6 highlights
the tax authorities’ emphasis on strengthening the monitoring of enterprises’ profit levels,
and improving enterprises’ compliance with the tax law through special tax adjustment
monitoring and administration as well as special tax investigation adjustment. PN 6
reinforces the transfer pricing administration on intercompany intangibles and services
transactions, and provides certain methods and principles for investigations and adjustments.
Taxpayers are advised to review and adjust, if necessary, their transfer pricing policies in
such transactions to ensure compliance with the new rules. PN 6 provides rules on transfer
pricing of intangibles, and reinforces the general principle that “allocation of income
generated by intangibles shall be commensurate with the commercial activities and
contribution to its value creation”. To allocate the income generated by intangibles, the
enterprise is required to perform an analysis of value contributed by parties performing the
functions of development, enhancement, maintenance, protection, exploitation and promotion
of the intangibles. Compared with the development, enhancement, maintenance, protection,
exploitation functions of intangibles in the Organisation for Economic Co-operation and
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Development (OECD) transfer pricing guidelines, PN6 includes “promotion” as an important
function. In addition, under PN 6, a related party that only provides funding for the creation
and exploitation of intangibles, but does not actually undertake relevant risks shall be
entitled to only a reasonable return on the funding cost. PN 6 introduces an important
principle in relation to intangibles, and provides that “tax authorities may make special tax
adjustments on royalties that are not commensurate with the economic benefit and result in a
reduction in the taxable gross income or taxable income of enterprise or their related
parties”. Enterprises that have low profits or are even in a loss position while paying a
royalty may face a heavy burden of proof to demonstrate the alignment between the royalty
payment and its economic benefits, or the deduction of the royalty payment may be
disallowed.
During the Track Record Period, Wing Kei Dongguan has submitted the annual related
party transactions reporting form
to the tax authority on an annual
basis and our Group did not meet the threshold for preparing transfer pricing documentation
and was not required to prepare transfer pricing documentation report as per the applicable
transfer pricing rules and regulations in the PRC. Our Group has conducted a transfer
pricing study and based on the report, our executive Directors are of the view that our
Group’s transfer pricing arrangement with respect to its fabrication work does not result in
material reduction to its taxable income in the PRC for the three years ended 31 December
2022. As advised by the PRC Legal Advisers, save as disclosed above, our Group is not
subject to any applicable laws and regulations in the PRC in respect of transfer pricing. For
details of our transfer pricing arrangement, please refer to the paragraph headed “Business –
Production facilities and capacity – Transfer pricing arrangement” in this prospectus.
Regulations in relation to M&A Regulation and Overseas Listing
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors
, or the M&A Rules requires, among other
things, that if an overseas company established or controlled by PRC companies or
individuals, or PRC Citizens, intends to acquire equity interests or assets of any other PRC
domestic company affiliated with the PRC Citizens, such acquisition shall be submitted to
the MOFCOM for approval. The M&A Rules also require offshore special purpose vehicles
established to pursue overseas listing of equity interests in PRC companies and controlled
directly or indirectly by PRC companies or individuals to obtain the approval of the Chinese
Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such
special purpose vehicle’s securities on any stock exchange overseas.
According to the Trail Administrative Measures of Overseas Securities Offering and
Listing by Domestic Companies
, or the Trial
Measures and five supporting guidelines, which became effective on 31 March, 2023, among
other requirements, (1) domestic companies that seek to offer or list securities overseas, both
directly and indirectly, shall fulfil the filing procedures with the CSRC; if a domestic
company fails to complete the filing procedure, such domestic company may be subject to
administrative penalties; (2) if the issuer satisfies both of the following conditions, the
overseas offering and listing shall be determined as an indirect overseas offering and listing
by a domestic company: (i) any of the total assets, net assets, revenues or profits of the
domestic operating entities of the issuer in the most recent accounting year accounts for
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more than 50% of the corresponding figure in the issuer’s audited consolidated financial
statements for the same period; (ii) its major operational activities are carried out in China
or its main places of business are located in China, or the senior managers responsible for
operation and management of the issuer are mostly Chinese citizens or are domiciled in
China; and (3) if the domestic company seeks to indirectly offer and list securities in an
overseas market, the issuer shall designate a major domestic operating entity responsible for
all filing procedures with the CSRC, and shall submit the filings to the CSRC within three
business days after the submission of the overseas offering and listing application.
Considering that (1) the operating revenue, profit, assets or net assets of Wing Kei
Dongguan, our Company’s indirect subsidiary established in the PRC, accounted for no more
than 50% of our Group’s total operating revenue, total profit, total assets or net assets as
presented in the audited consolidated financial statements for the most recent accounting
year; (2) our Company is headquartered in Hong Kong with its chief executive officer, chief
financial officer and all members of the board of directors based in Hong Kong who are not
PRC citizens; and (3) the operations and business of our Company are not principally
conducted in the PRC given that the revenue is mainly generated in Hong Kong and the
major sales and purchase activities are conducted in Hong Kong, the PRC Legal Advisers
are of the view that the Company would not be required to file with the CSRC under the
Trial Measures for the Share Offer.
Regulations in relation to Land Use Right and Lease Properties
Regulations in relation to Land Use Right
The PRC Land Administration Law
, which was
promulgated by the SCNPC on 25 June 1986 and last amended on 26 August 2019,
stipulates that the leasing of collectively-operated development land, the granting of the
right to use collectively-operated development land and its maximum term of years, transfer,
swap, capital contribution, gift and mortgage shall be implemented with reference to
State-owned construction land for the same type of land use purpose. The assignment and
lease of collectively-operated development land shall be subject to the consent of over
two-thirds of the members or over two-thirds of villagers’ representatives at the village
council of the members of the collective economic organization. On 23 June 2005, the
People’s Government of Guangdong Province promulgated the Administrative Measures of
Guangdong Province for the Circulation of the Right to the Use of Collectively-owned Land
for Construction Purposes
, which became
effective on 1 October 2005, stipulates a written contract shall be signed for the granting or
leasing of the right to the use of collectively-owned land for construction purposes. The
maximum terms for which the right to the use of collectively-owned land for construction
purposes may be granted or leased shall not exceed the maximum terms for which the right
to use State-owned land for the same type may be granted. On 19 May 1990, the State
Council issued the Interim Regulations of the People’s Republic of China on Grant and
Transfer of the Use Right of State-owned Urban Land
ᕄ਷ϞɺήԴ͜ᛆ̈
ᜫձᔷᜫᅲБૢԷ, which prescribes that the maximum term of granted land-use for
industrial purposes is 50 years.
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Regulations in relation to Lease Properties
The Administrative Measures for Commercial House Leasingॡ༣၍ଣ፬
, or the New Lease Measures, which was promulgated by MOHURD on 1 December
2010 and came into effective on 1 February 2011, the parties concerned to a housing leasing
shall go through the housing leasing registration formalities with the competent construction
(real estate) departments within thirty (30) days after the lease contract is signed.
Non-compliance with such registration and filing requirements shall be subject to fines no
more than RMB1,000 for individuals and from RMB1,000 to RMB10,000 for enterprises,
provided that they fail to rectify such non-compliance within the required time limits.
Pursuant to the Civil Code of the PRC
Պ, which was
promulgated by the NPC on 28 May 2020 and became effective on 1 January 2021, the term
of a leasing contract shall not exceed 20 years, and the parties’ failure to register the lease
contract in accordance with the provisions of laws and administrative regulations does not
affect the validity of the contract.
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OVERVIEW
Our Company was incorporated in the Cayman Islands under the Companies Act as an
exempted company with limited liability on 28 June 2023. Pursuant to the Reorganisation as
more particularly described in the paragraph headed “Reorganisation” in this section, our
Company has become the holding company of our Group for the purpose of the Listing and
holds the entire interest of four subsidiaries, namely, WK Development, Wing Kei Hong
Kong, Wing Kei Management and Wing Kei Dongguan.
OUR BUSINESS DEVELOPMENT
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel for construction projects in Hong Kong. The
history of our Group can be traced back to 1999 when Mr. WH Chan, who has accumulated
over 40 years of experience in structural steelwork, metal works and general construction,
and Mr. Kelvin Chan as the primary founders established the first subsidiary of our Group,
Wing Kei Hong Kong, to engage in the supply and installation of structural steel for
construction projects in Hong Kong. In order to support our projects, in 2000, Wing Kei
Hong Kong commenced to operate the Dapianmei Production Facility in Dongguan, the
PRC, through Dongguan Dalingshan Y ongji Metal Component Manufacturing Factory*
୷
᙮࿴΁Ⴁிᅀ (“Y ongji Manufacturing Factory ”), being an unincorporated
organisation established in the PRC. Subsequently, our Group established Wing Kei
Dongguan in 2015 to operate the Dapianmei Production Facility, and Y ongji Manufacturing
Factory was deregistered in 2016. In 2020, our Xinlong Production Facility came into
operation for the supply and fabrication of structural steel in light of the increasing demand
for our projects.
Mr. Eddie Chan joined our Group in 2003 to participate in the management of our
Group. Under the leadership of Mr. WH Chan, Mr. Kelvin Chan and Mr. Eddie Chan, our
Group has gradually expanded our business throughout the years and undertaken both
private and public projects, including some high-profile projects such as the Kai Tak Sports
Park project, the West Kowloon Terminus Station North and South projects, the Liantang/
Heung Y uen Wai Boundary Control Point project, the Hong Kong Science Park expansion
project and the Legislative Council Complex expansion project. In 2010, we commenced our
business relationship with Hip Hing Group, being our top customer during the Track Record
Period.
In October 2005 and October 2008, Wing Kei Hong Kong was first admitted to become
a registered subcontractor under the Subcontractors Registration Scheme (now known as the
Registered Specialist Trade Contractors Scheme) of the Construction Industry Council under
the trade category of “Structural Steelwork” and an approved specialist contractor under the
“Structural Steelwork” category on the List of Approved Suppliers of Materials and
Specialist Contractors for Public Works of the Development Bureau, respectively.
We endeavour to enhance our management system and provide quality services to our
customers. Wing Kei Hong Kong received a number of commendations from our customers
and/or project owners as recognition of our satisfactory performance in their projects, such
as the well-performed contractor award, the best subcontractor awards and certain
HISTORY, DEVELOPMENT AND REORGANISATION
–1 1 4–


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certificates recognising our commitment to achieving a safe workplace and/or quality works.
In 2008, Wing Kei Hong Kong was first accredited with ISO 9001 (Quality Management
System). In 2019, Wing Kei Hong Kong was first accredited with ISO 45001:2018
(Occupational Health and Safety Management Systems) and ISO 14001:2015 (Environmental
Management Systems).
In 2022, our Group was ranked third in the Hong Kong structural steelwork market in
terms of revenue, and accounted for approximately 3.4% of the market share in Hong Kong,
according to the Industry Report.
Our key business milestones
The key milestones in our Group’s development to date are set out below:
Y ear Events
1999 The first subsidiary of our Group, Wing Kei Hong Kong, was
incorporated in Hong Kong in July 1999 to engage in the
supply, fabrication and installation of structural steel for
construction projects in Hong Kong.
2000 We commenced to operate the Dapianmei Production Facility
in Dongguan, the PRC, for the supply and fabrication of
structural steel for the projects undertaken by Wing Kei Hong
Kong.
2005 Wing Kei Hong Kong was first admitted to become a
registered subcontractor under the Subcontractors Registration
Scheme (now known as the Registered Specialist Trade
Contractors Scheme) of the Construction Industry Council
under the trade category of “Structural Steelwork”.
2007 Wing Kei Hong Kong received a commendation from the
Hong Kong Housing Authority for early completion in relation
to the redevelopment project of Shek Pai Wan Estate Phase 2.
2008 Wing Kei Hong Kong was first admitted to become an
approved specialist contractor under the “Structural Steelwork”
category on the List of Approved Suppliers of Materials and
Specialist Contractors for Public Works of the Development
Bureau.
Wing Kei Hong Kong was first accredited with ISO 9001
(Quality Management System).
Wing Kei Hong Kong was awarded a structural steelwork
project of New Panda Habitat for the Ocean Park master
redevelopment project.
HISTORY, DEVELOPMENT AND REORGANISATION
–1 1 5–


--- page 126 ---
Y ear Events
2010 Wing Kei Hong Kong was awarded a structural steelwork
project for the construction of Town Park and Indoor
V elodrome-cum Sports Centre at Tseung Kwan O.
2014 Wing Kei Hong Kong was awarded the Good Safety
Performance Contractor (Structural Steel Works)
Commendation
 from a
customer in relation to a structural steelwork project at Lok
Wo Sha.
Wing Kei Hong Kong was awarded a structural steelwork
project at the West Kowloon Terminus Station North and
South.
2015 Wing Kei Hong Kong was awarded the Best Subcontractor
Award
௰ԳτΌʱкਠᆤfrom a customer for site safety in
relation to a MTR line extension project of the Kwun Tong
line.
Our subsidiary, Wing Kei Dongguan, was established in the
PRC in July 2015 to engage in the supply and fabrication of
structural steel.
Wing Kei Hong Kong was awarded a structural steelwork
project for the expansion of Terminal 1 annex building and car
park at the Hong Kong International Airport.
Wing Kei Hong Kong was awarded a structural steelwork
project at the section of the Hong Kong Link Road between
Scenic Hill and Hong Kong boundary crossing facilities for
the construction of the Hong Kong-Zhuhai-Macao Bridge.
2016 Wing Kei Hong Kong was awarded a structural steelwork
project at Liantang/Heung Y uen Wai Boundary Control Point.
2017 Wing Kei Hong Kong was awarded the Best Subcontractor
Award from a customer in relation to a structural steelwork
project at the West Kowloon Terminus Station South.
Wing Kei Hong Kong was awarded a structural steelwork
project at Harbour Road, Wanchai for the construction of a
hotel.
2018 Wing Kei Hong Kong was awarded a structural steelwork
project for the expansion of the Hong Kong Science Park.
Wing Kei Hong Kong was awarded a structural steelwork
project for the carriageways at Ho Chung and Nam Pin Wai.
HISTORY, DEVELOPMENT AND REORGANISATION
–1 1 6–


--- page 127 ---
Y ear Events
2019 Our subsidiary, Wing Kei Dongguan, established a branch in
Dongguan, the PRC, in December 2019.
Wing Kei Hong Kong was first accredited with ISO
45001:2018 (Occupational Health and Safety Management
Systems) and ISO 14001:2015 (Environmental Management
Systems).
Wing Kei Hong Kong secured a structural steelwork project
for the Kai Tak Sports Park.
Wing Kei Hong Kong was awarded a structural steelwork
project for the construction of the new General Post Office
building in Kowloon Bay.
Wing Kei Hong Kong was awarded a structural steelwork
project for the SkyCity commercial development at the Hong
Kong International Airport.
2020 Our Xinlong Production Facility in Dongguan, the PRC, was
established for the fabrication of structural steel.
2022 Wing Kei Hong Kong was awarded a structural steelwork
project for the expansion of the Legislative Council Complex.
Wing Kei Hong Kong was awarded a structural steelwork
project at Siu Ho Wan for the construction of engineering
vehicle (EV) stabling tracks.
2023 Wing Kei Hong Kong was awarded a structural steelwork
project of a hotel and commercial building in Central.
Wing Kei Hong Kong was awarded a structural steelwork
project for a private commercial project in Causeway Bay.
OUR CORPORATE DEVELOPMENT
The following is a brief corporate history of the establishment and major changes in
shareholdings of our subsidiaries:
WK Development
WK Development was incorporated in BVI with limited liability on 4 July 2023. It is
authorised to issue a maximum of 50,000 ordinary shares of par value US$1 in one class. It
is an investment holding company.
On the date of its incorporation, WK Development allotted and issued 100 shares of
US$1 each as fully paid to our Company, and all the issued shares of WK Development
became wholly-owned by our Company.
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Wing Kei Hong Kong
Wing Kei Hong Kong was incorporated in Hong Kong with limited liability on 28 July
1999. It principally engages in the supply and installation of structural steel for construction
projects in Hong Kong.
On the date of its incorporation, Wing Kei Hong Kong allotted and issued 15,000
shares, 15,000 shares, 30,000 shares, 30,000 shares and 10,000 shares of HK$1 each as fully
paid to Mr. WH Chan, Ms. Choi, Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan,
respectively, and the issued share capital of Wing Kei Hong Kong became owned as to 15%,
15%, 30%, 30% and 10% by Mr. WH Chan, Ms. Choi, Mr. Kelvin Chan, Mr. Eddie Chan
and Ms. Karen Chan, respectively.
On 22 July 2008, Wing Kei Hong Kong further allotted and issued 520,000 shares,
540,000 shares and 540,000 of HK$1 each as fully paid to Mr. WH Chan, Mr. Kelvin Chan
and Mr. Eddie Chan, respectively. Upon completion of the above transaction, Wing Kei
Hong Kong had 1,700,000 shares in issue, of which, 535,000 shares, 15,000 shares, 570,000
shares, 570,000 shares and 10,000 shares were owned by Mr. WH Chan, Ms. Choi, Mr.
Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan, respectively, representing approximately
31.5%, 0.9%, 33.5%, 33.5% and 0.6% of the issued share capital of Wing Kei Hong Kong,
respectively.
On 8 August 2017, (i) Mr. WH Chan transferred 120,000 shares and 160,000 shares to
Ms. Choi and Ms. Karen Chan, respectively; (ii) Mr. Kelvin Chan transferred 60,000 shares
to Ms. Choi; and (iii) Mr. Eddie Chan transferred 60,000 shares to Ms. Choi. The above
transactions were properly and legally completed on 8 August 2017, and the issued share
capital of Wing Kei Hong Kong became owned as to 15%, 15%, 30%, 30% and 10% by Mr.
WH Chan, Ms. Choi, Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan, respectively.
As part of the Reorganisation, Wing Kei Hong Kong became an indirect wholly-owned
subsidiary of our Company.
On 11 October 2023, Wing Kei Hong Kong allotted and issued 100,000 shares of
HK$1 each as fully paid to WK Development. Upon completion of the above transaction,
Wing Kei Hong Kong continued to be an indirect wholly-owned subsidiary of our Company.
Wing Kei Dongguan
Wing Kei Dongguan was established in the PRC on 6 July 2015 as a limited liability
company with an initial registered capital of US$1,000,000. It principally engages in the
supply and fabrication of structural steel for the structural steelwork projects in Hong Kong
undertaken by Wing Kei Hong Kong.
At the time of its establishment, the entire equity interest of Wing Kei Dongguan was
held by Wing Kei Hong Kong. On 5 December 2016, the registered capital of Wing Kei
Dongguan was increased to US$1,200,000. Such additional registered capital was contributed
by Wing Kei Hong Kong, and the entire equity interest of Wing Kei Dongguan continued to
be held by Wing Kei Hong Kong.
HISTORY, DEVELOPMENT AND REORGANISATION
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As part of the Reorganisation, Wing Kei Dongguan became an indirect wholly-owned
subsidiary of our Company.
Wing Kei Management
Wing Kei Management was incorporated in Hong Kong with limited liability on 28
March 2023. It provides administrative services for our Group.
On the date of its incorporation, Wing Kei Management allotted and issued 10,000
shares of HK$1 each as fully paid to Wing Kei Hong Kong, and the issued share capital of
Wing Kei Management became wholly-owned by Wing Kei Hong Kong.
As part of the Reorganisation, Wing Kei Management became an indirect
wholly-owned subsidiary of our Company.
REORGANISATION
Our Group underwent the Reorganisation in preparation for the Listing, which involved
the following steps:
Incorporation of WK (BVI)
On 26 June 2023, WK (BVI) was incorporated in BVI with limited liability. WK (BVI)
is authorised to issue a maximum of 50,000 ordinary shares of par value US$1 in one class.
On the date of its incorporation, WK (BVI) allotted and issued 30 shares, 30 shares, 15
shares, 15 shares and 10 shares with a par value of US$1 each as fully paid to Mr. Eddie
Chan, Mr. Kelvin Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan, respectively, and all
the issued shares of WK (BVI) were owned as to 30%, 30%, 15%, 15% and 10% by Mr.
Eddie Chan, Mr. Kelvin Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan, respectively.
Incorporation of our Company
On 28 June 2023, our Company was incorporated in the Cayman Islands as an
exempted company with limited liability. As at the date of its incorporation, it had an
authorised share capital of HK$380,000 divided into 38,000,000 ordinary shares of a
nominal or par value of HK$0.01 each.
On the date of its incorporation, our Company allotted and issued one subscriber Share
at par and credited as fully paid to a nominee subscriber, being an Independent Third Party.
On the same date, the nominee subscriber as transferor executed an instrument of transfer in
favour of WK (BVI), pursuant to which the nominee subscriber transferred the one
subscriber Share, representing the entire issued share capital of our Company, to WK (BVI).
Upon completion of the above transfer, the issued share capital of our Company then
became wholly-owned by WK (BVI).
HISTORY, DEVELOPMENT AND REORGANISATION
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Incorporation of WK Development
On 4 July 2023, WK Development was incorporated in BVI with limited liability. WK
Development is authorised to issue a maximum of 50,000 ordinary shares of par value US$1
in one class.
On the date of its incorporation, WK Development allotted and issued 100 shares with
a par value of US$1 each as fully paid to our Company, and all the issued shares of WK
Development became wholly-owned by our Company.
Acquisition of Wing Kei Hong Kong by WK Development from Mr. Eddie Chan, Mr.
Kelvin Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan
Immediately before the Reorganisation:
(i) Wing Kei Hong Kong had 1,700,000 ordinary shares in issue. Of which, 510,000
ordinary shares, 510,000 ordinary shares, 255,000 ordinary shares, 255,000
ordinary shares and 170,000 ordinary shares were legally and beneficially owned
by Mr. Eddie Chan, Mr. Kelvin Chan, Mr. WH Chan, Ms. Choi and Ms. Karen
Chan, respectively, representing 30%, 30%, 15%, 15% and 10% of the issued
share capital of Wing Kei Hong Kong, respectively.
(ii) Wing Kei Management had 10,000 ordinary shares in issue. The entire share
capital of Wing Kei Management is legally and beneficially owned by Wing Kei
Hong Kong.
(iii) Wing Kei Dongguan had a fully paid-up registered capital of US$1,200,000. The
entire equity interest of Wing Kei Dongguan is legally and beneficially owned by
Wing Kei Hong Kong.
On 21 July 2023, Mr. Eddie Chan, Mr. Kelvin Chan, Mr. WH Chan, Ms. Choi and Ms.
Karen Chan (as vendors), WK Development (as purchaser), and our Company entered into a
sale and purchase agreement and executed the relevant instruments of transfer and bought
and sold notes, pursuant to which, WK Development acquired 510,000 ordinary shares,
510,000 ordinary shares, 255,000 ordinary shares, 255,000 ordinary shares and 170,000
ordinary shares in Wing Kei Hong Kong from Mr. Eddie Chan, Mr. Kelvin Chan, Mr. WH
Chan, Ms. Choi and Ms. Karen Chan, respectively, representing 30%, 30%, 15%, 15% and
10% of the issued share capital of Wing Kei Hong Kong, respectively. In consideration of
the acquisition, WK Development allotted and issued 100 shares of US$1 each, credited as
fully paid, to our Company at the direction of Mr. Eddie Chan, Mr. Kelvin Chan, Mr. WH
Chan, Ms. Choi and Ms. Karen Chan.
Upon completion of the above transactions, Wing Kei Hong Kong, Wing Kei
Management and Wing Kei Dongguan became wholly-owned subsidiaries of WK
Development.
HISTORY, DEVELOPMENT AND REORGANISATION
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CORPORATE STRUCTURE
The following chart sets forth our Group’s shareholding and corporate structure
immediately before the Reorganisation:
Corporate structure of our Group immediately before the Reorganisation
Mr. Kelvin Chan Mr. Eddie Chan
30% 30%
Ms. Karen Chan
10%
Wing Kei Hong Kong
(Hong Kong)
Wing Kei Dongguan (Note)
(PRC)
100% 100%
Wing Kei Management
(Hong Kong)
Mr. WH Chan Ms. Choi
15% 15%
Note: Wing Kei Dongguan has a branch in Dongguan, namely Dongguan Y ongji Metal Component
Manufacturing Co., Ltd. Dalingshan Branch*ʮ̡ɽᏊʆʱʮ̡.
* for identification purpose only
Corporate structure of our Group immediately after the Reorganisation
The following chart sets forth our Group’s shareholding and corporate structure
immediately after the Reorganisation but before the Capitalisation Issue and the Share Offer:
Mr. Kelvin Chan Mr. Eddie Chan
30% 30%
Ms. Karen Chan
10%
Wing Kei Hong Kong
(Hong Kong)
Wing Kei Management
(Hong Kong)
Wing Kei Dongguan (Note)
(PRC)
WK (BVI)
(BVI)
Company
(Cayman Islands)
WK Development
(BVI)
100%
100%
100%
100%100%
Mr. WH Chan Ms. Choi
15% 15%
Note: Wing Kei Dongguan has a branch in Dongguan, namely Dongguan Y ongji Metal Component
Manufacturing Co., Ltd. Dalingshan Branch*ʮ̡ɽᏊʆʱʮ̡.
* for identification purpose only
HISTORY, DEVELOPMENT AND REORGANISATION
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Capitalisation Issue
Conditional upon the crediting of our Company’s share premium account as a result of
the issue of the Offer Shares pursuant to the Listing, our Directors are authorised to
capitalise an amount of HK$14,999,999.99 standing to the credit of the share premium
account of our Company by applying such sum towards to pay up in full at par a total of
1,499,999,999 Shares for allotment and issue, immediately prior to the Share Offer, to WK
(BVI) so that the number of Shares so allotted and issued, when aggregated with the number
of Shares already owned by it, will constitute 75% of the issued share capital of our
Company (without taking into account any Share that may be allotted and issued upon the
exercise of the Over-allotment Option or any option which may be granted under the Share
Option Scheme).
The following chart sets forth the shareholding and corporate structure of our Group
immediately after the completion of the Capitalisation Issue and the Share Offer (without
taking into account any Share that may be allotted and issued upon the exercise of the
Over-allotment Option or any option which may be granted under the Share Option
Scheme):
Corporate structure of our Group immediately
after the Capitalisation Issue and Share Offer
Mr. Kelvin Chan Mr. Eddie Chan
30% 30%
Ms. Karen Chan
10%
Wing Kei Hong Kong
(Hong Kong)
WK (BVI)
(BVI)
WK Development
(BVI)
25%
100%
100%
100%100%
Public Shareholders
75%
Wing Kei Management
(Hong Kong)
Wing Kei Dongguan (Note)
(PRC)
Company
(Cayman Islands)
Mr. WH Chan Ms. Choi
15% 15%
Note: Wing Kei Dongguan has a branch in Dongguan, namely Dongguan Y ongji Metal Component
Manufacturing Co., Ltd. Dalingshan Branch*ʮ̡ɽᏊʆʱʮ̡.
* for identification purpose only
HISTORY, DEVELOPMENT AND REORGANISATION
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PRC REGULATORY ISSUES RELATING TO THE REORGANISATION AND THE
LISTING
As advised by the PRC Legal Advisers, since our PRC subsidiary was established as a
wholly foreign-owned enterprise, and the Reorganisation did not involve any acquisition of
domestic enterprises, the Provisions on Merger and Acquisition of Domestic Enterprises by
Foreign Investors
 are not applicable to the
Reorganisation, and the Listing is not subject to the approval from any PRC securities
regulatory bodies.
In addition, as advised by the PRC Legal Advisers, since Mr. WH Chan, Ms. Choi, Mr.
Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan, being the ultimate shareholders and
beneficial owners of our Company, are not PRC domestic persons who hold PRC identity
documents nor individuals who reside in the PRC habitually for the purpose of economic
benefit, Mr. WH Chan, Ms. Choi, Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan
are not subject to the registration requirements under the Circular on Relevant Issues
Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and
Financing and Roundtrip Investment through Special Purpose V ehicles
׵
 promulgated by the
State Administration of Foreign Exchange of the PRC on 4 July 2014.
The PRC Legal Advisers further confirmed that there is no approval, permit and licence
required under the PRC laws and regulations in connection with the Reorganisation.
HISTORY, DEVELOPMENT AND REORGANISATION
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BUSINESS OVERVIEW
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel for construction projects in Hong Kong. We
were established in 1999 and have since undertaken structural steelwork in the role of
subcontractor. With two production facilities in Dongguan, the PRC, we possess our
in-house capacity to process and fabricate structural steel tailored to the specifications of our
customers. All of our structural steel production capacity is currently used to cater to our
own project needs. According to the Industry Report, our Group ranked third in the Hong
Kong structural steelwork industry in terms of revenue in 2022, and accounted for
approximately 3.4% of the market share in 2022.
Structural steelwork refers to the fabrication and forming of steel structures, typically
serving as the backbone of buildings and infrastructure during initial construction stage.
Essentially, structural steelwork involves columns and beams which are riveted, bolted or
welded together. Structural steelwork providers supply, cut, bend, weld and assemble
structural steel frames, trusses and other components into structures in accordance with the
specifications provided in the building plans and designs.
We mainly focused on the role of project management and supervision in carrying out
our projects, and we have engaged subcontractors to perform a substantial part of the
construction site works under our supervision. Typically, our major responsibilities in a
project include (i) arranging site preparatory and preliminary works; (ii) engaging and
supervising our subcontractors; (iii) maintaining regular communication with our customers;
(iv) monitoring the implementation of construction site works; (v) conducting site safety
supervision and quality control; and (vi) developing detailed work schedule and work
allocation plan. For FY2020, FY2021, FY2022 and the nine months ended 30 September
2023, we incurred subcontracting fees of approximately HK$71.0 million, HK$48.9 million,
HK$91.6 million and HK$57.2 million for our construction site works, representing
approximately 29.3%, 32.9%, 39.8% and 34.9% of our total purchases, respectively.
During the Track Record Period, we were mainly engaged in public sector projects in
Hong Kong. Our public sector projects mainly involved infrastructure and public facilities as
well as public residential developments. The customers of our public sector projects were
generally main contractors engaged by different Hong Kong government departments,
authorities and statutory bodies. To a lesser extent, we were also engaged in private sector
projects in Hong Kong. Our private sector projects mainly involved private commercial,
residential and industrial developments. The project owners of our private sector projects
were generally property developers, and our customers were main contractors engaged under
such projects. Based on enquiries with our major customers, save for certain mega-scale
construction projects, our Group was generally engaged by our customers as a subcontractor
exclusively for carrying out the structural steelwork involved in the projects that we
participated in during the Track Record Period.
BUSINESS
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During the Track Record Period, the majority of our revenue was derived from
structural steelwork for infrastructure and public facilities. The following table sets forth a
breakdown of our revenue during the Track Record Period by reference to project sectors
and the types of development involved:
FY2020 FY2021 FY2022
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
HK$’000 % HK$’000 % HK$’000 %
Public sector
– Infrastructure and public
facilities 17 117,650 36.2 10 142,717 62.4 18 273,912 81.4
– Residential 5 25,476 7.9 4 8,936 3.9 3 10,721 3.2
Sub-total 22 143,126 44.1 14 151,653 66.3 21 284,633 84.6
Private sector
– Commercial 12 169,410 52.2 13 76,850 33.6 13 51,741 15.4
– Residential 2 560 0.2 3 237 0.1 1 10 negligible
– Industrial 2 11,196 3.5 1 36 negligibl e–––
Sub-total 16 181,166 55.9 17 77,123 33.7 14 51,751 15.4
Total 38 324,292 100.0 31 228,776 100.0 35 336,384 100.0
For the nine months ended 30 September
2022 2023
No. of
projects Revenue
% of total
revenue
No. of
projects Revenue
% of total
revenue
HK$’000 % HK$’000 %
(Unaudited)
Public sector
– Infrastructure
and public
facilities 16 202,523 80.5 19 191,720 81.5
– Residential 3 6,207 2.5 2 3,915 1.7
Sub-total 19 208,730 83.0 21 195,635 83.2
Private sector
– Commercial 10 42,828 17.0 8 37,053 15.8
– Residential 1 3 negligible 1 2,350 1.0
– Industrial ––––––
Sub-total 11 42,831 17.0 9 39,403 16.8
Total 30 251,561 100.0 30 235,038 100.0
BUSINESS
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Our Group’s revenue decreased by approximately 29.5% from approximately HK$324.3
million for FY2020 to approximately HK$228.8 million for FY2021, which was mainly
attributable to:
(i) Project No. #01, being our top project for FY2020 involving a private sector
commercial development located at the Hong Kong International Airport with an
estimated contract sum of approximately HK$191.4 million. Project No. #01
contributed revenue of approximately HK$120.7 million to our Group for
FY2020, representing approximately 37.2% of our total revenue for the
corresponding year. Project No. #01 was completed at the end of FY2020, and no
revenue was derived from Project No. #01 for FY2021; and
(ii) the unexpected change to our works schedule of Project No. #02, which involved
a public infrastructure development located at Kai Tak with an estimated contract
sum of approximately HK$380.2 million. Our Group secured Project No. #02
from Hip Hing Group in late 2019 and started generating revenue from Project
No. #02 by October 2019. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, our Group recognised revenue of approximately
HK$71.3 million, HK$69.5 million, HK$193.2 million and HK$40.9 million, from
Project No. #02, respectively. According to the original project schedule, our
contract works were supposed to commence in or around late 2019 and complete
by mid-2021. In anticipation of the tight project schedule and scale of works
under Project No. #02, our Group had started procuring materials and commenced
part of the structural steel fabrication works shortly after we secured this project.
By mid-2020, we were informed that our works schedule of Project No. #02
would be revised primarily due to changes in design and drawings of structural
steelwork by the project owner and that the substantial part of our construction
site works would be rescheduled to 2021.
Being mindful of the revised project schedule of Project No. #02 and in light of
the constraint in our available resources, during the second half of 2020, our
executive Directors considered that it was vital to temporarily refrain from
tendering for sizeable projects which may substantially overlap with the revised
project schedule of Project No. #02. Our Group also decided to reserve a
substantial amount of our then available resources, including the capacity at our
production facilities and manpower of our project management staff, for Project
No. #02, taking into consideration (a) the substantial part of our construction site
works under Project No. #02 would be rescheduled to 2021; (b) the sizeable scale
and amount of works involved under such project; (c) the expected workloads for
other ongoing projects; (d) the uncertainty arising from the COVID-19 outbreak
and the associated risks of labour shortage and disruption to the transportation
between Hong Kong and the PRC; and (e) the need to preserve our industry
reputation and business relationship with Hip Hing Group via the satisfactory
completion of Project No. #02, which is a landmark sports infrastructure
development in Hong Kong.
BUSINESS
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Later in mid-2021, our Group was informed that the substantial part of our
construction site works under Project No. #02 would be further rescheduled due to
the late handover of the relevant work sites to us. While pending instruction from
Hip Hing Group for proceeding with our construction site works, we had
continued to perform fabrication works in 2021 to ensure we could meet the
revised project schedule of Project No. #02. The fabricated items have occupied
significant storage space at our production facilities, thereby reducing our
production capacity for undertaking other projects in 2021.
Amid the repeated rescheduling of Project No. #02, during the second half of
FY2021, we attempted to recoup the expected revenue which would otherwise be
generated from Project No. #02 in the absence of such rescheduling. We did this
by tendering for new projects that have relatively shorter duration and could
readily commence in the near term. Despite our efforts, the revenue generated
from the projects we obtained during the second half of 2021 was not sufficient to
compensate for the decrease in our revenue due to the lower amount of works
performed under Project No. #02. In addition, as mentioned above, during the
second half of 2020, we had temporarily refrained from tendering for sizeable
projects which may substantially overlap with the revised project schedule of
Project No. #02, resulting in lower amount of works performed by us in FY2021.
After mid-2021, our Group did not receive any further notice in relation to the
rescheduling of Project No. #02 and a substantial part of our construction site
works were carried out in 2022 in accordance with the last revised schedule.
Pursuant to the contract terms of the service agreement for Project No. #02, in the
event our contract works under Project No. #02 was not completed within the
original schedule due to reason(s) other than our default, our Group shall be
entitled to apply in writing to Hip Hing Group for an extension to project
duration and claim for any additional costs reasonably incurred by us arising from
the delay. Based on (i) our negotiation with Hip Hing Group; and (ii) the
aggregate payment certification certified by Hip Hing Group exceeds the original
contract sum of this project, the Directors are of the view that our Group was able
to claim for substantial part of the increase in costs incurred by us arising from
the rescheduling of Project No. #02 to Hip Hing Group.
During the Track Record Period, we had a total of 73 projects with revenue
contribution to us. During the Track Record Period and up to the Latest Practicable Date,
our Group did not experience any loss-making projects. As at the Latest Practicable Date,
we had 22 projects on hand. For further details, please refer to the paragraph headed
“Projects on hand” below in this section.
Our Group recorded a relatively lower gross profit margin of approximately 15.5% for
FY2021 as compared to approximately 17.0% and 19.9% for FY2020 and FY2022,
respectively, which was mainly due to the unforeseen rescheduling of our construction site
works for Project No. #02 in mid-2021 as aforementioned. Due to the unanticipated
rescheduling of Project No. #02, a substantial amount of the then available resources of our
Group originally reserved for Project No. #02 such as direct labour and structural steel
production capacity were rendered idle or not fully utilised during FY2021, resulting in
certain direct labour costs, manufacturing overheads and project administrative costs
BUSINESS
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--- page 138 ---
incurred, which amounted to approximately HK$1.9 million during FY2021 (the “ Idle
Cost”). In accordance with the relevant accounting standard, as the Idle Cost did not
contribute to our Group’s progress in satisfying our performance obligations amid the
rescheduling of Project No. #02, our Group did not recognise the corresponding revenue for
the Idle Cost by the time they were incurred, and such Idle Cost was not allocated to Project
No. #02 or any particular project undertaken by our Group, but were recognised as
unallocated costs in our Group’s cost of services for FY2021. As a result, the gross profit
margin of Project No. #02 was not adversely affected by the Idle Cost. Nonetheless, since
the Idle Cost had been recognised as unallocated cost of services of our Group for FY2021
and did not contribute the corresponding revenue to our Group for FY2021, our Group’s
overall gross profit margin for FY2021 was lower as compared to that of FY2020 and
FY2022.
During the Track Record Period, we identified business opportunities mainly through
invitation for tender from customers. As we undertake structural steelwork in the role of
subcontractor, all of our revenue generated was derived from projects awarded by
construction contractors during the Track Record Period. Therefore, to a significant extent,
our tender exposure depends on the types of projects obtained by our construction contractor
customers. Our Group has all along remained open to, and possesses substantial track record
in undertaking both public sector and private sector projects. Based on our past experience,
as far as structural steelwork is concerned, our executive Directors consider that there is no
material difference in the expertise and know-how required for public sector and private
sector projects. Our Group generally determines whether we should proceed with the
preparation of tender based on, amongst others, the scope of services, our capability, the
expected complexity, our production capacity of structural steel, the available space at our
production facilities for the fabrication process and storage of materials, our available
financial and human resources and feasibility and profitability of the project. As long as our
capacity and available resources allow, our Group will endeavor to respond to tender
invitations received from customers, with little regard to the sector that the relevant projects
belong to. Therefore, the proportion of our revenue derived from private and public sector
projects may vary from period to period, largely affected by the projects obtained and
undertaken by our construction contractor customers at the relevant times, rather than caused
by any change in our business focus or strategy.
Private sector projects contributed approximately 55.9%, 33.7%, 15.4% and 16.8% of
our total revenue for FY2020, FY2021, FY2022 and the nine months ended 30 September
2023, respectively. Our Group recorded a relatively higher percentage of revenue
contribution from private sector projects for FY2020 mainly because we performed a
substantial amount of works for Project No. #01 in the same year. Project No. #01 involved
a private sector commercial development located at the Hong Kong International Airport
with an estimated contract sum of approximately HK$191.4 million. Project No. #01
contributed revenue of approximately HK$120.7 million to our Group for FY2020,
representing approximately 37.2% of our total revenue for the corresponding year. Project
No. #01 was completed at the end of FY2020 and no revenue was generated therefrom since
FY2021.
BUSINESS
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Our principal operating subsidiary in Hong Kong, Wing Kei Hong Kong, is currently a
registered subcontractor under the category of structural steelwork on the Register of
Subcontractors maintained by the Construction Industry Council. Wing Kei Hong Kong is
also registered on the List of Approved Specialist Contractors for Public Works maintained
by the Development Bureau under the category of structural steelwork. For further details,
please refer to the paragraph headed “Licences, registrations and permits” in this section.
Wing Kei Dongguan, being our PRC operating subsidiary, operates two production
facilities located in Dongguan, the PRC, which process and fabricate structural steel required
by our steelwork projects. Our Dapianmei Production Facility commenced operations back in
2000, and our Xinlong Production Facility subsequently came into operation in 2020 in light
of the increasing needs of our structural steelwork projects. All of our structural steel
production capacity is currently used to cater to our own project needs.
Our Dapianmei Production Facility and Xinlong Production Facility could fabricate up
to 6,600 tonnes and 3,300 tonnes of structural steel per year, respectively. Our ability to
undertake additional and sizeable structural steelwork projects, to a large extent, depends on
the available capacity and space of our production facilities. Structural steel fabrication is a
space-intensive activity which involves significant areas for the storage, maneuver and
processing of bulky metal items. The size, shape, density and specifications of steel required
vary from project to project. As a general practice, each batch of steel used in a project is
bundled together and then physically endorsed with the signature of our customers’
representatives for identification purpose. To avoid intermingling of the steel bundle
earmarked for different projects, we generally place and store the steel bundle for each
project under designated and separate area in our production facilities. In addition, as we
operate gantry cranes for lifting and transporting bulky items within our production
premises, we would have to allow adequate room for moving around the loads in a safe and
unobstructed manner. Further, sufficient space has to be given to our workers to ensure their
safety and efficiency as they carry out manual works throughout the steel fabrication
process.
Our Directors consider that our ability to process and fabricate structural steel at our
own production facilities enables us to provide tailored solutions to our customers with
better quality assurance, achieve stability in supply and cost efficiency and allows us to
offer more competitive prices as compared to our competitors which have to source
structural steel from third party suppliers.
Suppliers of goods and services which are specific to our business and are required on
a regular basis to enable us to continue carrying on our business mainly include (i) suppliers
of materials such as steel; (ii) subcontractors of construction site works; (iii) subcontractors
of structural steel fabrication works; and (iv) suppliers of other miscellaneous services such
as testing, machinery services, transportation and technical engineering services.
We place emphasis on providing consistently high quality services. We have adopted
and implemented a quality control system that complies with international standards. Our
quality management system has been certified to satisfy the requirement of ISO 9001:2015.
BUSINESS
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According to the Industry Report, the demand for structural steelwork in Hong Kong
will continue to grow at a CAGR of approximately 4.8% from 2023 to 2027, reaching a
gross value of approximately HK$12,580.1 million in 2027. Driven by various growth
drivers including (i) the demand for structural steelwork generated from the planned and
ongoing infrastructural and property developments in both public and private sectors in
Hong Kong such as the Three Runway System development, Kwu Tung North, Hung Shui
Kiu/Ha Tsuen and Y uen Long South New Development Areas, New Central Harbourfront
development and the Caroline Hill Road Causeway Bay commercial project; (ii) the
increasingly common adoption of structural steelwork for construction in Hong Kong owing
to its eco-friendliness nature, flexibility of use and better performance in achieving space
efficiency; and (iii) the growing emphasis and continuous support from the Hong Kong
government for the development of the structural steelwork industry, including the increase
in use of steel structures by the Hong Kong government in major infrastructure projects and
the establishment of the Chinese National Engineering Research Centre for Steel
Construction at the Hong Kong Polytechnic University (“ PolyU ”), which is likely to
improve applied research and technology in structural steel engineering and infrastructure
sustainability, as well as strengthen the structural steel engineering industry’s productivity,
capability and competitiveness. The gross value of structural steelwork in Hong Kong is
expected to maintain a steady growth. With our experienced management team and past
track record, our executive Directors believe that we are well-positioned to capture the
growing demand for structural steelwork in Hong Kong. For details on the market drivers
relating to our Group, please refer to the section headed “Industry overview” in this
prospectus.
COMPETITIVE STRENGTHS
We believe that we have the following competitive strengths:
We provide tailored solutions in relation to structural steelwork to our customers
We provide tailored solutions to our customers comprising the supply, fabrication and
installation of structural steel for construction projects in Hong Kong. According to the
Industry Report, the structural steelwork industry in Hong Kong is highly competitive and
fragmented. Structural steelwork contractors which offer comprehensive engineering
contracting services are generally able to differentiate themselves from other market
participants and are typically preferred by customers such as property developers and
government agencies. In particular, structural steelwork contractors which possess in-house
capacity to process and fabricate structural steel and operate its own processing or
manufacturing facilities are generally able to control production costs more effectively,
respond to market demand more quickly, ensure a consistent supply of products for
customers and enjoy greater flexibility in adjusting the supply and installation schedules to
meet supplemental orders and tight timeline from unforeseen demand, thereby enhancing
their appeal to potential customers. As advised by F&S, within the pool of over 500
structural steelwork contractors in Hong Kong, only around 2% of them, such as KPa-BM
Holdings Limited, being one of the top structural steelwork contractors in Hong Kong, have
possessed in-house capacity to fabricate structural steel.
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Our Group, being one of the structural steelwork contractors in Hong Kong which
possesses in-house capacity to fabricate structural steel, operates two production facilities
located in Dongguan, the PRC, for structural steel fabrication. Our Dapianmei Production
Facility and Xinlong Production Facility could fabricate up to 6,600 tonnes and 3,300 tonnes
of structural steel per year, respectively. Our Directors consider that our established in-house
capacity to process and fabricate structural steel tailored to the specifications of our
customers gives us greater flexibility in undertaking projects of different scale and enables
us to cater to the project schedule required by our customers. Our in-house steel fabrication
capacity also enables us to maintain better quality control and assurance over the structural
steel used in our projects, achieve stability in supply and allows us to achieve cost
efficiency which in turn allows us to offer more competitive prices to our customers as
compared to our competitors which have to source structural steel from third party suppliers.
We have an established track record in the structural steelwork industry in Hong Kong
The history of our Group can be traced back to 1999, when Mr. WH Chan and Mr.
Kelvin Chan established Wing Kei Hong Kong. According to the Industry Report, our Group
ranked third in the Hong Kong structural steelwork industry in terms of revenue in 2022,
and accounted for approximately 3.4% of the market share in 2022. In our operating history
of over 24 years, we have focused on providing structural steelwork services in the role of
subcontractor and built up our expertise and track record in structural steelwork.
Wing Kei Hong Kong is currently a registered subcontractor under the category of
structural steelwork on the Register of Subcontractors maintained by the Construction
Industry Council. Wing Kei Hong Kong is also registered on the List of Approved Specialist
Contractors for Public Works maintained by the Development Bureau under the category of
structural steelwork. According to the Industry Report, as part of the tender conditions and
to ensure quality assurance, main contractors would generally select structural steelwork
contractors registered on the List of Approved Specialist Contractors for Public Works to
carry out the structural steelwork in a construction project. As at the Latest Practicable Date,
there were in total 50 structural steelwork contractors registered on the List of Approved
Specialist Contractors for Public Works. In light of the limited number of structural
steelwork subcontractors with such registration, our executive Directors consider that our
registration on the List of Approved Specialist Contractors for Public Works distinguished
our market position in the Hong Kong structural steelwork industry.
We take pride in our project portfolio of structural steelwork which involves a wide
range of buildings and facilities, including public infrastructure and facilities, residential,
commercial and industrial developments in Hong Kong. In particular, we have participated
in a number of sizeable landmark public infrastructure developments in Hong Kong
including Kai Tak Sports Park, Hong Kong-Zhuhai-Macao Bridge, Hong Kong International
Airport, Hong Kong Post Central Mail Centre and Liantang/Heung Y uen Wai Boundary
Control Point in our operating history.
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Further, our commitment to service quality has been well-recognised in the Hong Kong
structural steelwork industry. We have received a number of commendations from our
customers and/or project owners as recognition of our satisfactory performance in their
projects, such as the well-performed contractor award, the best subcontractor awards and
certain certificates recognising our commitment to achieving a safe workplace and/or quality
works.
We believe that our proven track record of quality works, our expertise in structural
steelwork and our ability to deliver works on time are the crucial factors that enable us to
gain trust from our customers and give us a competitive edge when tendering for projects.
Our management team is experienced and dedicated
Our management team has extensive industry knowledge and project experience in the
structural steelwork industry in Hong Kong. Mr. Kelvin Chan, an executive Director, the
chief executive officer of our Group and one of our founders, has more than 24 years of
experience in the structural steelwork industry. Mr. Kelvin Chan is primarily responsible for
the overall management and formulation of business strategies of our Group. Mr. Eddie
Chan, an executive Director and the chief operating officer of our Group, has more than 20
years of experience in the structural steelwork industry. Mr. Eddie Chan is primarily
responsible for the overall project management and day-to-day management of the
operations of our Group. Ms. Karen Chan, an executive Director, has over seven years of
experience in the structural steelwork industry. Ms. Karen Chan is primarily responsible for
the overall day-to-day management of the operations and administration of our Group. Our
executive Directors are supported by our project management team consisting of 10
personnel as at 30 September 2023, who possess practical skills and experience as required
in handling our projects. For example, Mr. Leung Lok Him, our project manager and a
member of our senior management, has over seven years of experience in the structural
steelwork industry. For further details regarding the background and experience of our
management team, please refer to the section headed “Directors and senior management” in
this prospectus.
Under the leadership of Mr. Kelvin Chan, Mr. Eddie Chan and Ms. Karen Chan, we
have a strong and dedicated execution team in liaising with our existing and potential
customers for their needs and market trends. In particular, we maintain frequent interactions
with our customers for their feedbacks on the quality of our services. Our executive
Directors believe that our management’s technical expertise and professional knowledge of
the industry have been our Group’s valuable assets and will continue to strengthen our
competitiveness in the industry.
We impose stringent quality control systems
We place emphasis on providing consistently high quality services. We have adopted
and implemented a quality control system that complies with international standards. Our
quality management system has been certified to satisfy the requirements of ISO 9001:2015.
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Our Group maintains an approved list of suppliers which is updated on a regular basis.
Depending on the contract terms with our customers, we may be required to procure
materials with certain specifications or quality standards. Our Group would generally arrange
for testing of the materials by external laboratory selected by the Hong Kong government or
by us. We typically conduct inspection on the materials upon their delivery to our
production facilities in the PRC. Our customers would also direct representatives to conduct
inspection and endorse on the materials for identification and tracking purpose.
Our quality control department closely monitors our structural steel fabrication process
to ensure strict compliance with our standard operating procedures. Our Group submits
quality control report to our customers throughout the structural steel fabrication process on
a regular basis. Our Group also engages third party testing service providers for weld testing
to ensure the strength and quality of our semi-finished products. The third party testing
service provider will issue testing reports to our Group, which will be submitted to our
customers for approval.
We perform in-house inspections on each batch of finished goods to ensure our
products comply with the specifications and requirements of our customers. We are generally
required to provide outgoing quality inspection reports to our customers for approval before
the products are delivered to the construction sites in Hong Kong. Our foremen and our
customers’ representatives at the construction sites would also conduct inspection on the
finished products upon their arrival.
Our executive Directors believe that stringent quality control system allows us to be
better positioned to deliver quality works on time and within budget, thereby strengthening
our position as a structural steelwork contractor in Hong Kong.
BUSINESS STRATEGIES
The principal business objective of our Group is to further strengthen our market
position, increase our market share and capture the growth in the Hong Kong structural
steelwork industry. We intend to achieve our business objective by expanding our scale of
operation through our intended effort in actively seeking opportunities in undertaking
additional structural steelwork projects, from both our existing and potential new customers,
on top of our present scale of operation and our current projects on hand.
Taking into consideration (i) our competitive strengths set out in the paragraph headed
“Competitive strengths” above in this section; (ii) our proven track record and expertise in
undertaking structural steelwork; (iii) our capability in providing tailored solutions to our
customers comprising the supply, fabrication and installation of structural steel for
construction projects in Hong Kong; and (iv) the forecasted growth of the structural
steelwork industry in Hong Kong as provided in the Industry Report, our Directors believe
that our Group would be able to capture the potential business opportunities associated with
the forecasted increase in demand for structural steelwork as discussed in the paragraphs
below if we continue to increase our available resources.
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In this connection, our key business strategies are as follows:
Competing for structural steelwork projects and expanding our market share
According to the Industry Report, it is expected that the gross value of structural
steelwork in Hong Kong will increase from approximately HK$10,409.2 million in 2023 to
approximately HK$12,580.1 million in 2027, representing a CAGR of approximately 4.8%
from 2023 to 2027. Driven by various growth drivers including (i) the demand for structural
steelwork generated from the planned and ongoing infrastructural and property developments
in both public and private sectors in Hong Kong such as the Three Runway System
development, Kwu Tung North, Hung Shui Kiu/Ha Tsuen and Y uen Long South New
Development Areas, New Central Harbourfront development and the Caroline Hill Road
Causeway Bay commercial project; (ii) the increasingly common adoption of structural
steelwork for construction in Hong Kong owing to its eco-friendliness nature, flexibility of
use and better performance in achieving space efficiency; and (iii) the growing emphasis and
continuous support from the Hong Kong government for the development of the structural
steelwork industry, including the increase in use of steel structures by the Hong Kong
government in major infrastructure projects and the establishment of the Chinese National
Engineering Research Centre for Steel Construction at the Hong Kong Polytechnic
University (“ PolyU ”), which is likely to improve applied research and technology in
structural steel engineering and infrastructure sustainability, as well as strengthen the
structural steel engineering industry’s productivity, capability and competitiveness. The gross
value of structural steelwork in Hong Kong is expected to maintain a steady growth. Our
Group has received tender invitations for projects in relation to the abovementioned
infrastructural and property developments in Hong Kong, including the Three Runway
System development, Kwu Tung North, Hung Shui Kiu/Ha Tsuen and Y uen Long South New
Development Areas, New Central Harbourfront development and the Caroline Hill Road
Causeway Bay commercial project. In particular, we have secured a project, namely Project
No. #13, in relation to the Caroline Hill Road Causeway Bay commercial project with an
estimated contract sum of approximately HK$388.0 million, details of which are disclosed
under the paragraph headed “Future plans and use of proceeds - Use of proceeds” in this
prospectus. With our experienced management team and past track record, our executive
Directors believe that we are well-positioned to capture the growing demand for structural
steelwork in Hong Kong. For details on the market drivers relating to our Group, please
refer to the section headed “Industry overview” in this prospectus.
In light of the steady growth in demand for structural steelwork in Hong Kong, our
Directors believe that we should focus on deploying our resources towards competing for
additional and more sizeable structural steelwork projects. The number of projects that can
be executed by our Group concurrently at any given time is constrained by our then
available resources. Hence our Directors believe that our Group will only be able to
undertake additional projects on top of our present scale of operation and our current
projects on hand if we are able to continue to increase our available resources, including the
capacity and available space of our production facilities, our manpower and financial
resources. As at the Latest Practicable Date, our Group had a total of 22 projects on hand
with an aggregate of approximately HK$574.5 million yet to be recognised as revenue.
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According to the Industry Report, our Group accounted for approximately 3.4% of the
market share in the Hong Kong structural steelwork industry in terms of revenue in 2022.
Taking into consideration the forecasted growth in the Hong Kong structural steelwork
industry as provided in the Industry Report, our executive Directors consider that there is
plenty of room for us to expand our business operations and strengthen our market standing
in the Hong Kong structural steelwork industry by actively seeking opportunities in
undertaking additional and sizeable structural steelwork projects from both our existing and
potential new customers. During the Track Record Period, Our Group has experienced
growth in tender opportunities for sizeable projects. This is illustrated by (i) the increasing
average tender value in respect of the tenders submitted by our Group from approximately
HK$13.5 million for FY2020 to approximately HK$16.1 million for FY2021 and further
increased to approximately HK$28.5 million for FY2022; and (ii) the fact that the number of
tenders submitted by our Group with tender amount above HK$50.0 million increased from
two for FY2020 to three for FY2021 and further increased to 13 for FY2022.
According to the Industry Report, as part of the tender conditions and to ensure quality
assurance, main contractors would generally select structural steelwork contractors registered
on the List of Approved Specialist Contractors for Public Works to carry out the structural
steelwork in a construction project. As at the Latest Practicable Date, there were in total 50
structural steelwork contractors registered on the List of Approved Specialist Contractors for
Public Works. In light of the limited number of structural steelwork contractors with such
registration, our Directors consider that our registration on the List of Approved Specialist
Contractors for Public Works distinguished our market position in the Hong Kong structural
steelwork industry and give us competitive advantages in capturing the increase in demand
for structural steelwork in Hong Kong.
Further, our Directors consider that the Listing will enhance our corporate profile and
credibility which will enable our Group to be considered more favourably by our existing
and potential new customers, given that a listed company is subject to ongoing regulatory
compliance for announcements, financial disclosure and corporate governance. Based on the
above, our Directors consider that upon our successful Listing, our Group will have greater
exposure to potential opportunities, and our competitiveness for structural steelwork projects
will increase accordingly.
Expanding our production capacity of structural steel
We take pride in being a structural steelwork contractor which can provide tailored
solutions comprising the supply, fabrication and installation of structural steel. As advised
by F&S, within the pool of over 500 structural steelwork contractors in Hong Kong, only
around 2% of them have possessed in-house capacity to fabricate structural steel. Our
in-house capacity to fabricate structural steel gives us competitive edge in the structural
steelwork industry in Hong Kong as it gives our customers better quality assurance and
allows us to achieve stability in supply and cost efficiency, thereby allowing us to offer
more competitive prices as compared to our competitors which have to source structural
steel from third party suppliers. In addition, we demonstrate a high level of transparency in
the production process of our structural steel. As a general practice, our customers would
assign their own representatives to carry out multiple rounds of inspection throughout the
fabrication process to ensure the materials and products conform to their standards and
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specifications. As a substantial portion of structural steel used in our projects are fabricated
at our own production facilities, we are able to give timely and full access to our customers
as they request for on-site inspection, which in turn could enhance their confidence in our
production process and product quality.
We are committed to expanding our production capacity and efficiency. We currently
operate two production facilities located in Dongguan, the PRC, for structural steel
fabrication, namely (i) the Dapianmei Production Facility with a gross floor area of
approximately 7,000 sq.m.; and (ii) the Xinlong Production Facility with a gross floor area
of approximately 8,700 sq.m.. The Dapianmei Production Facility and the Xinlong
Production Facility are both located in Dongguan, the PRC.
Our Group has been exposed to growing tender opportunities for more sizeable scale of
projects which can be demonstrated by the increase in number of tender invitations received
by us for projects with higher tender value. As at the Latest Practicable Date, our Group had
a total of 51 submitted tenders with an aggregate estimated tender value of approximately
HK$1.7 billion, that were still pending tender results. Out of the 51 submitted tenders, our
executive Directors consider that we would likely be able to secure at least two projects (the
“Identified Projects ”), with an estimated contract sum of approximately HK$367.7 million
in aggregate. In addition to those two Identified Projects, our remaining tenders submitted
which were pending tender results included, among others, three projects with an estimated
contract sum of approximately HK$264.5 million, HK$180.4 million and HK$91.5 million,
respectively. Further, in September 2023, our Group secured Project No. #13 with an
estimated contract sum of approximately HK$388.0 million, involving a commercial
development in Causeway Bay, from Hip Hing Group, details of which are set out in the
paragraph headed “Projects on hand” below in this section. Project No. #13 represents the
largest project obtained by us in terms of estimated contract sum during the Track Record
Period. Our Directors consider that the increasing scale of projects obtained by our Group is
a recognition of our service quality and reliability as demonstrated in our previous projects.
Given our Group is generally required to fabricate the structural steel required in a project,
our Directors anticipate that the increase in scale of projects tendered and obtained by us
will inevitably result in greater demand for our production capacity.
In this regard, we plan to acquire a piece of land within or in proximity to Dongguan,
the PRC (the “ Proposed Acquisition ”) and construct an additional production facility (the
“New Production Facility ”) with a gross floor area of approximately 16,000 sq.m.. It is
estimated that the New Production Facility will have a maximum annual production capacity
of approximately 6,600 tonnes.
As at the Latest Practicable Date, our Group had engaged a property agent in the PRC
for identifying suitable land for the New Production Facility based on the following criteria:
(i) being located within or in proximity to Dongguan, the PRC; (ii) the estimated
consideration for the land shall range from RMB20.0 million to RMB25.0 million; (iii) the
land is for industrial use and our Group shall be allowed to construct production facilities,
offices and ancillary facilities on the land; (iv) having obtained valid land use certificate; (v)
being free from any subsisting or potential defects to the title of land or any third party
claims; (vi) there being no major difficulties in obtaining approval or consent from relevant
government authorities for the transfer of land; and (vii) being equipped with the necessary
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infrastructural facilities such as electricity, drainage and sewage treatment. The property
agent has informed us that based on the search and enquiry performed, at least five targets
which fulfil the above criteria are available in the market for the time being. In order to
ensure that suitable land which fulfil our criteria will be readily available for sale, the
property agent had agreed to continue updating the list of identified land parcels on a
regular basis. In the event any of the identified land parcels is no longer available for sale,
the property agent shall identify alternative land parcels that fulfil our criteria.
Depending on (i) the progress and time required for conducting formal due diligence
on suitable targets; (ii) the final consideration for the land based on negotiation with
potential sellers; and (iii) the prevailing condition of the property market in Dongguan, the
PRC, our executive Directors currently expect that the Proposed Acquisition will be carried
out within three to six months from the Listing. Based on our management’s best estimation
and past experience, it would take approximately six to nine months to complete the
construction of the New Production Facility and commence operation and an additional three
months for the New Production Facility to come into full operation. As advised by our PRC
Legal Advisers, the following licenses would be required for the New Production Facility
and the underlying land to operate without any material legal risks: the land use right
certificate
, construction planning permitணʈ೻஝ྌ஢̙ᗇ and property
ownership certificateϞᛆᗇ.
If the construction of the New Production Facility is successfully completed on or
before October 2024, by which the lease of the Xinlong Production Facility would expire,
we will relocate those productions carried out at the Xinlong Production Facility to the New
Production Facility so as to reduce our rental costs and achieve better operational efficiency.
Meanwhile, if the New Production Facility is not yet available for use when the current
lease of the Xinlong Production Facility expires, our Group will either (i) negotiate with the
landlord of the Xinlong Production Facility for an extension of the lease term; or (ii)
identify and relocate to other leased premises on temporary basis until the New Production
Facility is completed.
(I) Fabrication of structural steel is space intensive in nature
Structural steel fabrication is a space-intensive activity which involves significant areas
for the storage, maneuver and processing of bulky metal items. The size, shape, density and
specifications of steel required vary from project to project. As a general practice, each
batch of steel used in a project is bundled together and then physically endorsed with the
signature of our customers’ representatives for identification purpose. To avoid intermingling
of the steel bundle earmarked for different projects, we generally place and store the steel
bundle for each project under designated and separate area in our production facilities.
Due to the weight and size of the materials involved (e.g. steels plates etc.), it is
inherently difficult to lift and transport the materials to different sections of the production
premises with general lifting equipment. In view of this, gantry cranes were installed in each
of our two production facilities for lifting and transporting bulky items within the production
premises throughout the fabrication process. As we operate gantry cranes for lifting and
transporting bulky items, we would have to allow adequate room for moving around the
loads in a safe and unobstructed manner.
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Further, sufficient space has to be given to our workers to ensure their safety and
efficiency as they carry out manual works throughout the steel fabrication process.
Notwithstanding the limitation of available storage space in our production facilities, we
usually refrain from piling up steel bundles or articles of different specifications on each
other as this may easily result in confusion over the segregation of materials for different
projects, and excessive piling of materials may also pose risks to work safety and hinder the
operations of our gantry cranes as the materials may collide with the hanging objects as the
lifting trolley moves along the rail tracks.
Our ability to undertake additional and sizeable structural steelwork projects, to a large
extent, depends on our production capacity of structural steel. Owing to the space-intensive
nature of structural steel fabrication, our production capacity is partly limited by the
available space at our production facilities. In order to enhance our capacity for undertaking
structural steelwork projects and strengthen our market position in the Hong Kong structural
steelwork industry, our Directors consider that it is imperative for our Group to expand the
available space for our fabrication works.
(II) Expanding our production and storage capacity
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
utilisation rate of the Dapianmei Production Facility was approximately 96.8%, 80.1%,
85.8% and 86.2%, respectively; whereas the utilisation rate of the Xinlong Production
Facility was approximately 85.3%, 76.2%, 77.6% and 78.3%, respectively. For further
details, please refer to the paragraph headed “Production facilities and capacity – Utilisation
rate” below in this section. Our Directors consider that the relatively high utilisation rates of
our production facilities have limited our capacity to compete for new projects. During the
Track Record Period, there were occasions when our production capacity of structural steel
was close to being fully utilised by our projects on hand and our Group had to refrain from
responding to certain tender invitations and/or pursuing new projects during the tender
selection process. Our Directors consider that it is not desirable for our Group to repeatedly
abstain from tender submissions because this may be perceived negatively by our customers
and they could be less inclined to invite us to tender for new projects again in the future.
Besides, under our occupational health and safety procedures and measures, we strive
to provide adequate work space for our production staff. For instance, when our workers
operate cutting machine and welding machine at our production facilities, we generally
require them to maintain a distance of no less than three meters from each other. Since the
floor area of our production facilities is substantially occupied by our materials and
products, our Directors consider that any material increase in production demands may
inevitably result in crowded workplace for our production staff and hence reduce their work
efficiency.
Leveraging our in-house capacity to process and fabricate structural steel, our Group
has endeavoured to cater to the project schedule including any subsequent changes to project
schedule required by our customers. During the Track Record Period, there were occasions
where our customers revised the project schedule during project implementation, resulting in
delay to the commencement of our construction site works. Given our Group is generally
required by our customers to process and fabricate the structural steel required in a project,
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we typically commence the fabrication process of structural steel well before the
commencement of our construction site works. Hence, any unforeseen delay to project
schedule and/or our commencement of construction site works may result in the finished
products being stored and accumulated at our production facilities in the PRC, thereby
undermining our available production capacity and hindering our prospect of undertaking
new projects.
In order to (i) secure our market position in the Hong Kong structural steelwork
industry and to capture the increase in demand for structural steelwork in Hong Kong as
stated in the Industry Report; and (ii) ensure a reasonably spacious workplace for our
production staff, our Directors consider that we have a genuine and imminent need to
increase our production capacity and expanding our production facilities.
Currently, the total maximum production capacity of the Dapianmei Production Facility
and the Xinlong Production Facility amounted to approximately 9,900 tonnes per annum in
aggregate. Subject to the establishment of the New Production Facility and upon expiry of
the lease term of the Xinlong Production Facility by October 2024, we currently plan to
relocate our operations from the Xinlong Production Facility to the New Production Facility.
It is expected that the New Production Facility will have a maximum annual production
capacity of approximately 6,600 tonnes per annum, which will result in a net increase in our
Group’s maximum production capacity by approximately 3,300 tonnes per annum. The setup
of the New Production Facility is also expected to expand our storage capacity for materials
and fabricated structural steel as we currently plan to allocate a substantial portion of our
New Production Facility for storage purpose. We will recruit additional production staff and
quality control staff using our own internal resources to support the expected increase in
production capacity.
(III) Commercial rationale for acquiring instead of leasing production facility
Our Directors considered that the Proposed Acquisition brings more commercial
benefits to our Group than leasing taking into consideration the followings:
/L50188with reference to the current market rental of properties located in Dongguan, the
PRC for production facility use, it is estimated that the cost of leasing a property
with gross floor area of approximately 16,000 sq.m. would be approximately
RMB4.8 million to RMB5.4 million for each financial year. By comparison, with
reference to the current market sale price of properties with similar nature, the
estimated land acquisition and construction cost would be approximately
RMB45.0 million (equivalent to approximately HK$48.9 million). Based on the
accounting policies adopted by our Group, it is estimated that the additional
annual depreciation expenses would be approximately RMB1.5 million (equivalent
to approximately HK$1.6 million). As the annual rental cost for a property within
our target size and location is expected to be significantly higher than the
depreciation expenses to be incurred in relation to the setup of the New
Production Facility and the Proposed Acquisition, our Directors consider that it is
more cost effective for our Group to acquire instead of leasing the new production
property; and
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/L50188leasing of properties often subject us to the risks of relocation due to non-renewal
or premature termination of lease by the landlord. In setting-up a new production
facility, we have to incur renovation and setup costs. In the event our lease is
being terminated early and we have to relocate to another leased location, we will
have to incur similar expenses all over again.
(IV) Breakeven and investment payback periods
Breakeven period refers to the amount of time it takes for the annual revenue generated
from the New Production Facility to cover (i.e. at least equal to) its annual costs and
expenses incurred; whereas cash investment payback period refers to the amount of time it
takes for the cumulative net cash flows to cover the initial capital expenditure of the New
Production Facility.
In determining the breakeven period and cash investment payback period of the New
Production Facility, our Directors have taken into account the following assumptions:
(i) the capital expenditure for the establishment of the New Production Facility is
estimated to be approximately RMB45.0 million (equivalent to approximately
HK$48.9 million) in aggregate, of which approximately RMB25.0 million
(equivalent to approximately HK$27.2 million) is for the acquisition of land and
approximately RMB20.0 million (equivalent to approximately HK$21.7 million) is
for the construction and setup of the New Production Facility;
(ii) the New Production Facility would come into full operation in 2026 as the New
Production Facility is expected to be constructed in 2024 and 2025, and a series
of installation, testing and adjustment on the machinery is expected to be
performed in 2025;
(iii) there is no material change in the pricing basis for the sales and purchase
transactions between Wing Kei Hong Kong and Wing Kei Dongguan;
(iv) there is no material change in the gross profit margin of our Group; and
(v) our Group’s net cash flows, taking into account the average turnover days of trade
receivables and unbilled revenue, and trade payables during the Track Record
Period.
Based on the assumptions above and subject to any unforeseen circumstances, our
Directors estimated that the breakeven period of the New Production Facility would be in
2026 when the New Production Facility comes into full operation; whereas the cash
investment payback period of the New Production Facility would be in 2032 when its
cumulative net cash flows is able to cover its initial capital expenditure.
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Adhering to prudent financial management to ensure optimal finance costs and capital
sufficiency
According to the Industry Report, structural steelwork contractors with proven track
record, technical know-how and sufficient capital and financial resources are generally
considered favourably by main contractors during the tender selection process. Therefore,
structural steelwork contractors with stronger financial standing and cash flow liquidity
generally possess competitive advantages to tender for a wider range and larger scale of
projects. In view of the aforesaid, our executive Directors believe that our expansion of
service capacity and business growth have to be supported by sound financial position and
sufficient financial resources. A strong capital base is essential to cope with increased
turnover and support capital intensive structural steelwork projects.
According to the Industry Report, structural steelwork contractors generally experience
net cash outflows as project up-front costs at the early stage of a project. The up-front costs
of our projects generally include costs incurred at the early stage of a project comprising
payment made to suppliers for materials, subcontracting fees for our construction site works
subcontractors in Hong Kong and structural steel fabrication works subcontractors in the
PRC, manufacturing overheads in the PRC and machinery service fees. We generally
continue to experience net cash outflows even after the first payment received from our
customers due to the time lag between the receipt of progress payment from our customers
and payments to third parties. Based on our experience, the amount of cash inflows received
from our customers over the duration of a project generally exhibits an increasing trend at
the early stages up to the peak amount of works, while the costs incurred by us typically
experienced a less-than-proportionate increase over the period. Accordingly, our cash flows
typically turn from net cash outflows into net cash inflows gradually as the project
progresses.
Based on our operation history during the Track Record Period and depending on the
scale of the projects, the average timeframe between (i) the time when we first incur project
up-front costs; and (ii) the time when our accumulated net cash outflows in respect of a
project starts to decrease from its peak is on average 11 months from the commencement of
the project (the “ Up-front Period ”). In respect of our top projects for each year/period
during the Track Record Period, we generally received the first progress payment from the
relevant customer five months after commencement of the project. Depending on our terms
of engagement with different customers, in respect of the top projects undertaken during the
Track Record Period, the total amount of up-front costs incurred by our Group during the
Up-front Period represented on average 12% of the contract sum of the project. The specific
amount of up-front costs incurred may vary from project to project, depending on the scale
of the project, the party being responsible for the procurement of materials, the schedule of
project implementation and the length of our relationships with the relevant customers. In
addition, we may experience cash flow mismatch from time to time as our projects progress,
which largely depend on (i) the certification process of our customers; (ii) our customers’
internal process for approving our invoices; (iii) the required settlement time to our
suppliers; and (iv) the number and scale of our projects in progress. The liquidity needs of
our projects would therefore impose a constraint on the number and/or scale of the projects
which we could undertake concurrently if we solely rely on our operating cash flow to
support our expansion.
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We believe that the net proceeds from the Share Offer will strengthen our available
financial resources, thereby allowing us to undertake more projects by applying a portion of
the net proceeds for satisfying our up-front costs. We currently plan to apply part of our net
proceeds from the Share Offer towards fulfilling the relevant up-front costs of Project No.
#13 and two tendered projects which our executive Directors consider that we would likely
be able to secure. For further details of these projects, please refer to the paragraph headed
“Future plans and use of proceeds – Use of proceeds” in this prospectus.
In September 2023, our Group secured Project No. #13 with an estimated contract sum
of approximately HK$388.0 million, involving a commercial development in Causeway Bay,
from Hip Hing Group, details of which are set out in the paragraph headed “Projects on
hand” below in this section. Project No. #13 represents the largest project obtained by us in
terms of estimated contract sum during the Track Record Period. In September 2023, our
Group had commenced preparation works for Project No. #13. Based on the expected work
schedule of Project No. #13, our Directors anticipated that a substantial part of works under
Project No. #13 will only be performed from the second quarter of 2024 onwards and we
will incur a substantial amount of up-front costs for the payment for the requisite materials
and subcontracting services for Project No. #13 from the second quarter of 2024.
Further, our Directors consider that we would likely be able to secure at least two
tendered projects, namely Project No. T01 and T02, which are expected to commence in the
second quarter of 2024. For further details on our tendered projects for which our executive
Directors consider that we would likely be able to secure, please refer to the paragraph
headed “Future plans and use of proceeds – Use of proceeds” in this prospectus. In addition
to Project No. T01 and T02 of which our executive Directors consider that we would likely
be able to secure, as at the Latest Practicable Date, our Group had 49 submitted tenders
(without taking into account Project No. T01 and T02), with an aggregate estimated tender
amount of approximately HK$1.3 billion, which were still undergoing tender selection
process and pending tender result.
Expanding our workforce
We mainly focused on the role of project management and supervision in carrying out
our projects. Our project management team, comprising project manager, engineer, quantity
surveyor and site foreman, is generally responsible for (i) formulating detailed work
programmes; (ii) liaising with our production team on the structural steel products required;
(iii) providing feedbacks to our customers on the design of structural steelwork in
accordance with their needs and specifications; (iv) coordinating with our customers on the
work schedule; (v) engaging, supervising and collaborating with our subcontractors for
construction site works; (vi) supervision of work progress, budget and quality of services
rendered; (vii) preparation of progress reports; (viii) participation in project meetings and
communication with our customers on a continual basis; and (ix) ensuring the works
performed fulfil our customers’ requirements, and are completed on schedule, within budget
and in compliance with all applicable statutory requirements.
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As at the Latest Practicable Date, all of our project management staff had been
deployed to our projects on hand. Our Directors consider that our current scale of project
management staff may not be sufficient to meet the project management needs arising from
the additional and more sizeable projects that we intend to undertake in the future. Should
we undertake additional projects in the future, our existing project management staff may
not be able to devote sufficient time and attention to properly supervise and manage the
works undertaken by us and our subcontractors. By expanding our manpower resources, our
executive Directors believe that we would have additional capacity to undertake more
projects simultaneously while maintaining our project management efficiency and service
quality.
Based on the aforesaid, our Directors consider that it is imperative for our Group to
expand our project management team in order to enhance our project management
capabilities along with the planned expansion in our business scale and operation. We
currently plan to hire three additional project managers and one additional engineer after the
Listing to cope with the expected growth in our business. For further details of our
recruitment plan, please refer to the paragraph headed “Future plans and use of proceeds –
Use of proceeds” in this prospectus.
DESCRIPTION OF OUR SERVICES
We provide structural steelwork services as a subcontractor in Hong Kong. We provide
tailored solutions to our customers comprising the supply, fabrication and installation of
structural steel for construction projects in Hong Kong.
We operate two production facilities located in Dongguan, the PRC, which process and
fabricate structural steel required by our steelwork projects. We would assist our customers
in preparing the design of structural steel conforming to their needs and specifications and
fabricate the structural steel according to the design drawing approved by our customers.
The construction site works covered under our projects typically involve installation,
touch-up painting and fire protection works for our structural steel. We mainly focus on the
role of project management and supervision in carrying out our projects. We have engaged
subcontractors to perform a substantial part of the construction site works under our
supervision, and to a much lesser extent, we have maintained and deployed our own labour
to carry out some of the construction site works, where necessary. Typically, our major
responsibilities in a project include (i) arranging site preparatory and preliminary works; (ii)
engaging and supervising our subcontractors; (iii) maintaining regular communication with
our customers; (iv) monitoring the implementation of construction site works; (v) conducting
site safety supervision and quality control; and (vi) developing detailed work schedule and
work allocation plan.
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The following image illustrates the process of our structural steel installation works:
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BUSINESS OPERATIONS
Operation flow
Set out below is a flowchart summarising the principal steps of our business
operations:
Progress payment from
customersQuality control
Defects liability period (if applicable)
Customer inspection and acceptance
Approximately three
months to one year
Approximately six
to 24 months
Approximately three to
six months
Approximately three to
five months
Approximately two to
four weeks
Identification of business opportunities
Preliminary assessment of the project
Preparation of tender
Award of contract
Planning and management of project
Fabrication of structural steel products in the PRC
Project implementation in Hong Kong
Formation of project
management team
Procurement of
materials
Preparation of
production plan
Selection and
appointment of
subcontractors
Site inspection
Supervising the progress
and regular progress
meetings with customers
Note: The timeframe is calculated on an approximate basis and may vary from project to project
depending on the complexity of the project, the requirements of our customers and/or our agreement
with our customers on the timeframe for the principal steps.
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Identification of business opportunities
We identify potential projects mainly through invitation for tender from customers. Our
Group has from time to time received invitations to submit tender from construction
contractors in Hong Kong. Sometimes our customers would seek pre-bid quotation from our
Group before they submit their tenders for the main contract. If these customers are
subsequently awarded with the project, they would generally engage us to perform the
structural steelwork involved in such project. Please refer to the paragraph headed “Sales
and marketing” below in this section for further details.
Preliminary assessment of the project
The tender documents and project details provided by our customers generally contain
project description, scope of services required, expected commencement date, contract
period, payment term and timeframe for submitting the tender.
In general, we would review and evaluate the tender documents and/or project details
available to us to assess the scope of services, our capability, the expected complexity, our
production capacity of structural steel, the available space at our production facilities for the
fabrication process and storage of materials, our available financial and human resources and
feasibility and profitability of the project to determine whether we should proceed with the
preparation of tender.
Preparation of tender
Our quantity surveyors and executive Directors are primarily responsible for the
preparation of tender submission. We may conduct site visit to the place at which the project
is to be undertaken so as to have a better assessment of the complexity of the works
involved.
Our tender submission generally includes priced bill of quantities or schedule of rates.
The tender submission will be approved and endorsed by our executive Directors before
submission to our customers.
We estimate the costs to be incurred in the project based on our past experience, the
recent price trends of materials, manufacturing overheads in the PRC and subcontracting
services required for the project. We may also obtain non-binding quotations from our
material suppliers and/or subcontractors in making our cost estimation. For further
information on our pricing strategy, please refer to the paragraph headed “Pricing strategy”
below in this section.
Our customers may arrange interviews with us after receiving our tender submission in
order to have a better understanding of our personnel, expertise and experience. We may be
required to answer queries in relation to our tender submission. Our customers may also
negotiate on the options of our scope of service or propose amendment to our specifications.
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Award of contract
Our customers generally confirm our engagement by issuing a letter of award or
entering into a formal contract with us. During the Track Record Period, our contracts with
customers are generally on re-measurement basis. Our service contract generally specifies an
estimated contract sum based on the agreed unit rates and the estimated quantities of work
items. The actual amount of works to be carried out by us under our contract is subject to
our customer’s instructions or orders placed during the contract period and the total actual
value of work done may be different from the original estimated contract sum stated in the
contract. Our customers will measure the actual quantities of works executed on site and our
Group will be paid based on the actual work done.
In addition, our service contracts generally set forth the payment terms, project
duration and other standard terms of services. For further details, please refer to the
paragraph headed “Our customers – Principal terms of engagement” below in this section.
The following table sets forth the number of projects for which we have submitted
tenders, the number of projects awarded, the average tender value in respect of tenders
submitted and the success rate during the Track Record Period:
FY2020 FY2021 FY2022
Nine months
ended
30 September
2023
Number of projects for which we
have submitted tenders 66 90 79 52
Number of projects awarded 11 8 8 6
Average tender value in respect
of tenders submitted
(HK$’000) 13,545 16,053 28,509 41,281
Success rate (%)
(Note 1) 16.7 8.9 10.1 11.5 (Note 2)
Notes:
1. Success rate for a financial year/period is calculated based on the number of projects awarded
(whether awarded in the same financial year/period or subsequently) in respect of the tenders
submitted during that financial year/period.
2. Out of the 52 projects tendered during the nine months ended 30 September 2023, the tender results
of 44 projects were still pending as at the Latest Practicable Date.
We recorded a relatively higher tender success rate of approximately 16.7% for FY2020
as compared to approximately 8.9% and 10.1% for FY2021 and FY2022, respectively,
mainly because we were awarded with a higher number of smaller scale projects in FY2020
as compared to FY2021 and FY2022. Out of the 11 projects awarded in respect of tenders
submitted in FY2020, seven projects had an estimated contract sum below HK$10.0 million;
whereas out of the eight and eight projects awarded in respect of tenders submitted in
FY2021 and FY2022, only four and four projects had an estimated contract sum below
HK$10.0 million, respectively.
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During the Track Record Period, our Group had from time to time received invitations
for tenders when our available resources were occupied by other projects on hand.
Nonetheless, on occasion, in order to (i) maintain our business relationship with customers;
(ii) maintain our presence in the market; and (iii) be informed of the latest market
developments and pricing trends which are useful for tendering projects in the future, it was
our strategy to respond to our customers’ invitations by submitting tenders to the extent our
resources allow. In such circumstances, our executive Directors would take a more prudent
approach in costs estimation by factoring a higher profit margin even though it may cause
our tender price to become less competitive than those submitted by our competitors. Due to
such strategy and subject to the tender strategy of our competitors from time to time, our
tender success rate may be affected.
Alternatively, on occasions when our production capacity of structural steel is close to
being fully occupied, our Group may also refrain from responding to certain tender
invitations and/or pursuing new projects during the tender selection process.
As advised by F&S, the tender success rate of the structural steelwork industry in
Hong Kong generally ranges from 5% to 20% which varies depending on various factors,
including market competition, economic conditions, track record, pricing, technical and
functional capabilities and negotiation with customers on contract terms. For FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, we recorded a tender
success rate of approximately 16.7%, 8.9%, 10.1% and 11.5%, respectively, which were
generally in line with the industry range. Our Directors consider that our tender success rate
for FY2021 and FY2022 lied within the lower range of the industry mainly because our
Group had been awarded with larger scale projects with higher estimated contract sum
during FY2021 and FY2022 as compared to FY2020 as aforementioned. Taking into
consideration the needs to reserve our capacity for fulfilling the workload involved in these
larger scale projects, our Group had on occasions adopted a more prudent approach in costs
estimation by factoring a higher profit margin, possibly resulting in our tender price
becoming less competitive, or we might simply refrain from submitting revised tender
quotations to the relevant customer during the tender selection process, both of which might
have affected our tender success rate for FY2021 and FY2022.
Planning and management of project
Upon being awarded with a new project, we will commence planning for the
implementation and management of the project, which include (i) formation of project
management team; (ii) preparation of production plan; (iii) procurement of materials; and
(iv) selection and appointment of subcontractors.
Formation of project management team
We usually form a project management team which consists of project manager,
engineer, quantity surveyor and site foreman. Our project management team is generally
responsible for (i) formulating detailed work programmes; (ii) liaising with our production
team on the structural steel products required; (iii) providing feedbacks to our customers on
the design of structural steelwork in accordance with their needs and specifications; (iv)
coordinating with our customers on the work schedule; (v) engaging, supervising and
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collaborating with our subcontractors for construction site works; (vi) supervision of work
progress, budget and quality of services rendered; (vii) preparation of progress reports; (viii)
participation in project meetings and communication with our customers on a continual
basis; and (ix) ensuring the works performed fulfil our customers’ requirements, and are
completed on schedule, within budget and in compliance with all applicable statutory
requirements. In general, we determine the manpower allocation to a project management
team based on the timeline, scale and complexity of the projects as well as the existing
workload of our staff.
Set out below are the major responsibilities of each key member in a project
management team:
/L50188our project manager is responsible for supervising our overall workforce on
multiple work sites, monitoring the work efficiency and performance of our
subcontractors, communicating with our customers, subcontractors and other
members of the project management team on the project status, allocation of
resources in a project, preparing progress reports and reviewing site records;
/L50188our engineer is responsible for assisting our site foreman in overseeing the
engineering and technical aspects of the projects such as planning for the site
operations and devising suitable methods and procedures;
/L50188our quantity surveyor is responsible for performing cost estimation, determining,
procuring and monitoring the quantity of materials required in the project,
managing the project implementation costs and handling the payment applications
to our customers; and
/L50188our site foreman is responsible for supervising and monitoring work progress on
site, supervising workmanship and quality and preparing site records setting out
the works performed by our workers and subcontractors. In general, each site
foreman is assigned and stationed at a particular project.
Depending on the complexity of the project, we may also engage external technical
engineering consultant to assist with our technical submissions to customers on a
case-by-case basis.
Preparation of production plan
The structural steel products used in each project are tailor-made according to the
specifications and requirements of our customers. Our project management team will
coordinate with our customers on the design of products and works, and obtain the approval
for such design from our customers. Once the design of products is confirmed, our project
management team will coordinate with our production team to prepare the production plan.
The production plan generally includes the specifications of materials, production schedule
and delivery time. On occasions, our customers may require us to perform galvanising works
on the structural steel which requires specialised technical skills. To achieve optimisation in
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our production, we outsource all required galvanising works to our subcontractors in the
PRC. Further, depending on our production capacity, we may also subcontract other parts of
structural steel fabrication works to our subcontractors in the PRC.
Procurement of materials
We are generally responsible for the procurement of materials such as steel required in
the projects. We typically purchase materials from our internal list of approved suppliers.
After being awarded with a project, we will contact the suppliers from whom we have
obtained pre-bid quotations during the tender phase, and may further negotiate on the pricing
and contract terms with them. Depending on the scale of our purchase, our executive
Directors will approve the purchase orders for the major supplies that will be used in the
project. We did not engage in any hedging activities to minimise the risk of price fluctuation
of materials.
Our Group would generally arrange for testing of the materials by external laboratory
selected by the Hong Kong government or by us. We typically conduct inspection on the
materials upon their delivery to our production facilities in the PRC. Our customers would
also direct representatives to conduct inspection and endorse on the materials for
identification and tracking purpose.
Selection and appointment of subcontractors of construction site works
We mainly focused on the role of project management and supervision in carrying out
our projects, and we have engaged subcontractors to perform a substantial part of the
construction site works under our supervision. Our Group maintains an approved list of
subcontractors which is updated on a regular basis. We select our subcontractors based on
their quality of services, qualifications, skills and technique, prevailing market price,
delivery time, availability of resources in accommodating our requests and reputation.
Fabrication of structural steel products in the PRC
After obtaining approval of the materials from our customers and/or the project owners,
our Group would engage third party logistics service providers to deliver the materials from
Hong Kong to our production facilities in the PRC for structural steel fabrication. We carry
out in-house fabrication of structural steel with our own labour. Meanwhile, we engage our
subcontractors in the PRC to perform galvanising works on the structural steel which
requires specialised technical skills. Depending on our production capacity, we may also
subcontract other parts of the structural steel fabrication works to our subcontractors in the
PRC. For details, please refer to the paragraph headed “Production facilities and capacity –
Fabrication process” below in this section. Our Group and our customers will conduct
quality inspection throughout the fabrication process to monitor the quality of our products.
We typically arrange for testing on the finished structural steel products by external
laboratory selected by the Hong Kong government or by us and conduct internal inspection
on the finished structural steel products prior to their delivery to the construction sites in
Hong Kong. For details, please refer to the paragraph headed “Quality control” below in this
section.
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Project implementation in Hong Kong
Site inspection and quality control
Upon obtaining approval of the finished structural steel products from our customers,
we would engage third party logistics service providers to deliver the finished products to
the relevant construction sites in Hong Kong. Our foremen and our customers’
representatives at the construction sites would conduct inspection on the finished products
upon their arrival.
We mainly focused on the role of project management and supervision in carrying out
our projects, and we have engaged subcontractors to perform a substantial part of the
construction site works under our supervision.
Our project management team holds regular meetings with our subcontractors and
conducts regular inspection to ensure that we strictly adhere to the project schedule and
specifications. In addition, we perform in-house quality inspection and project supervision
throughout project implementation in accordance with our in-house quality management
system. Our customers also conduct site inspection to monitor the quality of our works. For
further information regarding our quality management system, please refer to the paragraph
headed “Quality control” below in this section.
Supervising the progress and regular progress meetings with customers
Depending on our customers’ requests, we are generally required to submit progress
reports to our customers throughout project implementation. Our progress reports are
prepared by the project management team which will report on the project status and any
issue identified during project implementation. On occasions, our customers may adjust or
revise our works schedule in order to accommodate the implementation of other construction
works within the project site.
Progress payment from customers
We generally receive progress payments from our customers based on our works done
throughout project implementation. For further details on the payment terms, please refer to
the paragraph headed “Our customers – Principal terms of engagement” in this section.
Occasionally, depending on (i) the scale of the project; and (ii) the costs we had to incur for
the procurement of materials, we may negotiate with our customers, on a case-by-case basis,
to allow us to submit payment application right after we made the procurement of materials,
subject to customers’ own discretion. Such arrangement serves to alleviate our liquidity
pressure at the preliminary stage of projects.
Customer inspection and acceptance
Upon completion of our works, our customers will conduct inspection and examination
on our works done to ensure they comply with their quality standards, requirements and
specifications.
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Defects liability period
If so requested by our customers, our contracts may include a defects liability period
following the terms of the main contracts on back-to-back basis. During the defects liability
period, we are typically required to rectify any defect without delay at our own cost if the
defect is due to our non-conformance of works performed, or due to our negligence or
failure to comply with our contractual obligation.
Retention monies
Depending on the contract terms, our customers may hold up a certain percentage of
each payment made to us as retention monies. Our customers may withhold up to 10% of
each of our progress payment as retention monies and subject to a cap of 5% of the total
contract sum. Depending on the contract terms, half of the retention monies are generally
released upon completion of our works to the satisfaction of our customers or project
owners. The remaining half are generally released upon expiry of the defects liability period
of the relevant contracts or a pre-agreed time period.
As at 31 December 2020, 2021, 2022 and 30 September 2023, our gross retention
receivables amounted to approximately HK$50.5 million, HK$53.4 million, HK$55.9 million
and HK$63.0 million, respectively. Please refer to the paragraph headed “Financial
information – Discussion of selected statement of financial position items – Contract assets
and contract liabilities” in this prospectus for further discussion and analysis regarding our
retention receivables.
PROJECTS UNDERTAKEN DURING THE TRACK RECORD PERIOD
Revenue by project sectors and the types of developments involved
During the Track Record Period, we were mainly engaged in public sector projects in
Hong Kong. To a lesser extent, we were also engaged in private sector projects in Hong
Kong. Public sector projects refer to projects of which the project owners are Hong Kong
government departments, authorities and statutory bodies, while private sector projects refer
to projects that are not public sector projects.
Our public sector projects mainly involved infrastructure and public facilities as well as
public residential developments. The customers of our public sector projects were generally
main contractors engaged by different Hong Kong government departments, authorities and
statutory bodies. Our private sector projects mainly involved private commercial, residential
and industrial developments. The project owners of our private sector projects were
generally property developers, and our customers were main contractors engaged under such
projects. Based on enquiries with our major customers, save for certain mega-scale
construction projects, our Group was generally engaged by our customers as a subcontractor
exclusively for carrying out the structural steelwork involved in the projects that we
participated in during the Track Record Period.
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Set forth below are descriptions of the developments for which we performed structural
steelwork during the Track Record Period:
Infrastructure and public facilities: mainly included infrastructure and public facilities
developments such as bridges, postal centre, sports park, hospital, terminus station, and
university buildings.
Residential: mainly included public housing development initiated by the Housing
Authority and residential developments initiated by some of the leading private property
developers in Hong Kong.
Commercial: mainly included commercial developments such as hotels and office
buildings.
During the Track Record Period, the majority of our revenue was derived from
structural steelwork for infrastructure and public facilities. The following table sets forth a
breakdown of our revenue during the Track Record Period by reference to project sectors
and the types of development involved:
FY2020 FY2021 FY2022
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
No. of
projects Revenue
%o f
total
revenue
HK$’000 % HK$’000 % HK$’000 %
Public sector
– Infrastructure and public
facilities 17 117,650 36.2 10 142,717 62.4 18 273,912 81.4
– Residential 5 25,476 7.9 4 8,936 3.9 3 10,721 3.2
Sub-total 22 143,126 44.1 14 151,653 66.3 21 284,633 84.6
Private sector
– Commercial 12 169,410 52.2 13 76,850 33.6 13 51,741 15.4
– Residential 2 560 0.2 3 237 0.1 1 10 negligible
– Industrial 2 11,196 3.5 1 36 negligibl e–––
Sub-total 16 181,166 55.9 17 77,123 33.7 14 51,751 15.4
Total 38 324,292 100.0 31 228,776 100.0 35 336,384 100.0
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For the nine months ended 30 September
2022 2023
No. of
projects Revenue
% of total
revenue
No. of
projects Revenue
% of total
revenue
HK$’000 % HK$’000 %
(Unaudited)
Public sector
– Infrastructure
and public
facilities 16 202,523 80.5 19 191,720 81.5
– Residential 3 6,207 2.5 2 3,915 1.7
Sub-total 19 208,730 83.0 21 195,635 83.2
Private sector
– Commercial 10 42,828 17.0 8 37,053 15.8
– Residential 1 3 negligible 1 2,350 1.0
– Industrial ––––––
Sub-total 11 42,831 17.0 9 39,403 16.8
Total 30 251,561 100.0 30 235,038 100.0
Reasons for the decrease in our revenue for FY2021
Our Group’s revenue decreased by approximately 29.5% from approximately HK$324.3
million for FY2020 to approximately HK$228.8 million for FY2021, which was mainly
attributable to:
(i) Project No. #01, being our top project for FY2020 involving a private sector
commercial development located at the Hong Kong International Airport with an
estimated contract sum of approximately HK$191.4 million. Project No. #01
contributed revenue of approximately HK$120.7 million to our Group for
FY2020, representing approximately 37.2% of our total revenue for the
corresponding year. Project No. #01 was completed at the end of FY2020, and no
revenue was derived from Project No. #01 for FY2021; and
(ii) the unexpected change to our works schedule of Project No. #02, which involved
a public infrastructure development located at Kai Tak with an estimated contract
sum of approximately HK$380.2 million. Our Group secured Project No. #02
from Hip Hing Group in late 2019 and started generating revenue from Project
No. #02 by October 2019. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, our Group recognised revenue of approximately
HK$71.3 million, HK$69.5 million, HK$193.2 million and HK$40.9 million, from
Project No. #02, respectively. According to the original project schedule, our
contract works were supposed to commence in or around late 2019 and complete
by mid-2021. In anticipation of the tight project schedule and scale of works
under Project No. #02, our Group had started procuring materials and commenced
part of the structural steel fabrication works shortly after we secured this project.
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By mid-2020, we were informed that our works schedule of Project No. #02
would be revised primarily due to changes in design and drawings of structural
steelwork by the project owner and that the substantial part of our construction
site works would be rescheduled to 2021.
Being mindful of the revised project schedule of Project No. #02 and in light of
the constraint in our available resources, during the second half of 2020, our
executive Directors considered that it was vital to temporarily refrain from
tendering for sizeable projects which may substantially overlap with the revised
project schedule of Project No. #02. Our Group also decided to reserve a
substantial amount of our then available resources, including the capacity at our
production facilities and manpower of our project management staff, for Project
No. #02, taking into consideration (a) the substantial part of our construction site
works under Project No. #02 would be rescheduled to 2021; (b) the sizeable scale
and amount of works involved under such project; (c) the expected workloads for
other ongoing projects; (d) the uncertainty arising from the COVID-19 outbreak
and the associated risks of labour shortage and disruption to the transportation
between Hong Kong and the PRC; and (e) the need to preserve our industry
reputation and business relationship with Hip Hing Group via the satisfactory
completion of Project No. #02, which is a landmark sports infrastructure
development in Hong Kong.
Later in mid-2021, our Group was informed that the substantial part of our
construction site works under Project No. #02 would be further rescheduled due to
the late handover of the relevant work sites to us. While pending instruction from
Hip Hing Group for proceeding with our construction site works, we had
continued to perform fabrication works in 2021 to ensure we could meet the
revised project schedule of Project No. #02. The fabricated items have occupied
significant storage space at our production facilities, thereby reducing our
production capacity for undertaking other projects in 2021.
Amid the repeated rescheduling of Project No. #02, during the second half of
FY2021, we attempted to recoup the expected revenue which would otherwise be
generated from Project No. #02 in the absence of such rescheduling. We did this
by tendering for new projects that have relatively shorter duration and could
readily commence in the near term. Despite our efforts, the revenue generated
from the projects we obtained during the second half of 2021 was not sufficient to
compensate for the decrease in our revenue due to the lower amount of works
performed under Project No. #02. In addition, as mentioned above, during the
second half of 2020, we had temporarily refrained from tendering for sizeable
projects which may substantially overlap with the revised project schedule of
Project No. #02, resulting in lower amount of works performed by us in FY2021.
After mid-2021, our Group did not receive any further notice in relation to the
rescheduling of Project No. #02 and a substantial part of our construction site
works were carried out in 2022 in accordance with the last revised schedule.
Pursuant to the contract terms of the service agreement for Project No. #02, in the
event our contract works under Project No. #02 was not completed within the
original schedule due to reason(s) other than our default, our Group shall be
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entitled to apply in writing to Hip Hing Group for an extension to project
duration and claim for any additional costs reasonably incurred by us arising from
the delay. Based on (i) our negotiation with Hip Hing Group; and (ii) the
aggregate payment certification certified by Hip Hing Group exceeds the original
contract sum of this project, the Directors are of the view that our Group was able
to claim for substantial part of the increase in costs incurred by us arising from
the rescheduling of Project No. #02 to Hip Hing Group.
Reasons for our relatively lower gross profit margin for FY2021
Our Group recorded a relatively lower gross profit margin of approximately 15.5% for
FY2021 as compared to approximately 17.0% and 19.9% for FY2020 and FY2022,
respectively, which was mainly due to the unforeseen rescheduling of our construction site
works for Project No. #02 in mid-2021 as aforementioned. Due to the unanticipated
rescheduling of Project No. #02, a substantial amount of the then available resources of our
Group originally reserved for Project No. #02 such as direct labour and structural steel
production capacity were rendered idle or not fully utilised during FY2021, resulting in
certain direct labour costs, manufacturing overheads and project administrative costs
incurred, which amounted to approximately HK$1.9 million during FY2021 (the “ Idle
Cost”). In accordance with the relevant accounting standard, as the Idle Cost did not
contribute to our Group’s progress in satisfying our performance obligations amid the
rescheduling of Project No. #02, our Group did not recognise the corresponding revenue for
the Idle Cost by the time they were incurred, and such Idle Cost was not allocated to Project
No. #02 or any particular project undertaken by our Group, but were recognised as
unallocated costs in our Group’s cost of services for FY2021. As a result, the gross profit
margin of Project No. #02 was not adversely affected by the Idle Cost. Nonetheless, since
the Idle Cost had been recognised as unallocated cost of services of our Group for FY2021
and did not contribute the corresponding revenue to our Group for FY2021, our Group’s
overall gross profit margin for FY2021 was lower as compared to that of FY2020 and
FY2022.
Our strategy on public and private sector projects
During the Track Record Period, we identified business opportunities mainly through
invitation for tender from customers. As we undertake structural steelwork in the role of
subcontractor, all of our revenue generated was derived from projects awarded by
construction contractors during the Track Record Period. Therefore, to a significant extent,
our tender exposure depends on the types of projects obtained by our construction contractor
customers. Our Group has all along remained open to, and possesses substantial track record
in undertaking both public sector and private sector projects. Based on our past experience,
as far as structural steelwork is concerned, our executive Directors consider that there is no
material difference in the expertise and know-how required for public sector and private
sector projects. Our Group generally determines whether we should proceed with the
preparation of tender based on, amongst others, the scope of services, our capability, the
expected complexity, our production capacity of structural steel, the available space at our
production facilities for the fabrication process and storage of materials, our available
financial and human resources and feasibility and profitability of the project. As long as our
capacity and available resources allow, our Group will endeavor to respond to tender
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invitations received from customers, with little regard to the sector that the relevant projects
belong to. Therefore, the proportion of our revenue derived from private and public sector
projects may vary from period to period, largely affected by the projects obtained and
undertaken by our construction contractor customers at the relevant times, rather than caused
by any change in our business focus or strategy.
Private sector projects contributed approximately 55.9%, 33.7%, 15.4% and 16.8% of
our total revenue for FY2020, FY2021, FY2022 and the nine months ended 30 September
2023, respectively. Our Group recorded a relatively higher percentage of revenue
contribution from private sector projects for FY2020 mainly because we performed a
substantial amount of works for Project No. #01 in the same year. Project No. #01 involved
a private sector commercial development located at the Hong Kong International Airport
with an estimated contract sum of approximately HK$191.4 million. Project No. #01
contributed revenue of approximately HK$120.7 million to our Group for FY2020,
representing approximately 37.2% of our total revenue for the corresponding year. Project
No. #01 was completed at the end of FY2020 and no revenue was generated therefrom since
FY2021.
Number of projects by range of revenue recognised
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, there
were 38, 31, 35 and 30 projects which contributed a total of approximately HK$324.3
million, HK$228.8 million, HK$336.4 million and HK$235.0 million to our revenue,
respectively. Set out below is a breakdown of our projects based on their respective range of
revenue recognised during the Track Record Period:
FY2020 FY2021 FY2022
For
the nine
months
ended
30
September
2023
No. of
projects
No. of
projects
No. of
projects
No. of
projects
Revenue recognised
HK$50.0 million or above 211–
HK$10.0 million to below
HK$50.0 million 5467
HK$1.0 million to below
HK$10.0 million 12 13 11 13
Below HK$1.0 million 19 13 17 10
Total 38 31 35 30
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Top projects undertaken during the Track Record Period
The following table sets out the details of our top five projects for each of FY2020, FY2021, FY2022 and the nine months ended 30
September 2023 in terms of revenue contribution to our Group:
FY2020
Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)
FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
1 #01 Customer B 191,412 Private Commercial Hong Kong
International
Airport
Shopping
centre
Commencement:
June 2019
Completion:
December 2020
120,694 37. 2–––––––
2 #02 Hip Hing
Group
380,174 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
October 2019
Completion:
December 2023
71,343 22.0 69,506 30.4 193,249 57.4 40,854 17.4 3,235
3 #03 Hip Hing
Group
26,484 Public Residential Fanling Footbridge Commencement:
August 2019
Completion:
May 2021
19,576 6.0 3,291 1. 4–––––
4 #04 Customer C 65,532 Public Infrastructure
and public
facilities
Kowloon Bay Government
building
Commencement:
November 2019
Completion:
September 2022
17,326 5.3 44,533 19.5 3,646 1. 1–––
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Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)
FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
5 #05 Customer
Group D
18,448 Private Commercial Wong Chuk
Hang
Office building Commencement:
September 2019
Completion:
September 2021
13,702 4.2 192 0. 1–––––
Notes:
1. Please refer to the paragraph headed “Our customers – Top customers” in this section.
2. The contract sum shown in the above table represents the adjusted contract sum taken into account the actual work orders on re-measurement basis and variation
orders received by our Group as at the Latest Practicable Date.
3. The expected completion date for our works in respect of a particular project is provided based on our management’s best estimation. In making the es timation,
our management takes into account factors including the expected completion date specified in the relevant contract (if any), the extension period g ranted by our
customers (if any) and the actual work schedule.
4. The estimated revenue to be recognised after the Track Record Period is calculated based on the adjusted contract sum less revenue recognised.
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FY2021
Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)
FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
1 #02 Hip Hing
Group
380,174 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
October 2019
Completion:
December 2023
71,343 22.0 69,506 30.4 193,249 57.4 40,854 17.4 3,235
2 #04 Customer C 65,532 Public Infrastructure
and public
facilities
Kowloon Bay Government
building
Commencement:
November 2019
Completion:
September 2022
17,326 5.3 44,533 19.5 3,646 1. 1–––
3 #06 Hip Hing
Group
32,158 Private Commercial Kai Tak Office building
and shopping
centre
Commencement:
September 2020
Completion:
May 2022
640 0.2 29,296 12.8 2,222 0. 7–––
4 #07 Hip Hing
Group
58,841 Private Commercial Quarry Bay Footbridge Commencement:
July 2020
Completion:
December 2023
10,119 3.1 20,382 8.9 18,804 5.6 5,604 2.4 3,932
5 #08 Hip Hing
Group
20,532 Private Commercial Kai Tak Footbridge Commencement:
March 2020
Completion:
December 2022
9,045 2.8 10,251 4.5 1,236 0. 4–––
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Notes:
1. Please refer to the paragraph headed “Our customers – Top customers” in this section.
2. The contract sum shown in the above table represents the adjusted contract sum taken into account the actual work orders on re-measurement basis and variation
orders received by our Group as at the Latest Practicable Date.
3. The expected completion date for our works in respect of a particular project is provided based on our management’s best estimation. In making the es timation,
our management takes into account factors including the expected completion date specified in the relevant contract (if any), the extension period g ranted by our
customers (if any) and the actual work schedule.
4. The estimated revenue to be recognised after the Track Record Period is calculated based on the adjusted contract sum less revenue recognised.
FY2022
Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
1 #02 Hip Hing
Group
380,174 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
October 2019
Completion:
December 2023
71,343 22.0 69,506 30.4 193,249 57.4 40,854 17.4 3,235
2 #09 Customer
Group I
95,822 Public Infrastructure
and public
facilities
Siu Ho Wan Bridge Commencement:
July 2022
Completion:
May 2024
–––– 3 0 ,934 9.2 32,092 13.7 32,796
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Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
3 #10 Customer F 30,072 Private Commercial Kai Tak Plaza and
passageway
Commencement:
October 2021
Completion:
December 2022
– – 8,152 3.6 21,920 6. 5–––
4 #07 Hip Hing
Group
58,841 Private Commercial Quarry Bay Footbridge Commencement:
July 2020
Completion:
December 2023
10,119 3.1 20,382 8.9 18,804 5.6 5,604 2.4 3,932
5 #11 Zenith
(PMS)
Limited
69,100 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
July 2021
Completion:
March 2024
– – 428 0.2 11,228 3.3 34,323 14.6 23,121
Notes:
1. Please refer to the paragraph headed “Our customers – Top customers” in this section.
2. The contract sum shown in the above table represents the adjusted contract sum taken into account the actual work orders on re-measurement basis and variation
orders received by our Group as at the Latest Practicable Date.
3. The expected completion date for our works in respect of a particular project is provided based on our management’s best estimation. In making the es timation,
our management takes into account factors including the expected completion date specified in the relevant contract (if any), the extension period g ranted by our
customers (if any) and the actual work schedule.
4. The estimated revenue to be recognised after the Track Record Period is calculated based on the adjusted contract sum less revenue recognised.
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Nine months ended 30 September 2023
Rank
Project
No.
Customer
(Note 1)
Contract
sum
(Note 2)
Project
sector
Type of
developments
Location of
the project
Type of
infrastructure/
building
involved
Date of
commencement
and completion
of our works
(Note 3)
Revenue
(percentage of total revenue recognised for the year/period)
Estimated
revenue
recognised/
to be
recognised
after
the
Track
Record
Period
(Note 4)FY2020 FY2021 FY2022
For the nine
months ended
30 September 2023
HK$’000 HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000
1 #02 Hip Hing
Group
380,174 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
October 2019
Completion:
December 2023
71,343 22.0 69,506 30.4 193,249 57.4 40,854 17.4 3,235
2 #12 Hip Hing
Group
84,060 Public Infrastructure
and public
facilities
Tamar Government
building
Commencement:
April 2023
Completion:
September 2024
–––––– 37,516 16.0 46,544
3 #11 Zenith
(PMS)
Limited
69,100 Public Infrastructure
and public
facilities
Kai Tak Sports stadium Commencement:
July 2021
Completion:
March 2024
– – 428 0.2 11,228 3.3 34,323 14.6 23,121
4 #09 Customer
Group I
95,822 Public Infrastructure
and public
facilities
Siu Ho Wan Bridge Commencement:
July 2022
Completion:
May 2024
–––– 3 0 ,934 9.2 32,092 13.7 32,796
5 #13 Hip Hing
Group
388,000 Private Commercial Causeway
Bay
Office building Commencement:
September 2023
Completion:
December 2025
–––––– 20,766 8.8 367,234
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Notes:
1. Please refer to the paragraph headed “Our customers – Top customers” in this section.
2. The contract sum shown in the above table represents the adjusted contract sum taken into account
the actual work orders on re-measurement basis and variation orders received by our Group as at the
Latest Practicable Date.
3. The expected completion date for our works in respect of a particular project is provided based on
our management’s best estimation. In making the estimation, our management takes into account
factors including the expected completion date specified in the relevant contract (if any), the
extension period granted by our customers (if any) and the actual work schedule.
4. The estimated revenue to be recognised after the Track Record Period is calculated based on the
adjusted contract sum less revenue recognised.
Backlog
The following table sets out movement in the number of our projects during the Track
Record Period and up to the Latest Practicable Date:
FY2020 FY2021 FY2022
For the
nine
months
ended 30
September
2023
From 1
October
2023 up
to the
Latest
Practicable
Date
Opening number of
projects (Note 1) 43 33 39 28 21
Add: Number of new projects
awarded to us (Note 2) 8 7 10 10 2
Less: Number of projects
completed (Note 3) (18) (1) (21) (17) (1)
Ending number of
projects (Note 4) 33 39 28 21 22
Notes:
1. Opening number of projects means the number of awarded projects which were not completed as of
the beginning of the relevant year/period indicated.
2. Number of new projects means the number of new projects awarded to us during the relevant year/
period indicated.
3. Number of projects completed means the number of projects which are practically regarded as
completed.
4. Ending number of projects is equal to the opening number of projects plus number of new projects
minus number of projects completed during the relevant year/period indicated.
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The following table sets out the movement in the value of backlog of our projects
during the Track Record Period and up to the Latest Practicable Date:
FY2020 FY2021 FY2022
For the
nine
months
ended
30
September
2023
From 1
October
2023 up to
the Latest
Practicable
Date
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Opening value of backlog as at
the beginning of the relevant
year/period 749,039 505,333 425,866 253,464 668,926
Add: Total value of original
estimated contract
sum of projects
awarded and actual work
orders received on
re-measurement
basis
(Note 1) 66,081 118,450 108,049 621,552 41,259
Total value of variation
orders 14,505 30,859 55,933 28,948 19,814
Less: Total revenue recognised
during the relevant
year/period (324,292) (228,776) (336,384) (235,038) (155,514)
Ending value of backlog to be
carried forward to next
year/period
(Note 2) 505,333 425,866 253,464 668,926 574,485
Notes:
1. Total value of original estimated contract sum of projects awarded means the original estimated
contract sum of new projects awarded, or where applicable, the amount of actual work orders
received by our Group on re-measurement basis.
2. Ending value of backlog means the portion of the total estimated revenue that has not been
recognised with respect to our projects which had not been completed as at the end of the relevant
year/period indicated.
As at 31 December 2020 and 2021, our Group recorded a relatively higher backlog
value of approximately HK$505.3 million and HK$425.9 million, respectively, as compared
to the backlog value of approximately HK$253.5 million as at 31 December 2022. Our
Directors consider that such fluctuation was mainly attributable to:
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(i) the rescheduling in our works schedule under Project No. #02. According to the
original project schedule of Project No. #02, our contract works were supposed to
complete by mid-2021, with the majority of our construction site works being
scheduled to be performed between the period from late 2020 to early 2021.
By mid-2020, we were informed that our works schedule under Project No. #02
would be revised primarily due to changes in design and drawings of structural
steelwork by the project owner and that the substantial part of our construction
site works would be rescheduled to 2021. Subsequently, in mid-2021, our Group
was informed that our construction site works would be further rescheduled due to
the late handover of the relevant work sites to us.
Owing to the revision to the project schedule of Project No. #02, the majority of
construction site works under Project No. #02 had not yet been performed during
FY2020 and FY2021, resulting in a high amount of backlog value under Project
No. #02 being carried forward to subsequent years, and thereby contributing to
the relatively higher backlog value of our Group as at 31 December 2020 and
2021. For further details in relation to the revision to the project schedule of
Project No. #02, please refer to the paragraph headed “Projects undertaken during
the Track Record Period” in this section above; and
(ii) the backlog value of our projects subsequently decreased to approximately
HK$253.5 million as at 31 December 2022, which was mainly because our Group
performed a substantial amount of construction site works under Project No. #02
in FY2022 which generated revenue of approximately HK$193.2 million in the
corresponding financial year, representing approximately 53.6% of the total
contract sum of Project No. #02.
As at the Latest Practicable Date, our Group had a total of 22 projects on hand with an
aggregate of approximately HK$574.5 million yet to be recognised as revenue.
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PROJECTS ON HAND
As at the Latest Practicable Date, our Group had 22 projects on hand (representing projects that have commenced but not completed as
well as projects that have been awarded to us but not yet commenced). The following table sets out the details of our projects on hand as at
the Latest Practicable Date with estimated revenue of over HK$5 million to be recognised after the Track Record Period:
Project No.
Location of
the project Customer
Project
sector Type of development
Type of
infrastructure/
building
involved
Contract
sum
(Note 1)
Date of commencement and
completion of our works (Note 2)
Revenue recognised during the Track Record Period
Estimated revenue recognised/
to be recognised during
FY2020 FY2021 FY2022
Nine
months
ended
30
September
2023
Three
months
ended 31
December
2023 FY2024 FY2025
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
#13 Causeway
Bay
Hip Hing Group Private Commercial Office building 388,000 Commencement: September 2023
Completion: December 2025
– – – 20,766 46,097 126,250 194,887
O01 Kai Tak Customer Group E Public Infrastructure and public
facilities
Hospital 62,754 Commencement: August 2023
Completion: June 2025
– – – 12,854 9,830 35,000 5,070
#12 Tamar Hip Hing Group Public Infrastructure and public
facilities
Government
building
84,060 Commencement: April 2023
Completion: September 2024
– – – 37,516 22,426 24,118 –
O02 Central Customer Group E Private Commercial Footbridge 54,998 Commencement: September 2023
Completion: June 2025
– – – 8,764 5,591 29,630 11,013
O03 Tung Chung A construction contractor Public Residential Public housing
estate
43,809 Commencement: November 2023
Completion: June 2025
–––– 10,234 24,250 9,325
#09 Siu Ho Wan Customer Group I Public Infrastructure and public
facilities
Bridge 95,822 Commencement: July 2022
Completion: May 2024
– – 30,934 32,092 10,742 22,054 –
O04 Y au Ma Tei Customer Group I Public Infrastructure and public
facilities
Landscaped
deck
29,702 Commencement: April 2022
Completion: December 2024
– – 2,954 2,552 2,633 21,563 –
O05 Diamond
Hill
Sun Fook Kong
Construction Limited
Public Infrastructure and public
facilities
Bridge 38,246 Commencement: December 2022
Completion: November 2024
– – 109 16,570 3,632 17,935 –
O06 Tamar Hip Hing Group Public Infrastructure and public
facilities
Government
building
7,080 Commencement: September 2023
Completion: August 2024
– – – 16 1,615 5,449 –
O07 Kai Tak Hip Hing Group Public Infrastructure and public
facilities
Sports stadium 11,001 Commencement: November 2022
Completion: August 2024
– – 820 3,262 - 6,919 –
O08 Tung Chung A joint venture Public Infrastructure and public
facilities
Train station 21,735 Commencement: May 2024
Completion: December 2025
––––– 10,868 10,867
O09 Stanley A construction contractor Public Infrastructure and public
facilities
Government
building
19,524 Commencement: May 2024
Completion: December 2025
––––– 9,762 9,762
Other
projects (Note 3)
81,463 90,932 236,965 94,212 22,628 19,848 –
Total 81,463 90,932 271,782 228,604 135,428 353,646 240,924
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Notes:
1. The contract sum shown in the above table represents the adjusted contract sum, taken into account
actual work orders on re-measurement basis and variation orders received by our Group as at the
Latest Practicable Date.
2. The expected completion date for our works in respect of a particular project is provided based on
our management’s best estimation. In making the estimation, our management takes into account
factors including the expected completion date specified in the relevant contract (if any), the
extension period granted by our customers (if any) and the actual work schedule.
3. Other projects represent our remaining 10 on-going projects as at the Latest Practicable Date.
OUR CUSTOMERS
Characteristics of our customers
During the Track Record Period, our customers mainly included construction
contractors in Hong Kong, being the main contractors engaged by project owners. The
number of customers with revenue contribution to our Group was 17, 17, 17 and nine for
FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, respectively.
During the Track Record Period, all of our customers were located in Hong Kong and our
revenue was denominated in Hong Kong dollars.
Principal terms of engagement
We undertake structural steelwork on a project-by-project basis. Our executive
Directors consider such arrangement is in line with the structural steelwork industry practice
in Hong Kong. Our customers generally confirm our engagement by issuing a letter of
award or entering into a formal contract with us. The principal terms of our engagement
with customers are summarised as follows:
Scope of works
The contracts normally set out the scope of services to be carried out by our Group and
other project specifications or requirements. Our customers generally require us to complete
our works within a specified period and in accordance with their specified work schedule.
Duration
The contracts usually specify the commencement date and duration of the project
implementation, typically ranging from six months to two years, subject to extension granted
by the customers where necessary.
Contract sum
During the Track Record Period, our contracts with customers are generally on
re-measurement basis. The contracts usually specify an estimated contract sum based on the
agreed unit rates and the estimated quantities of work items. The actual amount of works to
be carried out by us under our contract is subject to our customer’s instructions or orders
placed during the contract period and the total actual value of work done may be different
BUSINESS
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--- page 179 ---
from the original estimated contract sum stated in the contract. Our customers will measure
the actual quantities of works executed on site and our Group will be paid based on the
actual work done.
Payment terms and arrangement
Our Group generally submits a progress payment application to our customer on a
monthly basis with reference to the amount of works completed. Upon receiving our
payment application for progress payments, our customer will examine and certify our works
done by issuing a payment certificate to us. Except for project at its preliminary stage or
project finalising the final account, it generally takes 30 to 60 days for our customers to
certify our works done. Upon receiving the payment certificate, we will then issue an
invoice to our customer. The credit term granted by us to our customers generally ranges
from 30 to 60 days from the issue of invoices and our customers generally approve and
settle our invoices within credit period. Occasionally, depending on (i) the scale of the
project; and (ii) the costs we had to incur for the procurement of materials, we may
negotiate with our customers, on a case-by-case basis, to allow us to submit payment
application right after we made the procurement of materials. Such arrangement serves to
alleviate our liquidity pressure at the preliminary stage of projects.
Depending on the terms of engagement, our customers may directly settle the wages of
the site workers deployed by our subcontractors and subsequently deduct such amounts in
the relevant progress payments to us. According to the Industry Report, it is common for
main contractors to directly settle the wages of the site workers deployed by subcontractors
at subordinate levels. The amount paid by the main contractors under such arrangement will
be subsequently deducted from the progress payment payable to the subcontractor directly
engaged by them. The purpose of such arrangement is to offer better protection and ensure
timely settlement of wages to the employees of the subcontractors at all levels.
Insurance
Our customers, being the main contractors of the projects, would normally take out
contractors’ all risk insurance and work injury compensation insurance covering their own
liabilities as well as our liabilities.
Procurement of materials
We are generally responsible for the procurement of materials such as steel required in
the projects. We typically purchase materials from our internal list of approved suppliers. On
occasions, our customers may require us to procure materials with certain specifications or
quality standards.
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Defects liability period
If so requested by our customers, our contracts may include a defects liability period
following the terms of the main contracts on back-to-back basis. During the defects liability
period, we are typically required to rectify any defect without delay at our own cost if the
defect is due to our non-conformance of works performed, or due to our negligence or
failure to comply with our contractual obligation.
Retention monies
Depending on the contract terms, our customers may hold up a certain percentage of
each payment made to us as retention monies. Our customers may withhold up to 10% of
each of our progress payment as retention monies and subject to a cap of 5% of the total
contract sum. Depending on the contract terms, half of the retention monies are generally
released upon completion of our works to the satisfaction of our customers or project
owners. The remaining half are generally released upon expiry of the defects liability period
of the relevant contracts or a pre-agreed time period.
As at 31 December 2020, 2021, 2022 and 30 September 2023, our gross retention
receivables amounted to approximately HK$50.5 million, HK$53.4 million, HK$55.9 million
and HK$63.0 million, respectively. Please refer to the paragraph headed “Financial
information – Discussion of selected statement of financial position items – Contract assets
and contract liabilities” in this prospectus for a further discussion and analysis regarding our
retention receivables.
V ariation orders
A variation order is usually placed by way of a purchase order by our customers
describing the detailed works to be performed under such variation order. A variation order
may vary the original scope of work. Our customers may request additional or alteration of
works beyond the scope of the contract during project implementation. Where the works
under the variation order are the same or similar to the works prescribed in the contract, the
rate of the works under the variation order usually accords with that of the contract. If there
are no equivalent or similar items under the contract for reference, we will further agree on
the rates with our customers. During the Track Record Period, our customers generally
requested additional or alteration of works by issuing additional work orders stating the
scope of works to our Group. Therefore, the scope of works for variation orders performed
by our Group are properly agreed and accepted by the relevant customers prior to
performing such variation orders.
Performance guarantee
Depending on the contract terms, our customers may require us to provide performance
guarantee in the amount of 10% of the original estimated contract sum. Such arrangement
serves to secure our due and timely performance of work and compliance with the contract.
If we fail to perform according to the requirements in the contract, our customer would be
entitled to the guaranteed compensation for any monetary loss up to the amount of the
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performance guarantee. Our performance guarantee is generally discharged after the expiry
of the defects liability period under the main contract. During the Track Record Period, we
had not taken out any performance guarantee in favour of our customers.
Liquidated damages
Liquidated damages clause may be included in the contracts to protect our customers
against late completion of work. We may be liable to pay liquidated damages to our
customers if we are unable to deliver or perform the contractual works within the time
specified in or in accordance with the contract. Liquidated damages are generally calculated
on the basis of a fixed sum per day. During the Track Record Period and up to the Latest
Practicable Date, no liquidated damages had been claimed by our customers against us.
Termination
Our customers may terminate our contracts if, among other things, we fail to execute
the agreed scope of works, or if we cause undue delay to the overall progress of the project.
During the Track Record Period and up to the Latest Practicable Date, none of our contracts
were terminated pursuant to the termination clause.
Top customers
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
percentage of our total revenue attributable to our top customer for each year/period during
the Track Record Period amounted to approximately 39.0%, 66.3%, 70.7% and 50.3%
respectively, while the percentage of our total revenue attributable to our top five customers
for each year/period during the Track Record Period combined amounted to approximately
91.5%, 94.6%, 93.8% and 97.8%, respectively. The following tables set forth the information
of our top five customers for each year/period during the Track Record Period:
FY2020
Rank Customer
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Revenue derived
from the customer
HK$’000 %
1 Hip Hing Group
(Note 1) Since 2010 49 days; by bank transfer 126,556 39.0
2 Customer B (Note 2) Since 2018 30 days; by cheque 120,694 37.2
3 Customer C (Note 3) Since 2013 30 days; by cheque 22,611 7.0
4 Customer Group D (Note 4) Since 2019 45 days; by cheque 16,942 5.2
5 Customer Group E (Note 5) Since 2014 30 days; by cheque 9,766 3.1
Top five customers combined 296,569 91.5
All other customers 27,723 8.5
Total revenue 324,292 100.0
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FY2021
Rank Customer
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Revenue derived
from the customer
HK$’000 %
1 Hip Hing Group
(Note 1) Since 2010 49 days; by bank transfer 151,593 66.3
2 Customer C (Note 3) Since 2013 30 days; by cheque 45,640 19.9
3 Customer F (Note 6) Since 2021 30 days; by cheque 8,152 3.6
4 Customer G (Note 7) Since 2021 30 days; by cheque 5,528 2.4
5 Customer H (Note 8) Since 2013 60 days; by cheque 5,443 2.4
Top five customers combined 216,356 94.6
All other customers 12,420 5.4
Total revenue 228,776 100.0
FY2022
Rank Customer
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Revenue derived
from the customer
HK$’000 %
1 Hip Hing Group
(Note 1) Since 2010 49 days; by bank transfer 237,715 70.7
2 Customer Group I (Note 9) Since 2016 35 days; by cheque 33,888 10.1
3 Customer F (Note 6) Since 2021 30 days; by cheque 21,920 6.5
4 Zenith (PMS) Limited (Note 10) Since 2021 30 days; by cheque 11,228 3.3
5 Sun Fook Kong Construction
Limited (Note 11)
Since 2018 45 days; by cheque 10,807 3.2
Top five customers combined 315,558 93.8
All other customers 20,826 6.2
Total revenue 336,384 100.0
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Nine months ended 30 September 2023
Rank Customer
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Revenue derived
from the customer
HK$’000 %
1 Hip Hing Group
(Note 1) Since 2010 49 days; by bank transfer 118,347 50.3
2 Customer Group I (Note 9) Since 2016 35 days; by cheque 35,948 15.3
3 Zenith (PMS) Limited (Note 10) Since 2021 30 days; by cheque 34,323 14.6
4 Customer Group E (Note 5) Since 2014 30 days; by cheque 21,618 9.2
5 Sun Fook Kong Construction
Limited (Note 11)
Since 2018 45 days; by cheque 19,632 8.4
Top five customers combined 229,868 97.8
All other customers 5,170 2.2
Total revenue 235,038 100.0
Notes:
1. Hip Hing Group consists of subsidiaries of NWS Holdings Limited, a company listed on the Main
Board of the Stock Exchange (stock code: 659) which is principally engaged in road and construction
businesses in Hong Kong and the PRC. Based on the latest annual report of NWS Holdings Limited,
its revenue amounted to over HK$45.2 billion for the year ended 30 June 2023. NWS Holdings
Limited is in turn owned as to 61% by New World Development Company Limited, a leading
property developer listed on the Main Board of the Stock Exchange (stock code: 0017) which is
principally engaged in property development and investment in Hong Kong with annual revenue
amounting to over HK$95.2 billion for the year ended 30 June 2023, according to its latest annual
report.
2. Customer B is a construction contractor company in Hong Kong. According to publicly available
information, Customer B is a private limited liability company incorporated in Hong Kong in 1993.
3. Customer C is a construction contractor company in Hong Kong. According to publicly available
information, Customer C is a private limited liability company incorporated in Hong Kong in 2003.
4. Customer Group D consists of subsidiaries of a company listed on the Main Board of the Stock
Exchange (the “Customer Group D Holdco” ) which is principally engaged in, amongst others,
construction and engineering, property investment and property development and operations
worldwide. Based on the latest annual report of Customer Group D Holdco, its revenue amounted to
over HK$7.1 billion for the year ended 31 March 2023.
5. Customer Group E consists of subsidiaries of a company listed on the Main Board of the Stock
Exchange (the “Customer Group E Holdco” ) which is principally engaged in construction business
in Hong Kong and Macau and infrastructure investment in the PRC. Based on the latest annual report
of Customer Group E Holdco, its revenue amounted to over HK$102.0 billion for the year ended 31
December 2022.
6. Customer F is a construction contractor company in Hong Kong. According to publicly available
information, Customer F is a private limited liability company incorporated in Hong Kong in 2018.
7. Customer G is a construction contractor company in Hong Kong. According to publicly available
information, Customer G is a private limited liability company incorporated in Hong Kong in 2014.
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8. Customer H is a construction contractor company in Hong Kong, being a subsidiary of a company
listed on the Frankfurt Stock Exchange (the “Customer H Holdco” ) which is an engineering-led
global infrastructure group specialising in activities in development, financing, construction and
operations. Based on the latest annual report of Customer H Holdco, its revenue amounted to over
EUR26.2 billion for the year ended 31 December 2022.
9. Customer Group I consists of subsidiaries of a company listed on the Main Board of the Stock
Exchange (the “Customer Group I Holdco” ) which is principally engaged in construction works in
Hong Kong. Based on the latest annual report of Customer Group I Holdco, its revenue amounted to
over HK$12.4 billion for the year ended 31 December 2022.
10. Zenith (PMS) Limited is a façade engineering contractor company in Hong Kong. According to
publicly available information, Zenith (PMS) Limited is a private limited liability company
incorporated in Hong Kong in 2011.
11. Sun Fook Kong Construction Limited is a construction contractor company in Hong Kong, being a
subsidiary of SFK Construction Holdings Limited, a company listed on the Main Board of the Stock
Exchange (stock code: 1447) which is principally engaged in construction and maintenance projects
in Hong Kong and construction projects in Macau. Based on the latest annual report of SFK
Construction Holdings Limited, its revenue amounted to over HK$3.7 billion for the year ended 31
December 2022.
None of our Directors, their close associates or any Shareholders who owned more than
5% of the number of issued shares of our Company as at the Latest Practicable Date had
any interest in any of the top five customers of our Group for each year/period during the
Track Record Period.
Customer concentration
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
percentage of our total revenue attributable to our top customer for each year/period during
the Track Record Period amounted to approximately 39.0%, 66.3%, 70.7% and 50.3%,
respectively. The percentage of our total revenue attributable to our top five customers for
each year/period during the Track Record Period combined amounted to approximately
91.5%, 94.6%, 93.8% and 97.8%, respectively, for the corresponding year/period. In
particular, a significant portion of our revenue during the Track Record Period was derived
from Hip Hing Group. For FY2020, FY2021, FY2022 and the nine months ended 30
September 2023, Hip Hing Group contributed revenue of approximately HK$126.6 million,
HK$151.6 million, HK$237.7 million and HK$118.3 million to our Group, respectively,
which accounted for approximately 39.0%, 66.3%, 70.7% and 50.3% of our total revenue for
the relevant years/period, respectively. Our Directors consider that our Group’s business
model is sustainable despite such customer concentration due to the following factors:
Industry landscape
 according to the Industry Report, the construction works in the public sector in
Hong Kong is dominated by a limited number of main contractors. Our major
customers, including Hip Hing Group, Customer Group D, Customer Group E,
Customer Group I and Sun Fook Kong Construction Limited, had accounted for
approximately 25.4% of the public sector construction contracts awarded by the
Hong Kong government, in terms of contract sum, during the years from 2020 to
2022. Given the landscape of the public sector construction works industry in
Hong Kong, it is common for a structural steelwork contractor, especially which
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is specialised in undertaking public sector projects, to rely on such main
contractors and such customer concentration is not uncommon in the structural
steelwork industry.
 according to the Industry Report, customer concentration is an industry norm in
the structural steelwork industry in Hong Kong. Customers generally prefer to
engage structural steelwork contractors which can provide tailored solutions
comprising the supply, fabrication and installation of structural steel with industry
reputation, technical expertise, proven track record and sound financial capability.
As part of the tender conditions and to ensure quality assurance, main contractors
would generally select structural steelwork contractors registered on the List of
Approved Specialist Contractors for Public Works to carry out the structural
steelwork in a construction project. As at the Latest Practicable Date, there were
in total 50 structural steelwork contractors registered on the List of Approved
Specialist Contractors for Public Works and our customers would generally select
their structural steelwork subcontractor among the list. The demands for structural
steelwork in Hong Kong are largely driven by construction works arising from
infrastructure and property developments initiated by the Government and private
property developers. The availability of these developments are generally limited
by the Government’s policies and planning as well as the prevailing economic
conditions. Amid the stable growth in the market size of structural steelwork and
increasing adoption of structural steel for construction in Hong Kong, a
substantial amount of contract values of structural steelwork remain to be
concentrated with, and contributed by those sizeable infrastructure and property
developments being implemented at the relevant times. According to the Industry
Report, a sizeable structural steelwork project would normally have a contract
sum of HK$100 million or above. To ensure such large-scale structural steelwork
projects could be completed on time and within budget, main contractors would
generally prefer to engage the established market players in the structural
steelwork industry who possess the requisite expertise, experience and resources
to handle such projects reliably. According to the Industry Report, the top five
structural steelwork contractors in Hong Kong had an estimated revenue ranging
from approximately HK$200 million to HK$475.5 million for the year of 2022.
As such, where a structural steelwork contractor obtains any sizeable projects with
contract sum of HK$100 million or above, such projects would likely contribute a
significant portion of its revenue in the forthcoming years. Given the fragmented
nature of the structural steelwork industry in Hong Kong as well as the business
scale of the existing top market players, those structural steelwork contractors
who are able to participate in one or more of the sizeable developments would
inevitably end up being heavily reliant on the relevant main contractors and hence
this may result in customer concentration for such structural steelwork contractor
in the relevant periods.
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Established relationship with major customers
 as at the Latest Practicable Date, our Group has established business relationship
with our major customers including those referred to in the paragraph headed
“Our customers – Top customers” above in this section ranging from two years to
13 years. Therefore, we will endeavour to accommodate their demand for our
services to the extent our resources allow instead of turning down their requests,
resulting in them being our top customers.
 we undertake projects of considerably different scales. If we undertake a project
with large contract sum, it may contribute a substantial amount to our revenue in
a particular period, resulting in the relevant customer becoming one of our top
customers in terms of revenue contribution to us.
 a number of our major customers, including Hip Hing Group, Customer Group D,
Customer Group E, Customer H, Customer Group I and Sun Fook Kong
Construction Limited, are subsidiaries of companies listed on the Stock Exchange.
Our Directors consider that group members of listed companies generally have
better performance in terms of credit ratings and financial resources, as compared
to private-owned entities.
Mutual and complementary reliance with major customers
 our Group has established business relationship with Hip Hing Group since 2010.
Hip Hing Group consists of subsidiaries of NWS Holdings Limited, a company
listed on the Main Board of the Stock Exchange (stock code: 659) which is
principally engaged in road and construction businesses in Hong Kong and the
PRC. Based on the latest annual report of NWS Holdings Limited, its revenue
amounted to over HK$45.2 billion for the year ended 30 June 2023. NWS
Holdings Limited is in turn owned as to 61% by New World Development
Company Limited, a leading property developer listed on the Main Board of the
Stock Exchange (stock code: 0017) which is principally engaged in property
development and investment in Hong Kong with annual revenue amounting to
over HK$95.2 billion for the year ended 30 June 2023 according to its latest
annual report. Taking into consideration the sizeable scale and strong financial
standing of Hip Hing Group, our Directors believe that Hip Hing Group would
have regular and sizeable demand for our structural steelwork services.
During our long-term business relationship with Hip Hing Group, we have
endeavored to accommodate their demand for our services to the extent our
resources allow, resulting in them being our top customer. For FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023, Hip Hing Group
contributed revenue of approximately HK$126.6 million, HK$151.6 million,
HK$237.7 million and HK$118.3 million to our Group, respectively, which
accounted for approximately 39.0%, 66.3%, 70.7% and 50.3% of our total revenue
for the relevant years/period.
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Hip Hing Group has indicated that an approved list of subcontractors for
structural steel works is maintained by them and our Group is included on the list.
Hip Hing Group confirmed that it generally evaluates its subcontractors based on
various factors including but not limited to pricing, safety record and quality of
services. Our Group is subject to evaluation by Hip Hing Group annually and on
project basis. Our Directors consider that our admission as an approved structural
steelwork subcontractor of Hip Hing Group and the fact that Hip Hing Group
continues to invite us for tender and engage us as a structural steelwork
subcontractor in its projects is a recognition of our ability in providing quality
services which conform with the quality standards, requirements and
specifications of Hip Hing Group.
Besides, Hip Hing Group indicated that our Group is one of its major
subcontractors for structural steel works in terms of the percentage of
subcontracting fees incurred. We believe that Hip Hing Group regards us as its
preferred business partner and the long-standing relationships with us is
attributable to its confidence in our ability to consistently deliver quality services
and fulfil their technical specifications over the years of business cooperation. As
confirmed by Hip Hing Group, (i) there has not been any material disputes,
claims or litigations between our Group and Hip Hing Group; (ii) there has not
been any instance where our Group was unable to meet the quality requirements
stipulated by Hip Hing Group; (iii) Hip Hing Group is generally satisfied with our
Group’s services; and (iv) Hip Hing Group is willing to continue engaging our
Group as its structural steelwork subcontractor when suitable opportunity arises.
Based on the aforementioned, our Directors consider that the likelihood of our
business relationship with Hip Hing Group being materially or adversely changed
or terminated is relatively low. Further, our Directors consider that our long-term
track record with Hip Hing Group were accumulated from years of co-operations
in various scale and types of projects, which could not be easily replicated by our
competitors. As such, our Directors believe that we are well-positioned to
continue pursuing sizeable projects from Hip Hing Group. In respect of our 22
projects on hand as at the Latest Practicable Date, a total of nine projects with
total estimated contract sum of approximately HK$943.3 million in aggregate
were attributable to Hip Hing Group.
 our executive Directors believe that it is mutually beneficial and complementary
for both our major customers and us to maintain a close and stable business
relationship with each other because our major customers could benefit from our
proven track record as a quality subcontractor in the provision of structural
steelwork to ensure their projects are executed on time, within budget and in
accordance with their quality standards. Our provision of quality structural
steelwork also enabled our major customers to fulfil their responsibilities under
the contractual relationships with their customers. The extensive experience of our
project management and supervision staff have also enabled us to assist our
customers in project management and site supervision, and build reliable
relationship and trust among our customers, their respective customers and us.
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Tender exposure via different main contractors
 other than our existing customers, our Group also received tender invitations from
other potential customers during the Track Record Period. There were occasions
where we received tender invitation in respect of the same structural steelwork
project from more than one of our customers/potential customers. This usually
occurs when a project owner invites different main contractors to submit tender
for a construction project, and more than one of these main contractors may have
invited us to submit quotations for undertaking the structural steelwork involved
in such projects so as to facilitate their budgeting and/or tender submission to the
project owner. In case the main contractors to which we had submitted quotations
successfully obtained the construction projects, they would tend to award the
structural steelwork to us. In such circumstances, even if any one of our
customers fails to obtain the construction project from the project owner, we may
still have the chance to obtain the structural steelwork involved via our tenders to
other main contractors.
 leveraging our track record, skills and experience in undertaking projects in both
public and private sectors involving different types of construction development
including infrastructure and public facilities, residential, commercial and industrial
developments, our executive Directors consider that we are well-positioned to
capture business opportunities arising from any future construction developments
in Hong Kong. In particular, our Directors believe that our track record in
delivering quality structural steelwork services for sizeable construction
contractors, especially group companies of leading property developers in Hong
Kong, such as Hip Hing Group and Customer Group E, has resulted in positive
effects to our industry reputation and increased our market exposure in the Hong
Kong structural steelwork industry which would be considered favourably by our
potential customers. Our Directors consider that our ability in delivering structural
steelwork services which fulfil the stringent quality and technical requirements of
various sizeable construction contractors, is a recognition of our service quality,
technical know-how, industry knowledge and experience which are transferrable
by us to serving new potential customers. During the Track Record Period, our
Group had secured new customers, including Customer F, Customer G and Zenith
(PMS) Limited, each of which had commenced business relationship with us since
2021.
Top customers who were also our suppliers
When we undertake projects for our customers, there may be occasions where our
customers procure materials and other services on our behalf and subsequently deduct such
amounts in the relevant progress payments to us. Such arrangement is generally known as
“contra-charge arrangement” and the amounts involved are referred to as “contra-charge”.
The procurement made by our customers on our behalf mainly included materials such as
steel and services such as machinery services and subcontracting services. While the formal
contracts with our customers generally do not impose specific condition or requirement on
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us to procure specific types of materials and/or services from them for the use in their
projects, our customers may in practice supply certain materials and other services to us for
the use in their projects at our costs.
According to the Industry Report, on some occasions, the main contractors may provide
certain materials and/or services (such as machinery services and subcontracting services) to
its subcontractors. The main contractor would subsequently deduct such amounts in the
relevant payment certificates issued to the subcontractors. Based on the Industry Report,
main contractors adopted the aforesaid arrangements mainly for the purpose of (i) improving
cost effectiveness as main contractors could generally negotiate a more favourable pricing
for placing bulk purchase order with suppliers; and (ii) facilitating procurement efficiency by
centralising the procurement of materials used for performing different types of construction
works under the same construction project. Meanwhile, on some occasions, in the structural
steelwork industry, having regard to the schedule of projects and the availability of
machinery, the main contractors may provide cranes to its subcontractors for lifting and
transporting the structural steel products for ensuring timely completion of the projects.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, we
incurred approximately HK$66.7 million, HK$6.1 million, HK$2.8 million and HK$22.1
million, respectively, for the procurement of materials and other services from our
customers.
The following table sets forth the details of our transactions with top customers who
supplied materials and services to us for FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023:
Types of goods/services
procured by our Group FY2020 FY2021 FY2022
For the nine months
ended 30 September 2023
HK$’000 % HK$’000 % HK$’000 % HK$’000 %
Hip Hing Group
Revenue derived and approximate
% of our total revenue
126,556 39.0 151,593 66.3 237,715 70.7 118,347 50.3
Procurement amounts and
approximate % of our total
purchases
Steel, machinery
services and
subcontracting services
355 0.1 546 0.4 1,179 0.5 10,146 6.2
Gross profit/gross profit margin 20,289 16.0 25,660 16.9 47,983 20.2 22,705 19.2
Customer B
Revenue derived and approximate
% of our total revenue
120,694 37. 2––––––
Procurement amounts and
approximate % of our total
purchases
Steel and machinery
services
64,961 26. 8––––––
Gross profit/gross profit margin 22,588 18. 7––––––
Customer C
Revenue derived and approximate
% of our total revenue
22,611 7.0 45,640 19.9 3,655 1.1 – –
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Types of goods/services
procured by our Group FY2020 FY2021 FY2022
For the nine months
ended 30 September 2023
HK$’000 % HK$’000 % HK$’000 % HK$’000 %
Procurement amounts and
approximate % of our total
purchases
Machinery services and
subcontracting services
242 0.1 – – 14 negligible – –
Gross profit/gross profit margin 3,117 13.8 6,516 14.3 524 14.3 – –
Customer Group D
Revenue derived and approximate
% of our total revenue
16,942 5.2 192 0. 1––––
Procurement amounts and
approximate % of our total
purchases
Steel, machinery
services and
subcontracting services
574 0.2 41 negligible ––––
Gross profit/gross profit margin 3,285 19.4 35 18. 2––––
Customer Group E
Machinery services and
subcontracting services
Revenue derived and approximate
% of our total revenue
9,766 3.1 213 0.1 – – 21,618 9.2
Procurement amounts and
approximate % of our total
purchases
268 0.1 30 negligible ––––
Gross profit/gross profit margin 2,064 21.1 34 16.0 – – 4,036 18.7
Customer F
Machinery services
Revenue derived and approximate
% of our total revenue
– – 8,152 3.6 21,920 6.5 – –
Procurement amounts and
approximate % of our total
purchases
– – 1,302 0.9 1,116 0.5 – –
Gross profit/gross profit margin – – 1,356 16.6 3,646 16.6 – –
Customer H
Machinery services and
subcontracting services
Revenue derived and approximate
% of our total revenue
7,672 2.4 5,443 2.4 9 negligible – –
Procurement amounts and
approximate % of our total
purchases
93 negligible 4,212 2. 8––––
Gross profit/gross profit margin 1,431 18.7 957 17.6 negligible negligible – –
Sun Fook Kong Construction
Limited
Revenue derived and approximate
% of our total revenue
– – 616 0.3 10,807 3.2 19,632 8.4
Procurement amounts and
approximate % of our total
purchases
Steel –––––– 1 1,950 7.3
Gross profit/gross profit margin – – 152 24.7 2,648 24.5 3,070 15.6
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Contra-charge arrangement with Customer B under Project No. #01
We incurred a relatively higher amount of contra-charge of approximately HK$66.7
million for FY2020 as compared to approximately HK$6.1 million, HK$2.8 million and
HK$22.1 million for FY2021, FY2022 and the nine months ended 30 September 2023,
respectively, mainly due to our contra-charge arrangement with Customer B under Project
No. #01. Out of the contract-charge amount of approximately HK$66.7 million incurred by
us in FY2020, approximately HK$65.0 million was attributable to the contra-charge
arrangement with Customer B.
Project No. #01 was awarded to us by Customer B in January 2019 which involved a
private sector commercial development located at the Hong Kong International Airport with
an estimated contract sum of approximately HK$191.4 million. Project No. #01 commenced
in June 2019 and was completed in December 2020.
Based on the design and specification of steel provided by the project owner, our
Group estimated the quantity of materials required under Project No. #01 and provided
recommendations on the design drawings of structural steel. Customer B then procured the
steel required for the use in Project No. #01 and subsequently deducted the amount they
incurred therefrom in the relevant progress payment to us. Our contra-charge arrangement
with Customer B under Project No. #01 was for the purposes of (i) facilitating procurement
efficiency by centralising the procurement of steel used for performing different types of
construction works by the subcontractors under the commercial development, including
structural steelwork performed by our Group; and (ii) improving cost effectiveness as
Customer B could negotiate a more favourable pricing for placing bulk purchase order with
the supplier of steel, namely Sum Kee Metal Company Limited.
Sum Kee Metal Company Limited has been an approved supplier of our Group since
2009. In respect of Project No. #01, prior to Customer B’s procurement of steel from Sum
Kee Metal Company Limited for us, Sum Kee Metal Company Limited was required to
satisfy our evaluation based on its pricing, quality of materials, timeliness of delivery and
ability to comply with our requirements and specifications. Based on our requirements,
Customer B then proceeded with the procurement from Sum Kee Metal Company Limited.
The engagement of Sum Kee Metal Company Limited by Customer B for the supply of steel
under Project No. #01 has given assurance to us in respect of the quality of steel materials
supplied for Project No. #01 which adhered to our commitment to the provision of quality
structural steelwork and maintaining our industry reputation. The pricing offered by Sum
Kee Metal Company Limited to Customer B for the supply of steel was generally in line
with that offered to our Group in other projects, hence the contra–charge arrangement with
Customer B under Project No. #01 did not result in any material increase in procurement
costs of steel or any material adverse effect to the profitability of Project No. #01 to our
Group.
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Contra-charge arrangement with Hip Hing Group
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
Group incurred contra-charge of approximately HK$0.4 million, HK$0.5 million, HK$1.2
million and HK$10.1 million to Hip Hing Group, respectively. Our Group incurred a
relatively higher amount of contra-charge to Hip Hing Group during the nine months ended
30 September 2023, which was mainly attributable to the procurement of subcontracting
services for the erection of scaffold and working platforms by Hip Hing Group on our
behalf under Project No. #02 and #07.
We and our subcontractors are sometimes required to perform installation works at
height on scaffold and working platforms at construction sites in Hong Kong. Depending on
the contract terms and negotiation between our Group and our customers, subcontracting
services for the erection of scaffold and working platforms may be (i) procured by us at our
cost; (ii) provided by our customers at their costs; or (iii) procured by our customers for our
use and such costs will be subsequently deducted in the relevant payment certificates issued
to us.
According to the respective project schedule, we were required to perform certain
installation works at height at the later stage of Project No. #02 and #07, respectively. In
light of our needs to perform installation works at height, our Group had requested Hip Hing
Group to procure subcontracting services for the erection of scaffold and working platforms
on our behalf taking into consideration (i) Hip Hing Group had previously selected and
engaged subcontractors for erecting scaffold and working platforms used for performing
other types of construction works at the construction sites of Project No. #02 and #07; (ii)
centralisation of the procurement of subcontracting services for the erection of scaffold and
working platforms could facilitate procurement efficiency and standardisation as well as
improve cost effectiveness as Hip Hing Group could negotiate a more favourable pricing for
placing bulk purchase order for the subcontracting services; and (iii) both our Group and
Hip Hing Group impose similar stringent safety and quality standards on the selection of
subcontractors for the erection of scaffold and working platforms. In respect of Project No.
#02 and #07, prior to the engagement of subcontractors for the erection of scaffold and
working platforms by Hip Hing Group on our behalf, such subcontractors were required to
satisfy our evaluation based on its pricing, work quality, timeliness of delivery and ability to
comply with our requirements and specifications.
Contra-charge arrangement with Sun Fook Kong Construction Limited
During the nine months ended 30 September 2023, our Group incurred contra-charge of
approximately HK$12.0 million to Sun Fook Kong Construction Limited, (“ Sun Fook
Kong”) which was mainly attributable to the procurement of steel materials by Sun Fook
Kong on our behalf under Project No. O05. Project No. O05 was awarded to us by Sun
Fook Kong, which involved a public sector infrastructural development located in Diamond
Hill with an estimated contract sum of approximately HK$38.2 million. Project No. O05
commenced in December 2022 and is expected to complete by November 2024.
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Based on the design and specification of steel provided by Sun Fook Kong, our Group
estimated the quantity of materials required under Project No. O05 and provided
recommendations on the design drawings of structural steel. Sun Fook Kong then procured
the steel required for the use in Project No. O05 and subsequently deducted the amount they
incurred therefrom in the relevant progress payment to us. Our contra-charge arrangement
with Sun Fook Kong under Project No. O05 was for the purposes of facilitating procurement
efficiency and standardisation and improving cost effectiveness as Sun Fook Kong could
negotiate a more favourable pricing for placing bulk purchase order with the supplier of
steel, namely Supplier Group G.
Supplier Group G has been an approved supplier of our Group since 2009. In respect
of Project No. O05, prior to the procurement of steel by Sun Fook Kong from Supplier
Group G for us, Supplier Group G was required to satisfy our evaluation based on its
pricing, quality of materials, timeliness of delivery and ability to comply with our
requirements and specifications. Based on our requirements, Sun Fook Kong then proceeded
with the procurement from Supplier Group G. The engagement of Supplier Group G by Sun
Fook Kong for the supply of steel under Project No. O05 has given assurance to us in
respect of the quality of steel materials supplied for Project No. O05 which adhered to our
commitment to the provision of quality structural steelwork and maintaining our industry
reputation. The pricing offered by Supplier Group G to Sun Fook Kong for the supply of
steel was generally in line with that offered to our Group in other projects, hence the
contra-charge arrangement with Sun Fook Kong under Project No. O05 did not result in any
material increase in procurement costs of steel or any material adverse effect to the
profitability of Project No. O05 to our Group.
PRICING STRATEGY
Our pricing is generally determined based on certain mark-up over our estimated costs.
We estimate our costs to be incurred in a project to determine our tender price and there is
no assurance that the actual amount of costs would not exceed our estimation during the
performance of our projects. Please refer to the paragraph headed “Risk factors – Any
material inaccurate cost estimation or cost overruns may adversely affect our financial
results” in this prospectus for further details of the associated risks in this regard.
In order to minimise the risk of inaccurate estimate and cost overrun, the pricing of our
services is overseen by our management team, whose background and experience are
disclosed in the section headed “Directors and senior management” in this prospectus, based
on our pricing strategy described in the following paragraphs.
Pricing of our services is determined on a case-by-case basis having regard to various
factors, which generally include (i) the scope of services; (ii) the complexity of the project;
(iii) the estimated number and types of machinery required; (iv) the price trend of the types
of materials, manufacturing overheads in the PRC, subcontracting services and machinery
services required; (v) our available production capacity of structural steel; (vi) the
completion time requested by customers; and (vii) the availability of our labour and
financial resources.
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We prepare our tender price based on a certain percentage of mark-up over our
estimated cost. The percentage of mark-up may vary from project to project due to factors
such as (i) the size, duration and sector of the project; (ii) years of business relationship
with the customer; (iii) credit history and financial track record of the customer; (iv) the
prospect of obtaining future contracts from the customer; (v) any possible positive effect of
our Group’s reputation in the structural steelwork industry; (vi) the likelihood of any
material deviation of the actual cost from our estimation having regard to the price trend of
key cost components; and (vii) the prevailing market conditions.
SALES AND MARKETING
During the Track Record Period, we secured new business through invitations for
tender by customers. Our Directors consider that due to our proven track record and our
relationship with existing customers, we are able to leverage our existing customer base and
our reputation in the structural steelwork industry in Hong Kong such that we do not rely
heavily on marketing activities other than promoting our Group through our corporate
website as well as liaising with existing and potential customers from time to time for
relationship building and management.
Seasonality
Our Directors believe that the structural steelwork industry in Hong Kong does not
exhibit any significant seasonality as structural steelwork projects take place throughout the
year in Hong Kong based on the experience of our Directors.
PRODUCTION FACILITIES AND CAPACITY
Wing Kei Dongguan, being our PRC operating subsidiary, operates two production
facilities located in Dongguan, the PRC, which process and fabricate structural steel required
by our structural steelwork projects. Our Dapianmei Production Facility commenced
operations back in 2000, and our Xinlong Production Facility subsequently came into
operation in 2020 in light of the increasing needs of our structural steelwork projects. All of
our structural steel production capacity is currently used to cater to our own project needs.
We did not engage in any hedging activities to minimise the foreign exchange risk of our
PRC operation.
Fabrication process
We are able to fabricate custom-made structural steel products based on our customers’
requirements and specifications. The fabrication requirements and time required vary
according to product shapes, specifications and size.
Structural steel fabrication is a space-intensive activity which involves significant areas
for the storage, maneuver and processing of bulky metal items. The size, shape, density and
specifications of steel required vary from project to project.
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The following chart illustrates the major fabrication process of our structural steel
products:
Materials
inspection
Cutting and
forming
Dimension
inspection and
assembling
Welding Surface
polishing Galvanising Painting
(if applicable)
Product
inspection
Lifting and transporting of materials
within the production premises
Except for materials inspection which is conducted by our Group and the
representatives designated by our customers in both Hong Kong and the PRC, the fabrication
process of our structural steel products is performed in the PRC. We carry out in-house
fabrication of structural steel with our own labour. Meanwhile, we engage our subcontractors
in the PRC to perform galvanising works on the structural steel which requires specialised
technical skills. Depending on our production capacity, we may also subcontract other parts
of the structural steel fabrication works to our subcontractors in the PRC.
Materials inspection
After obtaining approval of the materials from our customers and/or the project owners,
our Group would engage third party logistics service providers to deliver the materials to
our production facilities in the PRC for structural steel fabrication. Our production staff and
representatives designated by our customers would conduct inspection on the materials upon
their arrival at our production facilities in the PRC.
As a general practice, each batch of steel to be used in a project is bundled together
and then physically endorsed with the signature of our customers’ representatives for
identification purpose. To avoid intermingling of the steel bundle earmarked for different
projects, we generally place and store the steel bundle for each project under designated and
separate area in our production facilities.
Despite the limitation of available storage space in our production facilities, we usually
refrain from piling up steel bundles or articles of different specifications on each other as
this may easily result in confusion over the segregation of materials for different projects,
and excessive piling of materials may also hinder the operations of our gantry cranes as the
materials may collide with the hanging objects as the lifting trolley moves along the rail
tracks.
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Cutting and forming
We will cut the steel materials into parts of predetermined sizes, shapes and lengths.
The steel parts will then undergo the forming process, through which the parts will be
trimmed, levelled, milled and/or bent into three-dimensional shapes which fit our customers’
needs and specifications.
To ensure safe operation of cutting machine, we generally require our workers to
maintain a distance of no less than three meters from each other as they carry out cutting.
Dimension inspection and assembling
Upon inspection of the sizes, shapes, angles, weld joints, root gaps, groove angles and
other relevant dimensions of the steel parts and other components, we will assemble the
steel parts and components according to our customers’ specifications.
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Welding
Welding is a process of joining the steel parts and other components by heating.
Through the welding process, the steel parts and other components are joined together to
form the semi-finished products in accordance with our customers’ specifications. We will
carry out inspection on the semi-finished products to confirm whether the welding process
has been properly conducted. We will also appoint third party testing service providers to
conduct weld testing in order to ensure the strength and quality of welds. Our customers
may also direct their own representatives to inspect the semi-finished products so as to
ensure that such products meet the required quality standards.
To ensure safe operation of welding machine, we generally require our workers to
maintain a distance of no less than three meters from each other as they carry out welding.
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Surface polishing
Our Group will then conduct surface polishing to remove the imperfections such as
creases and scratches on the surface of the semi-finished products.
Galvanising
During the Track Record Period, we engaged our subcontractors in the PRC to conduct
the galvanising process. For details, please refer to the paragraph headed “Our suppliers –
Subcontractors of structural steel fabrication works” below in this section. During the
galvanising process, the semi-finished products will be immersed in a bath of molten zinc so
that a layer of zinc will form on the surface of the semi-finished products upon cooling
which can protect the steel underneath from corrosion.
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Painting (if applicable)
Depending on the requirements of the customers, a layer of painting may be applied to
the semi-finished products to better protect the products from corrosion.
Product inspection
Upon completion of the fabrication process, our production staff will carry out quality
inspection on the final products. Our Group’s customers may also direct their own
representatives to conduct inspection on the finished products. We strictly forbid piling of
finished products on top of each other as this may create scratches and abrasions due to the
size and weight of the objects.
Upon approval of the products by our Group and our customers, the final products will
be packaged and wrapped by protective materials to prevent development of cracks,
scratches and/or imperfection on the products. They will then be delivered to our project
sites in Hong Kong.
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Lifting and transporting of materials within the production premises
Due to the weight and size of the materials involved (e.g. steels plates etc.), it is
inherently difficult to lift and transport the materials to different sections of the production
premises with general lifting equipment. In view of this, gantry cranes were installed in each
of our two production facilities for lifting and transporting bulky items within the production
premises throughout the fabrication process. As we operate gantry cranes for lifting and
transporting bulky items, we would have to allow adequate room for moving around the
loads in a safe and unobstructed manner.
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Production facilities
Our Dapianmei Production Facility has a gross floor area of approximately 7,000 sq.m.
and our Xinlong Production Facility has a gross floor area of approximately 8,700 sq.m..
Both of our production facilities are located in Dongguan, the PRC.
Our Dapianmei Production Facility is mainly used for undertaking structural steel
fabrication works; whereas our Xinlong Production Facility is used for undertaking structural
steel fabrication works as well as storing a substantial portion of our materials and
fabricated structural steel products.
Our principal machinery includes cranes, cutting machines, drilling machines, grinding
machines and welding machines. Our machinery is well-equipped to be used for fabricating
steel plates into different sizes and shapes. As at the Latest Practicable Date, the principal
machinery that was owned and used by our Group at our production facilities is set out as
follows:
Type of machinery Principal functions
Number
of
units
Crane
Cranes are mainly used for lifting
and transporting bulky items.
8
Cutting
machine
Cutting machines are mainly used
for cutting the steel plates into
predetermined sizes.
10
Drilling machine
Drilling machines are mainly used
for cutting holes on the steel
plates.
7
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Type of machinery Principal functions
Number
of
units
Grinding machine
Grinding machines are mainly used
for removing imperfections on the
surface of the semi-finished
products.
9
Welding machine
Welding machines are mainly used
for joining the steel parts and
other components by heating.
18
Utilisation rate
The table below sets forth the maximum production capacity, actual production volume and
utilisation rate of our production facilities during the Track Record Period:
Dapianmei Production Facility
(Note 1)
FY2020 FY2021 FY2022
For the nine
months
ended 30
September
2023
Maximum production capacity
(tonnes) (Notes 2 and 3) 4,400 (Note 4) 6,600 6,600 4,950
Actual production volume (tonnes) 4,259 5,287 5,663 4,265.6
Utilisation rate (%) (Note 6) 96.8 80.1 85.8 86.2
Xinlong Production Facility (Note 1)
FY2020 FY2021 FY2022
For the nine
months
ended 30
September
2023
Maximum production capacity
(tonnes) (Notes 2 and 3) 825 (Note 5) 3,300 3,300 2,475
Actual production volume (tonnes) 704 2,514 2,560 1,938.2
Utilisation rate (%) (Note 6) 85.3 76.2 77.6 78.3
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Notes:
1. Our Dapianmei Production Facility is mainly used for undertaking structural steel fabrication works;
whereas our Xinlong Production Facility is used for undertaking structural steel fabrication works as
well as storing a substantial portion of our materials and fabricated structural steel products. As the
available workspace at our Xinlong Production Facility is shared between the production and storage
functions, the actual production volume of the facility has been affected by the volume and size of
materials and finished products placed therein from time to time.
2. Maximum production capacity is determined and calculated by multiplying the daily capacity of the
machine with the applicable number of days of operation and the number of machine during the year/
period.
3. We assume the daily operating hours for our machinery to be eight hours, operating 300 days per
year (except for FY2020), taking into account staff holidays and public holidays.
4. We assume that our Dapianmei Production Facility operated for eight months for FY2020, taking into
account the suspension of operations of our Dapianmei Production Facility for approximately four
months between January 2020 to April 2020 due to the outbreak of COVID-19, staff holidays and
public holidays.
5. We had carried out a series of installation, testing and adjustment on our machinery before our
Xinlong Production Facility came into full operation. Having been affected by the outbreak of
COVID-19, the commencement of operations of our Xinlong Production Facility was delayed to
October 2020. We assume that our Xinlong Production Facility operated for three months for
FY2020.
6. Utilisation rate is calculated by dividing actual production volume by maximum production capacity
for the relevant year/period.
Our Directors consider that the utilisation rates of our production facilities are affected
by a number of factors including the volume of products required, technical requirements
and specifications, status of repair and maintenance of our machinery and production
schedule.
The utilisation rates of our production facilities experienced certain fluctuations during
the Track Record Period, details of which are set forth as follows:
Relatively higher utilisation rates for FY2020
For FY2020, the Dapianmei Production Facility and the Xinlong Production Facility
recorded utilisation rate of approximately 96.8% and 85.3%, respectively, which were
relatively higher as compared to that for FY2021, FY2022 and the nine months ended 30
September 2023, respectively. The relatively higher utilisation rates of our production
facilities for FY2020 was mainly attributable to:
(i) the suspension of our Dapianmei Production Facility for approximately four
months between January to April 2020 in response to the lockdown measures
imposed by the PRC Government during the first quarter of 2020 as a result of
the emergence of the COVID-19 pandemic in the PRC in early 2020. Accordingly,
the production capacity of the Dapianmei Production Facility during the lockdown
period was not taken into account in the calculation of its maximum production
capacity for FY2020. After the resumption of works at our Dapianmei Production
Facility, our Group had used our best endeavour to increase our production
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volume through optimising our machinery usage and manpower deployment in
order to keep pace with the original production schedule during the remaining
period of FY2020, contributing to the relatively higher utilisation rate of our
Dapianmei Production Facility in FY2020; and
(ii) our Xinlong Production Facility has commenced operations since October 2020.
As aforementioned, our Xinlong Production Facility is used for undertaking
structural steel fabrication works as well as storing a substantial portion of our
materials and fabricated structural steel products. As the available workspace at
our Xinlong Production Facility is shared between the production and storage
functions, the actual production volume of our Xinlong Production Facility is
affected by the volume and size of materials and finished products placed therein
from time to time. Given the Xinlong Production Facility had only come into
operations in October 2020, the space taken up for storage was relatively
insignificant in FY2020. As we were then attempting to keep pace with the
original production schedule amid the impact of lockdown earlier in 2020, we had
allocated a relatively large portion of workspace at the Xinlong Production
Facility for conducting fabrication works upon its commencement of operations,
and hence contributing to the relatively higher utilisation rate of the Xinlong
Production Facility in FY2020.
Decrease in utilisation rates for FY2021
The utilisation rate of the Dapianmei Production Facility decreased from approximately
96.8% in FY2020 to 80.1% in FY2021; whilst the utilisation rate of the Xinlong Production
Facility decreased from approximately 85.3% in FY2020 to 76.2% in FY2021. The decrease
in utilisation rates of our production facilities from FY2020 to FY2021 was mainly
attributable to the unexpected rescheduling of Project No. #02 for which we had originally
reserved a substantial portion of our then production capacity to support the structural steel
fabrication works required under Project No. #02 in FY2021.
After we had been informed about the unexpected rescheduling of Project No. #02,
during the remaining period of FY2021, we mainly focused on submitting tender for projects
that have relatively shorter duration and could readily commence in the near term. Owing to
the smaller scale of projects we obtained and commenced during the remaining period of
FY2021, the amount of structural steel fabrication works required under such projects were
not comparable to the structural steel fabrication works required under sizeable projects like
Project No. #02, thereby resulting in the relatively lower utilisation rate of our production
facilities in FY2021. For further details in relation to the rescheduling of Project No. #02,
please refer to the paragraph headed “Projects undertaken during the Track Record Period”
in this section above.
Slight increase in utilisation rates for FY2022
The utilisation rate of the Dapianmei Production Facility increased slightly from
approximately 80.1% in FY2021 to 85.8% in FY2022; whilst the utilisation rate of the
Xinlong Production Facility increased from approximately 76.2% in FY2021 to 77.6% in
FY2022. The slight increase in utilisation rates of our production facilities from FY2021 to
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FY2022 was mainly attributable to the increase in needs of fabricated structural steel
products due to the increase in number of structural steelwork projects awarded to us from
seven for FY2021 to 10 for FY2022. The increase in utilisation rates of our production
facilities was limited by (i) the temporary loss of manpower for our structural steel
fabrication and disruption to the operation of our production facilities between November to
December 2022 due to the increase in number of COVID-19 infections among our PRC staff
subsequent to the withdrawal of the “zero-COVID-19” policy in the PRC by late 2022; and
(ii) in relation to our top project for FY2022, namely Project No. #02, the majority of
structural steel fabrication works had already been completed at our production facilities in
the PRC prior to FY2022, and a significant amount of works carried out during FY2022 for
such project was in relation to the installation of fabricated structural steel at construction
sites in Hong Kong.
Relatively stable utilisation rates for the nine months ended 30 September 2023
For the nine months ended 30 September 2023, the utilisation rates of the Dapianmei
Production Facility and the Xinlong Production Facility remained relatively stable as
compared to FY2022 at approximately 86.2% and 78.3%, respectively. According to the
project schedule of Project No. #12, being one of our top five projects for the nine months
ended 30 September 2023, a substantial amount of works performed by us was in relation to
the procurement of materials, while the fabrication works will be performed at later stage.
In September 2023, our Group secured Project No. #13 with an estimated contract sum
of approximately HK$388.0 million, involving a commercial development in Causeway Bay,
from Hip Hing Group. Project No. #13 represents the largest project obtained by us in terms
of estimated contract sum during the Track Record Period. In light of the sizeable scale of
Project No. #13, our Group had commenced procuring materials in preparation of the
fabrication works required under Project No. #13 shortly after we secured the project.
According to the project schedule of Project No. #13, it is expected that we will commence
the fabrication works thereunder since November 2023. Having considered the fabrication
works for Project No. #12 and #13, it is expected that the utilisation rates of our production
facilities will be relatively higher during the fourth quarter of 2023.
Repair and maintenance
We have implemented a maintenance system for our machinery, which includes regular
inspection and regular repair and maintenance of machinery. This allows us to undertake our
fabrication process at optimal levels. We carry out routine cleaning and maintenance of our
machinery to enhance its useful life. We also conduct major annual maintenance work and
engage external mechanicians to carry out repair and maintenance on our machinery on an
as-needed basis. Our maintenance system aims to maintain operational efficiency and
high-quality control standards. For FY2020, FY2021, FY2022 and the nine months ended 30
September 2023, we incurred repair and maintenance expenses of approximately
RMB104,000, RMB205,000, RMB241,000 and RMB71,000, respectively. We did not
experience any material or prolonged interruptions to our fabrication process due to
machinery failure or breakdown during the Track Record Period and up to the Latest
Practicable Date.
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Transfer Pricing Arrangement
During the Track Record Period, the principal functions of our Group, including sales
and marketing, procurement of steel materials, installation of structural steel products and
project management, were mainly carried out by Wing Kei Hong Kong; while the fabrication
process of the structural steel products required in our projects was carried out by Wing Kei
Dongguan, under our two production facilities located in Dongguan, the PRC. Under our
business model, the principal functions and risks of our Group are undertaken by Wing Kei
Hong Kong; whereas Wing Kei Dongguan only undertakes limited functions and risks in
relation to its manufacturing role.
Wing Kei Hong Kong has entered into a processing arrangement with Wing Kei
Dongguan, pursuant to which Wing Kei Hong Kong shall provide steel materials procured
from third party suppliers to Wing Kei Dongguan for the fabrication of structural steel.
During the Track Record Period, Wing Kei Hong Kong procured fabricated structural steel
products solely from Wing Kei Dongguan. All the fabricated structural steel products
processed by Wing Kei Dongguan are then transferred to Wing Kei Hong Kong on a cost
plus basis, for onward use in our Group’s structural steel projects in Hong Kong. There has
been no material changes to the pricing basis for the sales and purchase transactions
between Wing Kei Hong Kong and Wing Kei Dongguan throughout the Track Record Period
and up to the Latest Practicable Date.
As illustrated above, the supply of structural steel fabrication services by Wing Kei
Dongguan to Wing Kei Hong Kong was regarded as intra-group transactions (the “ Transfer
Pricing Arrangements ”). Wing Kei Dongguan recorded net loss in FY2020 and FY2022
and such net loss position in FY2020 and FY2022 were mainly due to the impact of
COVID-19 pandemic. Due to the emergence of the COVID-19 pandemic in the PRC in early
2020, the PRC Government imposed lockdown measures in Dongguan, the PRC in the first
quarter of 2020. During the lockdown period in Dongguan, transport was restricted, major
roads and highways were closed and factories were ordered to suspend operations. In
response to the requirements of the local government authorities, our Group’s production
facilities had been suspended from operations during the lockdown period, resulting in a
temporary loss of structural steel production capacity and a significant decrease in revenue
generated by Wing Kei Dongguan during FY2020. Meanwhile, Wing Kei Dongguan had to
continue bearing certain fixed costs such as direct labour costs and manufacturing overheads
during the lockdown period. As a result, Wing Kei Dongguan recorded a net loss in
FY2020. Further, subsequent to the withdrawal of the “zero-COVID-19” policy by late 2022,
a number of our staff and department heads based in the PRC experienced infection which
resulted in temporary loss of manpower for our structural steel fabrication and temporary
disruption to the operation of Wing Kei Dongguan between November to December 2022.
Meanwhile, Wing Kei Dongguan had to continue bearing certain fixed costs such as direct
labour costs and manufacturing overheads during the relevant period. As a result of the
aforesaid, Wing Kei Dongguan recorded a net loss in FY2022. Our Group’s business
operations in the PRC had resumed to normal by early 2023.
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In comparison, Wing Kei Hong Kong, being the sole customer of Wing Kei Dongguan,
remained profitable in FY2020 and FY2022 mainly due to the following factors:
(i) Difference in functions and operating activities between Wing Kei Dongguan
and Wing Kei Hong Kong
Wing Kei Dongguan primarily operates our Group’s production facilities in the
PRC and generates its revenue solely from the fabrication of structural steel products
for Wing Kei Hong Kong. Hence, any material disruption to the operation of our
Group’s production facilities in the PRC would result in significant impact on the
business operations and financial performance of Wing Kei Dongguan.
By comparison, Wing Kei Hong Kong generates revenue from contract works in
Hong Kong and undertakes a wider spectrum of functions for our Group’s operations,
including sales and marketing, procurement of steel materials and/or services,
installation of fabricated structural steel products and project management at project
sites in Hong Kong.
(ii) Wing Kei Hong Kong did not experience material works suspension due to the
outbreak of COVID-19 pandemic
During the Track Record Period and up to the Latest Practicable Date, Wing Kei
Hong Kong did not experience material works suspension at its workplace or project
sites in Hong Kong due to the outbreak of COVID-19 pandemic. While Wing Kei
Hong Kong experienced temporary disruption to the transportation of materials from
Hong Kong to the PRC and finished products from the PRC to Hong Kong during 2022
since cross-border transportation was significantly disrupted due to the fifth wave
outbreak of COVID-19 attributable to the SARS-CoV-2 Omicron variant, Wing Kei
Hong Kong was generally able to pass on part of the increase in logistics costs
incurred to its customers. Save as the aforesaid, Wing Kei Hong Kong did not
experience material adverse impact on its business operations and financial
performance attributable to the outbreak of COVID-19. For further details, please refer
to the paragraph headed “Impact of the outbreak of COVID-19 on our operation – Our
operations in Hong Kong” in this section.
Further, the temporary disruption to the operation and decrease in output of
fabricated structural steel products of our Group’s production facilities in the PRC
during the first quarter of 2020 due to the lockdown measures imposed by the PRC
Government and by late 2022 due to the increase in number of infection of our PRC
staff subsequent to the withdrawal of the “zero-COVID-19” policy (collectively, the
“Temporary Disruptions ”), did not result in any material adverse impact on the
business operations and financial performance of Wing Kei Hong Kong. This was
because Wing Kei Hong Kong was able to continue with its installation works by using
the fabricated structural steel products delivered by Wing Kei Dongguan prior to the
respective disruption in operation of our Group’s production facilities in the PRC. In
particular, Wing Kei Hong Kong was informed by Hip Hing Group in 2020 that the
works schedule of Project No. #02 would be revised to the effect that a substantial part
of its construction site works would be performed in 2021. In preparation of the
construction site works expected to be performed in 2021 under Project No. #02, Wing
Kei Hong Kong had continued to procure steel materials in late 2020 and recognised
revenue correspondingly in accordance with the relevant accounting standards.
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(iii) Cost inefficiency of Wing Kei Dongguan attributable to the outbreak of
COVID-19
During the two periods of Temporary Disruptions in 2020 and 2022 respectively,
Wing Kei Dongguan recorded no or relatively low output of fabricated structural steel,
thereby resulting in a significant decrease in revenue generated by Wing Kei Dongguan
during the relevant periods in FY2020 and FY2022, respectively. During such periods,
Wing Kei Dongguan had to continue bearing certain fixed costs such as direct labour
costs and manufacturing overheads during the Temporary Disruptions, thereby
adversely affected the profitability of and contributed to the net loss incurred by Wing
Kei Dongguan in FY2020 and FY2022, respectively.
Transfer pricing study by independent tax adviser
We have engaged an independent tax adviser to conduct transfer pricing study
concerning the Transfer Pricing Arrangements during the Track Record Period taking into
account the applicable laws and regulations in respect of transfer pricing in Hong Kong and
the PRC. According to the transfer pricing study, Wing Kei Dongguan is characterised as a
limited-risk structural steel fabricator, having considered its business function, risk profile
and asset profile. The key basis of the benchmarking study involved a comparison of the
operating margin of Wing Kei Dongguan and the operating margin of the market
comparables.
Based on the transactional net margin method and benchmarking analysis and having
considered the operating nature of Wing Kei Dongguan for FY2020, FY2021 and FY2022,
full cost mark-up (“ FCMU”) is considered to be the most appropriate profit level indicator
and the result of the benchmarking analysis are as follows:
 for FY2022, the inter-quartile range of the three-year weighted average FCMU for
the three-year period cycle ended FY2022 ranges between 2.07% and 4.29%, with
a median of 3.62%. The adjusted FCMU of Wing Kei Dongguan is determined to
be 3.65%, having adjusted the cost inefficiencies arising from the impact of the
COVID-19 pandemic disruption, which falls within the inter-quartile range for the
three-year period cycle ended FY2022;
 for FY2021, the inter-quartile range of the three-year weighted average FCMU for
the three-year period cycle ended FY2021 ranges between 3.21% and 4.12%, with
a median of 3.44%. The FCMU of Wing Kei Dongguan is determined to be
3.44%, which falls within the inter-quartile range for the three-year period cycle
ended FY2021; and
 for FY2020, the inter-quartile range of the three-year weighted average FCMU for
the three-year period cycle ended FY2020 ranges between 1.98% and 2.30%, with
a median of 2.01%. The adjusted FCMU of Wing Kei Dongguan is determined to
be 2.08%, having adjusted cost inefficiencies arising from the impact of the
COVID-19 pandemic disruption, which falls within the inter-quartile range for the
three-year period cycle ended FY2020.
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Our executive Directors, after considering the analysis result and reviewing the transfer
pricing study prepared by our independent tax adviser, are of the view that the Transfer
Pricing Arrangements were carried out on an arm’s length basis in a material respect and
does not result in material reduction to Wing Kei Dongguan’s taxable income in the PRC for
the three years ended 31 December 2022.
As advised by the Hong Kong Legal Counsel, save as disclosed in the paragraph
headed “Regulatory Overview – Hong Kong – Laws and Regulations in relation to Tax and
Transfer Pricing” in this prospectus, our Group is not subject to any applicable laws and
regulations in Hong Kong in respect of transfer pricing. As advised by the PRC Legal
Advisers, save as disclosed in the paragraph headed “Regulatory Overview – The PRC –
Laws and Regulations in relation to Taxation – Tax on Related Party Transactions”, our
Group is not subject to any applicable laws and regulations in the PRC in respect of transfer
pricing. Our executive Directors confirmed that our Group did not pay any tax subject to
applicable laws and regulations in Hong Kong and the PRC in respect of transfer pricing
during the Track Record Period.
OUR SUPPLIERS
Characteristics of our suppliers
Suppliers of goods and services which are specific to our business and are required on
a regular basis to enable us to continue carrying on our business mainly include (i) suppliers
of materials such as steel; (ii) subcontractors of construction site works; (iii) subcontractors
of structural steel fabrication works; and (iv) suppliers of other miscellaneous services such
as testing, machinery services, transportation and technical engineering services.
The following table sets forth a breakdown of our total purchase, which represents our
cost of services excluding direct labour costs and depreciation, during the Track Record
Period by type of goods and services provided by our suppliers:
For the nine months ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %
(Unaudited)
Materials 150,560 62.1 62,266 41.9 73,708 32.1 48,694 28.2 85,938 52.5
Subcontracting of
construction site works 71,005 29.3 48,919 32.9 91,606 39.8 72,941 42.3 57,190 34.9
Subcontracting of structural
steel fabrication works 4,854 2.0 13,014 8.8 13,696 6.0 10,949 6.4 5,641 3.4
Miscellaneous services
(Note) 16,169 6.6 24,403 16.4 50,922 22.1 39,787 23.1 15,123 9.2
Total 242,588 100.0 148,602 100.0 229,932 100.0 172,371 100.0 163,892 100.0
Note: These miscellaneous services mainly included testing, machinery services, transportation and
technical engineering services.
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Please refer to the paragraph headed “Financial information – Key factors affecting our
results of operations and financial conditions – Fluctuation in our cost of services” in this
prospectus for a discussion of the fluctuation in our purchases from our suppliers and
subcontractors during the Track Record Period as shown in the above table as well as the
relevant sensitivity analysis in this connection. During the Track Record Period, save for the
temporary disruption to the transportation between Hong Kong and the PRC during 2022
caused by the fifth wave of outbreak of COVID-19 attributable to the SARS-CoV-2 Omicron
variant, we did not experience any material shortage in the supply of goods and services that
we required.
We may obtain pre-bid quotations from our suppliers and/or subcontractors in making
our cost estimation during the tender phase. We may negotiate on the pricing and contract
terms with them after we are awarded with the projects. Our Directors consider that we are
generally able to pass on the increase in purchase costs to our customers because we
generally take into account our overall costs of providing our services to customers when
determining our tender price.
Principal terms of engagement
Suppliers of materials
During the Track Record Period, our suppliers of materials were mainly located in
Hong Kong and the PRC and our purchases were denominated in Hong Kong dollars and
Renminbi. Steel is the major type of material sourced by us.
We purchase materials from our suppliers on an order-by-order basis. We have not
committed to any minimum purchase amount with our suppliers of materials. Our purchase
orders generally specify the unit price, volume, delivery date, product specifications and
types of materials we required. The purchased materials are generally delivered to our
production facilities in the PRC and the transportation costs are generally borne by us.
Upon delivery of the materials to our production facilities in the PRC, we typically
arrange for testing on the materials by external laboratory selected by the Hong Kong
government or by us. Any materials that fail to comply with the specifications or standards
provided in the purchase order will be returned to the suppliers for replacement.
Subcontractors of construction site works
We engage our subcontractors of construction site works on a project-by-project basis.
The construction site works undertaken by our subcontractors mainly include installation,
touch-up painting and fire protection works for our fabricated structural steel. We have
neither entered into long-term agreements nor committed to any minimum purchase amount
with our subcontractors. The salient terms included in our subcontracting agreements are
summarised as follows:
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Scope of services
The subcontracting agreement generally sets forth the scope of services to be provided
by our subcontractors. We require our subcontractors to complete the subcontracted works
according to our customers’ specifications, drawings and requirements.
Subcontracting fees
The contracts with our subcontractors are mainly on re-measurement basis. Under the
re-measurement contracts, the final contract sum will be determined based on the agreed unit
rates of each item set out in the bill of quantities or schedule of rate and the actual
quantities of work done.
Payment arrangements
Our subcontractors are required to submit progress payment application to us setting
out the details of the completed work on a monthly basis. Depending on our engagement
terms with subcontractors, we may withhold up to 10% of each payment made to our
subcontractors as retention monies. Generally, the retention monies are partially released
upon completion of the project, expiry of the defects liability periods or a pre-agreed time
period.
As at 31 December 2020, 2021, 2022 and 30 September 2023, our retention payables to
subcontractors amounted to approximately HK$3.0 million, HK$4.3 million, HK$7.2 million
and HK$5.9 million, respectively. Please refer to the paragraph headed “Financial
information – Discussion of selected statement of financial position items – Trade and
retention payables” in this prospectus for further details.
Depending on the terms of engagements with our subcontractors, we may directly settle
the wages of the site workers deployed by our subcontractors and subsequently deduct such
amounts in the relevant progress payment application issued to us by such subcontractors.
According to the Industry Report, it is common for construction contractors to directly settle
the wages of their subcontractors which will be subsequently deducted from the progress
payment application issued by the subcontractors and the purpose of such arrangement is to
offer better protection and ensure timely settlement of wages to the employees of the
subcontractors.
Termination and liquidated damages
Subcontractors are required to indemnify our Group against any loss, expense or claim
arising from the failure to comply with subcontracting agreement by the subcontractor and/or
its employees. We may be entitled to hold our subcontractors liable for any loss and damage
suffered by our Group if their works are not performed in accordance with our requirements.
We may also be entitled to terminate the work order in the event of breach of contract by
our subcontractor.
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Subcontractors of structural steel fabrication works
On occasions, our customers may require us to perform galvanising works on the
structural steel which requires specialised technical skills. To achieve optimisation in our
production, we outsource all required galvanising works to our subcontractors in the PRC.
Further, depending on our production capacity, we may also subcontract other parts of
structural steel fabrication works to our subcontractors in the PRC.
We engage our subcontractors of structural steel fabrication works on a
project-by-project basis. Our agreements with the subcontractors generally specify the price,
scope of services and technical and quality standards required and delivery date. Depending
on our negotiation with subcontractors of structural steel fabrication works, we may make
prepayments to our subcontractors on a case-by-case basis. We have neither entered into
long-term agreements nor committed to any minimum purchase amount with our
subcontractors.
Suppliers of miscellaneous services
We also procure services from suppliers of miscellaneous services such as testing,
machinery services, transportation and technical engineering services.
Our Group engages external laboratory selected by the Hong Kong government or by
us to conduct testing of materials and engages third party testing service providers to
conduct weld testing.
Our Group mainly relies on third party machinery services providers for the hiring of
machinery to be used at construction sites such as cranes and lifting machines.
Our Group engages third party logistics service providers for (i) the delivery of
materials from Hong Kong to our production facilities in the PRC; and (ii) the delivery of
our finished structural steel products from our production facilities in the PRC to the
relevant construction sites in Hong Kong. Depending on our negotiation with third party, we
may make prepayments to the logistics service providers on a case-by-case basis.
Depending on the complexity of the project, we may also engage external technical
engineering consultant to assist with our technical submissions to customers on a
case-by-case basis. Our purchase orders generally specify the price, scope of services
required and delivery date. We have neither entered into long-term agreements nor
committed to any minimum purchase amount with our suppliers of miscellaneous services.
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Top suppliers
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
percentage of our total purchases from our top supplier amounted to approximately 26.8%,
15.6%, 15.2% and 24.0% respectively, while the percentage of our total purchases from our
top five suppliers combined amounted to approximately 73.2%, 46.4%, 56.0% and 63.7%,
respectively. The following tables set forth the information of our top five suppliers for each
year/period during the Track Record Period:
FY2020
Rank Supplier
Types of goods or
services purchased by
us from the suppliers
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Purchase by us
from the suppliers
HK$’000 %
1 Customer B
(Note 1) Mainly supply of steel
and machinery
services
Since 2018 N/A
(Note 1) 64,961 26.8
2 Wo Lee Group (Note 2) Mainly supply of steel Since 2013 90 days; by cheque 59,211 24.4
3 Supplier B (Note 3) Mainly subcontracting
of construction site
works
Since 2018 30 days; by cheque 29,110 12.0
4 Supplier C
(Note 4) Mainly subcontracting
of construction site
works
Since 2016 30 days; by cheque 15,031 6.2
5 Sum Kee Metal Company Limited
(Note 5)
Mainly supply of steel Since 2009 90 days; by cheque 9,344 3.8
Top five suppliers combined 177,657 73.2
All other suppliers 64,931 26.8
Total purchases 242,588 100.0
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FY2021
Rank Supplier
Types of goods or
services purchased by
us from the suppliers
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Purchase by us
from the suppliers
HK$’000 %
1 Wo Lee Group
(Note 2) Mainly supply of steel Since 2013 90 days; by cheque 23,109 15.6
2 Wah Chong Engineering Company
(Note 6)
Mainly subcontracting
of construction site
works
Since 2019 30 days; by bank
transfer
18,263 12.3
3 Easy Smart Engineering Limited
(Note 7)
Mainly subcontracting
of fire protection
works on fabricated
structural steel
Since 2009 30 days; by cheque 14,756 9.9
4 Supplier Group G
(Note 8) Mainly supply of steel Since 2009 45 days; by cheque 6,499 4.4
5 Kanson Crane & Heavy Transport
Company Limited (Note 9)
Mainly supply of
machinery services
Since 2016 30 days; by cheque 6,278 4.2
Top five suppliers combined 68,905 46.4
All other suppliers 79,697 53.6
Total purchases 148,602 100.0
FY2022
Rank Supplier
Types of goods or
services purchased by
us from the suppliers
Y ear of
commencement
of business
relationship
Typical credit
terms and
payment method
Purchase by us
from the suppliers
HK$’000 %
1 Easy Smart Engineering Limited
(Note 7)
Mainly subcontracting
of fire protection
works on fabricated
structural steel
Since 2009 30 days; by cheque 34,887 15.2
2 Wah Chong Engineering Company
(Note 6)
Mainly subcontracting
of construction site
works
Since 2019 30 days; by cheque 29,842 13.0
3 Wo Lee Group
(Note 2) Mainly supply of steel Since 2013 90 days; by cheque 29,286 12.7
4 Kanson Crane & Heavy Transport
Company Limited (Note 9)
Mainly supply of
machinery services
Since 2016 30 days; by cheque 20,950 9.1
5 Supplier Group G (Note 8) Mainly supply of steel Since 2009 45 days; by cheque 13,844 6.0
Top five suppliers combined 128,809 56.0
All other suppliers 101,123 44.0
Total purchases 229,932 100.0
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Nine months ended 30 September 2023
Rank Supplier
Types of goods or
services purchased by
us from the suppliers
Y ear of
commencement
of business
relationship
Typical credit terms
and payment method
Purchase by us
from the suppliers
HK$’000 %
1 Wo Lee Group
(Note 2) Mainly supply of steel Since 2013 90 days; by cheque 39,324 24.0
2 Wah Chong Engineering
Company (Note 6)
Mainly subcontracting
of construction site
works
Since 2019 30 days; by bank
transfer
22,532 13.7
3 Supplier Group G
(Note 8) Mainly supply of steel Since 2009 45 days or payment on
delivery; by cheque
and bank transfer
20,414 12.5
4 Sun Fook Kong
Construction Limited
(Note 1)
Mainly steel Since 2018 N/A (Note 1) 11,950 7.3
5 Hip Hing Group (Note 1) Mainly steel,
machinery services
and subcontracting
of construction site
works
Since 2010 N/A
(Note 1) 10,146 6.2
Top five suppliers combined 104,366 63.7
All other suppliers 59,526 36.3
Total purchases 163,892 100.0
Notes:
1. Hip Hing Group, Customer B and Sun Fook Kong Construction Limited were also our top customers
during the Track Record Period. The amount of our purchase of materials and/or services from them
was directly deducted from the relevant progress payments issued to us. For further details, please
refer to the paragraphs headed “Our customers – Top customers” and “Our customers – Top
customers who were also our suppliers” above in this section.
2. Wo Lee Group consists of (i) Wo Lee Steel Company Limited, a private limited liability company
incorporated in Hong Kong in 1962 principally engaged in the supply of steel products; and (ii)
Qianhai Helida (Shenzhen) Supply Chain Management Company Limited*
ऎձл༺ଉέԶᏐᗡ၍
ʮ̡, a private limited liability company established in the PRC in 2015 principally engaged in
the provision of supply chain management and related services.
3. Supplier B is a sole proprietorship established in Hong Kong principally engaged in the provision of
subcontracting services of construction site works.
4. Supplier C is a sole proprietorship established in Hong Kong principally engaged in the provision of
engineering services. Supplier C commenced its business in February 2001 and ceased its business in
July 2022. There was no outstanding amount due from us to Supplier C as at the Latest Practicable
Date.
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5. Sum Kee Metal Company Limited is a private limited liability company incorporated in Hong Kong
in 1989 principally engaged in the fabrication and supply of steel products.
6. Wah Chong Engineering Company is a sole proprietorship established in Hong Kong in 2001
principally engaged in the provision of welding services.
7. Easy Smart Engineering Limited is a subsidiary of Easy Smart Group Holdings Limited, a company
listed on the Main Board of the Stock Exchange (stock code: 2442) which is principally engaged in
fire protection works as a subcontractor in Hong Kong. According to publicly available information,
Easy Smart Group Holdings Limited generated revenue of approximately HK$240.5 million for the
year ended 30 June 2022.
8. Supplier Group G consists of (i) a private limited liability company incorporated in Hong Kong in
1983 principally engaged in the supply of steel products; and (ii) a private limited liability company
established in the PRC in 2004 principally engaged in steel processing and supply of steel products.
9. Kanson Crane & Heavy Transport Company Limited is a private limited liability company
incorporated in Hong Kong in 2004 principally engaged in the provision of crane rental and heavy
transportation services.
None of our Directors, their close associates or any Shareholders who owned more than
5% of the number of issued shares of our Company as at the Latest Practicable Date had
any interest in any of the top five suppliers of our Group for each year/period during the
Track Record Period.
Basis of selecting our suppliers of materials
We generally purchase materials from our internal list of approved suppliers. In
selecting our materials suppliers, we take into account various factors, including pricing,
quality of materials provided, timeliness of delivery and ability to comply with our
requirements and specifications. We maintain an internal list of approved suppliers which is
updated on a continuous basis.
Reasons for subcontracting arrangement
Construction site works
We mainly focused on the role of project management and supervision in carrying out
our projects, and we have engaged subcontractors to perform a substantial part of the
construction site works under our supervision. According to the Industry Report, it is
common for structural steelwork contractors in Hong Kong to engage subcontractors to
perform construction site works. Our executive Directors confirm that our subcontracting
arrangement is in line with normal market practice.
Structural steel fabrication works
On occasions, our customers may require us to perform galvanising works on the
structural steel which requires specialised technical skills. To achieve optimisation in our
production, we outsource all required galvanising works to our subcontractors in the PRC.
Further, depending on our production capacity, we may also subcontract other parts of
structural steel fabrication works to our subcontractors in the PRC.
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Basis of selecting our subcontractors
We evaluate subcontractors taking into account their quality of services, skills and
technique, reputation, prevailing market price, delivery time and availability of resources in
accommodating our requests. Based on these factors, we maintain an internal list of
approved subcontractors which is updated on a continuous basis. We generally obtain
quotations from different suitable subcontractors for comparison and select our
subcontractors based on their experience relevant to the particular project as well as their
availability and fee quotations.
QUALITY CONTROL
We believe that our commitment to quality services is crucial to our reputation and
continual success. We place strong emphasis on service quality by implementing a
comprehensive quality control system. Our Group has obtained certification certifying its
quality management to be in conformance with the requirements of ISO 9001:2015 standard.
In conformity with the ISO 9001:2015 standard, our Group has developed and implemented
a quality manual which stipulates procedures and control in relation to quality management
system, proper filing, communication with customers, revision on quality manual and
procedures, employees’ training, internal and external audits, procurement of materials and
subcontracting services, structural steel fabrication process and non-conforming works
management.
The quality control measures adopted by our Group include the followings:
Procurement, inspection and testing of materials
Our Group maintains an approved list of suppliers which is updated on a regular basis.
Depending on the contract terms with our customers, we may be required to procure
materials with certain specifications or quality standards. Our Group would generally arrange
for testing of the materials by external laboratory selected by the Hong Kong government or
by us. We typically conduct inspection on the materials upon their delivery to our
production facilities in the PRC. Our customers would also direct their own representatives
to conduct inspection and endorse on the materials. Please refer to the paragraph headed
“Our suppliers – Basis of selecting our suppliers of materials” above for our procurement
policies of materials. Our suppliers are responsible for replacing any materials which do not
meet the relevant specifications or standards and any associated costs incurred.
Quality control on the structural steel fabrication process
Our quality control department closely monitors our structural steel fabrication process
to ensure strict compliance with our standard operating procedures. Our Group submits
quality control report to our customers throughout the structural steel fabrication process on
a regular basis. Our Group also engages third party testing service providers for weld testing
to ensure the strength and quality of our semi-finished products. The third party testing
service provider will issue testing reports to our Group, which will be submitted to our
customers for approval.
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We have implemented a maintenance system for our machinery, which includes regular
inspection and regular repair and maintenance of machinery. Our production department is
responsible for conducting management, examination, repair and maintenance of our
machinery for fabrication of structural steel products from time to time in order to ensure
their proper functioning and safe operation, thus enhancing our productivity and product
quality. For further details on the repair and maintenance of our machinery, please refer to
the paragraph headed “Production facilities and capacity – Repair and maintenance” above
in this section.
Quality control on finished products
We perform in-house inspections on each batch of finished goods to ensure our
products comply with the specifications and requirements of our customers. We are generally
required to provide outgoing quality inspection reports to our customers for approval before
the products are delivered to the construction sites in Hong Kong. Our foremen and our
customers’ representatives at the construction sites would also conduct inspection on the
finished products upon their arrival.
Any defective products identified will not be delivered to our customers. Our quality
control inspectors will identify the causes for any product defects and follow up closely with
our quality control department to confirm any deficiencies in our production process.
Collecting feedbacks from customers
Our executive Directors and senior management team regularly communicate with and
conduct site visits to collect feedbacks from our customers. We would follow up and
respond to the feedbacks from our customers in a timely manner with a view to maintain
and continually improve our service standards. Throughout the project implementation, we
may be invited to attend progress meetings held by our customers from time to time to
resolve any issues identified in the projects.
Designation of project management team
A project management team is assigned for every project based on the project nature
and the relevant qualifications and experiences required. The project management team is
headed by the project manager who is responsible for the overall management of the project,
including liaising and communicating with our customers, coordinating and providing
guidance to the other team members, overseeing the progress, budget and quality of services
rendered. Depending on our customers’ requests, we are generally required to submit
progress reports to our customers throughout the project implementation. Our progress
reports are prepared by the project management team which will report on the project status
and any issue identified during project implementation. After the review by our senior
management team, the progress reports will then be submitted to our customers for record.
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Works performed by subcontractors of construction site works
We remain accountable to our customers for the performance and quality of works
rendered by our subcontractors. In general, works performed by our subcontractors are
inspected and monitored by our project management team based on our quality management
system, environmental management system and occupational health and safety management
system which are in conformity with the requirements of ISO 9001, ISO 14001 and ISO
45001 standards, respectively.
We have implemented the following measures to monitor the quality and progress of
works outsourced to our subcontractors so as to ensure the compliance with our contract
specifications:
(i) our project management team conducts regular meetings with subcontractors’
responsible personnel to review their performance and resolve any issues
encountered in the course of their works;
(ii) our project management team reviews the works performed by our subcontractors
on a continual basis during project implementation based on our quality control
manual. We assess the performance of our subcontractors based on their (a) ability
to meet delivery schedules; (b) response to instructions; (c) management
commitment; (d) quality of services; and (e) cost competitiveness; and
(iii) our subcontractors are required to follow our guidelines and instructions on
workplace safety. Our project management team will closely monitor the on-site
safety performance of our subcontractors.
INVENTORY
We do not keep any inventory during the Track Record Period. We do not purchase
materials in advance for anticipated orders from customers. The size, shape, density and
specifications of steel procured by us are generally tailored to fulfil the specific
requirements for each project and the materials procured by us are physically endorsed with
the signature of our customers’ representatives. Hence, each batch of procurement is
designated for a pre-determined project. Once the materials are procured by us for a
pre-determined project, it cannot and would not be applied for the use in other projects.
LOGISTICS
We engage third party logistics service providers for (i) the delivery of materials from
Hong Kong to our production facilities in the PRC; and (ii) the delivery of our finished
structural steel products from our production facilities in the PRC to the relevant
construction sites in Hong Kong. The logistics service providers are responsible for the risks
associated with the delivery of goods and have to bear any losses or other liabilities should
the goods be damaged during delivery. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, we incurred transportation expenses of approximately HK$4.5
million, HK$5.5 million, HK$12.0 million and HK$3.6 million to third party logistics
services providers, respectively.
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INSURANCE
We undertook projects in the role of subcontractor during the Track Record Period. Our
executive Directors confirmed that our structural steelwork were covered by the employees’
compensation insurance and contractors’ all risks insurance taken out by the main
contractors. Such insurance policies covered and protected all employees of main contractors
and subcontractors of all tiers working in the relevant construction site and works performed
by them in the relevant construction site.
Our Group has also maintained key man life insurance policies for our executive
Directors and employees’ compensation insurance for our executive Directors and employees
at our office in Hong Kong.
Our executive Directors consider that our insurance coverage is adequate and consistent
with the industry norm having regard to our current operations and the prevailing industry
practice.
Uninsured risks
Certain risks disclosed in the “Risk factors” section of this prospectus, such as risks in
relation to our ability to obtain new contracts, our ability to retain and attract personnel,
credit risk and liquidity risk, are generally not covered by insurance because they are either
uninsurable or it is not cost justifiable to insure against such risks. Please refer to the
paragraph headed “Risk management and internal control systems” below in this section for
further details regarding how our Group manages certain uninsured risks.
EMPLOYEES
Number of employees
As at the Latest Practicable Date, we had a total of 148 employees (including our three
executive Directors and two non-executive Directors but excluding our three independent
non-executive Directors). The following table sets out a breakdown of our employees by
function and geographical location during the Track Record Period and as at the Latest
Practicable Date:
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As at
31 December
2020
As at
31 December
2021
As at
31 December
2022
As at
30
September
2023
As at the
Latest
Practicable
Date
Hong Kong
– General management 55555
– Project management and
supervision 10 10 10 10 12
– Engineering 57654
– Site workers 31 49 22 16 16
– Finance and accounting 33344
Sub-total: 54 74 46 40 41
The PRC
– Production 89 96 78 85 89
– Drawing 65555
– Quality control 55554
– Finance and
administration 12 11 10 9 9
Sub-total: 112 117 98 104 107
Total: 166 191 144 144 148
Our number of site workers increased from 31 as at 31 December 2020 to 49 as at 31
December 2021 and decreased to 22 and 16 as at 31 December 2022 and 30 September
2023, respectively.
Our Group secured Project No. #02 from Hip Hing Group in late 2019. According to
the original project schedule, our contract works under Project No. #02 were supposed to
commence in or around late 2019 and complete by mid-2021. By mid-2020, we were
informed that our works schedule of Project No. #02 would be revised and the substantial
part of our construction site works would be rescheduled to 2021. Taking into consideration
(i) the sizeable scale and relatively tight project schedule of Project No. #02; (ii) a
substantial part of our construction site works was rescheduled to be performed in or around
2021; and (iii) the uncertainty arising from the COVID-19 outbreak and the associated risks
of labour shortage, our Group started recruiting additional site workers by late 2020 in order
to equip ourselves with sufficient labour force to prepare for the rescheduled construction
site works under Project No. #02 in 2021, which resulted in our number of site workers
totaling 31 as at 31 December 2020.
Subsequently, our Group had further recruited additional number of site workers in
preparation of the rescheduled construction site works, resulting in the increase in number of
our site workers in 2021. However, later in mid-2021, our Group was informed that the
substantial part of our construction site works under Project No. #02 would be further
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rescheduled. Notwithstanding we had been informed about the revision in schedule of our
construction site works under Project No. #02, our Group had decided to keep, instead of
immediately laying-off, our site workers who were designated for Project No. #02, taking
into consideration (i) the rescheduling was expected to last for several months and the
substantial part of our construction site works was expected to be performed by 2022; (ii) it
is administratively not desirable to lay-off such site workers and hire for replacements
shortly after. In light of the revision in project schedule, our Directors anticipated that we
would be required to complete our construction site works within a shorter timeframe. Hence
it is vital for us to retain our site workers in order to mitigate the risks of being unable to
identify suitable and sufficient site workers later by the time when the substantial part of our
construction site works was expected to be performed by us.
Due to natural attrition, the number of our site workers gradually decreased during
2022. Instead of recruiting additional site workers to fill the vacancies for performing the
construction site works for Project No. #02, we have decided to subcontract a relatively
larger amount of our construction site works under Project No. #02, having considered that
it may be costly to recruit suitable labour in a short period of time. We consider such
arrangements were in our interests, given that (i) our subcontractors indicated they could
readily deploy suitable and sufficient labour for undertaking our construction site works
under Project No. #02; and (ii) the increasing use of subcontractors was not expected to
adversely affect our ability to meet the project schedule or work quality. Further, based on
negotiation with Hip Hing Group, we were allowed to claim for certain increase in our
subcontracting fees resulting from the rescheduling of Project No. #02 to Hip Hing Group.
Taking into consideration (i) our subcontractors were able to provide quality works
which fulfil the requirements and schedule to the satisfaction of Hip Hing Group under
Project No. #02, while we continued to focus on our role of project management and
supervision; and (ii) our past experience in which we had to bear the costs of our site
workers throughout the rescheduling of Project No. #02, our Directors consider that the
costs of maintaining a pool of site workers may be burdensome especially when our projects
experience unforeseen rescheduling resulting in the revenue generated therefrom being lower
than expected, our Group had decided not to re-fill the vacancies, resulting in the number of
our own site workers being lowered to 16 as at 30 September 2023.
Training and recruitment policies
We recruit our employees through online recruitment platform and referral from
existing employees. We intend to use our best effort to attract and retain appropriate and
suitable personnel to serve our Group. Our Group assesses the available human resources on
a continuous basis and determines whether additional personnel is required to cope with our
business development from time to time.
We provide various types of training to our employees and sponsor our employees to
attend various training courses covering areas such as technical knowledge relating to the
carrying out of structural steelwork, safety, first aids, and environmental matters. Such
training courses include our internal trainings as well as courses organised by external
parties such as the Construction Industry Council.
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Staff costs and remuneration policy
In general, our Group determines employees’ salaries based on their qualifications,
position and seniority. In order to attract and retain valuable employees, our Group reviews
the performance of our employees annually which will be taken into account in annual
salary review and promotion appraisal.
Our Group incurred staff costs (including directors’ remuneration) of approximately
HK$32.5 million, HK$51.0 million, HK$45.8 million and HK$27.4 million for FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, respectively.
Employee relationship
Our Directors believe that we have maintained a good relationship with our employees.
Save as disclosed in the paragraph headed “Litigations and claims” in this section, we have
not experienced any significant problems with our employees or any disruption to our
operations due to labour disputes nor have we experienced any material difficulties in the
recruitment and retention of experienced core staff or skilled personnel during the Track
Record Period. There has not been any trade union set up for our employees.
Welfare contribution
We participate in a provident fund scheme (the “ MPF Scheme ”) registered under the
Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for
all our eligible employees in Hong Kong. For further details on the MPF Scheme, please
refer to the paragraph headed “Regulatory overview – Hong Kong – Laws and regulations in
relation to labour, health and safety” in this prospectus.
Pursuant to applicable PRC laws and regulations, employers are required to make
contributions to, and employees are required to participate in, a number of social security
funds, including funds for basic pension insurance, basic medical insurance, unemployment
insurance, work-related injury insurance and maternity insurance, and the housing provident
fund. For further information, please refer to the paragraph headed “Regulatory overview –
The PRC – Laws and regulations in relation to social security and housing provident funds”
in this prospectus.
LICENCES, REGISTRATIONS AND PERMITS
The following table sets forth the details of the material licences and registrations of
Wing Kei Hong Kong as at the Latest Practicable Date:
Relevant authority/
Organisation
Registration and
qualification Trade Code/ Category Date of expiry
Construction Industry
Council
Registered subcontractor Structural steelwork 24 October 2025
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Relevant authority/
Organisation
Registration and
qualification Trade Code/ Category Date of expiry
Development Bureau Contractor on the List of
Approved Specialist
Contractors for Public
Works
Structural steelwork N/A
Our executive Directors are of the view that our aforesaid registrations are adequate for
our business needs. As advised by our Hong Kong Legal Counsel, Wing Kei Hong Kong has
obtained all necessary licences, permits and registrations which are required to carry on our
principal business activities in Hong Kong as at the Latest Practicable Date.
The following table sets forth the details of the material registrations of Wing Kei
Dongguan as at the Latest Practicable Date:
Permit Issuing authority Date of expiry
Customs Declaration Entity
Registration Certificate of the
PRC*
ʕശɛ͏΍ձ਷ऎᗫజᗫ

Chang’an office of Huangpu
Customs District*
τ፬ԫஈ
N/A
Registration for discharge of
fixed pollutant*๕ર
Ϯ೮াΫੂ
Ministry of Ecology and
Environment of the PRC*
ʕശɛ͏΍ձ਷͛࿒ᐑྤ௅
26 April 2025
Our executive Directors are of the view that our aforesaid registrations are adequate for
our business needs. As advised by our PRC Legal Advisers, Wing Kei Dongguan has
obtained all necessary licences, permits and registrations which are required to carry on our
principal business activities in the PRC as at the Latest Practicable Date.
Our Directors confirm that our Group has not experienced suspension or failure to
renew any material licences and registrations in Hong Kong and the PRC during the Track
Record Period and up to the Latest Practicable Date.
ENVIRONMENTAL COMPLIANCE
Our Group has established an environmental management system and also formulated
an environmental policy to provide guidance, support and adequate resources for effective
implementation of our environmental protection measures. Our environmental management
system involves, among others, the following environmental protection measures:
 ensuring our compliance with regulatory requirements, customers’ specifications
and industry practices in relation to environmental protection;
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 evaluating the environmental impact of our business activities, products and
services and the associated environmental risks, and devising targets and plans for
managing such risks;
 effectively conserving the use of resources and minimising waste generation;
 ensuring our subcontractors and their workers comply with our environmental
protection policies; and
 providing trainings to our employees in relation to our environmental management
system.
We are subject to general Hong Kong and PRC laws and regulations on environmental
protection. For details, please refer to the paragraphs headed “Regulatory overview – Hong
Kong – Laws and regulations in relation to environmental protection” and “Regulatory
overview – The PRC – Laws and regulations in relation to environmental protection” in this
prospectus. We are committed to conducting our business operations to comply with all
applicable environmental laws and regulations.
We generally arrange recycling of any leftover steel materials. Our Directors believe
that our fabrication process does not generate a large amount of environmental hazards and
does not impose significant adverse impact on the environment and that our environmental
protection measures are adequate to comply with all applicable PRC laws and regulations on
environmental protection. We engaged third-party agencies to assess, examine and evaluate
the environmental impact of the operations of our production facilities.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, we
incurred approximately RMB98,000, RMB76,000, RMB105,000 and RMB68,000,
respectively, directly in relation to our compliance with applicable environmental
requirements in Hong Kong and the PRC. We estimate that our annual cost of compliance
going forward will be consistent with our scale of operation.
During the Track Record Period and up to the Latest Practicable Date, we did not
record any material non-compliance with applicable environmental requirements in Hong
Kong and the PRC that resulted in prosecution, conviction, penalty or administrative
sanction being brought against or imposed upon us.
OCCUPATIONAL HEALTH AND WORK SAFETY
Our Group places emphasis on occupational health and work safety. Our Group has
implemented occupational health and safety policies, which is certified to be in compliance
with ISO 45001 standards, in order to provide our employees with a safe and healthy
working environment.
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Work safety measures at our production facilities
We are committed to maintain a safe working environment at our production facilities
in the PRC and abide by work safety laws and regulations imposed by the PRC government
authorities. We have established work safety policies and procedures to ensure that our
operations are in compliance with applicable work safety laws and regulations. We have
adopted and implemented occupational health and safety procedures and measures for our
structural steel fabrication process which include operational and safety control procedures,
occupational health management procedures, machinery operation and maintenance
procedures and emergency control procedures.
We provide our production staff with safety induction and regular trainings on work
safety in connection with matters such as the safe operation of machinery with a view to
enhancing occupational safety and minimising the occurrence of work-related accidents and
occupational illness. Our production department carries out regular safety inspections on our
production facility to ensure compliance with the safety measures. Protective devices are
installed and warning signs are posted to ensure the machinery is operated safely. Our
production staff is provided with occupational safety gear such as safety helmets, protective
eyewear, safety shoes and gloves.
We have established a policy in recording and handling accidents. Upon occurrence of
an accident, the employees shall report to the relevant department head and the
administration department. The relevant department head shall prepare a report detailing the
accident, including date and time of the accident, employees involved, cause, confirmation
of responsibility, suggestion on rectification, and submit to the administration department.
The department shall then carry out an investigation, assess the impact of the accident and
recommend appropriate measures to improve safety.
Work safety measures at project sites
Our Group has put in place an internal safety manual which sets out the work safety
measures implemented by our Group to prevent workplace accidents at the construction
sites. Set out below are some of the work safety measures included in our internal safety
manual:
 organises site safety induction briefing sessions for workers on the first day of
work and provides trainings for the workers on site, including subcontractors’
employees. Topics of the safety training typically cover safety procedures for
performing structural steel works, safety procedures for emergency and duties and
procedures for reporting hazards, incidents, accidents and diseases, potential
hazards in respect of the work sites, function and proper usage of personal
protection equipment, contingency measures at work sites, and good housekeeping
of workplaces;
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 effective promotion and communication of safety procedures are maintained
through among others, establishing safety bulletin and detailed record of accident
statistics, holding regular internal and external safety meetings, and documenting
safety measures and issues identified for each project by preparing safety reports
and training record;
 risk assessments are conducted to identify potential hazards and accidents and
provide suggestion on proper preventive measures prior to commencement of
works;
 site inspections are carried out by our safety officers on a daily basis to ensure
strict compliance with the statutory occupational health and safety laws, rules and
regulations. We may also engage external safety consultant to assist with our
safety supervision on a case-by-case basis;
 our safety officer shall (i) advise our senior management team on the legal
requirements in respect of occupational health and safety matters; (ii) anticipate
possible workplace hazards and recommend relevant prevention procedures; (iii)
provide statistics and analysis on workplace accidents and make recommendations
for improvement; (iv) report and investigate works accidents, determine their
causes and recommend measures for preventing recurrence; and (v) arrange safety
trainings for all our employees;
 our project management team shall ensure that our work safety measures are
incorporated into our proposed construction methods from the planning stage, and
are subsequently adhered to throughout project implementation;
 our site foremen shall co-operate with our safety officer to establish on-site safety
practices and ensure that all new comers to the construction sites are aware of
their obligations to comply with such practices; and
 safety audits and safety reviews are conducted in accordance with the
requirements of the Factories and Industrial Undertakings (Safety Management)
Regulation.
Our project management team is responsible for overseeing the implementation of our
occupational health and safety policies at project sites and ensuring that we comply with all
applicable occupational health and safety standards and laws. Our internal safety manual is
reviewed from time to time to incorporate the best practices and to address and improve
specific areas of our occupational health and safety policies. Our workplace and safety rules
set out in our internal safety manual identify common safety and health hazards and
recommendations on prevention of workplace accidents. We require our employees and our
subcontractors’ employees to strictly comply with our safety rules.
We provide suitable personal protective equipment such as full-body harness, safety
helmet and safety boots to our employees and our subcontractors’ employees. We also
provide safety training to all of our employees who are working at the construction sites to
ensure that they are aware of and comply with our internal safety guidelines.
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Our project management team regularly provides guidance to our workers and
subcontractors on correct and safe working practices. We may impose fines on or remove
the subcontractors who have repeatedly breached the internal safety procedures from our
internal approved list of subcontractors. We also hold regular meetings with our
subcontractors to discuss on the implementation of safety measures and follow up with any
safety issues identified during the course of project implementation.
During the Track Record Period, we engaged safety auditors for the purpose of
conducting safety audits on our safety management system in accordance with the
requirements of the Factories and Industrial Undertakings (Safety Management) Regulation.
During the course of the safety audits, the safety auditors (i) conducted physical inspection
on selected sites to assess if our established safety management system was implemented in
accordance with the relevant laws and regulations in Hong Kong; (ii) conducted interview
with personnel selected from different levels; (iii) obtained documents for review to assess
the adequacy and effectiveness of our safety management system; and (iv) suggested areas
of improvements and recommendations on our safety management system. Upon completion
of the safety audits, the safety audit reports were submitted to our executive Directors for
review and then submitted to the Labour Department. Our Directors confirmed that no
material deficiencies in relation to our safety management system had been identified by the
safety auditors and that our safety management system had continually fulfilled the relevant
safety regulations in all material respects.
Handling and recording of workplace accidents
Our Group has a proper system in place for handling and recording work accidents at
the construction sites during the Track Record Period and up to the Latest Practicable Date.
Set out below is our general procedures for handling and recording work accidents:
 Upon occurrence of an accident, we require the injured worker or person who
witnessed the accident to report to our safety officer about the details of the
accident on a timely basis, including the venue, time, cause of injury, etc..
 Our safety supervisor will prepare a notice of accident and send the notice of
accident to the project manager and our administrative staff detailing the venue,
date and time of the accident, name of the injured, details of the accident and
injury and follow up action performed by the safety supervisor after the
occurrence of the accident. Our administrative staff maintains a master file for
recording all details of injury cases.
 Our administrative staff will report the work injury case on time to the main
contractor and the Labour Department in accordance with the relevant
requirements.
Fatal accident prior to the Track Record Period
Prior to the Track Record Period, a fatal accident occurred at the site of Siu Ho Wan
Depot, Lantau Island, Hong Kong (the “ Siu Ho Wan Site ”), at which our Group was
engaged by the main contractor to provide structural steelwork as a subcontractor. On 11
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March 2017, one worker (the “ Deceased ”), being an employee of the subcontractor of our
Group, sustained fatal injury during the course of work. It was alleged that while the
Deceased was working on a metal platform at height located at the Siu Ho Wan Site, an
unfixed metal plate displaced and dropped, thereby causing the Deceased to fall from the
metal platform onto the ground (the “ Siu Ho Wan Accident ”).
Following the Siu Ho Wan Accident, our Group has implemented enhanced work safety
measures to prevent recurrence of similar accidents, which included but not limited to:
(i) conducting an external safety audit under the Factories and Industrial
Undertakings (Safety Management) Regulation in which the external safety
auditor was satisfied with the findings on the safety management system of our
Group;
(ii) adopting and implementing safety work system for working-at-height activities;
(iii) carrying out site inspections regularly by our safety officer to ensure strict
compliance with the statutory occupational health and safety laws, rules and
regulations;
(iv) providing frequent reminders and briefings to our workers and our subcontractors’
workers to increase their awareness to occupational safety and health and our
in-house safety rules;
(v) issuing warning letters to our workers and our subcontractors’ workers if they
failed to follow our in-house safety rules; and
(vi) taking disciplinary actions against our workers and our subcontractors’ workers if
they repeatedly or seriously breached our in-house safety rules.
As advised by the Hong Kong Legal Counsel, (i) all the litigation and claims relating
to the Siu Ho Wan Accident has been fully settled and hence there is no litigation risk going
forward; and (ii) the Siu Ho Wan Accident would have no impediment to our renewal of
registration with the Construction Industry Council and the Development Bureau in the
future. During the Track Record Period, we did not have any fatal accidents.
Workplace accidents during the Track Record Period and up to the Latest Practicable
Date
During the Track Record Period and up to the Latest Practicable Date, we recorded one
accident involving our employee at our project site in Hong Kong which gave rise or may
give rise to potential employees’ compensation claim and/or personal injury claims. The
following table sets out the nature of the aforesaid accident occurred during the Track
Record Period and up to the Latest Practicable Date:
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Date of accident Details of the accident
13 November 2021 An employee of our Group suffered injury to her left leg
during work hours.
For further details of the employees’ compensation claims under the Employees’
Compensation Ordinance and personal injury claims under common law, please refer to the
paragraph headed “Litigations and claims” below in this section. Save as disclosed above,
our Group did not experience any significant incidents or accidents at our project sites in
relation to workers’ safety during the Track Record Period and up to the Latest Practicable
Date.
Analysis of accident rates
The following table sets out a comparison of the industrial accident rate per 1,000
workers and the industrial fatality rate per 1,000 workers in the construction industry in
Hong Kong between our Group and the industry average during the Track Record Period:
Industry
average in
Hong Kong
(Note 1)
Our Group
(Notes 2 and 3)
From 1 January to 31 December 2020
Accident rate per 1,000 workers 26.1 Nil
Fatality rate per 1,000 workers 0.185 Nil
From 1 January to 31 December 2021
Accident rate per 1,000 workers 29.5 7.8
Fatality rate per 1,000 workers 0.218 Nil
From 1 January to 31 December 2022
Accident rate per 1,000 workers 29.1 Nil
Fatality rate per 1,000 workers 0.162 Nil
From 1 January to 30 September 2023
Accident rate per 1,000 workers N/A
(Note4) Nil
Fatality rate per 1,000 workers N/A (Note4) Nil
Notes:
1. The statistics are extracted from the Occupational Safety and Health Statistics Bulletin Issue No.23
(August 2023) published by the Occupational Safety and Health Branch of the Labour Department.
2. Our Group’s accident rate is calculated as the number of industrial accidents during the year/period
divided by the daily average of the construction site workers in our Group’s projects during the year/
period.
3. The above data provided includes the employees of our Group and workers of our subcontractors in
Hong Kong during the Track Record Period.
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4. The relevant data has not been published as at the Latest Practicable Date.
The following table sets forth our Group’s lost time injuries frequency rate (“ LTIFR”)
during the Track Record Period:
LTIFR
(Note 1)
For the year ended 31 December 2020 Nil
For the year ended 31 December 2021 3.8
For the year ended 31 December 2022 Nil
For the nine months ended 30 September 2023 Nil
Notes:
1. LTIFR is a frequency rate that shows how many lost time injuries occurred over a specified time
(e.g. per 1,000,000 hours) worked in a period. The LTIFRs shown above are calculated by
multiplying the number of lost time injuries of our Group that occurred during the relevant year/
period by 1,000,000 divided by the number of hours worked by site workers over the same year/
period. It is assumed that the working hour of each worker is 8 hours per day.
2. The above data provided includes the employees of our Group and workers of subcontractors during
the Track Record Period.
RESEARCH AND DEVELOPMENT
During the Track Record Period and as at the Latest Practicable Date, we did not
engage in any research and development activity.
PROPERTIES
Leased properties
As at the Latest Practicable Date, we leased and occupied properties consisting of (i) a
parcel of land and buildings located in Dongguan, the PRC for our Dapianmei Production
Facility; (ii) the Xinlong Production Facility located in Dongguan, Guangdong, the PRC; and
(iii) offices and car parking spaces in Hong Kong. The table below sets forth the
information regarding the properties leased by us as at the Latest Practicable Date:
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Address and
description
of location Landlord
Use of
property
Approximate
area
Term of
tenancy
Dapianmei Village,
Dalingshan Town,
Dongguan City,
Guangdong Province, PRC
୷̹ɽᏊʆᕄ
Ӏ
Independent third
parties
Production facility
and ancillary
use
A parcel of land
with a site area
of
approximately
8,400 sq.m. and
buildings with
an aggregate
gross floor area
of
approximately
7,000 sq.m.
13 July 1999 to
12 July 2049
1/F, building no. 3-4, Xinlong
Technology Park, 1 Lingchuang
Street, Y ongjun Road,
Dalingshan Town, Dongguan
City, Guangdong Province,
PRC
୷̹ɽᏊʆᕄ
༩Ꮚ௴൑1Ҧ෤ୋ3-4
ಊɓᅽ
An independent
third party
Production facility
and staff
dormitory
8,700 sq.m. 23 October 2022
to
22 October
2024
Rooms 1510-1512 and 1520,
Fortune Commercial Building
and parking lot nos. 315, 316
and 201, 362 Sha Tsui Road,
Tsuen Wan, New Territories,
Hong Kong
Wealthy River
International
Investment
Limited
(Note)
Office and car
parking space
1,896 sq.ft. 1 January 2024 to
31 December
2024
Room 1516, Fortune Commercial
Building, 362 Sha Tsui Road,
Tsuen Wan, New Territories,
Hong Kong
An independent
third party
Office 297 sq.ft. 1 January 2024 to
31 December
2024
Room 2318, Fortune Commercial
Building, 362 Sha Tsui Road,
Tsuen Wan, New Territories,
Hong Kong
An independent
third party
Office 282 sq.ft. 17 May 2023 to
16 May 2024
Parking lot no. 511, Sha Tsui
Road, Tsuen Wan, New
Territories, Hong Kong
An independent
third party
Car parking 125.9 sq.ft. 1 February 2023
to
31 January 2025
Note: Wealthy River International Investment Limited is owned as to one-third by Mr. Kelvin Chan (an executive
Director, the chief executive officer of our Group and one of our Controlling Shareholders), one-third by
Mr. Eddie Chan (an executive Director, the chief operating officer of our Group and one of our Controlling
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Shareholders) and one-third by Ms. Karen Chan (an executive Director and one of our Controlling
Shareholders). Therefore, Wealthy River International Investment Limited is a connected person of our
Company. For details, please refer to the paragraph headed “Relationship with our Controlling
Shareholders – Transactions entered into before the Listing which would otherwise constitute connected
transactions” in this prospectus.
As at 30 September 2023, our Group had no single property with a carrying amount of
15% or more of our Group’s total assets. On this basis, our Group is not required by Rule
5.01A of the Listing Rules to include any valuation report in this prospectus. Pursuant to
section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance
with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this prospectus is
exempted from compliance with section 342(1)(b) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule to
the Companies (Winding Up and Miscellaneous Provisions) Ordinance in respect of the
requirements for a valuation report with respect to interests in land or buildings.
Leased land and leased properties which are subject to title defects
As at the Latest Practicable Date, we have entered into agreements in the PRC in
relation to (i) a lease of land (the “ Leased Land ”) and the property for the Dapianmei
Production Facility (“ Leased Property No. 1 ”) for a term of 50 years; and (ii) a lease of the
property for the Xinlong Production Facility (“ Leased Property No. 2 ”, together with the
Leased Land and Leased Property No. 1, collectively the “ Leased Properties ”).
In respect of Leased Property No. 2, it is located at 1/F, Building No. 3-4, Xinlong
Technology Park, 1 Lingchuang Street, Y ongjun Road, Dalingshan Town, Dongguan City,
Guangdong Province, PRC, which is not at the same location as the Leased Land being
located in another village. In relation to the land use right of Leased Property No. 2 (“ Land
No. 2 ”), two agreements have been entered into, namely (i) the land use right transfer
agreement between the relevant village committee and a villager of the village (“ the
Villager ”), pursuant to which it is agreed that the relevant village committee shall transfer
the land use right of Land No. 2 to the Villager for the purpose of industrial use for a period
of 50 years from 2002 to 2052, and that the Villager shall have the right to use or sublet
Land No. 2; and (ii) the sublease agreement between the Villager and the owner of the
Leased Property No. 2 regarding the construction and sub-leasing of a factory building (i.e.
Leased Property No. 2) for a period of 50 years from 2002 to 2052.
The ownership nature of the land for both of the Leased Property No. 1 and Leased
Property No. 2 is collectively owned land. To the best of our Directors’ knowledge and as
advised by our PRC Legal Advisers, owing to historical reasons, (i) the landlords of the
Leased Land and Leased Property No. 1 failed to obtain the land use right certificate
ɺή
for the Leased Land, and the construction planning permitணʈ೻஝ྌ஢̙ᗇ
and property ownership certificateϞᛆᗇfor Leased Property No. 1; whereas (ii)
the landlord of Leased Property No. 2 failed to obtain the construction planning permitண
ʈ೻஝ྌ஢̙ᗇand property ownership certificateϞᛆᗇfor Leased Property No.
2. In addition, both landlords failed to obtain the consent of over two-thirds of the members
or over two-thirds of the representatives of villagers at the villagers’ meetings of the
relevant collective economic organisations in respect of the leases for the Leased Properties.
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Legal consequences
According to the Regulations on the Lease of Properties in Towns and Cities in the
Guangdong Provinceॡ༣ૢԷ, a landlord shall not lease any building
without relevant property ownership certificate or management right, and shall not lease any
property with illegal building structure. According to the Laws on Rural and Urban Planning
of the PRC
, if a landlord of a property does not possess valid
construction planning permit, the landlord may be ordered by the relevant PRC authorities to
dismantle the property within a prescribed time limit. According to the Interpretation by the
Supreme People’s Court about the Specific Application of Law on Certain Issues in the
Hearing of Contractual Dispute Cases on the Leasing of Properties in Towns and Cities
௰
༆ᙑ, if a landlord
enters into a lease with a tenant for a property which has not been issued with the
construction planning permit or was not built in accordance with the provisions of the
construction planning permit, such lease shall be invalid. Nevertheless, if before the closing
of debate in the court of first instance, such property obtains the construction planning
permit or the construction of such property is approved by the competent authorities, the
People’s Court shall hold such lease to be valid.
If the agreements in respect of the lease of the Leased Properties are declared null and
void, the landlords of the Leased Properties may be ordered by the relevant PRC authorities
to dismantle the properties within a prescribed time limit. In such circumstances, we may
need to relocate from our production facilities.
According to the Land Administration Law of the PRC (1998 revision)
ʕശɛ͏΍ձ
ج1998ࠈࡌ), the right to use land collectively owned by peasants may not be
granted, transferred or leased for non-agricultural construction. According to the Land
Administration Law of the PRC (2019 revision)
ج2019ࠈࡌ),
assignment or leasing of collectively-operated development land shall be subject to consent
by more than two-thirds of the members of the rural collective economic organisation or
more than two-thirds of villager representatives. According to the Administrative Measures
of Guangdong Province for the Circulation of the Right to the Use of Collectively-owned
Land for Construction Purposes
 (the
“Measures ”), collectively-owned land for construction purposes may be used for the
establishment and development of industrial and commercial enterprises or foreign-invested
enterprises, provided that the lease of the right to use the collectively-owned land for
construction purposes is approved by more than two-thirds of the members or more than
two-thirds of the villagers’ representatives at the villagers’ meeting of the relevant collective
economic organisation. Any failure to comply with the aforesaid procedure may result in the
lease being declared null and void.
Leased Land and Leased Property No. 1
On 9 May 2023, the PRC Legal Advisers and the Sponsor consulted Dongguan
Dalingshan Town Planning Management Office
and Dalingshan
Branch of Dongguan City Natural Resources Bureau୷̹І್༟๕҅ɽᏊʆʱ҅, and both
of which confirmed that: (i) Wing Kei Dongguan is not subject to any administrative
penalties for violation of laws and regulations relating to land management and planning,
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and Wing Kei Dongguan’s use of the Leased Land and Leased Property No. 1 does not
constitute any material violation of any PRC laws; (ii) neither Dongguan Dalingshan Town
Planning Management Office nor Dalingshan Branch of Dongguan City Natural Resources
Bureau will impose any fines or other administrative penalties, such as demolition,
confiscation of property in kind or illegal income on us for the use of the Leased Land and
Leased Property No. 1; (iii) the Leased Land and Leased Property No. 1 are in compliance
with land use master plan and urban-rural planning, there is no plan to change the existing
land use of the Leased Land and Leased Property No. 1 and Leased Property No. 1 is not
subject to any risks of demolition or confiscation as a result of any proposed changes to the
land use; (iv) Wing Kei Dongguan is entitled to continue to use the Leased Land and Leased
Property No. 1 on an as-is basis; and (v) the leasing of lands and properties without the
relevant certificates and/or permits was relatively common in such region.
As confirmed by the Dongguan City Natural Resources Bureau
୷̹І್༟๕҅to
the PRC Legal Advisers, the Dongguan Songshan Lake Hi-Tech Industrial Development
Zone Management Committee Natural Resources Bureau
ʆಳ৷อҦஔପุක೯ਜ၍ଣ
ึІ್༟๕҅is the competent superior authority of the Dalingshan Branch of Dongguan
City Natural Resources Bureau. As confirmed by the Dongguan Songshan Lake Hi-Tech
Industrial Development Zone Management Committee Natural Resources Bureau to the PRC
Legal Advisers, the Dalingshan Branch of Dongguan City Natural Resources Bureau is the
competent authority to give administrative order or impose penalty within the jurisdiction of
Dalingshan Town; and the Dongguan Songshan Lake Hi-Tech Industrial Development Zone
Management Committee Natural Resources Bureau confirmed to the PRC Legal Advisers,
the Dongguan Dalingshan Town Planning Management Office is the competent authority
within the jurisdiction of Dalingshan Town to implement the administrative supervision and
management.
On 21 July 2023, the PRC Legal Advisers and the Sponsor consulted the landlords of
the Leased Land and Leased Property No. 1, which, also being the relevant village
committee and collective economic organisation, confirmed that: (i) there are no complaints,
disputes, controversies, disagreements, litigations or arbitrations between our Group and the
landlords in relation to the validity, interpretation, execution and performance of the lease
for the Leased Land and Leased Property No. 1 (“ Agreement No. 1 ”); and (ii) Wing Kei
Dongguan is entitled to continue to use the Leased Land and Leased Property No. 1 in
accordance with Agreement No. 1. In addition, the landlords confirmed that they have no
intention to early terminate Agreement No. 1.
According to the Response of the Legal System Working Committee of the Standing
Committee of the National People’s Congress to the Request for Clarification on the
Division of Rights and Relations between Village Committee and Collective Economic
Organisation
ྌʱ
ഈᔧ of 31 January 1992, the land owned collectively by the peasants of the
village in accordance with the law shall be operated and managed by collective economic
organisation such as village agricultural production cooperatives or, if there is no village
collective economic organisation, by village committee. According to the Organic Law of
the Villagers Committees of the PRC (amended in 1998)
ج
1998) , which was in force at the time, and the Organic Law of the Villagers Committees
of the PRC (amended in 2018)ج2018) , which is
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currently in force, the villagers committee shall, in accordance with the provisions of laws,
administer the affairs concerning the land and other property owned collectively by the
peasants of the village. Therefore, as advised by the PRC Legal Advisers, based on the
foregoing, the landlords of the Leased Land and Leased Property No. 1, which also being
the relevant village committee and collective economic organisation, could represent the
members or representatives of villagers to give the confirmations in relation to the
continuous usage of the Leased Land and Leased Property No. 1.
As confirmed by our Directors, no administrative penalties have been imposed on Wing
Kei Dongguan by any PRC government authority in relation to our use of the Leased Land
and Leased Property No. 1 and neither Wing Kei Dongguan nor the landlords have been
challenged, investigated or penalised by any PRC government authority in relation to our
use of the Leased Land and Leased Property No. 1 since the date of Agreement No. 1 and
up to the Latest Practicable Date. Considering that (i) Leased Property No. 1 has obtained a
Building Structural Safety Appraisal Report
జѓ issued by a qualified
institution in 2019, which concluded that the Leased Property No. 1 has complied with the
safety requirements for use of the building structure and can continue to be used safely in
the existing conditions; According to the Building Structural Safety Appraisal Report of
Leased Property No. 1, Leased Property No. 1 can continue to be used safely in the existing
conditions within the prescribed service loads, with the next appraisal to be conducted by
April 2024 under normal conditions of use; (ii) Leased Property No. 1 has not experienced
any safety-related issues since completion of its construction in 2000; (iii) Wing Kei
Dongguan has never received any penalties or notices from the relevant authority for
safety-related issues in respect of Leased Property No. 1; (iv) the failure of Leased Property
No. 1 to obtain a construction planning permit is due to historical reasons and does not
necessarily indicate that there are any issues with the safety of the building. Our Directors
are of the view that Leased Property No. 1 has no safety concern. In addition, as advised by
the PRC Legal Advisers, based on the Building Structural Safety Appraisal Report
ഐ࿴
జѓ, Leased Property No. 1 in all material respects complies with relevant
standards and safety regulations.
According to the Measures for the Administration of Construction Project Quality
Appraisal, an appraisal institution which issues building
structural safety appraisal reports should obtain the qualification as a construction project
quality appraisal institution and being engaged in construction project quality appraisal
activities within the scope of the qualification permit. The appraisal institution which issued
the Building Structural Safety Appraisal Report for Leased Property No. 1 is an appraisal
institution which has obtained the qualification as a construction project quality appraisal
institution. As at the date of the Building Structural Safety Appraisal Report, the
qualification of the appraisal institution was valid and subsisting.
According to the Measures for the Administration of Construction Project Quality
Appraisal, the appraisal institution should carry out construction project quality appraisal in
accordance with laws, regulations and applicable standards, and issue appraisal reports.
Furthermore, as confirmed by the relevant authority which is in charge of the appraisal
institution, if the appraisal report concludes that the building can continue to be used safely
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within prescribed service loads, the building structure meets the requirements for structural
safety. The building has no safety concerns and complies with relevant standards and safety
regulations in all material respects.
Leased Property No. 2
On 9 May 2023, the PRC Legal Advisers and the Sponsor consulted Dongguan Dalingshan
Town Planning Management Office
and Dalingshan Branch of
Dongguan City Natural Resources Bureau୷̹І್༟๕҅ɽᏊʆʱ҅, and both of which
confirmed that: (i) Wing Kei Dongguan is not subject to any administrative penalties for
violation of laws and regulations relating to land management and planning, and Wing Kei
Dongguan’s use of Leased Property No. 2 does not constitute any material violation of any
PRC laws; (ii) neither Dongguan Dalingshan Town Planning Management Office nor
Dalingshan Branch of Dongguan City Natural Resources Bureau will impose any fines or
other administrative penalties, such as demolition, confiscation of property in kind or illegal
income on us for the use of Leased Property No. 2; (iii) Leased Property No. 2 is in
compliance with land use master plan and urban-rural planning, there is no plan to change
the existing land use of Leased Property No. 2 and Leased Property No. 2 is not subject to
any risks of demolition or confiscation as a result of any proposed changes to the land use;
(iv) Wing Kei Dongguan is entitled to continue to use Leased Property No. 2 on an as-is
basis; and (v) the leasing of properties without the relevant certificates and/or permits was
relatively common in such region.
As confirmed by the Dongguan City Natural Resources Bureau to the PRC Legal
Advisers, the Dongguan Songshan Lake Hi-Tech Industrial Development Zone Management
Committee Natural Resources Bureau is the competent superior authority of the Dalingshan
Branch of Dongguan City Natural Resources Bureau. As confirmed by the Dongguan
Songshan Lake Hi-Tech Industrial Development Zone Management Committee Natural
Resources Bureau to the PRC Legal Advisers, the Dalingshan Branch of Dongguan City
Natural Resources Bureau is the competent authority to give the administrative order or
penalty within the jurisdiction of Dalingshan Town; and the Dongguan Songshan Lake
Hi-Tech Industrial Development Zone Management Committee Natural Resources Bureau
confirmed to the PRC Legal Advisers, the Dongguan Dalingshan Town Planning
Management Office is the competent authority within the jurisdiction of Dalingshan Town to
implement the administrative supervision and management.
On 21 July 2023, the PRC Legal Advisers and the Sponsor consulted the relevant
village committee and collective economic organisation of the village where the Leased
Property No. 2 is located, confirmed that: (i) there are no complaints, disputes,
controversies, disagreements, litigations or arbitrations among our Group, the village
committee, the owner and the landlord of Leased Property No. 2 in relation to the lease for
Leased Property No. 2 (“ Agreement No. 2 ”); and (ii) Wing Kei Dongguan is entitled to
continue to use Leased Property No. 2 in accordance with Agreement No. 2. In addition, on
21 July 2023, the owner and the landlord of Leased Property No.2 confirmed that they have
no intention to early terminate Agreement No. 2.
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As mentioned above, according to the Response of the Legal System Working
Committee of the Standing Committee of the National People’s Congress to the Request for
Clarification on the Division of Rights and Relations between Village Committee and
Collective Economic Organisation of 31 January 1992, the land owned collectively by the
peasants of the village in accordance with the law shall be operated and managed by
collective economic organisation such as village agricultural production cooperatives or, if
there are no village collective economic organisation, by village committee. According to
the Organic Law of the Villagers Committees of the PRC (amended in 1998), which was in
force at the time, and the Organic Law of the Villagers Committees of the PRC (amended in
2018), which is currently in force, the villagers committee shall, in accordance with the
provisions of laws, administer the affairs concerning the land and other property owned
collectively by the peasants of the village. Therefore, as advised by the PRC Legal Advisers,
based on the foregoing, the relevant village committee and collective economic organisation
of the village where the Leased Property No. 2 is located could represent the members or
representatives of villagers to give the confirmations in relation to the continuous usage of
the Leased Property No. 2.
As confirmed by our Directors, no administrative penalties have been imposed on Wing
Kei Dongguan by any PRC government authority in relation to our use of Leased Property
No. 2 and neither Wing Kei Dongguan nor the landlord has been challenged, investigated or
penalised by any PRC government authority in relation to our use of Leased Property No. 2
since the date of Agreement No. 2 and up to the Latest Practicable Date. Considering that (i)
Leased Property No. 2 has obtained a Building Structural Safety Appraisal Report
ഐ
జѓ issued by a qualified institution in 2023, which concluded that Leased
Property No. 2 has complied with the safety requirements for the use of the building
structure and can continue to be used safely in the existing condition. According to the
Building Structural Safety Appraisal Report of Leased Property No. 2, Leased Property No.
2 can continue to be used safely in the existing conditions within the prescribed service
loads, with the next appraisal to be conducted by August 2025 under normal conditions of
use; (ii) Leased Property No. 2 has not experienced any safety-related issued since we leased
it in 2019; (iii) Wing Kei Dongguan has never received any penalties or notices from the
relevant authority for safety-related issues in respect of Leased Property No. 2 since we
leased it in 2019; and (iv) the failure of Leased Property No. 2 to obtain a construction
planning permit is due to historical reasons and does not necessarily indicate that there are
any issues with the safety of the building. Our Directors are of the view that Leased
Property No. 2 has no safety concern. In addition, as advised by the PRC Legal Advisers,
based on the Building Structural Safety Appraisal Report
జѓ, Leased
Property No. 2 in all material respects complies with relevant standards and safety
regulations.
According to the Measures for the Administration of Construction Project Quality
Appraisal
, an appraisal institution which issues building
structural safety appraisal reports should obtain the qualification as a construction project
quality appraisal institution and being engaged in construction project quality appraisal
activities within the scope of the qualification permit. The appraisal institution which issued
the Building Structural Safety Appraisal Report for Leased Property No. 2 is an appraisal
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institution which has obtained the qualification as a construction project quality appraisal
institution. As at the date of the Building Structural Safety Appraisal Report, the
qualification of the appraisal institution is still valid and subsisting.
According to the Measures for the Administration of Construction Project Quality
Appraisal, the appraisal institution should carry out construction project quality appraisal in
accordance with laws, regulations and applicable standards, and issue appraisal reports.
Furthermore, as confirmed by the relevant authority which is in charge of the appraisal
institution, if the appraisal report concludes that the building can continue to be used safely
within prescribed service loads, the building structure meets the requirements for structural
safety. The building has no safety concerns and complies with relevant standards and safety
regulations in all material respects.
Indemnity from Controlling Shareholders
Each of our Controlling Shareholders has jointly and severally undertaken to indemnify
and will keep Wing Kei Dongguan fully indemnified against all claims, losses, liabilities,
damages, costs, charges, fees, expenses, fines suffered or incurred by Wing Kei Dongguan as
a result of or in connection with Agreement No. 1 and Agreement No. 2 being void or
terminated prematurely as a result of the above mentioned title defects.
Views of our PRC Legal Advisers
Based on the foregoing, our PRC Legal Advisers are of the view that (1) the usage of
the Leased Properties were in accordance with the land usage planning; (2) the districts in
which the Leased Properties situated are not subject to any new planning, and the Leased
Properties are not expected to be demolished; (3) the relevant authorities have no plans to
change the existing land use of the Leased Properties and there is no risk of demolition or
confiscation as a result of any proposed changes to the land use of Lease Properties; (4)
Wing Kei Dongguan will be able to continue to use the Leased Properties on an as-is basis
according to the terms of Agreement No. 1 and Agreement No. 2; (5) as a tenant, we are not
liable for the title defects and are not in breach of the applicable laws and regulations; (6)
we will not be subject to any administrative punishment or penalties in this regard; and (7)
the chance that Wing Kei Dongguan will be required to relocate due to title defects in the
Leased Properties is remote, and that the risk of material adverse effect on Wing Kei
Dongguan’s overall production and operations is remote.
Views of our Directors
On the aforesaid basis, we intend to continue to lease the Leased Properties in
accordance with the terms of the Agreement No. 1 and Agreement No. 2, respectively. Our
Directors consider that the possibility that we will be forced to relocate our production
facilities before the expiry of Agreement No. 1 and Agreement No. 2 is low because:
(i) from the respective dates we started to lease the Leased Properties (namely 13
July 1999 for the Leased Land and Leased Property No. 1 and 23 October 2019
for Leased Property No. 2) and up to the Latest Practicable Date, we and the
landlords had not received, and the relevant government authorities had not
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issued, any notice, letter or order, about the title defect of the Leased Properties,
and the respective landlords or villagers raised no objections to our use of the
Leased Properties;
(ii) the relevant and competent authorities have confirmed that Wing Kei Dongguan is
entitled to continue to use the Leased Properties on an as-is basis; and
(iii) the respective landlords of the Leased Properties have confirmed that Wing Kei
Dongguan is entitled to continue to use the respective Leased Properties in
accordance with the terms of the Agreement No. 1 and Agreement No. 2,
respectively.
Our Directors further consider that the chance that both our Dapianmei Production
Facility and Xinlong Production Facility need to be relocated at the same time due to the
title defects is very remote.
Contingent relocation plan
We carry out fabrication of structural steel required in our projects at the Leased
Properties. In the unlikely event that we were forced to relocate our operations from the
existing production facilities, we might be subject to possible risk of disruption to our
business. In order to mitigate such risk, our management has devised a contingent plan for
relocating our operations to other suitable leased premises.
We have consulted a property agent in the PRC for identifying suitable leased
properties for our contingent relocation plan based on the following criteria (i) being located
within or in proximity to Dongguan with a gross floor area of approximately 8,000 sq.m.;
(ii) being available for lease at the monthly rental between RMB200,000 and RMB220,000;
(iii) permitted for industrial use; (iv) having obtained the necessary certificates and
registrations including land use certificate and building ownership certificate; (v) having
complied with all relevant standards and safety regulations; (vi) equipped with all necessary
fitting-out and ancillary facilities; and (vii) readily available for immediate use and
occupation. Based on the response from the property agent, there are at least six properties
which fulfil the abovementioned criteria available for lease. In order to ensure that suitable
properties which fulfil our criteria will be readily available for lease, the property agent had
agreed to continue updating the list of identified properties on a regular basis. In the event
any of the identified properties is no longer available for lease, the property agent shall
identify alternative properties that fulfil our criteria.
In the unlikely event of forced relocation, we would migrate our operations to other
leased property(ies) in phases to mitigate the risks of complete suspension in our fabrication
works and to minimise any potential adverse impact brought by the relocation.
According to the Administrative Penalty Law of the PRC
,
an administrative organ shall make a decision on administrative penalty within 90 days from
the date the case of administrative penalty is placed on file. According to the Administrative
Compulsory Law of the PRC
, for any unlawful building,
structure, facility or otherwise that needs to be removed mandatorily, a statutory period is
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required for the party concerned to apply for administrative reconsideration or brings an
administrative lawsuit. According to the Administrative Procedure Law of the PRC (as
amended in 2017)
, where a citizen, a legal person or any
other organisation chooses to directly initiate an action to a people’s court, he or it shall do
so within six months from the date when he or it knows or should know that a specific
administrative act has been taken.
According to the consultation by the PRC Legal Advisers with the Dongguan Urban
Management and Comprehensive Law Enforcement Bureau
҅,
the time limit imposed by the administrative order or penalty to the dismantlement is
determined on a case-by-case basis. As a general practice, the time limit imposed by the
order or penalty to the dismantlement generally ranges from six to 18 months. As confirmed
by the PRC Legal Advisers, according to the Breakdown Table of Administrative Law
Enforcement Powers and Administrative Law Enforcement Responsibilities of Dalingshan
Town, Dongguan City
, Dongguan
Urban Management and Comprehensive Law Enforcement Bureauج
҅is competent to give such confirmation.
Based on our estimation, the phased migration of our operations would be completed
within approximately two to three months, taking into account the transportation time of our
machinery and materials, and the setup time for our machinery at the new premises. Further,
if we encountered significant production orders while we were conducting relocation, we
might temporarily outsource some of our steel fabrication works to subcontractors.
As advised by the PRC Legal Advisers, if an administrative order or penalty to
dismantle any illegal building, structure or facility is imposed on the Dapianmei Production
Facility or Xinlong Production Facility, the time limit for implementing such administrative
order or penalty generally ranges from six to 18 months. As we would unlikely be forced to
relocate immediately or within short notice, our Directors believe that it would be feasible
for us to carry out the relocation in phases and make appropriate planning or adjustment to
our production schedule before relocation, thereby mitigating the overall adverse impacts on
our operations. For instance, if we received notice from the relevant landlord(s) requiring us
to relocate our production facilities in our Dapianmei Production Facility and/or Xinlong
Production Facility, we could prioritise our fabrication works with regard to the schedule of
our construction site works and the urgency of having the relevant materials delivered to
Hong Kong. In order to facilitate our production efficiency during the relocation period, the
more imminent fabrication work orders would remain with our existing production facilities,
while those less urgent orders might be processed at the new premises during the transition
period of relocation. Further, once the actual timing of relocation is determined, we could
negotiate with our customers for providing us with temporary space at the construction work
sites so that we might complete the fabrication works earlier in advance and place the
fabricated items in Hong Kong or rent a warehouse in the PRC temporarily as an interim
measure. This would enable us to allocate our production capacity more evenly, and hence
reducing the risk of late delivery during the relocation period. Where necessary, we may
also consider seeking for minor extension or rescheduling of our installation works from our
customers such that we could have more leeway in planning our production schedule.
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In the unlikely event that we were forced to relocate our operations from both the
Dapianmei Production Facility and the Xinlong Production Facility at the same time, we
estimate that we would have to incur additional subcontracting fees of approximately
RMB2.0 million during the relocation. Such estimation takes into account various factors
including (i) the expected extent of reduction in our total production capacity during the
relocation, as mitigated by appropriate planning or adjustment to our production schedule as
explained in the paragraph above; (ii) the estimated volume of structural steel fabrication
works which might have to be outsourced to subcontractors during the relocation; and (iii)
the historical unit rate chargeable by our subcontractors in relation to structural steel
fabrication works.
Save as the additional subcontracting fees that we might have to incur, our Directors
consider that any forced relocation of our production facilities in the Dapianmei Production
Facility and/or Xinlong Production Facility would not result in a material loss of revenue
and/or material adverse impact on our Group’s financial performance, given that we could
significantly mitigate the potential impact by (i) carrying out the relocation in phases and
making appropriate planning or adjustment to our production schedule in the meantime; (ii)
where necessary, temporarily outsourcing part of our fabrication works to subcontractors;
and (iii) seeking for special arrangements with our customers or renting a warehouse in the
PRC temporarily for temporary storage space and/or minor extension or rescheduling for our
installation works. Our Directors believe that these measures could prevent failure to deliver
the required fabricated materials to Hong Kong for our construction site works.
Our Directors consider that we will not experience material difficulties in identifying
suitable and readily available subcontractors for structural steel fabrication works with
sufficient production capacity and quality assurance for fulfilling any temporary increase in
our needs for subcontracting services in case of relocation taking into consideration (i) our
Group maintains an approved list of subcontractors for structural steel fabrication works
which is updated on a regular basis. We select our subcontractors based on their quality of
services, qualifications, skills and technique, prevailing market price, delivery time,
availability of resources in accommodating our requests and reputation. As at the Latest
Practicable Date, our Group had a pool of over 10 approved subcontractors for structural
steel fabrication works which fulfil our evaluation criteria; (ii) our quality control staff
conducts site inspection at our subcontractors’ production facilities on a regular basis to
ensure their works comply with the quality standards, requirements and specifications of our
Group and our customers; and (iii) during the Track Record Period and up to the Latest
Practicable Date, we did not experience any material shortage in the supply of
subcontracting services for structural steel fabrication works or any material quality issues in
relation to the works of our subcontractors for structural steel fabrication works.
Given we plan to carry out the necessary relocation in phases and we would be able to
temporarily engage more subcontracting services, if necessary, as interim measure, our
Directors expect that the potential relocation would neither result in substantial downtime in
our production, nor material impact in our Group’s operation.
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Set forth below is a quantitative analysis on the potential impact in case of forced
relocation from our Leased Properties:
Xinlong Production Facility
Our Group incurs a monthly rental of RMB265,000 under the lease of the Xinlong
Production Facility. Since the prevailing market rental for similar properties are between
RMB200,000 and RMB220,000, we expect that we would not have to incur additional
monthly rental if we had to relocate from the Xinlong Production Facility to another
property of similar features. Therefore, in the event of forced relocation from the Xinlong
Production Facility, we would likely incur only minimal logistics and setup costs of
approximately RMB0.2 million for the relocation.
Dapianmei Production Facility
By the time we leased the Dapianmei Production Facility, we had already settled
upfront rental for the entire lease term of 50 years up to July 2049. If we were forced to
relocate from our Dapianmei Production Facility to another property of similar features, it is
estimated that we would incur additional monthly rental expenses of approximately
RMB200,000 to RMB220,000. In addition, we would likely incur logistics and setup costs of
approximately RMB0.2 million for the relocation.
INTELLECTUAL PROPERTY
As at the Latest Practicable Date, our Group is the registered owner of four trademarks
in Hong Kong and a domain name. For further information, please refer to the section
headed “B. Further information about the business of our Group – 2. Intellectual property
rights” in Appendix V to this prospectus.
As at the Latest Practicable Date, we were not aware of any material infringements (i)
by us of any intellectual property rights owned by third parties, or (ii) by any third parties
of any intellectual property rights owned by us. As at the Latest Practicable Date, we were
also not aware of any pending or threatened claims against us or against any members of
our Group in relation to any material infringement of intellectual property rights of third
parties.
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LEGAL COMPLIANCE
Hong Kong
Our Directors confirm, and as advised by the Hong Kong Legal Counsel, that during the Track Record Period and up to the Latest
Practicable Date, there was no non-compliance incident in relation to our Hong Kong operation which is material or systemic in nature.
The PRC
Non-compliance incident
Reasons for
non-compliance
Legal consequences including potential maximum penalty and
other financial liabilities Latest status, remedial actions and measures
Failure to make adequate
social insurance contributions
for all employees
During the Track Record
Period, Wing Kei Dongguan
failed to make adequate social
insurance contributions for all
of its employees in accordance
with provisions of the Social
Insurance Law of the PRC
ʕ
(the
“Social Insurance Law ”). The
social insurance contributions
made by Wing Kei Dongguan
for its employees have reached
the minimum amount required
by the local government, but
are less than the amount
calculated based on the actual
salaries of the employees.
For FY2020, FY2021, FY2022
and the nine months ended 30
September 2023, the
outstanding amounts of social
insurance contributions were
approximately RMB30,000
(Note) , RMB0.9 million, RMB0.6
million and RMB0.5 million,
respectively.
The non-compliance was
primarily due to (i) Wing
Kei Dongguan made social
insurance contributions
based on the local
minimum wages; and (ii)
some of the employees of
Wing Kei Dongguan
preferred not to make
social insurance
contributions at the actual
salary level or at all. In
particular, certain
employees have made
social insurance
contribution in their
hometowns and refused to
make additional
contribution.
Pursuant to Article 86 of the Social Insurance Law, if an employer
fails to pay its social insurance contributions in accordance with the
Social Insurance Law, the relevant authority may demand the
employer to pay all outstanding social insurance contributions
within a prescribed time limit.
The employer may also be subject to a surcharge at a daily rate of
0.05% on the outstanding amount, accruing from when the social
insurance contribution was due. If the employer fails to make such
payment within the prescribed time limit, the relevant authority may
impose a further fine of one to three times the outstanding amount.
According to Article 20 of the Regulation on Labour Security
Supervision
ღ္࿀ૢԷ, if the violation of labour security
laws, regulations or rules has not been discovered by the labour
security administrative department within 2 years, nor has it been
reported or complained, the labour security administrative
department shall no longer investigate and deal with it. According to
the Law of the PRC on Administrative Penalty
ஈ
, where an illegal act is not discovered within two years of its
commission, administrative penalty shall no longer be imposed.
Therefore, as advised by the PRC Legal Advisers, Wing Kei
Dongguan might be demanded to pay the outstanding social
insurance contributions for a period of two years prior to the Latest
Practicable Date of approximately RMB1.3 million and a late
payment fee of approximately RMB0.3 million within a prescribed
time limit. If Wing Kei Dongguan fails to make such payment
within the prescribed time limit, the relevant authority may impose a
further fine of one to three times of the abovementioned outstanding
social insurance contributions.
As confirmed with Dalingshan Branch Office of Dongguan Municipal Human Resources and Social
Security Bureau
ღ҅ɽᏊʆʱ҅on 28 July 2023, we had not been penalised for
violating any PRC laws or regulations in relation to social insurance contributions.
On 28 July 2023, our PRC Legal Advisers confirmed with the Dalingshan Branch Office of Dongguan
Municipal Human Resources and Social Security Bureauღ҅ɽᏊʆʱ҅that (i) the
authority was fully aware of the production and operation situation of Wing Kei Dongguan and its social
insurance payment; (ii) as of the date of the interview, Wing Kei Dongguan has not been found to have
violated any laws, regulations, rules or ordinances and has not been subject to any administrative penalties
or supervisory measures for violating social insurance laws and regulations; and (iii) the authority has
never initiated and will not initiate any proceedings including requiring us to pay all outstanding social
insurance contributions. As advised by the PRC Legal Advisers, the aforementioned government authority
have the authority and are competent to make the aforesaid confirmations.
Indemnity from our Controlling Shareholders
On 22 February 2024, each of our Controlling Shareholders issued a letter of indemnity, pursuant to which
he/she/it jointly and severally undertook that if Wing Kei Dongguan is required to pay outstanding social
insurance contributions for its employees, or bear any fine or loss due to Wing Kei Dongguan’s failure to
pay social insurance contributions for its employees in accordance with the Social Insurance Law, he/she/it
would jointly and severally make up such payment for Wing Kei Dongguan unconditionally and undertake
responsibilities on behalf of Wing Kei Dongguan.
During the Track Record Period and up to the Latest Practicable Date, (i) we had not received any
notification from Dongguan Municipal Bureau of Human Resources, Dalingshan Sub-bureau of Social
Security and Dongguan Municipal Bureau of Human Resources and Social Security
ღ
ღ҅ɽᏊʆʱ҅or any authority requiring us to pay the outstanding social insurance
contributions or imposing surcharge or fine against us; and (ii) we were not aware of any complaint from
our employees or dispute with our employees in respect of social insurance contributions.
Based on the foregoing, the PRC Legal Advisers are of the view that the risk of Wing Kei Dongguan
being required to pay the outstanding social insurance contributions or imposing surcharge penalties
against Wing Kei Dongguan is remote.
Based on the above, our Directors are of the view, and the Sponsor concurred, that this non-compliance
will not have a material adverse effect on our business operations or financial condition as a whole and
there is no need to make provision for such non-compliance.
Note: We enjoyed certain exemptions from making social insurance contributions on our part in FY2020 due to the introduction of Notice by the Ministry of Hum an Resources and Social Security, the Ministry of
Finance and the State Taxation Administration of the Temporary Reduction and Exemption of Social Insurance Premiums Payable by Enterprisesڭ
and Notice by the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Taxation Administration on the extension of th e implementation period of the policy of
phased reduction and exemption of enterprise social insurance premiums and other issuesin light of the
COVID-19 pandemic in 2020.
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Non-compliance incident Reasons for non-compliance
Legal consequences including potential maximum
penalty and other financial liabilities Latest status, remedial actions and measures
Failure to make adequate
housing provident fund
contributions for all
employees
During the Track Record
Period, Wing Kei Dongguan
failed to make adequate
housing provident fund
contributions for all of its
employees in accordance with
the Regulations Concerning
the Administration of Housing
Provident Fund
၍
ଣૢԷ.
The housing provident fund
contributions paid by Wing
Kei Dongguan for its
employees have reached the
minimum amount required by
the local government, but less
than the amount calculated
based on the actual salaries of
the employees.
For FY2020, FY2021,
FY2022 and the nine months
ended 30 September 2023, the
outstanding amount of
housing provident fund
contributions were
approximately RMB0.4
million, RMB0.4 million,
RMB0.4 million and RMB0.3
million, respectively.
The non-compliance was
primarily due to (i) we made
the housing provident fund
contributions based on the
local minimum; and (ii) some
of the employees of Wing Kei
Dongguan preferred not to
make housing provident fund
contributions at the actual
salary level or had made
housing provident fund
contributions in their
hometowns, and Wing Kei
Dongguan has provided
dormitory space as staff
welfare for its employees.
Pursuant to Article 38 of the Regulations Concerning the
Administration of Housing Provident Fund
ږ
၍ଣૢԷ, if an employer fails to pay its housing
provident fund contributions in accordance with the
Regulations Concerning the Administration of Housing
Provident Fund, the relevant authority has the power to
order the employer to pay all outstanding housing
provident fund contributions within a prescribed time
limit. If the employer fails to make such payment within
the prescribed time limit, an application of compulsory
enforcement can be made to the People’s Court of the
PRC.
Therefore, in respect of the outstanding housing
provident fund contributions during the Track Record
Period, the maximum amount that Wing Kei Dongguan
might be ordered to pay would be approximately
RMB1.5 million.
According to the Credit report
dated 2 June 2023, we had not been
penalised for violating any PRC laws or regulations in relation to housing provident fund
contributions.
As confirmed with Dongguan Housing Provident Fund Management Centre
၍ଣʕ
ːon 1 August 2023, the authority will not initiate in requesting enterprises in default of housing
provident fund contribution to pay the shortfall unless there is any complaint from the employees.
In this regard, the relevant employees have undertaken not to make any complaint or claim, or
take any action, in relation to the outstanding housing provident fund contributions. According to
the Implementation Measure for the Enforcement of the Dongguan Housing Provident Fund
Administrative Law
։20222໮, the Dongguan
Housing Provident Fund Management Centre is the competent authority for the enforcement of the
housing provident fund administrative law and is responsible for the implementation of the
investigation and handling of housing provident fund violations in Dongguan. As advised by the
PRC Legal Advisers, the Dongguan Housing Provident Fund Management Centre has the authority
and is competent to provide such confirmations.
Indemnity from our Controlling Shareholders
On 22 February 2024, each of our Controlling Shareholders issued a letter of indemnity, pursuant
to which he/she/it jointly and severally undertook that if Wing Kei Dongguan is required to pay
outstanding housing provident fund contributions for its employees, or bear any fine or loss due to
Wing Kei Dongguan’s failure to fully pay housing provident fund contributions for its employees,
he/she/it would make up payment for Wing Kei Dongguan unconditionally and undertake
responsibilities on behalf of Wing Kei Dongguan.
During the Track Record Period and up to the Latest Practicable Date, (i) we had not received any
notification from the Dongguan Housing Provident Fund Management Center or any authority
requiring us to pay the outstanding housing provident fund contributions or about initiation of any
compulsory enforcement at the court against us in relation to housing provident fund contributions;
and (ii) we were not aware of any complaint from its employees or dispute with our employees in
respect of housing provident fund contributions.
Based on the foregoing, the PRC Legal Advisers are of the view that the risk of Wing Kei
Dongguan being required to pay the outstanding housing provident fund contributions or being
subject to compulsory enforcement to court is remote.
Based on the above, our Directors are of the view, and the Sponsor concurred, that this
non-compliance will not have a material adverse effect on our business operations or financial
condition as a whole and there is no need to make provision for such non-compliance.
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LITIGATIONS AND CLAIMS
During the Track Record Period and up to the Latest Practicable Date, our Group had
been involved in certain claims, litigations and potential claims against our Group in the
ordinary and usual course of our business. Set out below are the details of (i) the ongoing
civil litigation involving our Group as at the Latest Practicable Date; (ii) the litigations
against our Group settled or discontinued during the Track Record Period and up to the
Latest Practicable Date; and (iii) the potential claim against our Group as at the Latest
Practicable Date.
(i) Ongoing civil litigation involving our Group as at the Latest Practicable Date
The following table sets forth details of the ongoing civil litigation against our Group
as at the Latest Practicable Date:
Nature of the claim Particulars of the claim Status
Winding-up proceedings
(the “ Winding-up
Proceedings ”)
Our Group as the petitioner petitioned for
winding-up of the respondent (the
“Respondent ”) on insolvency grounds,
relying on the Respondent’s debts owed to
our Group arising from balance of unpaid
contract price under a subcontract (the
“Subcontract ”) entered into between our
Group and the Respondent.
(Note)
The court has made the
winding-up order
against the Respondent.
Note: The original contract sum of the Subcontract amounted to approximately HK$30.3 million. For
FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our Group recognised
revenue of approximately HK$9.0 million, nil, nil and nil, respectively, from the Subcontract,
representing approximately 2.8%, nil, nil and nil of the total revenue for the corresponding year/
period, respectively. As at 30 September 2023, the trade receivables and retention receivables owing
from the Respondent amounted to approximately HK$2.6 million and HK$1.5 million, respectively,
in which provision for impairment has been fully provided. To the best knowledge and belief of our
Directors, our Group has completed all the works under the Subcontract as at the Latest Practicable
Date.
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(ii) Litigations against our Group settled or discontinued during the Track Record
Period and up to the Latest Practicable Date
The following table sets forth details of the litigations against our Group settled or
discontinued during the Track Record Period and up to the Latest Practicable Date:
No. Nature of the claim Particulars of the claim
1. Contractual dispute
claims (Note 1)
These are two duplicated counter-claims by the Respondent of the
Winding-up Proceedings in respect of the Subcontract (i.e. the same
subcontract under dispute in the Winding-up Proceedings). The
Respondent alleged that, as a result of the delay by our Group under
the Subcontract, the Respondent incurred a liability to pay liquidated
damages to the main contractor under the same project.
2. Employees’
compensation
claim
(Note 2)
It was alleged that, on 13 November 2021, the plaintiff, an employee of
our Group, sprained her left leg in the course of employment as a
wooden plank was unstable and caused the plaintiff to lose balance.
3. Personal injury
claim
(Note 2)
This litigation was in respect of the fatal accident occurred prior to the
Track Record Period, the details of which are set out in the paragraph
headed “Occupational health and work safety – Fatal accident prior to
the Track Record Period” in this section.
4. Labour Tribunal
claim
(Note 4)
It was alleged that our Group failed to grant the plaintiff, an employee
of a subcontractor of our Group, statutory holidays.
5. Labour Tribunal
claim
(Note 5)
It was alleged that the severance payment payable to the plaintiff, an
employee of a subcontractor of our Group, was incorrectly calculated.
6. Personal injury
claim
(Note 3)
It was alleged that, on 28 September 2017, the plaintiff, an employee
of our Group, sustained injuries to his right arm and ribs in the course
of employment as a metal plank was unstable and caused him to fall
from the second floor to the first floor.
7. Personal injury
claim
(Note 2)
It was alleged that, on 24 August 2018, the plaintiff, an employee for
our Group, sustained injuries to his rib and sternum in the course of
employment as the bamboo on which he was standing broke and caused
the plaintiff falling from the scaffold onto the working platform.
8. Personal injury
claim
(Note 2)
It was alleged that, on 12 November 2017, an employee of the owner
of a lorry-mounted elevating work platform from which our Group
rented from, sustained fracture dislocation of his left talus as the
elevating work platform toppled over and caused a bucket to fall onto
the planter.
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No. Nature of the claim Particulars of the claim
9. Personal injury
claim (Note 2)
It was alleged that, on 2 September 2016, the right hand of the
plaintiff, an employee of our Group, was crushed between a box
section and a metal rack and sustained injury.
10. Personal injury
claim
(Note 2)
It was alleged that, on 12 October 2016, a metal subframe fell from
height towards the ground and hit the plaintiff, an employee of our
Group.
11. Labour Tribunal
claim
(Note 3)
It was alleged that the annual leave payment in lieu to the plaintiff, an
employee of a subcontractor of our Group, was incorrectly calculated.
12. Personal injury
claim
(Note 6)
It was alleged that, on 12 May 2016, the right hand of the plaintiff, an
employee of a subcontractor of our Group, was crushed against an
I-beam in the course of employment.
13. Personal injury
claim
(Note 2)
It was alleged that, on 8 December 2017, the right fingers of the
plaintiff, an employee of a subcontractor of our Group, were hurt by
heavy metals in the course of employment.
14. Personal injury
claim
(Note 2)
It was alleged that, on 12 November 2017, the plaintiff, an employee of
our Group, sustained left foot fracture in the course of employment as
he fell from a work platform onto the planter.
As at the Latest Practicable Date, there was no outstanding liability in respect of all
the above litigations.
Notes:
1. The Respondent discontinued with the two duplicated litigations very shortly after it made the
counter-claims. As these two litigations were discontinued, the amount of settlement paid by our
Group was nil.
2. The amount of settlement paid by our Group was nil as these litigations were covered by insurance.
3. The amount of settlement paid by our Group was nil as these litigations were discontinued.
4. The amount of settlement paid by our Group was approximately HK$46,000.
5. The amount of settlement paid by our Group was approximately HK$34,000.
6. The amount of settlement paid by our Group was approximately HK$516,000.
(iii) Potential claim against our Group as at the Latest Practicable Date
Personal injuries suffered by our employees or by our subcontractors’ employees as a
result of accidents arising out of and in the course of their employment may lead to
employees’ compensation claims and common law personal injury claims against us.
Potential claims refer to those claims that have not commenced against our Group but are
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within the limitation period of two years (for employees’ compensation claims) or three
years (for common law personal injury claims) from the date of the relevant incidents
pursuant to the Limitation Ordinance (Chapter 347 of the Laws of Hong Kong).
As at the Latest Practicable Date, there was one accident resulting in injury to our
employee which may give rise to potential litigation in relation to common law personal
injury claim against our Group. The table below sets out a summary of the expiry of
limitation period of the aforesaid work injury accident:
Y ear
Number of employees’
compensation claims
which limitation
period will expire
Number of common
law personal injury
claims which
limitation period
will expire
For the year ending 31 December
2024 – 1
Total – 1
As no court proceedings for such potential claim have been commenced, the Hong
Kong Legal Counsel is of the view that the likely quantum of such potential claim cannot be
assessed at this stage. As advised by the Hong Kong Legal Counsel, the amount of such
potential claim to be borne by our Group, if any, shall be covered by insurance policies
maintained by the relevant main contractor. As such, our Directors consider that such
potential claims will not have any material adverse impact on our operation and financial
performance and no provision had been made in respect of such potential claim.
Save as disclosed above, during the Track Record Period and up to the Latest
Practicable Date, we were not engaged in any litigation, arbitration or claim of material
importance, and no litigation, arbitration or claim of material importance is known to our
Directors to be pending or threatened by or against us as at the Latest Practicable Date.
Indemnity executed by our Controlling Shareholders
Our Controlling Shareholders have entered into a Deed of Indemnity whereby our
Controlling Shareholders have agreed to indemnify our Group, subject to the terms of the
Deed of Indemnity, in respect of all liabilities and penalties which may arise as a result of
any legal proceedings instituted by or against our Group and non-compliance by our Group
on or before the date on which the Share Offer becomes unconditional. Please refer to the
paragraph headed “E. Other Information – 1. Tax and other indemnities” in Appendix V to
this prospectus for details.
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ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE MATTERS
Our Group’s governance on environmental-related risks, climate-related risks and
opportunities, and social responsibilities
Our Directors consider that establishing and implementing sound environmental, social
and governance (“ ESG”) principles and practices will help increase the investment value of
our Company and provide long-term returns to our stakeholders. We are committed to
complying with the Stock Exchange’s reporting requirements on ESG following the Listing.
We will formulate an ESG policy (the “ ESG Policy ”) which will outline, among others, (a)
the appropriate risk governance on ESG matters; (b) ESG strategy formation procedures; (c)
ESG risk management and monitoring; and (d) identification of key performance indicators
(“KPI(s) ”) and the relevant measurements. The ESG Policy will be formulated in
accordance with the standards of Appendix 27 to the Listing Rules and be reviewed on an
annual basis to ensure that it remain relevant and appropriate to the needs of our operation.
Our Board is principally responsible for (i) overseeing the formulation and reporting of
our ESG direction and strategies; (ii) determining our ESG-related risks; (iii) establishing
and adopting the ESG policy and targets of our Group; (iv) ensuring that ESG
considerations are taken into consideration during the business decision-making process; (v)
monitoring and reviewing our ESG performance; and (vi) revising the ESG strategies as
appropriate if significant variance from the target is identified. Our Board also closely
follows the latest ESG-related laws and regulations and updates our ESG measures
correspondingly to ensure that we comply with the latest regulatory requirements.
Upon the Listing, we will establish a committee (the “ ESG Committee ”), comprising
our Directors and senior management with sufficient knowledge of our Group’s operations,
and relevant experience and/or responsibilities for handling the current and emerging ESG
matters. The ESG Committee will support our Board in implementing the ESG policy,
targets and strategies, conducting materiality assessments of material ESG and
climate-related risks and assessing how our Group adapts its business in light of climate
change, collecting ESG data from different parties while preparing for the ESG report, and
continuous monitoring of the implementation of measures to address our Group’s
ESG-related risks and responsibilities. The ESG Committee is also responsible for the
investigation of deviation from targets and making recommendation on rectification actions.
The ESG Committee will report to our Board on a half-yearly basis on the ESG performance
of our Group and the effectiveness of our ESG system.
Identification, management and assessment approaches
Our Board has adopted the following approaches to identify, assess and manage
material ESG issues relevant to our Group:
(i) Identification : Our Directors discuss the ESG issues relevant to our Group with
our key stakeholders, including our major customers, major suppliers,
management team and employees, and collect their views and opinions on our
ESG measures and practices, which, help us better identify and prioritise the ESG
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issues and risks inherent in our business operations and formulate effective ESG
measures to mitigate those risks. Our Directors believe that this open dialogue
with stakeholders plays a crucial role in maintaining our business sustainability.
(ii) Management: Attributed to the above efforts, we have implemented ESG measures
that provide guidelines in managing our ESG issues. In this connection, our Board
will review ESG issues arising from our business operations including
climate-related issues when reviewing our ESG measures, major plans of actions,
risk management policies, annual budget in implementing these ESG measures
and our business plans as well as setting our performance objectives.
(iii) Assessment: Apart from assessing the performance of our ESG measures through
discussion among our Directors and our stakeholders, our Board would engage
independent third party inspection and assessment institutions to identify and
assess our level of compliance in respect of environmental protection covering air
pollution control, noise control and climate changes.
Materiality assessment
We conduct a materiality assessment to identify ESG topics that are material to us,
from which we are able to prioritise ESG aspects and strategise our action plan. We identify
potential material ESG issues which may affect our Group’s business or stakeholders, based
on corporate strategies of our Group and characteristics of the Hong Kong structural
steelwork industry, as well as the development of relevant government policies and
applicable regulatory requirements and industry standards.
In assessing the materiality of identified ESG issues, we take both internal and external
materiality assessments into account. The internal materiality assessment takes into
consideration factors including but not limited to (i) the likelihood or frequency of the
occurrence of the relevant risk; (ii) the degree of impact on our Group if the relevant risk
occurs; (iii) our key company values, policies, strategies and objectives; (iv) direct financial
impact; (v) ESG issues and metrics of concern to internal stakeholders; (vi) core
competencies and strengths of our Group; (vii) reputational risks and opportunities; (viii)
key issues in the Hong Kong structural steelwork industry; (ix) the operation environment of
structural steel fabrication in the PRC; (x) development of government policies and
applicable regulatory requirements and industry standards. The external materiality
assessment takes into account (i) ESG issues and metrics of interest from external
stakeholders; (ii) key ESG issues of interest from our competitors; (iii) policy guidelines and
ESG risks; and (iv) opportunities identified by qualified independent third parties after
in-depth investigation.
Based on our evaluation as well as internal and external inputs, we identify certain
material ESG topics. Our material topics are closely aligned with our ESG strategic
priorities. The results from our materiality exercise enable us to address stakeholder
expectations and develop our ESG strategies with better priority setting and more efficient
resources allocation.
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Environmental matters
We endeavour to minimise any adverse impact on the environment resulting from our
business activities. In order to comply with the applicable environmental protection laws, we
have established an environmental management system in conformance with ISO 14001
international standard. Our environmental management system includes measures and work
procedures governing environmental protection compliance that are required to be followed
by our employees and our subcontractors.
Set out below are policies in addressing different environmental issues pertinent to our
Group:
A. Emission
GHG emissions
Our major sources of greenhouse gas (“ GHG”) emissions are generated from (i)
combustion of petrol by lifting machines and cranes at project sites and motor vehicles
(Scope 1); and (ii) electricity consumption at our production facilities in the PRC and
our office in Hong Kong (Scope 2). The following table sets forth a breakdown of our
GHG emissions during the Track Record Period:
Indicator Unit FY2020 FY2021 FY2022
Nine months
ended
30 September
2023
Direct GHG emissions
(Scope 1) – Petrol
consumption
tCO2e 115.2 110.2 119.9 104.8
Indirect GHG emissions
(Scope 2) – Electricity
consumption
tCO2e 1,424.5 1,606.6 1,588.7 1,111.6
Total GHG emissions
(Scope 1 and Scope 2)
tCO2e 1,539.7 1,716.8 1,708.6 1,216.4
We have adopted the following measures to minimise direct GHG emissions in
our operations:
 encouraging our employees to switch off idling engines when the lifting
machines, cranes or motor vehicles are not in use;
 promoting and adopting the use of energy-saving and efficient equipment,
and switching off machinery and electronic appliances when they are not in
use;
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 cleaning the fan blades of the ventilation system at our production facilities
in the PRC regularly and maintaining the equipment for filtering dust and
smoke regularly to ensure its normal operation;
 promoting e-office practices and measures, such as switching off electronic
appliances when they are not in use; and
 our environmental management plan provides air pollution abatement
guidelines and measures, which include (i) ensuring the concentration and
rates of air pollutants are in compliance with the relevant environmental
protection laws and regulations; and (ii) conducting periodic checks to
ensure the GHG emission of lifting machines, cranes and motor vehicles is
within the standard level as prescribed by law.
Waste management
(a) Hazardous wastes
Due to our business nature and to the best knowledge of our executive Directors,
our Group did not generate hazardous waste in the course of our operation.
(b) Non-hazardous wastes
We generally arrange recycling of any leftover steel materials. The non-hazardous
wastes generated from our Group’s operations mainly include paper consumed in our
office. For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
we generated a total of approximately nil, 80 tonnes, 118 tonnes and 61 tonnes of
non-hazardous wastes.
With the aim of minimising the environmental impacts from non-hazardous wastes
generated from our business operations, our Group has implemented the following
measures in waste management and launched different wastes reduction initiatives:
 providing recycling bins for different types of waste streams to promote
recycling;
 promoting the use of electronic media for communication and reducing the
use of paper;
 promoting reusing paper by placing a collection box for single-sided used
paper next to each printer; and
 encouraging our employees to use double sided printing or photocopying
wherever possible.
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Sewage discharge
As we do not consume significant volume of water in our operation, our operation
does not generate material discharges of water during the Track Record Period.
Wastewater of our Group is discharged into the municipal sewage pipeline network for
processing.
Noise
Our machinery at the production facilities in the PRC emanates noise during
operation. To minimise the impact on the environment, we have implemented noise
isolation at our production facilities and provided hearing protection devices to our
employees.
Besides, due to our business nature, our operations on project sites generate noise.
To mitigate disturbance created to the community and the environment, we adopted
certain noise pollution control policies on project sites, which include:
 taking practicable measures to reduce excessive noise by using advance
construction and noise damping technology;
 ensuring the noise level does not exceed the prescribed level regulated by
the Noise Control Ordinance and other relevant regulations; and
 providing hearing protection devices to our employees.
B. Resources consumption
Energy consumption
Our Group’s energy consumption mainly included (i) consumption of petrol by
lifting machines, cranes and motor vehicles; and (ii) electricity consumed at our
production facilities in the PRC and office in Hong Kong. The following table sets
forth a breakdown of our major sources of energy consumption during the Track
Record Period:
Types of energy
consumption Unit FY2020 FY2021 FY2022
Nine months
ended
30 September
2023
(approximately) (approximately) (approximately) (approximately)
Petrol kWh 44,000 42,000 46,000 40,000
Electricity kWh 1,726,000 1,946,000 1,924,000 1,349,000
Total kWh 1,770,000 1,988,000 1,970,000 1,389,000
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Apart from the energy saving measures in relation to the use of lifting machines,
cranes and motor vehicles as mentioned above, our Group has established the following
energy conservation management in order to minimise the waste of energy:
 promoting e-office practices and measures, such as switching off electronic
appliances when not in use;
 encouraging our employees to set room temperature ranges from 23°C to 25°C;
 conducting regular trainings and workshops to help our employees identify
energy-saving measures and enhance their awareness; and
 promoting and adopting the use of energy-saving and efficient equipment and will
adopt immediate maintenance once damage is reported.
Water consumption
We mainly consume water in our production facilities in the PRC and office in
Hong Kong. To ensure water is efficiently used, our Group has adopted measures to
increase water efficiency such as placing environmental signs with water-saving
messages at prominent places to remind our employees to conserve water.
Social matters
Set out below are our policies in addressing different social issues pertinent to our
Group:
A. Employment
We are committed to upholding the principles of equal opportunities, diversity and
anti-discrimination in our workplace. Recruitment and retention of employees are based on a
range of diversity parameters, including but not limited to gender, age, cultural and
educational background, nationality, ethnicity, industry experience, skills and knowledge. We
conduct performance appraisal to analyse our employees’ personal strengths and weaknesses,
and suitability for promotion or further training. Discretionary bonus and salary adjustment
are given to our employees based on their performance appraisal.
B. Health and safety
Please refer to the paragraph headed “Occupational health and work safety” in this
section.
C. Development and training
 Staff handbook is given to our employees to ensure that they are familiar with our
Group’s policy.
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 On-the-job training and industrial trainings are provided to our employees to
equip them with the skills and knowledge essential to our fabrication process and
construction site works.
D. Labour standards
We comply with the relevant laws and regulations in Hong Kong and the PRC and
follow strictly with the Employment of Children Regulations and the Employment Ordinance
in the recruitment of staff. We are also committed to eliminating discrimination in working
environment and strive to provide our employees with equal job opportunities in relation to
recruitment, training, opportunities, benefits and job arrangements, regardless of their race
and gender.
Our Group also prohibits any punishments, management methods and disciplinary
actions that involve verbal or physical abuse, physical punishment, or any actions that may
constitute oppression or sexual harassment against our employees for any reason.
E. Supply chain management
 We have adopted a stringent policy and procedure on the selection of suppliers
and subcontractors. For further details of our evaluation criteria, please refer to
the paragraphs headed “Basis of selecting our subcontractors” and “Basis of
selecting our suppliers of materials” in this section.
 We carry out quality assurance checks on materials received from suppliers to
ensure the quality and reliability of materials meet our requirement. We generally
arrange for testing of the materials by external laboratory selected by the Hong
Kong government or by us.
 Our quality control department closely monitors our structural steel fabrication
process to ensure strict compliance with our standard operating procedures. Our
Group submits quality control report to our customers throughout the structural
steel fabrication process on a regular basis. Our Group also engages third party
testing service providers for weld testing to ensure the strength and quality of our
semi-finished products. The third party testing service provider will issue testing
report to our Group, which will be submitted to our customers for approval.
 We perform in-house inspections on each batch of finished goods to ensure our
products comply with the specifications and requirements of our customers. We
are generally required to provide outgoing quality inspection reports to our
customers for approval before the products are delivered to the construction sites
in Hong Kong.
 All subcontractors are required to follow our safety inspection policy and comply
with our safe work practices when carrying out structural steelwork on project
sites.
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 We have developed a procedure in evaluating and assessing the safety
performance of our subcontractors. Any unsatisfactory performance of our
subcontractors will be reported to our Directors and warning letter may be issued
to the relevant subcontractor. If the unsatisfactory performance persisted, we may
remove such subcontractor from our internal approved list of subcontractors for a
period of time and cease our existing engagements with such subcontractor should
there be any material non-conformance with the safety requirement following the
issue of the warning letter.
F . Services responsibility
We maintain ongoing communication with our customers to ensure understanding and
satisfaction of their demand and expectations.
Upon completion of our projects, our project management team will arrange handover
of the project sites to our customers. Site visits are performed by our customers and if any
defects on our works are detected, we will arrange for rectifications.
G. Anti-corruption and whistleblowing
We strictly abide by the laws and regulations related to anti-corruption, including but
not limited to the Anti-Unfair Competition Law of the PRC, the Criminal Law of the PRC
and the Prevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong). We
uphold a high standard of integrity and adopt a zero-tolerance policy on acts of corruption in
any form, including bribery and extortion, fraud and money laundering. Our Group stipulates
the disciplinary code in our staff handbook and ensure our employees understand the details
of the terms. Any suspected or actual fraudulent behavior will be reported to our Directors
immediately. We strongly encourage our employees to report any suspected misconduct.
To avoid any conflict of interest of our employees, we stipulate the declaration of
interest guidelines in our staff handbook, which provides guidelines and procedures to our
employees in exercising their good faith and honesty in all transactions and avoid using their
positions or knowledge gained from their employment for their own personal benefits. Our
employees are required to ensure there is no conflict of interest between their personal
interest and their duties to our Group and declare any potential or perceived conflict of
interest to our executive Directors when they have or have had a personal relationship with
a related person.
Our Group also adopts a whistleblowing policy and encourages our employees who
have concerns about any suspected misconduct or malpractice within our Group to come
forward and voice their concerns. Complainants are assured of their anonymity and are
protected against unfair dismissal, victimisation or unwarranted disciplinary action even
when their concerns turn out to be unsubstantiated. Our Audit Committee is responsible for
monitoring and reviewing the effectiveness of the whistleblowing policy.
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H. Community involvement
We are working towards to building a healthy and sustainable community and
maintaining communication and interaction with the community. We aim to promote the
stability of society and support the underprivileged to improve the quality of life. We focus
to inspire our employees towards social welfare awareness and encourage our employees to
participate in voluntary works to make contribution to society.
Corporate governance matters
Our Company will comply with the Corporate Governance Code. We have established
procedures for developing and maintaining internal control systems covering areas such as
corporate governance, operations management, compliance matters, financial reporting, as
appropriate for our business operations. We believe that our internal control systems and
current procedures are sufficient in terms of comprehensiveness, practicability and
effectiveness. In particular, we have adopted the following internal control measures to
enhance our corporate governance:
(i) our Board includes three independent non-executive Directors, whose backgrounds
and profiles are set out in the section headed “Directors and senior management”
in this prospectus, to ensure transparency in management and fairness in business
decisions and operations. The independent non-executive Directors contribute to
the enhancement of corporate value by providing advice and oversight based on
their extensive administrative experience and specialised knowledge;
(ii) our Directors will review and provide recommendation on our risk management
related policies and procedures, and review the effectiveness and adequacy of our
risk management activities annually;
(iii) we have established three board committees, namely, the Audit Committee, the
Nomination Committee and the Remuneration Committee, with respective terms
of reference in compliance with the Corporate Governance Code. For details,
please refer to the paragraph headed “Directors and senior management – Board
committees” in this prospectus;
(iv) we have strengthened our internal audit system to ensure the appropriate
functioning of the risk management and operation oversight systems. We have
established the Audit Committee which comprises three independent non-executive
Directors to review and monitor the effectiveness of our financial controls,
internal control and risk management systems. Our internal control system will be
reviewed by our internal audit personnel or independent internal control
consultant on an annual basis to ensure that effective internal control procedures
are in place;
(v) our Directors have attended a training session on 25 July 2023 conducted by our
legal advisers as to Hong Kong law on, among other things, the obligations,
on-going corporate governance requirements and the duties of directors of a
company listed on the Stock Exchange;
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(vi) our company secretary, Mr. Tam Hon Fai, will attend external professional
training each year to keep himself abreast of the latest accounting and/or
regulatory regime in Hong Kong;
(vii) we have appointed Grande Capital as our compliance adviser to advise us on
compliance matters in relation to the Listing Rules;
(viii) to avoid potential conflicts of interest, we will implement corporate governance
measures in compliance with the Corporate Governance Code set out in Appendix
C1 to the Listing Rules; and
(ix) our Directors will review our corporate governance measures and our compliance
with the Corporate Governance Code each financial year and comply with the
“comply or explain” principle in our corporate governance reports to be included
in our annual reports after Listing.
Actual and potential impact of environmental, social and climate-related risks and
opportunities on our Group’s business, strategy and financial performance
Our executive Directors are responsible for evaluating and managing any material ESG
issues and climate-related risks and opportunities of our Group. Our executive Directors will
meet regularly to discuss issues and risks that are pertinent to the business development of
our Group. Our executive Directors will keep track of the latest policies implemented by the
Hong Kong government in tackling climate change. For better identification of the risks and
opportunities, our executive Directors and senior management will attend to discussion on
sustainability of the structural steelwork industry and low-carbon economy. Our Board will
work closely in identifying future risks and opportunities, as well as identifying appropriate
actions to cope with the ever-changing situations.
We may be exposed to possible financial loss and non-financial detriments arising from
environmental and climate-related risks which can be mainly categorised into (i) physical
risks; and (ii) transitional risks.
A. Physical risks
Increased frequency and severity of extreme weather conditions such as cyclones and
extreme precipitation
During recent years, Hong Kong and the PRC have faced extreme weather
conditions. Extreme precipitation events have become more frequent in the last few
decades. Increase in frequency and severity of extreme weather events may result in
the following adverse impacts on our Group:
 Damage to our products: Our structural steel products are susceptible to water
damage. Flooding may cause rusting to our products and render them unusable,
resulting in material financial loss to our Group.
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 Delay in project completion: The progress of our projects could be adversely
affected if there is an increase in the occurrence of tropical cyclones and/or
floods. The rising frequency of extreme weather conditions are likely to interrupt
the delivery of our materials, project schedule and wreak havoc on the project
sites’ environment. Any damage on our project sites will render us in deploying
more resources on ensuring the safety conditions of our project sites before work
is resumed, thereby resulting in delay in our projects as heightened safety
procedures are adopted. In particular, our employees and/or our subcontractors’
employees may be required to work at height, which are susceptible to extreme
weather conditions such as strong wind. If there is any delay on our part in
completion of a project, we may be liable to pay liquidated damages under the
contract, which in turn will have adverse impact on our reputation, business,
financial condition and results of operations.
 Increase in our operation costs: We may have to deploy additional resources to
minimise the potential adverse impacts caused by extreme weather hazards. For
instance, should there be any temporary project suspension and/or delay resulted
from extreme weather conditions, we may have to deploy additional workers,
engage additional subcontractors and/or arrange for additional overtime works to
ensure timely delivery of works to our customers, thereby increasing our
operating costs and resulting in project costs overrun. Further, we may have to
implement additional precautionary and safety measures at our project sites to
prevent damage caused by extreme weather conditions, resulting in an increase in
our overall operating costs. Also, in order to strengthen our protection against
intense precipitation and flood, we may have to implement enhanced flood
protection measures such as installation of flood gate system and improvement in
the water and drainage system at our production facility, resulting in an increase
in our operation costs.
 Increase in maintenance cost and storage fees for our machinery: Extreme weather
conditions may result in flooding and cause damages to our machinery, resulting
in increased maintenance cost. If our machinery and equipment is damaged, there
is a need to replace the machinery or lease additional machinery from third party
machinery services providers to ensure timely completion of our structural steel
fabrication process and construction site works.
Rising mean temperature and increasing number of days of extreme heat
According to the Hong Kong Observatory, the average temperature increasing rate
per decade was 0.14°C from 1885 to 2022. The rate of increase accelerated in the latter
half of the 20th century and the average increasing rate per decade was 0.28°C from
1993 to 2022. Furthermore, the annual number of very hot days (i.e. days with a
maximum temperature of 33°C or above) in Hong Kong has increased from 2.2 for
1885 to 1914 to 17.5 for 1991 to 2020.
Our employees and/or our subcontractors’ employees are prone to rising
temperature since most of our project sites are not equipped with air-conditioning
systems. Hot weathers can easily lead to heat exhaustion, heat strokes or other health
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diseases. Such negative impacts on the health condition of our employees and/or our
subcontractors’ employees may reduce our productivity and/or delay our work progress,
resulting in interruption to our business operations.
To lower the risks of sickness suffered by our employees and/or our
subcontractors’ employees, we will have to provide heat-relieving measures, such as
providing electric fans, resting areas and sufficient hydration to the workers, to combat
increasing temperatures and re-arrange work schedules to avoid working under hot
weathers.
Rising temperature and heightened precipitation has also resulted in the
proliferation of mosquitoes, which increases the risk of transmission of mosquito-borne
diseases in Hong Kong. Several mosquito-borne diseases are of public health concern
in Hong Kong, including dengue fever and Japanese encephalitis. Heightened measures
will have to be implemented at our project sites to guard against mosquito-borne
diseases, such as (i) frequent cleaning at the project site to avoid accumulation of
stagnant water; (ii) installation of bug zappers; and (iii) encourage workers to wear
loose, light-coloured, long-sleeved tops and trousers and wear insect repellent clothing
at work.
In the event of heatwave or extremely hot weather in the PRC, our machinery
located at our production facilities may face the problem of overheating and lead to
reduced useful life. We will have to adopt additional measures, which include letting
the machinery rest after prolonged use and more frequent maintenances to ensure
smooth fabrication process, thereby resulting in additional costs to be incurred by us.
Rising sea levels
Hong Kong is a low-lying coastal city, and the rise in sea level can pose
immediate flooding risk. Low-lying areas in Hong Kong such as Tai O, North District
and Lei Y ue Mun are constantly hit by flooding in summer. Flooding at our project
sites may result in severe damages to our structural steelwork performed, resulting in
rectification works to be performed and additional costs and time to be incurred by us.
If the rectification works to be performed by us result in any delay on our part in
completion of a project, we may be liable to pay liquidated damages under the
contract, which in turn will have adverse impact on our reputation, business, financial
condition and results of operations.
B. Transitional risks
Potential impairment on our financial performance due to the transition to low-carbon
economy
The Hong Kong government has been working towards to achieve sustainable
development in Hong Kong. In response to the Paris Agreement, which was ratified by
the PRC on 3 September 2016 and applied to Hong Kong as decided by the Central
People’s Government of the PRC, the Hong Kong government has implemented the
Hong Kong’s Climate Action Plan 2030+, targeting to reduce the carbon emission per
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capita by 3.3 to 3.8 tonnes, absolute carbon emission by 26% to 36% and carbon
intensity by 65% to 70% in 2030, as compared to 2005. Furthermore, the Hong Kong
government also aims to (i) reduce carbon by phasing down coal for electricity
generation and replacing it with natural gas by 2030; (ii) optimise the introduction of
renewable energy in a more systematic manner with the Hong Kong government taking
the lead; (iii) promote energy saving to continuously reduce carbon emissions in
construction and property development; and (iv) provide a safe, efficient, reliable and
environmentally friendly transport system.
There is no assurance that the Hong Kong government will not impose carbon tax
on the emission of greenhouse gases (“ GHG”). In the event that the Hong Kong
government decided to levy carbon tax, our financial performance may be adversely
affected as we may have to allocate resources in strengthening our environmental
control measures on lowering our GHG emissions or settle any levies imposed by the
Hong Kong government on our GHG emission.
Changing customer behaviour
Driven by the gradual recognition and promotion of low-carbon economy by the
Hong Kong government, our executive Directors anticipate that our Group will be
increasingly required by our customers to adopt clean technology and deploy
energy-saving and efficient machinery in performing our projects. If we are unable to
fulfil our customers’ requirements in this regard, our customers may become less likely
to award projects to us, resulting in material adverse impact on our reputation,
business, financial condition and results of operation.
Increasing costs in compliance with applicable environmental requirements
In the event of any changes in the laws and/or regulations and/or government
policies in environmental protection in Hong Kong and/or the PRC and more stringent
requirements are imposed on our Group, we may have to incur additional costs and
expenses to comply with such requirements. We may also be required to revise our
current practices, implement enhanced compliance and internal control measures and
systems, adopt the use of energy-saving and efficient equipment, offer training to our
employees and/or our subcontractors’ employees and introduce new preventive or
remedial measures so as to ensure compliance with the relevant laws, regulations,
policies and standards, which would incur additional financial, human and other
resources. Furthermore, if we fail to comply, or are alleged to fail to comply, with the
relevant laws and regulations, we may be involved in costly litigation or subject to
penalties or other sanctions imposed by the relevant judicial or governmental
authorities. Our reputation may also be adversely affected, resulting in a loss of
business as our customers may be less inclined to engage subcontractors with
environmental non-compliance. Regulatory development and evolution may potentially
have significant impacts on our business operations and present transition risks to us.
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C. Opportunities
Our Group has identified the following potential business opportunities arising from
our promotion of low-carbon economy:
Reduce fossil usage and consumption
In view of the increasing awareness of sustainable development and green energy,
our Group has set out a plan in replacing our machinery at our production facilities in
the PRC with those that are more efficient in energy consumption. As at the Latest
Practicable Date, our Group did not have a fixed timeline for the replacement schedule.
The replacement of our existing machinery is likely to provide long-term benefits to
our Group. With reduced energy consumption, we will create a more
environmentally-friendly workplace for our employees.
Recycling steel waste
According to the Industry Report, structural steelwork is more environmentally
friendly than concrete construction as steel can be recycled and reused. Once steel
structures reach the end of their lifespan or usage, the steel materials can be
dismantled, collected and re-melted to manufacture new products. As such, steel
recycling has significant environmental benefits such as reducing landfill waste,
lowering emissions from mining and manufacturing operations, and conserving natural
resources required for new steel production. In contrast, concrete from demolished
structures typically ends up as landfill waste because it cannot be recycled in the same
way as steel. The raw materials used to produce concrete like sand, gravel and
limestone also require heavy mining operations which result in damages to the
environment.
During the Track Record Period, we arranged recycling of leftover steel materials.
Recycling steel waste helps to reduce the amount of landfill waste generated from our
projects. In view of the increasing awareness of eco-friendliness and sustainable
property development by property developers and construction contractors, our
executive Directors consider that our practice of recycling steel waste will enable our
Group to be considered more favourably by our customers and increase our prospect of
obtaining new projects.
Metrics and targets
Our Board will set targets for each KPI at the beginning of each financial year in
accordance with the disclosure requirements of Appendix 27 to the Listing Rules and
other relevant rules and regulations upon Listing. The relevant targets on material KPIs
will be reviewed on an annual basis to ensure that they remain appropriate to the needs
of our Group. In setting targets for the KPIs, our Group has taken into account their
respective historical levels during the Track Record Period, and has considered our
future business expansion in a thorough and prudent manner with a view of balancing
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business growth and environmental protection to achieve sustainable development. Set
forth below are the key metrics and targets for the material KPIs we have currently
identified:
(i) our major sources of GHG emissions are generated from (a) scope 1 direct
GHG emissions resulting from the combustion of petrol by lifting machines
and cranes at project sites and motor vehicles; and (b) scope 2 indirect GHG
emissions resulting from electricity consumed in our production facilities in
the PRC and our office in Hong Kong. Our Group will make continuous
efforts in working towards the target of reducing the level of GHG emissions
in terms of tonnes of carbon dioxide equivalent (tCO2e). By using FY2022
as a baseline year, our Group strives to reduce our GHG emissions intensity
by 3% before 2025;
(ii) our major sources of wastes are paper consumed in our office. By using
FY2022 as a baseline year, we will make continuous efforts in working
towards the target of reducing the tonnes of wastes produced by 3%
annually; and
(iii) our major sources of energy consumption are petrol and electricity. Our
Group will make continuous efforts in working towards the target of
reducing the kilowatt-hour (kWh) of petrol and electricity consumed
annually. By using FY2022 as a baseline year, our Group targets to decrease
our energy consumption intensity by 3% by 2025.
Our Group has adopted the policies and measures as explained in the paragraph
headed “Environmental, social and corporate governance matters – Environmental
matters” in this section with the aim of reducing our GHG emissions, wastes and
energy consumption to minimise any adverse impact on the environment resulting from
our business activities. Our Directors consider that the implementation of such policies
and measures in achieving our ESG targets will not have any material adverse impact
on our Group’s operations. Further, by achieving the ESG targets, our Group will be
able to reduce the consumption of resources, which will in turn lower our operating
costs, thereby enhancing our profitability in the long term.
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR OPERATIONS
Our operations in the PRC
Due to the emergence of the COVID-19 pandemic in the PRC in early 2020, the PRC
Government imposed lockdown measures in Dongguan, the PRC in the first quarter of 2020.
Transport was restricted, major roads and highways were closed and factories were ordered
to suspend operations. In response to the requirements of the local government authorities,
our production facilities suspended from operations during the lockdown period.
Our Directors consider that impact of the lockdown on our business and financial
performance for FY2020 was mitigated taking into consideration the suspension was only
temporary and the operations of our production facilities resumed normal since May 2020;
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while the temporary suspension in our PRC production facilities hindered the progress of our
fabrication works, the overall impact on us was partly mitigated as the structural steel
required in some projects were already delivered to Hong Kong by the end of 2019 in view
of the forthcoming Chinese New Y ear holiday in early 2020, and hence we were able to
continue with our installation works for such projects during the first quarter of 2020. Once
our production facilities resumed normal operations in May 2020, our Group had made
efforts to fulfil the project schedule required by our customers. During the Track Record
Period and up to the Latest Practicable Date, our Group did not experience any material
delay in fulfilling the project schedule required by our customers. As at the Latest
Practicable Date, our Group also did not experience any material delay requested by our
customers in relation to our projects on hand.
Subsequent to the withdrawal of the “zero-COVID-19” policy by late 2022, a number
of our staff based in the PRC experienced infection which resulted in temporary loss of
manpower for our structural steel fabrication and temporary disruption to the operation of
our production facilities between November to December 2022. Our business operations in
the PRC had resumed to normal by early 2023.
Our operations in Hong Kong
From January 2022 and up to April 2022, Hong Kong recorded the fifth wave of the
outbreak of COVID-19 attributable to the SARS-CoV-2 Omicron variant (the “Fifth Wave
Outbreak ”), as the daily number of confirmed cases increased significantly during the
period. Our Group experienced temporary disruption to the transportation of materials from
Hong Kong to the PRC and finished products from the PRC to Hong Kong during 2022
since cross-border transportation was significantly disrupted. Our Directors consider that the
temporary disruption to the transportation of materials and finished products did not have
long-lasting adverse impact on our operation, taking into consideration that (i) cross-border
transportation have gradually resumed to normal level as the pandemic came under control
in 2022; (ii) as contingency measures, our Group had engaged third party logistics services
providers to deliver materials and finished products between Hong Kong and the PRC by sea
instead of by road at that time to minimise the impact of such disruption on the supply of
raw materials to our production facilities and structural steel to our work sites; and (iii) we
were generally able to pass on part of the increase in logistics costs incurred by us from the
delivery of materials and finished products between Hong Kong and the PRC by sea to our
customers.
Save as disclosed above and based on information available as at the Latest Practicable
Date, our Directors confirm that the COVID-19 pandemic did not and will not have material
adverse impact on our business operations and financial performance.
RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS
Key risks relating to our business are set out in the section headed “Risk factors” in
this prospectus. The following sets out the key measures adopted by our Group under our
risk management and internal control system for managing the more particular operational
and financial risks relating to our business operation:
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(i) Customer concentration risk
Please refer to the paragraph headed “Our customers – Customer concentration” above
in this section.
(ii) Risk of cost overruns
We estimate our costs to be incurred in a project to determine our tender price and
there is no assurance that the actual amount of costs we incur would not exceed our
estimation during the course of project implementation. For details of our measures on
minimising the risk of cost overruns, please refer to the paragraph headed “Pricing strategy”
above in this section.
(iii) Risk relating to subcontractors’ performance
Please refer to the paragraphs headed “Our suppliers – Basis of selecting our
subcontractors” and “Quality control – Works performed by subcontractors of construction
site works” above in this section.
(iv) Credit risk management
We are subject to risks in relation to the collectability of our trade and other
receivables, details of which are summarised in the paragraph headed “Risk factors – We are
subject to credit risk in relation to the collectability of our trade receivables and contract
assets”.
For the purpose of mitigating our exposure to credit risk, our finance and
administration staff are responsible for conducting individual credit evaluations on our
customers on a regular basis. Prior to accepting work orders from new customers, our
finance and accounting staff would check on the background of the potential customer in
order to assess their credibility.
Material overdue payments are closely monitored and evaluated on a case-by-case basis
in order to deduce the appropriate follow-up actions having regard to our business
relationship with the customer, its history of making payments, its financial position as well
as the general economic environment. During the Track Record Period, our follow-up
actions for recovering long-overdue payment included active communications, conducting
follow up calls with the customers and commencing legal actions. Despite we have actively
conducted follow-up actions with our customers in respect of material overdue payments,
our Group recorded long overdue payments from a customer during the Track Record
Period. In 2022, our Group petitioned to wind-up such customer on insolvency grounds,
relying on its debts owed to our Group arising from the subcontract with us. As at 30
September 2023, the trade receivables and retention receivables owing from this customer
amounted to approximately HK$2.6 million and HK$1.5 million, respectively, for which
impairment provision has been fully provided.
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We generally grant our customers a credit term ranging from 30 to 60 days from the
invoice date. As at 31 December 2020, 2021 and 2022 and 30 September 2023, we recorded
trade receivables (net of provision for impairment) of approximately HK$10.9 million,
HK$22.1 million, HK$14.5 million and HK$19.8 million respectively.
To ensure timely identification of doubtful or irrecoverable debts, our finance and
administration staff would report to our financial controller on the collection status and
ageing analysis of outstanding payments on a regular basis. Trade receivables overdue will
be reviewed by our financial controller and, if appropriate, provisions for impairment of
trade receivables will be made accordingly.
(v) Liquidity risk management
There are often time lags between making payment to our suppliers and receiving
payment from our customers when undertaking contractual works, resulting in possible cash
flow mismatch. In order to manage our liquidity position in view of the aforementioned
working capital requirement and the possible cash flow mismatch associated with
undertaking contractual works, we have adopted the following measures:
 our financial controller is responsible for the overall monitoring of our current
and expected liquidity requirements on a monthly basis to ensure that we maintain
sufficient financial resources to meet our liquidity requirements;
 as a general policy, we only procure materials on an as-needed basis according to
the requirement and schedule of the project to prevent excessive purchases; and
 we closely monitor our working capital to ensure that our financial obligations
can be fulfilled when due, by, among other things (i) ensuring healthy bank
balances and cash for payment of our short-term working capital needs; (ii)
performing monthly review of our trade receivables and aging analysis, and
following up closely to ensure prompt receipt of amounts due from our customers;
and (iii) performing monthly review of our trade payables and aging analysis to
ensure that payments to our suppliers are made on a timely basis.
(vi) Regulatory risk management
We keep ourselves abreast of any changes in government policies, regulations, and
licensing requirements in Hong Kong and the PRC in relation to our business operations, as
well as the relevant environmental and safety requirements. We will ensure that any changes
of the above are closely monitored and communicated to our senior management for proper
implementation and compliance.
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SUMMARY OF DIRECTORS AND SENIOR MANAGEMENT
Name Age Present position
Date of
appointment
as Director/
senior
management
Date of
joining our
Group
Principal
responsibilities
Relationship
with other
Director(s),
and/or senior
management
Executive Directors
Mr. Chan Kam Kei
௓㒥ਿ
48 Executive
Director and chief
executive officer
of our Group
28 June
2023
28 July 1999 Overall
management and
formulation of
business strategies
of our Group. He is
also the chairperson
of our Nomination
Committee and a
member of our
Remuneration
Committee
Son of Mr.
WH Chan and
Ms. Choi, and
brother of Mr.
Eddie Chan
and Ms. Karen
Chan
Mr. Chan Kam Kong
௓㒥Ϫ
45 Executive
Director and chief
operating officer
of our Group
28 June
2023
1 September
2003
Overall project
management and
day-to-day
management of the
operations of our
Group
Son of Mr.
WH Chan and
Ms. Choi, and
brother of Mr.
Kelvin Chan
and Ms. Karen
Chan
Ms. Chan Suk Man
௓ૺත
43 Executive
Director
28 June
2023
2 January
2016
Overall day-to-day
management of the
operations and
administration of
our Group
Daughter of
Mr. WH Chan
and Ms. Choi,
and sister of
Mr. Eddie
Chan and Mr.
Kelvin Chan
Non-executive Directors
Mr. Chan Wing Hong
௓͑ੰ
75 Non-executive
Director and
chairman of the
Board
28 June
2023
28 July 1999 Participating in the
decision making of
our Board with
respect to strategic
development of our
Group
Spouse of Ms.
Choi, and
father of Mr.
Kelvin Chan,
Mr. Eddie
Chan and Ms.
Karen Chan
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Name Age Present position
Date of
appointment
as Director/
senior
management
Date of
joining our
Group
Principal
responsibilities
Relationship
with other
Director(s),
and/or senior
management
Ms. Choi Chick Cheong

72 Non-executive
Director
28 June
2023
28 July 1999 Overall corporate
strategies
Spouse of Mr.
WH Chan,
and mother of
Mr. Kelvin
Chan, Mr.
Eddie Chan
and Ms. Karen
Chan
Independent non-executive Directors
Mr. Cha Ho Wa
ԓ㒊ശ 34 Independent
non-executive
Director
5 February
2024
5 February
2024
Providing
independent advice
to our Board and
serving as the
chairperson of our
Remuneration
Committee and a
member of our
Audit Committee
Nil
Mr. Y u Chun Kit
௫ 34 Independent
non-executive
Director
5 February
2024
5 February
2024
Providing
independent advice
to our Board and
serving as the
chairperson of our
Audit Committee
and a member of
our Remuneration
Committee and
Nomination
Committee
Nil
Mr. Liu Chi Kwun Albert
࿋қ੤
61 Independent
non-executive
Director
5 February
2024
5 February
2024
Providing
independent advice
to our Board and
serving as a
member of our
Audit Committee
and Nomination
Committee
Nil
DIRECTORS AND SENIOR MANAGEMENT
– 259 –


--- page 270 ---
Name Age Present position
Date of
appointment
as Director/
senior
management
Date of
joining our
Group
Principal
responsibilities
Relationship
with other
Director(s),
and/or senior
management
Senior management
Mr. Tam Hon Fai
ᗈဏሾ
40 Financial
controller and
company
secretary of our
Company
1 April 2023 1 April 2023 Financial
management and
secretarial affairs of
our Group
Nil
Mr. Leung Lok Him
૑ᆀᑹ
36 Project manager 1 April 2023 17 August
2015
Overseeing and
managing project
execution and
operation of our
Group
Nil
DIRECTORS
Our Board consists of eight Directors, comprising three executive Directors, two
non-executive Directors and three independent non-executive Directors.
Executive Directors
Mr. Chan Kam Kei ௓㒥ਿ, aged 48, was appointed as a Director on 28 June 2023
and was re-designated as an executive Director on 6 July 2023. Mr. Kelvin Chan also serves
as the chief executive officer of our Group, the chairperson of our Nomination Committee
and a member of our Remuneration Committee. He is primarily responsible for the overall
management and formulation of business strategies of our Group. He is also a director of
various subsidiaries of our Company, namely WK Development, Wing Kei Hong Kong and
Wing Kei Management. He is the son of Mr. WH Chan and Ms. Choi, and the brother of
Mr. Eddie Chan and Ms. Karen Chan. Mr. Kelvin Chan is one of our Controlling
Shareholders.
Mr. Kelvin Chan co-founded our Group in July 1999 with Mr. WH Chan, and has since
accumulated over 24 years of experience in the structural steelwork industry. Since founding
our Group, Mr. Kelvin Chan has been overseeing various aspects of our Group’s business
including our strategic and corporate development, expansion plans and bidding tenders, and
leading our Group to gradually expand our business throughout the years and undertake both
private and public projects, including some high-profile projects, the details of which are set
out in the paragraph headed “History, development and Reorganisation – Our business
development” in this prospectus.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 271 ---
Mr. Kelvin Chan has been a member of the New Territories General Chamber of
Commerceᐼਠึsince March 2013 and was a director of the chamber from 2014 to
2016 and 2020 to 2022. He has also been a member of Tsuen Wan Trade Association
Limited
ʮ̡since April 2016. Mr. Kelvin Chan attended secondary school
education in Canada.
Mr. Chan Kam Kong ௓㒥Ϫ, aged 45, was appointed as a Director on 28 June 2023
and was re-designated as an executive Director on 6 July 2023. Mr. Eddie Chan also serves
as the chief operating officer of our Group. He is primarily responsible for the overall
project management and day-to-day management of the operations of our Group. He is also
a director of all our subsidiaries, namely WK Development, Wing Kei Hong Kong, Wing
Kei Management and Wing Kei Dongguan. He is the son of Mr. WH Chan and Ms. Choi,
and the brother of Mr. Kelvin Chan and Ms. Karen Chan. Mr. Eddie Chan is one of our
Controlling Shareholders.
Mr. Eddie Chan joined our Group in September 2003, and has since accumulated
nearly 20 years of experience in the structural steelwork industry. Since joining our Group,
Mr. Eddie Chan has been overseeing various aspects of our Group’s business including our
strategic and corporate development, project management and expansion plans. Mr. Eddie
Chan has been managing our operations in the PRC.
Mr. Eddie Chan graduated from Centennial College in Canada in April 2003. He has
also been a member and executive vice chairman
of the Hong Kong Metals
Manufacturers Association᙮Ⴁிุ՘ึ and the Dongguan City Association of
Enterprises with Foreign Investment Dalingshan Branch୷̹̮ਠҳ༟Άุ՘ึɽᏊʆʱึ
since April 2019 and August 2018, respectively.
Ms. Chan Suk Man ௓ૺත, aged 43, was appointed as a Director on 28 June 2023
and was re-designated as an executive Director on 6 July 2023. She is primarily responsible
for the overall day-to-day management of the operations and administration of our Group.
She is also a director of various subsidiaries of our Company, namely WK Development,
Wing Kei Hong Kong and Wing Kei Management. She is the daughter of Mr. WH Chan and
Ms. Choi, and the sister of Mr. Eddie Chan and Mr. Kelvin Chan. Ms. Karen Chan is one of
our Controlling Shareholders.
Ms. Karen Chan has over seven years of experience in the structural steelwork
industry. Prior to joining our Group in January 2016, Ms. Karen Chan has accumulated over
ten years of experience in the finance sector. From March 2005 to August 2009, Ms. Karen
Chan worked in the Hong Kong branch of The Royal Bank of Scotland N.V . (formerly
known as ABN AMRO Bank N.V .) with her last position as relationship manager of retail
and commercial markets in Asia. From December 2010 to February 2012, Ms. Karen Chan
worked in Bank of China (Hong Kong) Limited with her last position as business officer in
securities services of personal banking and product management. From February 2012 to
December 2015, Ms. Karen Chan worked in Hong Kong Exchanges and Clearing Limited
with her last position as associate in cash clearing risk management of the global clearing
division.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 272 ---
Ms. Karen Chan graduated from the University of Toronto, Canada, with a degree of
bachelor of science in June 2004. She further obtained a master’s degree of science in
mathematics for finance and actuarial science in Hong Kong jointly awarded by the City
University of Hong Kong and the Université Paris-Dauphine, France in July 2010.
Non-executive Directors
Mr. Chan Wing Hong
௓͑ੰ, aged 75, was appointed as a Director on 28 June 2023
and was re-designated as a non-executive Director on 6 July 2023. Mr. WH Chan also serves
as the chairman of our Board. He is primarily responsible for participating in the decision
making of our Board with respect to strategic development of our Group. He is also a
director of various subsidiaries of our Company, namely WK Development and Wing Kei
Hong Kong. He is the spouse of Ms. Choi, and the father of Mr. Kelvin Chan, Mr. Eddie
Chan and Ms. Karen Chan. Mr. WH Chan is one of our Controlling Shareholders.
Mr. WH Chan has accumulated over 40 years of experience in structural steel works,
metal works and general construction. Mr. WH Chan co-founded our Group in July 1999
with Mr. Kelvin Chan. Since founding our Group, Mr. WH Chan has been overseeing
various aspects of our Group’s business including our strategic and corporate development,
expansion plans and bidding tenders, and leading our Group to gradually expand our
business throughout the years and undertake both private and public projects, including some
high-profile projects, the details of which are set out in the paragraph headed “History,
development and Reorganisation – Our business development” in this prospectus. Prior to
founding our Group, from February 1983 to June 1999, Mr. WH Chan worked at Choi Lam
Kee Iron Works Limited (currently known as Hang Yick Engineering Limited), a company
engaging in iron works. Mr. WH Chan attended secondary school education in Hong Kong.
Ms. Choi Chick Cheong
, aged 72, was appointed as a Director on 28 June
2023 and was re-designated as a non-executive Director on 6 July 2023. She is primarily
responsible for the overall corporate strategies of our Group. She is also a director of
various subsidiaries of our Company, namely WK Development and Wing Kei Hong Kong.
She is the spouse of Mr. WH Chan, and the mother of Mr. Kelvin Chan, Mr. Eddie Chan
and Ms. Karen Chan. Ms. Choi is one of our Controlling Shareholders.
Ms. Choi joined our Group in July 1999 and has since accumulated over 24 years of
experience in the structural steelwork industry. Since joining our Group, Ms. Choi has been
assisting Mr. WH Chan and Mr. Kelvin Chan by providing administrative and secretarial
support to our Group. Ms. Choi attended secondary school education in Hong Kong.
Independent non-executive Directors
Mr. Cha Ho Wa
ԓ㒊ശ, aged 34, was appointed as an independent non-executive
Director on 5 February 2024. He is the chairperson of our Remuneration Committee and a
member of our Audit Committee.
Mr. Cha has over 7 years of experience in the legal field in Hong Kong. Mr. Cha was
admitted as a solicitor of the High Court of Hong Kong in October 2018 and he has been a
practising solicitor since then. Mr. Cha worked at Messrs. Peter K.S. Chan & Co. since June
DIRECTORS AND SENIOR MANAGEMENT
– 262 –


--- page 273 ---
2016 with his last position as partner. Since April 2023, Mr. Cha has been working in
Messrs. Eddie Lee & Co., Solicitors as senior consultant. In addition, from September 2022
to January 2023, Mr. Cha served as a part-time visiting lecturer at the Community College
of the School of Professional and Continuing Education of The University of Hong Kong
(HKU SPACE). From December 2021 to December 2022, Mr. Cha was accredited as a
general mediator of the Hong Kong Mediation Accreditation Association Limited.
From December 2020 to September 2021, Mr. Cha was an independent non-executive
director of China Oil Gangran Energy Group Holdings Limited (currently known as Century
Energy International Holdings Limited), a company listed on GEM of the Stock Exchange
(stock code: 8132). Since September 2023, Mr. Cha has been an independent non-executive
director of Vision International Holdings Limited, a company listed on GEM of the Stock
Exchange (stock code: 8107).
Mr. Cha graduated from the Chinese University of Hong Kong with a bachelor’s degree
of arts in November 2013, and further obtained a degree of Juris Doctor and a Postgraduate
Certificate in Laws from The Chinese University of Hong Kong in November 2015 and July
2016, respectively.
Mr. Yu Chun Kit
௫, aged 34, was appointed as an independent non-executive
Director on 5 February 2024. He is the chairperson of our Audit Committee and a member
of our Remuneration Committee and Nomination Committee.
Mr. Y u has over 12 years of experience in corporate finance, accounting and auditing.
Mr. Y u worked at BDO Limited from October 2011 to July 2014, with his last position as
senior associate. From July 2014 to August 2015, Mr. Y u worked at KPMG with his last
position as assistant manager. From December 2016 to December 2017, Mr. Y u worked at
Kingston Corporate Finance Limited as assistant manager. Mr. Y u has been the financial
controller and company secretary of Mannings (Asia) Consultants Limited, being a
subsidiary of Boltek Holdings Limited, a company listed on GEM of the Stock Exchange
(stock code: 8601), and Boltek Holdings Limited since January 2018 and April 2018,
respectively. In addition, Mr. Y u has been a company secretary of Global Uin Intelligence
Holdings Limited (formerly known as Global Dining Holdings Limited and Singapore Food
Holdings Limited), a company listed on GEM of the Stock Exchange (stock code: 8496),
since September 2019.
Since April 2022, Mr. Y u has been an independent non-executive director of Sinohope
Technology Holdings Limited (formerly known as New Huo Technology Holdings Limited
and Huobi Technology Holdings Limited), a company listed on the Main Board of the Stock
Exchange (stock code: 1611).
Mr. Y u graduated from the Hong Kong Polytechnic University with a degree of
bachelor of business administration in accounting and finance in October 2011. He has been
a member of the Hong Kong Institute of Certified Public Accountants since July 2015.
Mr. Liu Chi Kwun Albert
࿋қ੤, aged 61, was appointed as an independent
non-executive Director on 5 February 2024. He is a member of our Audit Committee and
Nomination Committee.
DIRECTORS AND SENIOR MANAGEMENT
– 263 –


--- page 274 ---
Mr. Liu has over 37 years of experience in structural engineering. From January 1986
to December 1987, Mr. Liu worked at Camp Scott Furphy Pty. Ltd. in Sydney, Australia as a
graduate engineer. From January 1988 to April 1989, Mr. Liu worked at Bernard Leung &
Partners as a project engineer. Prior to co-founding Liu Hok Y an & Associates Limited in
July 1995 and subsequent to his departure from Bernard Leung & Partners in April 1989,
Mr. Liu worked at Fugro (Hong Kong) Limited with his last position as senior engineer. In
July 1995, Mr. Liu co-found Liu Hok Y an & Associates Limited and has been working as
director since then. Mr. Liu re-joined Fugro (Hong Kong) Limited in June 1996 and left in
June 1999 with his last position as associate director. In October 1997, Mr. Liu founded
Albert Liu & Associates Limited (formerly known as LC Design Consultants Limited) and
has been working as director since then.
Mr. Liu graduated from the University of Sydney, Australia, with a degree of bachelor
of science in March 1984 and further obtained a degree of bachelor of engineering in civil
engineering from the same university in March 1986. Mr. Liu has been a registered
structural engineer, an authorised person (list of engineers) and a registered inspector (list of
engineers) under the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) since
November 1994, April 1999 and November 2015, respectively. Mr. Liu has been a member
of the Institution of Structural Engineers and the Hong Kong Institution of Engineers since
November 1989 and May 1993, respectively. In addition, Mr. Liu has been a PRC registered
structural engineer (Class 1)
since March 2008.
Save as disclosed above, each of our Directors has not held directorships in the last
three years in other public companies the securities of which are listed on any securities
market in Hong Kong or overseas during the three years immediately preceding the Latest
Practicable Date.
DISCLOSURE REQUIRED UNDER RULE 13.51(2) OF THE LISTING RULES
Mr. WH Chan was a director of the following company prior to its dissolution. Mr.
WH Chan confirmed that the company was solvent and inactive, and had no outstanding
claims or liabilities at the time of its dissolution, that there was no wrongful act on his part
leading to the dissolution and that he is not aware of any actual or potential claim which has
been or will be made against him as a result of the dissolution of the company. Mr. WH
Chan also confirmed that the company had no material non-compliance prior to its
dissolution. The following are the details of the aforementioned dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Gar Hin Engineering
Limited
Hong Kong Provision of metal works 31 December
2004
Cessation of
business
Deregistration
DIRECTORS AND SENIOR MANAGEMENT
– 264 –


--- page 275 ---
Mr. Kelvin Chan was a director of the following company prior to its dissolution. Mr.
Kelvin Chan confirmed that the company was solvent and inactive, and had no outstanding
claims or liabilities at the time of its dissolution, that there was no wrongful act on his part
leading to the dissolution and that he is not aware of any actual or potential claim which has
been or will be made against him as a result of the dissolution of the company. Mr. Kelvin
Chan confirmed that the company had no material non-compliance prior to its dissolution.
The following are the details of the aforementioned dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Fully Zone Limited Hong Kong Dormant 24 July 2015 No business
operation
commenced
since its
incorporation
Deregistration
Mr. Y u Chun Kit was a director of the following company prior to its dissolution. Mr.
Y u Chun Kit confirmed that the company was solvent and inactive, and had no outstanding
claims or liabilities at the time of its dissolution, that there was no wrongful act on his part
leading to the dissolution and that he is not aware of any actual or potential claim which has
been or will be made against him as a result of the dissolution of the company. Mr. Y u Chun
Kit also confirmed that the company had no material non-compliance prior to its dissolution.
The following are the details of the aforementioned dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
AA Food Company
Limited
Hong Kong Dormant 11 August 2023 No business
operation
commenced
since its
incorporation
Deregistration
Mr. Liu Chi Kwun Albert was a director of the following companies prior to their
dissolutions. Mr. Liu Chi Kwun Albert confirmed that the companies were solvent and inactive,
and had no outstanding claims or liabilities at the time of their dissolutions, that there was no
wrongful act on his part leading to the dissolutions and that he is not aware of any actual or
potential claim which has been or will be made against him as a result of the dissolutions of the
companies. Mr. Liu Chi Kwun Albert also confirmed that the companies had no material
non-compliance prior to their respective dissolutions. The following are the details of the
aforementioned dissolved companies:
DIRECTORS AND SENIOR MANAGEMENT
– 265 –


--- page 276 ---
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Melbourne Books
Distribution Limited
Hong Kong Book distribution 6 July 2012 Cessation of
business
Deregistration
Melbourne Education
(Holdings) Limited
Hong Kong Dormant 29 January
2010
No business
operation
commenced
since its
incorporation
Deregistration
Melbourne e-Learning
Limited
Hong Kong Dormant 29 January
2010
No business
operation
commenced
since its
incorporation
Deregistration
Melbourne Education
Centre Limited
Hong Kong Dormant 29 January
2010
No business
operation
commenced
since its
incorporation
Deregistration
Ultra Rigid Building
Contractors Limited
Hong Kong Building construction 17 October
2003
Cessation of
business
Deregistration
Save as disclosed above, each of our Directors confirms with respect to him/her that:
(a) he/she does not hold other positions in our Company or other members of our Group as
at the Latest Practicable Date; (b) he/she does not have any relationship with any other
Directors, senior management, substantial shareholder or Controlling Shareholder of our
Company as at the Latest Practicable Date; (c) he/she does not have any interests in our
Shares within the meaning of Part XV of the SFO, save as disclosed in the paragraph
headed “C. Further information about our Directors and substantial shareholders – 1.
Disclosure of Interests” in Appendix V to this prospectus; (d) he/she does not have any
interest in any business which competes or is likely to compete, directly or indirectly, with
our Group, which is disclosable under the Listing Rules; and (e) to the best knowledge,
information and belief of our Directors having made all reasonable enquiries, there is no
additional information relating to our Directors or senior management that is required to be
disclosed pursuant to Rule 13.51(2) of the Listing Rules and no other matter with respect to
their appointments that needs to be brought to the attention of our Shareholders as at the
Latest Practicable Date.
Each of our Directors confirmed that he or she (i) obtained the legal advice referred to
under Rule 3.09D of the Listing Rules on 25 July 2023; and (ii) understood his or her
obligations as a director of a listed issuer under the Listing Rules.
Each of our independent non-executive Directors confirmed (i) his independence as
regards each of the factors referred to in Rule 3.13(1) to (8) of the Listing Rules; (ii) that he
had no past or present financial or other interest in the business of our Company or our
subsidiaries or any connection with any core connected person of our Company under the
Listing Rules as at the Latest Practicable Date; and (iii) that there are no other factors that
may affect his independence at the time of his appointment.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 277 ---
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
Our Company will comply with the Corporate Governance Code set out in Appendix
C1 to the Listing Rules. Our Directors will review our corporate governance policies and
compliance with the Corporate Governance Code each financial year and comply with the
“comply or explain” principle in our corporate governance report which will be included in
our annual reports upon the Listing.
SENIOR MANAGEMENT
Mr. Tam Hon Fai
ᗈဏሾ, aged 40, is the financial controller of our Group and the
company secretary of our Company and is responsible for the financial management and
secretarial affairs of our Group.
Mr. Tam worked at Deloitte Touche Tohmatsu from September 2006 to August 2011 in
the audit department. From January 2012 to November 2022, Mr. Tam acted as an audit
partner of CTY & Co, a CPA firm. Since August 2017, Mr. Tam has been a director of JMG
Corporate Advisory Limited, a firm principally engaged in the provision of corporate
advisory services. Since June 2020, Mr. Tam has been a director of Marksman Services
Group Limited, a firm principally engaged in provision of corporate advisory services. Since
October 2020, Mr. Tam has acted as a director of IPA CPA Limited.
Mr. Tam has served different roles in various listed companies as follows:
Period
Company name, stock code and venue of
listing Position
December 2011
to July 2013
Noble House (China) Holdings Limited (currently
known as Zhonghua Gas Holdings Limited)
(stock code: 8246), a company listed on GEM
of the Stock Exchange
Company
secretary
February 2014 to
September
2014
Bamboos Health Care Holdings Limited (stock
code: 2293), a company then listed on GEM of
the Stock Exchange in July 2014 which
transferred its listing to the Main Board in
March 2017
Financial
controller
Since August
2019
S&T Holdings Limited (stock code: 3928), a
company listed on the Main Board of the Stock
Exchange
Independent
non-executive
director
December 2020
to February
2022
Sino Vision Worldwide Holdings Limited, a
company previously listed on GEM of the
Stock Exchange (stock code: 8086) until 4 July
2023
Company
secretary
DIRECTORS AND SENIOR MANAGEMENT
– 267 –


--- page 278 ---
Mr. Tam obtained a degree of bachelor of business administration in accounting from
the Hong Kong University of Science and Technology in May 2006. He has been a member
of the Hong Kong Institute of Certified Public Accountants since January 2010 and is
currently a fellow member of the Hong Kong Institute of Certified Public Accountants.
Mr. Leung Lok Him
૑ᆀᑹ, aged 36, is the project manager of our Group and is
responsible for overseeing and managing project execution and operation of our Group.
Mr. Leung has over seven years of experience in the structural steelwork industry. He
first joined our Group in October 2012 until June 2014 as project engineer. Mr. Leung
re-joined our Group in August 2015 as project engineer and was promoted to his current
position in April 2023.
Mr. Leung obtained a degree of bachelor of engineering in mechanical engineering
from The Hong Kong University of Science and Technology in April 2010. From October
2010 to October 2012, he worked in Genetron Engineering Company Limited with his last
position as assistant engineer. From June 2014 to July 2015, he worked in Leighton
Contractors (Asia) Limited with his last position as engineer.
Save as disclosed above, each of our senior management has not held directorships in
the last three years in other public companies the securities of which are listed on any
securities market in Hong Kong or overseas.
COMPANY SECRETARY
Mr. Tam Hon Fai
ᗈဏሾis our company secretary for the purposes of Rule 8.17 of
the Listing Rules. For details of his background and experience, please refer to the
paragraph headed “Senior management” above in this section.
BOARD COMMITTEES
Audit committee
Our Company established an audit committee with written terms of reference in
compliance with Rule 3.22 of the Listing Rules and paragraph D.3.3 of part 2 of the
Corporate Governance Code set out in Appendix C1 to the Listing Rules pursuant to a
resolution of our Directors passed on 5 February 2024. The primary duties of our audit
committee are, among others, to make recommendations to our Board on the appointment,
reappointment and removal of external auditor, review the financial statements and material
advice in respect of financial reporting, oversee the financial reporting process, internal
control, risk management systems and audit process of our Company and perform other
duties and responsibilities assigned by our Board.
At present, our audit committee comprises Mr. Y u Chun Kit, Mr. Cha Ho Wa and Mr.
Liu Chi Kwun Albert, all being our independent non-executive Directors. Mr. Y u Chun Kit is
the chairperson of our audit committee.
DIRECTORS AND SENIOR MANAGEMENT
– 268 –


--- page 279 ---
Remuneration committee
Our Company established a remuneration committee on 5 February 2024 with written
terms of reference in compliance with Rule 3.26 of the Listing Rules and paragraph E.1.2 of
part 2 of the Corporate Governance Code set out in Appendix C1 to the Listing Rules. The
primary duties of our remuneration committee are to review and approve the management’s
remuneration proposals, make recommendations to our Board on the remuneration package
of our Directors and senior management and ensure none of our Directors determine their
own remuneration.
At present, our remuneration committee comprises Mr. Cha Ho Wa and Mr. Y u Chun
Kit, being our independent non-executive Directors, and Mr. Kelvin Chan, being our
executive Director. Mr. Cha Ho Wa is the chairperson of our remuneration committee.
Nomination committee
Our Company established a nomination committee on 5 February 2024 with written
terms of reference in compliance with paragraph B.3.1 of part 2 of the Corporate
Governance Code set out in Appendix C1 to the Listing Rules. The primary duties of our
nomination committee are, among others, to review the structure, size and composition of
our Board, and select or make recommendations on the selection of individuals nominated
for directorships.
At present, our nomination committee comprises Mr. Y u Chun Kit and Mr. Liu Chi
Kwun Albert, being our independent non-executive Directors, and Mr. Kelvin Chan, being
our executive Director. Mr. Kelvin Chan is the chairperson of our nomination committee.
BOARD DIVERSITY POLICY
Our Company has adopted a board diversity policy which sets out the approach of
which our Board could achieve a higher level of diversity. Our Company recognises the
benefits of having a diversified Board. In summary, our board diversity policy sets out that
when considering the nomination and appointment of a director, with the assistance of our
nomination committee, our Board would consider a number of factors, including but not
limited to the skills, knowledge, professional experience and qualifications, cultural and
educational background, age, gender and diversity of perspectives that the candidate is
expected to bring to our Board and what would be the candidate’s potential contributions, in
order to better serves the needs and development of our Company. Our board diversity
policy also seeks to attract, retain and motivate our Directors and other staff from the widest
pool of available talent. All Board appointments will be based on merits and candidates will
be considered against objective criteria, having due regard to the benefits of diversity on our
Board.
DIRECTORS AND SENIOR MANAGEMENT
– 269 –


--- page 280 ---
COMPLIANCE ADVISER
Our Company has appointed Grande Capital Limited as the compliance adviser
pursuant to Rule 3A.19 of the Listing Rules for the term commencing on the Listing Date
and ending on the date on which our Company distributes annual report in respect of our
financial results for the first full financial year commencing after the Listing Date. Such
appointment may be subject to extension by mutual agreement.
Pursuant to Rule 3A.23 of the Listing Rules, our Company shall seek advice from the
compliance adviser on a timely basis in the following circumstances:
 before the publication of any regulatory announcement, circular or financial
report;
 where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
 where our Company proposes to use the proceeds of the Listing in a manner
different from that detailed in this prospectus or where business activities,
developments or results of our Company deviate from any forecast, estimate, or
other information in this prospectus; and
 where the Stock Exchange makes an inquiry of our Company regarding unusual
movements in the price or trading volume of our Shares.
REMUNERATION POLICY
Our Directors and senior management receive compensation in the form of salaries,
benefits in kind and discretionary bonuses related to their performance. Our Group also
reimburses them for expenses which are necessarily and reasonably incurred in relation to
all business and affairs carried out by our Group from time to time or for providing services
to our Group or executing their functions in relation to our Group’s business and operations.
Our Group regularly reviews and determines the remuneration and compensation package of
our Directors and senior management by reference to, among other things, market level of
salaries paid by comparable companies, the respective responsibilities of our Directors and
performance of our Group.
After the Listing, our Directors and senior management may also receive options to be
granted under the Share Option Scheme.
REMUNERATION OF DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS
For each of FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
the aggregate remuneration including basic salaries, allowance, other benefits and
contribution to retirement benefit scheme, paid to our Directors by our Group was
approximately HK$7.5 million, HK$8.6 million, HK$8.6 million and HK$5.3 million,
respectively.
DIRECTORS AND SENIOR MANAGEMENT
– 270 –


--- page 281 ---
For each of FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
the aggregate remuneration including basic salaries, allowance, other benefits and
contribution to retirement benefit scheme, paid to our five highest paid individuals
(including our Directors) by our Group was approximately HK$7.8 million, HK$8.8 million,
HK$8.9 million and HK$5.5 million, respectively.
Save as disclosed above, no other emoluments have been paid, or are payable, by our
Group to our Directors and our five highest paid individuals in respect of each of FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023.
Under the arrangements currently in force, we estimate that the aggregate remuneration
payable to, and benefits in kind receivable by, our Directors for FY2023 will be
approximately HK$9.0 million. Upon completion of the Listing, our Remuneration
Committee will make recommendations on the remuneration of our Directors taking into
account the performance of our Directors and market standards and the remuneration will be
subject to approval by our Shareholders. Accordingly, the historical remuneration to our
Directors during the Track Record Period may not reflect the future levels of remuneration
of our Directors.
During the Track Record Period, no remuneration was paid by our Group to, or
received by, our Directors or our five highest individuals as an inducement to join or upon
joining our Group or as compensation for loss of office. There was no arrangement under
which a director waived or agreed to waive any remuneration during the Track Record
Period.
For additional information on our Directors’ remuneration during the Track Record
Period as well as information on our five highest paid individuals, please refer to the
Accountant’s Report set out in Appendix I to this prospectus.
SHARE OPTION SCHEME
Our Company has conditionally adopted the Share Option Scheme. Further information
on the Share Option Scheme is set forth in the paragraph headed “D. Share Option Scheme”
in Appendix V to this prospectus.
DIRECTORS AND SENIOR MANAGEMENT
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BACKGROUND OF OUR CONTROLLING SHAREHOLDERS
Immediately after the completion of the Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the exercise of
the Over-allotment Option or any option which may be granted under the Share Option
Scheme), our Company will be owned as to 75% by WK (BVI). WK (BVI) is an investment
holding company incorporated in BVI and is owned as to 30% by Mr. Kelvin Chan, 30% by
Mr. Eddie Chan, 15% by Mr. WH Chan, 15% by Ms. Choi and 10% by Ms. Karen Chan. On
the basis that Mr. Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen
Chan hold their respective interests in our Company through a common investment holding
company, i.e. WK (BVI), which in turn will be entitled to exercise 30% or more of the
voting power at general meetings of our Company, WK (BVI), Mr. Kelvin Chan, Mr. Eddie
Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan are regarded as a group of Controlling
Shareholders under the Listing Rules.
Mr. Kelvin Chan, Mr. Eddie Chan, Ms. Karen Chan are also the executive Directors,
whereas Mr. WH Chan and Ms. Choi are also the non-executive Directors. In addition, Mr.
WH Chan is the chairman of our Board and Mr. Kelvin Chan is the chief executive officer
of our Group. For details of their background and experience, please refer to the paragraph
headed “Directors and senior management – Directors” in this prospectus.
RULE 8.10 OF THE LISTING RULES
Each of our Controlling Shareholders, Directors and their respective close associates
does not have any interest apart from the business of our Group which competes or is likely
to compete, directly or indirectly with the business of our Group and which requires
disclosure pursuant to Rule 8.10 of the Listing Rules.
INDEPENDENCE FROM CONTROLLING SHAREHOLDERS
Save as disclosed in the paragraph headed “Transactions entered into before the Listing
which would otherwise constitute connected transactions” in this section below, our
Directors do not expect that there will be any significant transaction between our Group and
our Controlling Shareholders upon or shortly after the Listing.
Our Directors believe that our Group is capable of carrying on our business
independently of, and does not place undue reliance on, our Controlling Shareholders or
their respective close associates, taking into consideration the following factors:
Management independence
Our Group has an independent management team comprising our executive Directors
and senior management who have substantial experience in the business of our Group. Our
management team is able to implement the policies and strategies of our Group and perform
its roles in our Company independently.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Our Group aims at establishing and maintaining a strong and independent Board to
oversee our Group’s business. Our Board comprises three executive Directors, two
non-executive Directors and three independent non-executive Directors. Our three
independent non-executive Directors have extensive experience in different areas or
professions. The main functions of our Board include the approval of our Group’s overall
business plans and strategies, monitoring the implementation of these plans and strategies
and the management of our Group.
Further, each of our Directors is aware of his or her fiduciary duties as a Director
which require, among other things, that he or she acts for the benefit and in the best
interests of our Company and our Shareholders as a whole, and does not allow any conflict
between his or her duties as a Director and his or her personal interest to exist. In the event
that there is a potential conflict of interest arising out of any transaction to be entered into
between our Group and our Directors or their respective close associates, the interested
Director(s) shall abstain from voting at the relevant Board meetings in respect of such
transaction and shall not be counted in the quorum. In case Mr. Kelvin Chan, Mr. Eddie
Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan are required to abstain from voting at
the Board meetings due to potential conflict(s) of interest, our independent non-executive
Directors will be able to form a quorum and ensure that the decisions of our Board are made
after due consideration of independent and impartial opinion.
In view of the aforesaid, our Directors are of the view that our Group is capable of
managing our business independently of our Controlling Shareholders and their respective
close associates after the Listing.
Operational independence
Our Group has established our own organisational structure comprising individual
departments, each with specific areas of responsibilities. Our Group has not shared our
operational resources, such as suppliers, customers, and marketing, sales and general
administration resources with our Controlling Shareholders and/or their respective close
associates.
Further, our Group holds all relevant licences necessary to carry on our businesses and
has sufficient capital, equipment and employees to operate our businesses independently. Our
Group has also established various internal control procedures to facilitate the effective
operation of our businesses.
Save as disclosed in the paragraph headed “Transactions entered into before the Listing
which would otherwise constitute connected transactions” in this section below, our Group
has not entered into any connected transaction with any of our Controlling Shareholders that
will continue after the Listing.
Financial independence
Our Group has our own accounting systems, accounting and finance department and
independent treasury function for cash receipts and payments. Our Group makes financial
decisions according to our own business needs.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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The accounting and finance department of our Group will be responsible for the
financial reporting, liaising with our auditors, reviewing our cash position and negotiating
and monitoring our bank loan facilities and drawdowns.
During the Track Record Period, Mr. Kelvin Chan, Mr. Eddie Chan, Ms. Karen Chan
and Mr. WH Chan had provided personal guarantees, while Wealthy River International
Investment Limited, a company owned as to one-third by Mr. Kelvin Chan, one-third by Mr.
Eddie Chan and one-third by Ms. Karen Chan, together with Mr. WH Chan and Ms. Choi
had provided securities, for the banking facilities granted to our Group. All such personal
guarantees and securities will be replaced by a corporate guarantee given by our Company
or released or otherwise settled in full before or upon the Listing.
Our Directors are of the view that our Group is not financially dependent on our
Controlling Shareholders or their respective close associates in the business operations of
our Group and our Group is able to obtain external financing on market terms and
conditions for our business operations as and when required.
Independence from major suppliers
Our Directors have confirmed that none of our Controlling Shareholders, our Directors
and their respective close associates, had any relationship with the major suppliers of our
Group (other than business contacts in the ordinary and usual course of business of our
Group) during the Track Record Period and up to the Latest Practicable Date.
Independence from major customers
Our Directors have confirmed that none of our Controlling Shareholders, our Directors
and their respective close associates, had any relationship with the major customers of our
Group (other than business contacts in the ordinary and usual course of business of our
Group) during the Track Record Period and up to the Latest Practicable Date.
TRANSACTIONS ENTERED INTO BEFORE THE LISTING WHICH WOULD
OTHERWISE CONSTITUTE CONNECTED TRANSACTIONS
During the Track Record Period and prior to the Listing, we entered into the following
transaction with Wealthy River International Investment Limited (“ Wealthy River ”), being a
connected person (as defined under the Listing Rules) of our Company after the Listing
Date. This transaction is accounted as one-off in nature under HKFRS 16. If this transaction
was entered into after the Listing, such transaction would constitute a connected transaction
under Chapter 14A of the Listing Rules. Details of such transaction are set out below:
Connected person
Upon the Listing, Wealthy River, which has entered into the following tenancy
agreement with our Group, will be our connected person. Wealthy River is owned as to
one-third, one-third and one-third by Mr. Kelvin Chan (an executive Director, the chief
executive officer of our Group and one of our Controlling Shareholders), Mr. Eddie Chan
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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(an executive Director and one of our Controlling Shareholders) and Ms. Karen Chan (an
executive Director and one of our Controlling Shareholders), respectively. Therefore,
Wealthy River is a connected person of our Company pursuant to the Listing Rules.
Tenancy Agreement
As at the Latest Practicable Date, our Group has leased certain properties from Wealthy
River under a tenancy agreement (the “ Tenancy Agreement ”), the details of which are set
out as follows:
Date of the Tenancy Agreement: 29 November 2023
Landlord: Wealthy River
Tenant: Wing Kei Hong Kong
Property addresses: Rooms 1510-1512 and 1520, Fortune Commercial
Building and parking lot nos. 315, 316 and 201,
362 Sha Tsui Road, Tsuen Wan, New Territories,
Hong Kong
Approximate area: 1,896 sq.ft.
Term: 1 January 2024 to 31 December 2024
Total rental: HK$540,000
Use of the property: Office and car parking space
Basis in determining the rental payable
The rental payable under the Tenancy Agreement was determined after arm’s length
negotiations between the parties thereto with reference to the prevailing market rates in
respect of similar premises in the vicinity.
Reasons for the transaction
Our Group has historically been using the properties under the Tenancy Agreement as
our offices and car parking spaces. Having considered that the rental of the properties under
the Tenancy Agreement was comparable to the prevailing market rates in respect of similar
premises in the vicinity, and the Tenancy Agreement was entered into in the ordinary and
usual course of our business, on terms no less favourable to us than those available from
Independent Third Parties, our Directors consider that the terms of the Tenancy Agreement
are fair and reasonable and it is in the interests of our Company and our Shareholders as a
whole to continue using the properties under the Tenancy Agreement as our offices and car
parking spaces.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Accounting treatment of the Tenancy Agreement
Our Group has consistently applied HKFRS 16 in the preparation of the financial
information of our Group throughout the Track Record Period, pursuant to which, at the
commencement date of a lease, our Group as lessee shall recognise a liability to make lease
payments and an asset representing the right to use the underlying asset during the lease
term. Accordingly, the lease transaction under the Tenancy Agreement would be regarded as
an acquisition of assets by the tenant for the purpose of the Listing Rules.
Listing Rules implications
As each of the relevant percentage ratios calculated for the purpose of Chapter 14A of
the Listing Rules in respect of the value of the right-of-use asset of the properties under the
Tenancy Agreement was less than 5% and the value of the right-of-use asset was less than
HK$3.0 million, the relevant transaction would constitute a de minimis connected transaction
under Rules 14A.76 of the Listing Rules and would be fully exempt from the reporting,
annual review, announcement, circular and independent shareholders’ approval requirements
under Chapter 14A of the Listing Rules should our Company be listed on the Stock
Exchange at the time of the relevant transactions.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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SUBSTANTIAL SHAREHOLDERS
So far as is known to our Directors or chief executive of our Company, immediately
after the completion of the Capitalisation Issue and the Share Offer (without taking into
account any Share that may be allotted and issued upon the exercise of the Over-allotment
Option or any option which may be granted under the Share Option Scheme), the following
persons will have an interest or short position in our Shares or underlying Shares which
would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part
XV of the SFO, or, who/which is expected, directly or indirectly, to be interested in 10% or
more of the issued voting shares of any other member of our Group:
Person / corporation
Capacity / nature of
interest
Number of
Shares interested
in as at the date
of submission of
the application
for the Listing
Number of
Shares interested
in immediately
after the
completion of the
Capitalisation
Issue and the
Share Offer
Percentage of
interests in our
Company
immediately
after the
completion of the
Capitalisation
Issue and the
Share Offer
(Note 1)
WK (BVI) Beneficial owner (Note 2) One Share 1,500,000,000 (L) 75%
Mr. Kelvin Chan Interest in controlled
corporation
(Notes 2 and 4)
One Share 1,500,000,000 (L) 75%
Mr. Eddie Chan Interest in controlled
corporation (Note 2 and 5)
One Share 1,500,000,000 (L) 75%
Ms. Karen Chan Interest in controlled
corporation (Note 2)
One Share 1,500,000,000 (L) 75%
Mr. WH Chan Interest in controlled
corporation/Interest of
spouse (Notes 2 and 3)
One Share 1,500,000,000 (L) 75%
Ms. Choi Interest in controlled
corporation/Interest of
spouse (Notes 2 and 3)
One Share 1,500,000,000 (L) 75%
Notes:
1. The letter “L” denotes a person’s/corporation’s “long position” (as defined under Part XV of the
SFO) in such Shares.
2. Our Company will be owned as to 75% by WK (BVI) immediately after the completion of the
Capitalisation Issue and the Share Offer (without taking into account any Share that may be allotted
and issued upon the exercise of the Over-allotment Option or any option which may be granted under
the Share Option Scheme). WK (BVI) is owned as to 30% by Mr. Kelvin Chan, 30% by Mr. Eddie
Chan, 15% by Mr. WH Chan, 15% by Ms. Choi and 10% by Ms. Karen Chan. By virtue of the SFO,
Mr. Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan are deemed to be
interested in the same number of Shares held by WK (BVI).
SUBSTANTIAL SHAREHOLDERS
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3. Mr. WH Chan and Ms. Choi are spouses. Under the SFO, Mr. WH Chan is deemed to be interested in
the same number of Shares in which Ms. Choi is interested, and Ms. Choi is deemed to be interested
in the same number of Shares in which Mr. WH Chan is interested.
4. Ms. Tang Wing Y ee Jenny
቎൘ᄃis the spouse of Mr. Kelvin Chan. Under the SFO, Ms. Tang
Wing Y ee Jenny is deemed to be interested in the same number of Shares in which Mr. Kelvin Chan
is interested.
5. Ms. Fong Ying Wah
ശis the spouse of Mr. Eddie Chan. Under the SFO, Ms. Fong Ying Wah
is deemed to be interested in the same number of Shares in which Mr. Eddie Chan is interested.
Save as disclosed above, our Directors are not aware of any person/corporation who/
which will, immediately after the completion of the Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the exercise of
the Over-allotment Option or any option which may be granted under the Share Option
Scheme), have an interest or short position in our Shares or underlying Shares which fall to
be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2
and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the
issued voting shares of any other member of our Group. Our Directors are not aware of any
arrangement which may at a subsequent date result in a change of control of our Company.
SUBSTANTIAL SHAREHOLDERS
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SHARE CAPITAL
The tables below set forth information with respect to the share capital of our
Company after the completion of the Capitalisation Issue and the Share Offer.
Authorised share capital: HK$
10,000,000,000 Shares of HK$0.01 each 100,000,000
Assuming the Over-allotment Option is not exercised and without taking into account
any Share that may be allotted and issued upon the exercise of any option which may be
granted under the Share Option Scheme, our Company’s issued share capital immediately
after the completion of the Capitalisation Issue and the Share Offer will be as follows:
Shares HK$
1 Share in issue as at the Latest Practicable Date 0.01
1,499,999,999 Shares to be issued pursuant to the Capitalisation
Issue
14,999,999.99
500,000,000 Shares to be issued pursuant to the Share Offer 5,000,000
2,000,000,000 Shares in total 20,000,000
Assuming the Over-allotment Option is exercised in full and without taking into
account any Share that may be allotted and issued upon the exercise of any option which
may be granted under the Share Option Scheme, the issued share capital of our Company
immediately after the completion of the Capitalisation Issue and the Share Offer will be as
follows:
Shares HK$
1 Share in issue as at the Latest Practicable Date 0.01
1,499,999,999 Shares to be issued pursuant to the Capitalisation
Issue
14,999,999.99
500,000,000 Shares to be issued pursuant to the Share Offer 5,000,000
75,000,000 Shares to be issued upon exercise of the
Over-allotment Option
750,000
2,075,000,000 Shares in total 20,750,000
ASSUMPTIONS
The above tables assume that the Share Offer becomes unconditional and Shares are
issued pursuant to the Share Offer. It does not take into account of any Share that may be
issued or repurchased by our Company pursuant to the general mandates granted to our
Directors to issue or repurchase Shares as described below.
SHARE CAPITAL
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MINIMUM PUBLIC FLOAT
Pursuant to Rule 8.08(1)(a) of the Listing Rules, at the time of Listing and at all times
thereafter, our Company must maintain the minimum prescribed percentage of at least 25%
of the total number of issued Shares in the hands of the public.
RANKING
The Offer Shares are ordinary Shares and will rank equally with all Shares in issue or
to be issued as mentioned in this prospectus and will qualify for all dividends or other
distributions declared, paid or made on our Shares in respect of a record date which falls
after the date of this prospectus save for the entitlement under the Capitalisation Issue.
SHARE OPTION SCHEME
Our Company has conditionally adopted the Share Option Scheme. The principal terms
of the Share Option Scheme are summarised in the paragraph headed “D. Share Option
Scheme” in Appendix V to this prospectus.
Our Company did not have any outstanding share option, warrant, convertible
instrument or similar right convertible into our Shares as at the Latest Practicable Date.
GENERAL MANDATE TO ISSUE SHARES
Subject to the Share Offer becoming unconditional, our Directors have been granted a
general unconditional mandate to allot, issue and deal with Shares in aggregate not
exceeding:
(a) 20% of the total number of Shares in issue immediately after the completion of
the Capitalisation Issue and the Share Offer (assuming the Over-allotment Option
is not exercised and without taking into account any Share that may be allotted
and issued upon the exercise of any option which may be granted under the Share
Option Scheme); and
(b) the aggregate number of issued Shares which may be repurchased by our
Company (if any) under the mandate to repurchase Shares referred to below.
Our Directors may, in addition to the Shares which they are authorised to issue under
the general mandate, allot, issue and deal in the Shares pursuant to a rights issue, an issue
of Shares pursuant to the exercise of the subscription rights attaching to any warrant of our
Company, scrip dividends or similar arrangements or options providing for the allotment and
issue of Shares in lieu of the whole or in any part of any cash dividends or options to be
granted under the Share Option Scheme and any option scheme(s) or similar arrangement for
the time being adopted.
SHARE CAPITAL
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This general mandate to issue Shares will remain in effect until whichever is the
earliest of:
(a) the conclusion of our next annual general meeting;
(b) the date by which our next annual general meeting is required by the Articles or
any applicable law to be held; or
(c) the passing of an ordinary resolution of our Shareholders in a general meeting
revoking or varying the authority given to our Directors.
Further details of this general mandate are set out in the paragraph headed “A. Further
Information about our Group — 5. Written resolutions of our sole Shareholder passed on 5
February 2024” in Appendix V to this prospectus.
GENERAL MANDATE TO REPURCHASE SHARES
Subject to the Share Offer becoming unconditional, our Directors have been granted a
general unconditional mandate to exercise all powers of our Company to repurchase, on the
Stock Exchange and/or on any other stock exchange on which the securities of our Company
may be listed and which is recognised by the SFC and the Stock Exchange for this purpose
in accordance with applicable laws and requirements of the Stock Exchange (or of such
other stock exchange), Shares in the number not exceeding 10% of the total number of
Shares in issue immediately after the completion of the Capitalisation Issue and the Share
Offer (assuming the Over-allotment Option is not exercised and without taking into account
any Share that may be allotted and issued upon the exercise of any option which may be
granted under the Share Option Scheme).
This general mandate only relates to repurchases made on the Stock Exchange, or on
any other stock exchange which is recognised by the SFC and the Stock Exchange for this
purpose in accordance with the applicable laws and requirements of the Stock Exchange (or
such other stock exchange). A summary of the relevant Listing Rules is set out in the
paragraph headed “A. Further information about our Group — 6. Repurchase of our Shares”
in Appendix V to this prospectus.
This general mandate to repurchase Shares will remain in effect until whichever is the
earliest of:
(a) the conclusion of our next annual general meeting; or
(b) the date by which our next annual general meeting is required by the Articles or
any applicable law to be held; or
(c) the passing of an ordinary resolution of our Shareholders in a general meeting
revoking or varying the authority given to our Directors.
SHARE CAPITAL
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Further details of this repurchase mandate are set out in the paragraph headed “A.
Further information about our Group — 6. Repurchase of our Shares” in Appendix V to this
prospectus.
CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING
ARE REQUIRED
As a matter of the Companies Act, an exempted company is not required by law to
hold any general meeting or class meeting. The holding of general meeting or class meeting
is prescribed under the articles of association of a company. Accordingly, our Company will
hold general meetings as prescribed under the Articles, a summary of which is set out in
Appendix IV to this prospectus.
SHARE CAPITAL
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You should read the following discussion and analysis in conjunction with our
consolidated financial information and notes thereto set forth in the Accountant’s Report
included as Appendix I to this prospectus and our selected historical consolidated
financial information and operating data included elsewhere in this prospectus. Our
consolidated financial information has been prepared in accordance with HKFRS issued
by Hong Kong Institute of Certified Public Accountants. Our financial information and
the discussion and analysis below assume that our current structure had been in
existence throughout the Track Record Period. For further information in relation to our
Group’s structure, please refer to the section headed “History, development and
Reorganisation” in this prospectus.
The following discussion and analysis contain certain forward-looking statements
that reflect our current views with respect to future events and our financial performance.
These statements are based on assumptions and analyses made by us in light of our
experience and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the
circumstances. However , whether actual outcomes and developments will meet our
expectations and predictions depends on a number of risks and uncertainties over which
we do not have control. Please refer to the sections headed “Risk factors” and
“Forward-looking statements” in this prospectus for discussions of those risks and
uncertainties.
OVERVIEW
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel for construction projects in Hong Kong. We
were established in 1999 and have since undertaken structural steelwork in the role of
subcontractor. With two production facilities in Dongguan, the PRC, we possess our
in-house capacity to process and fabricate structural steel tailored to the specifications of our
customers. All of our structural steel production capacity is currently used to cater to our
own project needs. During each of FY2020, FY2021, FY2022 and the nine months ended 30
September 2023, our Group derived revenue from the provision of structural steelwork in
Hong Kong of approximately HK$324.3 million, HK$228.8 million, HK$336.4 million and
HK$235.0 million, respectively.
During the Track Record Period, we had a total of 73 projects with revenue
contribution to us. As at the Latest Practicable Date, we had 22 projects on hand. Our value
of backlog as at 31 December 2020, 2021 and 2022 and 30 September 2023 amounted to
approximately HK$505.3 million, HK$425.9 million, HK$253.5 million and HK$668.9
million, respectively.
For further information about our business and operations, please refer to the section
headed “Business” in this prospectus.
FINANCIAL INFORMATION
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KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITIONS
Our results of operations and financial conditions have been and will continue to be
affected by a number of factors as mentioned in the section headed “Risk factors” in this
prospectus, and in particular, the following:
Availability of public sector projects in Hong Kong
During the Track Record Period, we were mainly engaged in public sector projects in
Hong Kong. Our public sector projects mainly involved infrastructure and public facilities as
well as public residential developments. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, we derived approximately 44.1%, 66.3%, 84.6% and 83.2% of
our revenue from public sector projects. The nature, extent and timing of available public
sector structural steelwork projects is determined by an interplay of a variety of factors,
including the Hong Kong government’s policies on the infrastructure and public facilities
development, its land supply and public housing policy and the general conditions and
prospects of the Hong Kong’s economy. In the event the Hong Kong government reduces its
expenditure on or changes its policy in relation to public residential and/or infrastructure and
public facilities developments, the number of available public sector structural steelwork
projects may decrease and our business, financial condition and results of operations may be
materially and adversely affected.
There is no guarantee that our customers will provide us with new businesses
Our customers are under no obligation to award projects to us. During the Track
Record Period, we secured new businesses mainly through invitation for tender by
customers. There is no assurance that we will be able to secure new contracts in the future.
Accordingly, the number and scale of projects and the amount of revenue we are able to
derive therefrom may vary significantly from period to period, and it may be difficult to
forecast the volume of future business. For FY2020, FY2021, FY2022 and the nine months
ended 30 September 2023, we recorded a tender success rate of approximately 16.7%, 8.9%,
10.1% and 11.5%, respectively. Our Directors consider that our success rate on project
tendering depends on a range of factors, which primarily include our pricing and tender
strategy, competitors’ tender and pricing strategy, the availability of our resources and
subcontractors, level of competition and our customers’ evaluation standards. Furthermore,
so far as our Directors are aware, some of our customers have maintained an evaluation
system to ensure that the service providers meet certain standards of management, industrial
expertise, financial capability, reputation and regulatory compliance which may change from
time to time. There is no assurance that our Group could achieve the same or higher tender
success rate in the future as we did during the Track Record Period. In the event that our
Group fails to secure new contracts or there is a significant decrease in the number of tender
invitations or contracts available for bidding in the future, the business, financial position
and prospects of our Group could be materially and adversely affected.
FINANCIAL INFORMATION
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Price fluctuations of materials used for our structural steel fabrication
Steel is the principal type of material used for our structural steel fabrication. Key
factors affecting the purchase price of materials include supply and demand in the market
and market competition, many of which are beyond our control. According to the Industry
Report, the price index of steel plates increased from 117.7 in 2018 to 196.3 in 2022, at a
CAGR of approximately 13.6%. Specifically, the price index of steel plates in Hong Kong
recorded a significant increase from 123.1 in 2020 to 184.3 in 2021, representing an annual
growth rate of approximately 49.7%, primarily due to the decrease in steel production, the
cancellation of export tax rebates of exported steel and the increase in export tariffs on
major components of steel in the PRC. The price index of steel plates in Hong Kong further
increased to 196.3 in 2022, representing an increase of approximately 6.5% as compared to
184.3 in 2021. Such increase in price of steel was primarily due to further decrease in steel
production in the PRC in 2022 and the impact from the fifth wave outbreak of COVID-19.
The price index of steel plates in Hong Kong is expected to decrease from 196.3 in 2022 to
171.0 in 2023 as a result of the relaxation of measures imposed by the PRC Government on
containing the outbreak of COVID-19 which contributed to an increase in the supply of steel
from the PRC. For further details on the historical price trend of our materials, please refer
to the paragraph headed “Industry overview – Cost structure analysis” in this prospectus.
We purchase materials from our suppliers on an order-by-order basis. We did not enter
into any long-term supply agreement with our suppliers and we did not engage in any
hedging activities to minimise the risk of price fluctuation of materials. Price fluctuations of
our principal types of materials will affect our structural steel fabrication costs. We cannot
assure you that we will be able to transfer any increase in cost of materials to our customers
in a timely manner or at all. There is no guarantee that the cost of materials will remain
stable in the future, or that any increase in price of materials will not lead to unexpected
and potentially significant increase in our production costs. If we are unable to transfer the
increase in cost of materials to our customers in a timely manner or at all, our profitability
and profit margins may be adversely affected.
Inflation in the PRC could increase our production costs
Inflation rates in the PRC have been volatile in recent years. Increasing inflation in the
PRC could cause a rise in the rental costs, wages, materials and other expenses, which will
in turn increase our structural steel fabrication costs. We cannot assure you that the volatility
in inflation rates will not continue in the future and/or we will be able to transfer any
increase in structural steel fabrication costs resulting from inflation in the PRC to our
customers in a timely manner or at all. If we are unable to transfer the increase in structural
steel fabrication costs to our customers in a timely manner or at all, our profitability and
profit margins may be adversely affected.
Fluctuation in our cost of services
Our cost of services mainly comprise (i) cost of materials, (ii) subcontracting fees, and
(iii) direct labour costs. Our major purchases include cost of materials as well as
subcontracting fees. Please refer to the paragraph headed “Business – Our suppliers” in this
prospectus for further details on our suppliers.
FINANCIAL INFORMATION
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--- page 296 ---
The following sensitivity analysis illustrates the impact of hypothetical fluctuations of
cost of materials, subcontracting fees and direct labour costs (being the major components of
our cost of services) on our profit before income tax expense during the Track Record
Period. The hypothetical fluctuation rate for cost of materials is set at 13.6%, which
corresponds to the CAGR for the price of steel plates (being the major components of our
cost of materials) in Hong Kong from 2018 to 2022 as stated in the Industry Report (please
refer to the paragraph headed “Industry overview – Cost structure analysis” in this
prospectus) and is therefore considered reasonable for the purpose of this sensitivity
analysis. The hypothetical fluctuation rate for subcontracting fees and direct labour costs is
set at 1.2%, which corresponds to the CAGR of the average daily wage of workers engaged
in structural steelwork market in Hong Kong from 2018 to 2022 as stated in the Industry
Report (please refer to the paragraph headed “Industry overview – Cost structure analysis”
in this prospectus) and is therefore considered reasonable for the purpose of this sensitivity
analysis.
Hypothetical fluctuations in
our cost of materials -13.6% +13.6%
Increase/(decrease) in profit before income tax expense
(Note) HK$’000 HK$’000
FY2020 20,476 (20,476)
FY2021 8,468 (8,468)
FY2022 10,024 (10,024)
Nine months ended 30 September 2023 11,688 (11,688)
Hypothetical fluctuations in
our subcontracting fees -1.2% +1.2%
Increase/(decrease) in profit before income tax expense
(Note) HK$’000 HK$’000
FY2020 910 (910)
FY2021 743 (743)
FY2022 1,264 (1,264)
Nine months ended 30 September 2023 754 (754)
Hypothetical fluctuations in
our direct labour costs -1.2% +1.2%
Increase/(decrease) in profit before income tax expense
(Note) HK$’000 HK$’000
FY2020 275 (275)
FY2021 486 (486)
FY2022 420 (420)
Nine months ended 30 September 2023 244 (244)
Note: Our profit before income tax was approximately HK$43.4 million, HK$20.9 million, HK$46.5
million and approximately HK$20.8 million for each of FY2020, FY2021 and FY2022 and the nine
months ended 30 September 2023, respectively.
FINANCIAL INFORMATION
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BASIS OF PRESENTATION OF HISTORICAL FINANCIAL INFORMATION
Please refer to Note 1.3 of the Accountant’s Report set out in Appendix I to this
prospectus.
CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the financial information
of our Group are in accordance with HKFRS. The critical accounting estimates and
accounting policies adopted by our Group are set forth in detail in the notes to the
Accountant’s Report set out in Appendix I to this prospectus.
Some of the accounting policies involve judgements, estimates and assumptions made
by our management. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Further information
regarding the key judgements made in applying our accounting policies are set forth in note
4 to the Accountant’s Report set out in Appendix I to this prospectus.
Revenue recognition
Our Group recognises revenue according to the progress towards complete satisfaction
of performance obligation of the individual contract of structural steelwork. The progress is
determined by the aggregated cost for the individual performance obligation incurred at the
end of the reporting period compared with the estimated budgeted cost. Management’s
estimation of the cost incurred to date which contributes to our Group’s progress in
satisfying the performance obligation and the budgeted cost is primarily based on
construction contract budget and actual cost summary prepared by internal quantity
surveyors, where applicable. Corresponding revenue from contract work is also estimated by
management based on the progress. Because of the nature of the activities undertaken in the
construction contracts, the date at which the contract activity is entered into and the date
when the activity is completed usually fall into different accounting periods. Our Group
regularly reviews and revises the estimation of contract cost in the budget prepared for each
construction contract as the contract progresses.
Impairment
Our Group assess on a forward-looking basis the expected credit losses associated with
its debt instruments carried at amortised cost. The impairment methodology applied depends
on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, our Group applies the simplified approach
permitted by HKFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables and contract assets.
FINANCIAL INFORMATION
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For other financial assets at amortised cost, including deposits and other receivables,
management considers that their credit risks have not increased significantly since initial
recognition with reference to the counterparty historical default rate and current financial
position. The impairment provision is determined based on the 12-month expected credit
losses which is close to zero.
SUMMARY OF RESULTS OF OPERATIONS
The consolidated statements of comprehensive income for FY2020, FY2021 and
FY2022 and the nine months ended 30 September 2023 are summarised below, which have
been extracted from the Accountant’s Report set out in Appendix I to this prospectus:
FINANCIAL INFORMATION
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--- page 299 ---
Y ear ended 31 December
Nine months
ended 30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Revenue 324,292 228,776 336,384 251,561 235,038
Cost of services (269,254) (193,359) (269,445) (202,279) (188,044)
Gross profit 55,038 35,417 66,939 49,282 46,994
Other income 1,283 133 2,611 2,579 40
Other gain/(loss), net 112 159 123 86 (540)
Administrative expenses (12,695) (14,670) (19,078) (13,441) (12,075)
Listing expenses –––– (12,184)
Reversal of impairment losses/(impairment
losses) on financial assets and contract
assets 162 383 (3,800) (3,778) (1,102)
Operating profit 43,900 21,422 46,795 34,728 21,133
---------- ---------- ---------- ---------- ----------
Finance income 23 39 95 38 182
Finance costs (496) (526) (434) (281) (544)
Finance costs, net (473) (487) (339) (243) (362)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Profit before income tax expense 43,427 20,935 46,456 34,485 20,771
Income tax expense (6,721) (3,599) (7,191) (5,629) (5,656)
Profit for the year/period attributable to
owners of the Company 36,706 17,336 39,265 28,856 15,115
Other comprehensive (losses)/income:
Item that may be reclassified to profit or
loss:
Currency translation differences (1,149) (636) 1,482 1,829 826
Total comprehensive income for the
year/period attributable to owners of
the Company 35,557 16,700 40,747 30,685 15,941
FINANCIAL INFORMATION
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--- page 300 ---
PRINCIPAL COMPONENTS OF RESULTS OF OPERATIONS
Revenue
We are a structural steelwork contractor in Hong Kong, specialising in the supply,
fabrication and installation of structural steel. During the Track Record Period, our Group’s
revenue was derived from our services for the provision of structural steelwork in Hong
Kong. For detailed breakdowns of our revenue during the Track Record Period by reference
to project sectors and the types of development involved, please refer to the paragraphs
headed “Business – Business overview” and “Business – Projects undertaken during the
Track Record Period” in this prospectus.
Please refer to the paragraph headed “Period-to-period comparison of results of
operations” in this section for the discussion of fluctuations in the amount of our revenue
during the Track Record Period.
Cost of services
The table below sets forth a breakdown of our cost of services during the Track Record
Period:
For the nine months ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %
(Unaudited)
Cost of materials 150,560 55.9 62,266 32.2 73,708 27.3 48,694 24.1 85,938 45.7
Subcontracting fees 75,859 28.2 61,933 32.0 105,302 39.1 83,890 41.5 62,831 33.4
Direct labour costs 22,950 8.5 40,502 21.0 35,021 13.0 26,722 13.2 20,302 10.8
Transportation 4,461 1.7 5,457 2.8 12,037 4.5 9,906 4.9 3,627 1.9
Testing expenses 4,263 1.6 3,055 1.6 3,175 1.2 1,954 1.0 2,636 1.4
Depreciation 3,716 1.4 4,255 2.2 4,492 1.7 3,187 1.6 3,850 2.0
Machinery service
fees 2,956 1.1 9,290 4.8 28,411 10.5 21,429 10.6 6,500 3.5
Consultancy fees 385 0.1 955 0.5 1,510 0.6 1,288 0.6 361 0.2
Others 4,104 1.5 5,646 2.9 5,789 2.1 5,209 2.5 1,999 1.1
269,254 100.0 193,359 100.0 269,445 100.0 202,279 100.0 188,044 100.0
Our cost of services during the Track Record Period comprised:
(a) Cost of materials
It represents costs for procuring materials required for performing our structural
steelwork. Steel represents the major type of material sourced by us.
FINANCIAL INFORMATION
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--- page 301 ---
(b) Subcontracting fees
It represents the costs for engaging subcontractors for carrying out (i) construction
site works, and (ii) structural steel fabrication works. For subcontractors of construction
site works, the scope of services are determined according to our customers’
specifications, drawings and requirements. The construction site works undertaken by
our subcontractors mainly include installation, touch-up painting and fire protection
works for our fabricated structural steel. For subcontractors of structural steel
fabrication works, we outsource all required galvanising works to our subcontractors in
the PRC to achieve optimisation in our production. Further, depending on our
production capacity, we may also subcontract other parts of structural steel fabrication
works to our subcontractors in the PRC. For further detail of our subcontractors, please
refer to the paragraph headed “Business – Our suppliers” in this prospectus.
(c) Direct labour costs
It represents our salaries and benefits provided to our staff who were directly
involved in carrying out structural steelwork, and our staff who were responsible for
project management and supervision, engineering, production, drawing, quality control
and site works.
(d) Transportation
It represents costs of engaging third party logistics service providers for (i) the
delivery of materials from Hong Kong to our production facilities in the PRC; and (ii)
the delivery of our finished structural steel products from our production facilities in
the PRC to the relevant construction sites in Hong Kong.
(e) Testing expenses
It represents costs of engaging external laboratory selected by the Hong Kong
government or by us to conduct testing of materials and engaging third party testing
service providers to conduct weld testing.
(f) Depreciation
It represents the depreciation charges for our plant and equipment and right-of-use
assets which included our leasehold land and leased production facilities in the PRC.
(g) Machinery service fees
It represents costs in relation to hiring of machinery necessary for carrying out
our construction works, such as cranes and lifting machines.
FINANCIAL INFORMATION
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--- page 302 ---
(h) Consultancy fees
It mainly represents (i) services provided by external technical engineering
consultant to assist with our technical submissions to our customers on a case-by-case
basis; and (ii) services provided by external safety consultant to assist with our safety
supervision on a case-by-case basis.
(i) Others
It represents various miscellaneous expenses relevant to the provision of our
works, such as utilities expenses of our leased production facilities in the PRC, repair
and maintenance and sundry expenses.
Please refer to the paragraph headed “Period-to-period comparison of results of
operations” in this section for a discussion of material fluctuations in our cost of services.
Gross profit and gross profit margin
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %
(Unaudited)
Public sector
projects 25,205 17.6 25,989 17.1 59,738 21.0 42,971 20.6 40,989 21.0
Private sector
projects 29,833 16.5 9,429 12.2 7,201 13.9 6,311 14.7 6,005 15.2
55,038 17.0 35,417 15.5 66,939 19.9 49,282 19.6 46,994 20.0
Our gross profit margin for public sector projects remained relatively stable at
approximately 17.6% and 17.1% for FY2020 and FY2021, respectively. Our gross profit
margin for public sector projects increased to approximately 21.0% for FY2022. The
relatively higher gross profit margin for public sector projects for FY2022 was mainly
attributable to a substantial amount of works was performed for projects with relatively
higher gross profit margin during FY2022, namely (i) Project No. #09; (ii) Project No. #11;
and (iii) a public sector project with an estimated contract sum of approximately HK$18.6
million, involving a residential development in Diamond Hill, from Sun Fook Kong
Construction Limited. Please refer to the paragraph headed “Period-to-period comparison of
results of operations – FY2022 compared with FY2021 – Gross profit and gross profit
margin” below in this section for further details. Our gross profit margin for public sector
projects for the nine months ended 30 September 2022 and 2023 remained relatively stable
at approximately 20.6% and 21.0%, respectively.
FINANCIAL INFORMATION
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--- page 303 ---
Our gross profit margin for private sector projects decreased from approximately 16.5%
for FY2020 to approximately 12.2% for FY2021 and increased to approximately 13.9% for
FY2022. The relatively lower gross profit margin for private sector projects for FY2021 and
FY2022 was mainly attributable to a substantial amount of works was performed for a
project with relatively lower gross profit margin during FY2021 and FY2022, namely
Project No. #07, being a private sector commercial development project located at Quarry
Bay and one of our Group’s top five projects for FY2021 and FY2022. Subsequent to the
commencement of Project No. #07, our Group was informed by Hip Hing Group, being our
customer for Project No. #07, that the installation works involved thereunder required steel
plates with thinner thickness measurement. Such thinner thickness measurement
specifications of the steel plates required higher standards of workmanship as well as more
complicated fabrication and installation processes. As a result, to the best estimation of our
Directors, our Group had incurred additional costs of approximately HK$3.5 million in
aggregate for FY2021 and FY2022 owing to the unexpected complexity encountered when
our Group carried out the fabrication and installation of structural steel works involved
under Project No. #07. Project No. #07 contributed gross profit of approximately HK$2.0
million and HK$1.9 million to our Group for FY2021 and FY2022, respectively. Our gross
profit margin for private sector projects for the nine months ended 30 September 2022 and
2023 remained relatively stable at approximately 14.7% and 15.2%, respectively.
For the fluctuation of our Group’s overall gross profit and overall gross profit margin
during the Track Record Period, please refer to the paragraph headed “Period-to-period
comparison of results of operations” in this section.
Other income and other gain/(loss), net
The table below sets forth a breakdown of our other income and other gain/(loss), net
during the Track Record Period:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Other income
Government grants 1,283 133 2,611 2,579 40
Other gain/(loss), net
Change in value of
life insurance
contracts 112 123 100 86 (461)
Gain/(loss) on
disposal of
property, plant and
equipment – – 23 – (79)
Others – 3 6–––
112 159 123 86 (540)
1,395 292 2,734 2,665 (500)
FINANCIAL INFORMATION
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--- page 304 ---
Our other income and other gain/(loss), net during the Track Record Period mainly
comprised:
(a) Government grants
It mainly represents the wage subsidy granted under the Employment Support
Scheme under the Anti-Epidemic Fund. Subsidies are offered to employers who have
employed regular employees and paid MPF for them. Wage subsidies were granted to
our Group for the use of paying wages and MPF of regular employees from June 2020
to November 2020 and from May 2022 to July 2022.
(b) Change in value of life insurance contracts
It represents changes to the cash surrender value at each balance sheet date as
recognised during each reporting period. Our Group has invested in certain key
management life insurance contracts, which contain both investment and insurance
elements. The life insurance contracts are initially recognised at the amount of
premium paid, and subsequently measured at each balance sheet date at its cash
surrender value.
Administrative expenses
The table below sets forth a breakdown of our administrative expenses during the
Track Record Period:
For the nine months ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %
(Unaudited)
Staff costs (including directors’
remunerations) 9,589 75.5 10,536 71.8 10,779 56.5 6,768 50.4 7,061 58.5
Motor vehicle expenses 1,459 11.5 1,450 9.9 2,099 11.0 973 7.2 1,039 8.6
Depreciation 983 7.7 875 6.0 896 4.7 659 4.9 681 5.6
Entertainment expenses 379 3.0 471 3.2 304 1.6 185 1.4 226 1.9
Insurance 362 2.9 418 2.9 286 1.5 264 2.0 285 2.4
Legal and professional fees 305 2.4 355 2.4 455 2.4 350 2.6 302 2.5
Exchange differences (1,985) (15.6) (1,109) (7.6) 2,701 14.1 3,108 23.1 803 6.6
Other expenses 1,603 12.6 1,674 11.4 1,558 8.2 1,134 8.4 1,678 13.9
12,695 100.0 14,670 100.0 19,078 100.0 13,441 100.0 12,075 100.0
FINANCIAL INFORMATION
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--- page 305 ---
Our administrative expenses during the Track Record Period comprised:
(a) Staff costs
It represents the fees, salaries, discretionary bonuses, other welfare and
allowances and contributions to retirement benefit scheme provided to our Directors,
and finance, accounting and administrative staff.
(b) Motor vehicle expenses
It represents the fuel costs, parking fees and repair and maintenance costs in
relation to the use of motor vehicles.
(c) Depreciation
It represents the depreciation charges for our motor vehicles, computer and office
equipment and furniture.
(d) Entertainment expenses
It represents costs in relation to the relationship building with existing and
potential customers.
(e) Insurance
It represents the insurance premium for insurance policies maintained by our
Group.
(f) Legal and professional fees
It mainly represents the service fees incurred for audit and accounting services,
legal advisory services and annual ISO audit services.
(g) Exchange differences
It represents exchange gains or losses recognised in relation to our PRC operation.
(h) Others
It represents other administrative expenses, such as printing and stationery,
donation, printing and postage, utilities expenses, bank charges and sundry expenses.
FINANCIAL INFORMATION
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--- page 306 ---
Reversal of impairment losses/(impairment losses) on financial assets and contract
assets
Our Group recognised impairment losses for trade receivables of approximately HK$0.4
million, HK$2.1 million, HK$2.1 million and HK$36,000 for FY2021, the nine months
ended 30 September 2022, FY2022 and the nine months ended 30 September 2023,
respectively, while our Group recognised reversal of impairment losses on trade receivables
of approximately HK$17,000 for FY2020.
Our Group recognised impairment losses for contract assets of approximately HK$1.7
million, HK$1.7 million and HK$1.1 million for the nine months ended 30 September 2022,
FY2022 and the nine months ended 30 September 2023, respectively, while our Group
recognised reversal of impairment losses on contract assets of approximately HK$0.1 million
and HK$0.8 million for FY2020 and FY2021, respectively.
Our total impairment losses on financial assets and contract assets amounted to
approximately HK$3.8 million, HK$3.8 million and HK$1.1 million for the nine months
ended 30 September 2022, FY2022 and the nine months ended 30 September 2023,
respectively, while our total reversal of impairment losses on financial assets and contract
assets amounted to approximately HK$0.2 million and HK$0.4 million for FY2020 and
FY2021, respectively.
FINANCIAL INFORMATION
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--- page 307 ---
Finance costs, net
The table below sets forth a breakdown of our finance income and costs during the
Track Record Period:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Finance income
– Interest income
from bank deposits (1) (15) (73) (21) (159)
– Unwinding of
discount impact (22) (24) (22) (17) (23)
(23) (39) (95) (38) (182)
Finance costs
– Interest expense on
bank borrowings 227 352 316 226 336
– Interest expense on
lease liabilities 269 174 118 55 208
496 526 434 281 544
Finance costs, net 473 487 339 243 362
Our finance income during the Track Record Period represents the interest income from
bank deposits and unwinding of discount impact, while our finance costs represent interest
expenses on bank borrowings and lease liabilities. For further details of our bank borrowings
and lease liabilities, please refer to the paragraph headed “Indebtedness” in this section.
Income tax expense
Our Group is not subject to any income tax in the Cayman Islands and British Virgin
Islands pursuant to the rules and regulations in those jurisdictions, while our subsidiaries,
namely Wing Kei Hong Kong and Wing Kei Management, are subject to Hong Kong profits
tax, and Wing Kei Dongguan is subject to the PRC corporate income tax.
Hong Kong profits tax is calculated at 16.5% of the estimated assessable profits during
the Track Record Period, except for one entity that is qualified under the two-tiered profits
tax rate regime, under which the first HK$2.0 million of its assessable profits are taxed at
8.25% and the remaining assessable profits are taxed at 16.5%.
Provision for the PRC corporate income tax is calculated at the statutory rate of 25%
on the assessable income of Wing Kei Dongguan during the Track Record Period.
FINANCIAL INFORMATION
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--- page 308 ---
Our income tax expense for the Track Record Period can be reconciled to the profit
before income tax expense per the consolidated statements of comprehensive income as
follows:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Profit before income
tax expense 43,427 20,935 46,456 34,485 20,771
Tax calculated at
domestic tax rates
applicable to profits
in the respective
countries/places of
business 6,615 3,552 7,358 6,039 5,594
Tax effects of:
Income not subject to
tax (230) (20) (430) (419) (25)
Expenses not
deductible for tax
purpose 336 67 263 9 87
6,721 3,599 7,191 5,629 5,656
During the Track Record Period, our effective tax rates (calculated as income tax
expense for the year/period divided by the profit before income tax expense excluding
listing expenses) were as follows:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
(Unaudited)
Effective tax rate 15.5% 17.2% 15.5% 16.3% 17.2%
FINANCIAL INFORMATION
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--- page 309 ---
PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS
For the nine months ended 30 September 2023 compared with the nine months ended
30 September 2022
Revenue
Our revenue decreased by approximately HK$16.5 million or 6.6%, from approximately
HK$251.6 million for the nine months ended 30 September 2022 to approximately
HK$235.0 million for the nine months ended 30 September 2023, which was mainly due to
the combined effect of:
(i) Project No. #02, which involved a public infrastructure development located at
Kai Tak with an estimated contract sum of approximately HK$380.2 million,
contributed a relatively lower revenue of approximately HK$40.9 million for the
nine months ended 30 September 2023 as compared to approximately HK$153.0
million for the nine months ended 30 September 2022, as substantial amount of
construction site works was performed by our Group under the project in FY2022;
(ii) Project No. #12, which involved a public infrastructure development located at
Tamar with an estimated contract sum of approximately HK$84.1 million, which
commenced works in April 2023 and contributed revenue of approximately
HK$37.5 million for the nine months ended 30 September 2023 while no revenue
was recognised for such project for the nine months ended 30 September 2022;
(iii) Project No. #11, which involved a public infrastructure development located at
Kai Tak with an estimated contract sum of approximately HK$69.1 million, which
contributed revenue of approximately HK$34.3 million for the nine months ended
30 September 2023 while revenue of approximately HK$1.4 million was
recognised for the nine months ended 30 September 2022;
(iv) Project No. #13, which involved a private commercial development located at
Causeway Bay with an estimated contract sum of approximately HK$388.0
million, commenced works in September 2023 which contributed revenue of
approximately HK$20.8 million for the nine months ended 30 September 2023
while no revenue was recognised for the nine months ended 30 September 2022;
and
(v) Some new projects were awarded in 2023 while the purchase of materials,
fabrication works and/or substantial site works are expected to be performed in or
after the third quarter of 2023, such as (i) Project No. #13, a private commercial
development located at Causeway Bay with an estimated contract sum of
approximately HK$388.0 million which was awarded and commenced in
September 2023; (ii) Project No. O02, a private commercial development located
at Central with an estimated contract sum of approximately HK$55.0 million
which was awarded in June 2023 and commenced in September 2023; and (iii)
Project No. O03, a public residential development located at Tung Chung with an
FINANCIAL INFORMATION
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--- page 310 ---
estimated contract sum of approximately HK$43.8 million which was awarded in
June 2023 and expected to commence in November 2023, resulting in lower
amount of works performed during the nine months ended 30 September 2023.
Cost of services
Our cost of services decreased by approximately HK$14.2 million or 7.0%, from
approximately HK$202.3 million for the nine months ended 30 September 2022 to
approximately HK$188.0 million for the nine months ended 30 September 2023. The
decrease was primarily driven by the decrease in our revenue. Our cost of services mainly
comprised cost of materials, subcontracting fees, direct labour costs, transportation, and
machinery service fees.
The following is a discussion of the changes in the key components of our cost of
services during the nine months ended 30 September 2023 as compared to the nine months
ended 30 September 2022:
(i) Our cost of materials increased by approximately HK$37.2 million or 76.5%, from
approximately HK$48.7 million for the nine months ended 30 September 2022 to
approximately HK$85.9 million for the nine months ended 30 September 2023.
Such increase was mainly due to our Group procured substantial amount of
materials for Project No. #12 and Project No. #13, and incurred cost of materials
of approximately HK$35.7 million in aggregate for such projects for the nine
months ended 30 September 2023;
(ii) Our subcontracting fees decreased by approximately HK$21.1 million or 25.1%,
from approximately HK$83.9 million for the nine months ended 30 September
2022 to approximately HK$62.8 million for the nine months ended 30 September
2023, which was mainly because a substantial amount of construction site works
was performed for Project No. #02, being our top project for the nine months
ended 30 September 2023, during FY2022 while two of our remaining top five
projects for the nine months ended 30 September 2023 were at their initial stage;
and
(iii) Our direct labour costs decreased by approximately HK$6.4 million or 24.0%, from
approximately HK$26.7 million for the nine months ended 30 September 2022 to
approximately HK$20.3 million for the nine months ended 30 September 2023,
which was mainly attributable to the decrease in our number of site workers from
28 as at 30 September 2022 to 16 as at 30 September 2023. For details on the
decrease in our number of site workers during FY2022 and up to the nine months
ended 30 September 2023, please refer to the paragraph headed “Business –
Employees – Number of employees” in this prospectus.
Gross profit and gross profit margin
Our gross profit decreased by approximately HK$2.3 million or 4.6%, from
approximately HK$49.3 million for the nine months ended 30 September 2022 to
approximately HK$47.0 million for the nine months ended 30 September 2023, which was
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mainly due to the decrease in revenue as discussed above. Our gross profit margin remained
stable at approximately 19.6% for the nine months ended 30 September 2022 and at
approximately 20.0% for the nine months ended 30 September 2023.
Other income and other gain/(loss), net
Our other income and other gain/(loss), net changed from other income and gain of
approximately HK$2.7 million for the nine months ended 30 September 2022 to other loss
of approximately HK$0.5 million for the nine months ended 30 September 2023, which was
mainly due to (i) the decrease in government grants received by our Group from
Employment Support Scheme under Anti-Epidemic Fund; and (ii) the loss recognised for the
change in value of life insurance contracts, which was measured at its cash surrender value
at each balance sheet date.
Administrative expenses
Our administrative expenses decreased by approximately HK$1.4 million or 10.2%,
from approximately HK$13.4 million for the nine months ended 30 September 2022 to
approximately HK$12.1 million for the nine months ended 30 September 2023, which was
mainly due to the decrease in exchange losses recognised in relation to our PRC operation
of approximately HK$3.1 million for the nine months ended 30 September 2022 to
approximately HK$0.8 million for the nine months ended 30 September 2023.
Reversal of impairment losses/(impairment losses) on financial assets and contract assets
We recorded impairment losses on financial assets and contract assets of approximately
HK$3.8 million for the nine months ended 30 September 2022 and approximately HK$1.1
million for the nine months ended 30 September 2023.
The impairment losses recognised for the nine months ended 30 September 2022 was
mainly due to specific provision made on trade receivable (with gross carrying amount of
approximately HK$2.6 million) and retention receivable (with gross carrying amount of
approximately HK$1.5 million) from one of our customers. During FY2021, impairment losses
of approximately HK$0.5 million and HK$0.3 million were made on the gross carrying
amounts of trade receivable and retention receivable of the said customer, respectively. For
further details, please refer to the paragraph headed “FY2021 compared with FY2020 –
Reversal of impairment losses on financial assets and contract assets” below in this section.
Our Group entered into contract with the said customer in March 2019 in relation to a project
with contract sum of approximately HK$30.3 million. Our Group had notified the said
customer on the completion of works in July 2020. As at 31 December 2020, the gross
carrying amount of trade receivable was approximately HK$5.8 million and the gross carrying
amount of retention receivable was approximately HK$1.5 million. In February 2021, the said
customer had committed to pay the outstanding balance by four instalments and also set out
the terms of release of retention money. During 2021, the said customer settled approximately
HK$3.2 million. In December 2021, the said customer had confirmed with our Group on the
remaining amount and issued 13 post-dated cheques for such settlement. In view of the above
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and having considered the expected credit loss rate, impairment losses of approximately
HK$0.5 million and HK$0.3 million were made on the gross carrying amounts of trade
receivable and retention receivable of the said customer during FY2021, respectively.
During the nine months ended 30 September 2022, the cheques issued by the
abovementioned customer were dishonoured. In April 2022, our executive Directors became
aware that there was a winding-up petition against such customer. Our executive Directors
considered that the chance of collecting the remaining outstanding receivable balance from
the said customer was low. Therefore, impairment losses were made on the remaining gross
carrying amounts of such trade receivable and retention receivable of approximately HK$2.1
million and HK$1.2 million, respectively. In 2022, our Group petitioned for winding-up of
the said customer on insolvency grounds. For further detail and status of the aforesaid
winding-up petition, please refer to claim number 1 as described in the paragraph headed
“Business – Litigations and claims – (i) Ongoing civil litigation involving our Group as at
the Latest Practicable Date” in this prospectus.
Finance costs, net
Our finance costs, net increased by HK$0.1 million or 49.0%, from approximately
HK$0.2 million for the nine months ended 30 September 2022 to approximately HK$0.4
million for the nine months ended 30 September 2023. Such increase was mainly due to the
increase in the interest expenses on bank borrowings and lease liabilities. Our finance
income remained at low level for the nine months ended 30 September 2022 and the nine
months ended 30 September 2023.
Income tax expense
Despite the decrease in our revenue, our income tax expense remained stable at
approximately HK$5.6 million for the nine months ended 30 September 2022 and at
approximately HK$5.7 million for the nine months ended 30 September 2023, which was
due to (i) the non-deductible listing expenses of approximately HK$12.2 million incurred
during the nine months ended 30 September 2023 while nil incurred for the nine months
ended 30 September 2022; and (ii) impairment losses on financial assets and contract assets
of approximately HK$3.8 million for the nine months ended 30 September 2022 was
recognised while impairment losses on financial assets and contract assets of approximately
HK$1.1 million was recognised for the nine months ended 30 September 2023.
Profit for the period
As a result of the foregoing factors and the listing expenses of approximately HK$12.2
million incurred during the nine months ended 30 September 2023, our profit for the period
decreased by approximately HK$13.7 million or 47.6%, from approximately HK$28.9
million for the nine months ended 30 September 2022 to approximately HK$15.1 million for
the nine months ended 30 September 2023, while our net profit margin decreased by
approximately 5.0 percentage point, from approximately 11.5% for the nine months ended 30
September 2022 to approximately 6.4% for the nine months ended 30 September 2023.
FINANCIAL INFORMATION
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FY2022 compared with FY2021
Revenue
Our revenue increased by approximately HK$107.6 million or 47.0%, from
approximately HK$228.8 million for FY2021 to approximately HK$336.4 million for
FY2022, which was mainly attributable to the unexpected change to our works schedule of
Project No. #02, which involved a public infrastructure development located at Kai Tak with
an estimated contract sum of approximately HK$380.2 million. This project contributed
revenue of approximately HK$193.2 million, for FY2022 and approximately HK$69.5
million for FY2021. Our Group secured Project No. #02 from Hip Hing Group in late 2019
and started generating revenue from Project No. #02 by October 2019. For FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, our Group recognised
revenue of approximately HK$71.3 million, HK$69.5 million, HK$193.2 million and
HK$40.9 million, from Project No. #02, respectively. According to the original project
schedule, our contract works were supposed to commence in or around late 2019 and
complete by mid-2021. In anticipation of the tight project schedule and scale of works under
Project No. #02, our Group had started procuring materials and commenced part of the
structural steel fabrication works shortly after we secured this project.
By mid-2020, we were informed that our works schedule under Project No. #02 would
be revised primarily due to changes in design and drawings of structural steelwork by the
project owner and that the substantial part of our construction site works would be
rescheduled to 2021.
Being mindful of the revised project schedule of Project No. #02 and in light of the
constraint in our available resources, during the second half of 2020, our executive Directors
considered that it was vital to temporarily refrain from tendering for sizeable projects which
may substantially overlap with the revised project schedule of Project No. #02. Our Group
also decided to reserve a substantial amount of our then available resources, including the
capacity at our production facilities and manpower of our project management staff, for
Project No. #02, taking into consideration (a) the substantial part of our construction site
works under Project No. #02 would be rescheduled to 2021; (b) the sizeable scale and
amount of works involved under such project; (c) the expected workloads for other ongoing
projects; (d) the uncertainty arising from the COVID-19 outbreak and the associated risks of
labour shortage and disruption to the transportation between Hong Kong and the PRC; and
(e) the need to preserve our industry reputation and business relationship with Hip Hing
Group via the satisfactory completion of Project No. #02, which is a landmark sports
infrastructure development in Hong Kong.
Later in mid-2021, our Group was informed that the substantial part of our construction
site works under Project No. #02 would be further rescheduled due to the late handover of
the relevant work sites to us. While pending instruction from Hip Hing Group for
proceeding with our construction site works, we had continued to perform fabrication works
in 2021 to ensure we could meet the revised project schedule of Project No. #02. The
fabricated items have occupied significant storage space at our production facilities, thereby
reducing our production capacity for undertaking other projects in 2021.
FINANCIAL INFORMATION
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Amid the repeated rescheduling of Project No. #02, during the second half of FY2021,
we attempted to recoup the expected revenue which would otherwise be generated from
Project No. #02 in the absence of such rescheduling. We did this by tendering for new
projects that have relatively shorter duration and could readily commence in the near term.
Despite our efforts, the revenue generated from the projects we obtained during the second
half of 2021 was not sufficient to compensate for the decrease in our revenue due to the
lower amount of works performed under Project No. #02. In addition, as mentioned above,
during the second half of 2020, we had temporarily refrained from tendering for sizeable
projects which may substantially overlap with the revised project schedule of Project No.
#02, resulting in lower amount of works performed by us in FY2021. After mid-2021, our
Group did not receive any further notice in relation to the rescheduling of Project No. #02
and a substantial part of our construction site works were carried out in 2022 in accordance
with the last revised schedule. Pursuant to the contract terms of the service agreement for
Project No. #02, in the event our contract works under Project No. #02 was not completed
within the original schedule due to reason(s) other than our default, our Group shall be
entitled to apply in writing to Hip Hing Group for an extension to project duration and
claim for any additional costs reasonably incurred by us arising from the delay. Based on (i)
our negotiation with Hip Hing Group; and (ii) the aggregate payment certification certified
by Hip Hing Group exceeds the original contract sum of this project, the Directors are of the
view that our Group was able to claim for substantial part of the increase in costs incurred
by us arising from the rescheduling of Project No. #02 to Hip Hing Group.
Cost of services
Our cost of services increased by approximately HK$76.1 million or 39.3%, from
approximately HK$193.4 million for FY2021 to approximately HK$269.4 million for
FY2022. The increase was primarily driven by the increase in our revenue. Our cost of
services mainly comprised cost of materials, subcontracting fees, direct labour costs,
transportation and machinery service fees.
The following is a discussion of the changes in the key components of our cost of
services during FY2022 as compared to FY2021:
(i) Our cost of materials increased by approximately HK$11.4 million or 18.4%, from
approximately HK$62.3 million for FY2021 to approximately HK$73.7 million for
FY2022. Such less-than-proportionate increase as compared to the increase in our
revenue was mainly because more than half of the materials cost of approximately
HK$40.5 million for Project No. #02 were incurred during FY2020 having
considered the original works schedule under Project No. #02, while the
construction site works were mainly performed during FY2022 due to the
rescheduling of Project No. #02;
(ii) Our subcontracting fees increased by approximately HK$43.4 million or 70.0%,
from approximately HK$61.9 million for FY2021 to approximately HK$105.3
million for FY2022. Such increase in subcontracting fees was mainly due to (a)
the engagement of a subcontractor specialised in fire protection works for our
projects (including Project No. #02) which incurred subcontracting fees of
approximately HK$14.8 million for FY2021 and approximately HK$34.9 million
FINANCIAL INFORMATION
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for FY2022; and (b) the reduction in number of our site workers as explained in
(iii) below, resulting in the increase in use of subcontractors for construction site
works for our projects as represented by the increase in subcontracting fees for
construction site work incurred by us (excluding the subcontracting fees of the
aforementioned subcontractor who specialised in fire protection works) from
approximately HK$34.1 million for FY2021 to approximately HK$56.7 million for
FY2022;
(iii) Our direct labour costs decreased by approximately HK$5.5 million or 13.5%,
from approximately HK$40.5 million for FY2021 to approximately HK$35.0
million for FY2022, which was mainly attributable to the decrease in our number
of site workers. For details on the decrease in our number of site workers from
FY2021 to FY2022, please refer to the paragraph headed “Business – Employees
– Number of employees” in this prospectus.
(iv) Our transportation costs increased by approximately HK$6.6 million or 120.6%,
from approximately HK$5.5 million for FY2021 to approximately HK$12.0
million for FY2022. Such increase was mainly attributable to (a) the
transportation of substantial volume of finished products from our production
facilities in the PRC to the construction site of Project No. #02; and (b) the
transportation of materials and finished products between Hong Kong and the
PRC by sea instead of by road during 2022 as cross-border transportation was
significantly disrupted because of the fifth wave outbreak of COVID-19 resulting
in higher transportation costs being incurred; and
(v) Our machinery service fees increased by approximately HK$19.1 million or
205.8%, from approximately HK$9.3 million for FY2021 to approximately
HK$28.4 million for FY2022. Such increase was mainly attributable to the
engagement of services provider for using sizeable cranes and heavy machinery to
transport our steel products in the construction site of Project No. #02. We
incurred machinery service fees of approximately HK$26.5 million for FY2022
for Project No. #02.
Gross profit and gross profit margin
Our gross profit increased by approximately HK$31.5 million or 89.0%, from
approximately HK$35.4 million for FY2021 to approximately HK$66.9 million for FY2022,
which was mainly due to the increase in revenue as discussed above.
Our gross profit margin increased by approximately 4.4 percentage point from 15.5%
for FY2021 to approximately 19.9% for FY2022. We recorded a relatively lower gross profit
margin for FY2021 mainly due to the unforeseen rescheduling of our construction site works
for Project No. #02 in mid-2021. Due to the unanticipated rescheduling of Project No. #02,
a substantial amount of the then available resources of our Group originally reserved for
Project No. #02 such as direct labour and structural steel production capacity were rendered
idle or not fully utilised during FY2021, resulting in certain direct labour costs,
manufacturing overheads and project administrative costs incurred which amounted to
approximately HK$1.9 million during FY2021 (the “ Idle Cost ”). In accordance with the
FINANCIAL INFORMATION
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relevant accounting standard, as the Idle Cost did not contribute to our Group’s progress in
satisfying our performance obligations amid the rescheduling of Project No. #02, our Group
did not recognise the corresponding revenue for the Idle Cost by the time they were
incurred, and such Idle Cost was not allocated to Project No. #02 or any particular project
undertaken by our Group, but were recognised as unallocated costs in our Group’s cost of
services for FY2021. As a result, the gross profit margin of Project No. #02 was not
adversely affected by the Idle Cost. Nonetheless, since the Idle Cost had been recognised as
unallocated cost of services of our Group for FY2021 and did not contribute the
corresponding revenue to our Group for FY2021, our Group’s overall gross profit margin for
FY2021 was lower as compared to that of FY2020 and FY2022. In addition, the increase in
our gross profit margin was also attributable to projects with relatively higher gross profit
margin with substantial amount of works performed during FY2022, namely, (i) Project No.
#09, (ii) Project No. #11; and (iii) a public sector project with an estimated contract sum of
approximately HK$18.6 million, involving a residential development in Diamond Hill, from
Sun Fook Kong Construction Limited (the “ Diamond Hill Project ”). In relation to Project
No. #09, which involved the building of a vehicular access bridge using structural steel, our
Group was able to apply our past experience in relation to the installation of structural steel
bridge which resulted in lower costs incurred than expected and was able to record a
relatively higher profit margin from Project No. #09. This project contributed a gross profit
of approximately HK$8.9 million to our Group for FY2022. In relation to Project No. #11,
our customer has given us a relatively short timeframe to complete such project. Having
considered the additional costs associated with engaging subcontractors to work overtime to
ensure timely completion, we had set a higher pricing for such project. Project No. #11
contributed gross profit of approximately HK$3.3 million to our Group for FY2022. In
relation to the Diamond Hill Project, having regard to the revised drawings which were
mutually agreed by our Group and the customer, the welding works in the construction site
were less than expected resulting in lower costs incurred than expected and we were able to
record a relatively higher gross profit margin from such project. Such project contributed
gross profit of approximately HK$3.2 million for FY2022.
Other income and other gain/(loss), net
Our other income and other gain/(loss), net increased by approximately HK$2.4 million
or 836.3%, from approximately HK$0.3 million for FY2021 to approximately HK$2.7
million for FY2022, which was mainly attributable to the increase in government grants
received by our Group from Employment Support Scheme in 2022 under Anti-Epidemic
Fund. Subsidies are offered to employers who have employed regular employees with MPF
Scheme. Such subsidies were granted to our Group for May 2022 to July 2022 at
approximately HK$2.5 million for FY2022 while no such subsidies were available in
FY2021.
Administrative expenses
Our administrative expenses increased by approximately HK$4.4 million or 30.0%,
from approximately HK$14.7 million for FY2021 to approximately HK$19.1 million for
FY2022, which was mainly because the exchange gain recognised in relation to our PRC
operation of approximately HK$1.1 million for FY2021 turned into exchange losses of
approximately HK$2.7 million for FY2022.
FINANCIAL INFORMATION
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Reversal of impairment losses/(impairment losses) on financial assets and contract assets
We recorded a reversal of impairment losses on financial assets and contract assets of
approximately HK$0.4 million for FY2021, while we recognised impairment losses on
financial assets and contract assets of approximately HK$3.8 million for FY2022. The
impairment losses on financial assets and contract assets for FY2022 were mainly due to a
specific provision made on trade receivable and retention receivable from one of our
customers. For further details, please refer to paragraph headed “For the nine months ended
30 September 2023 compared with the nine months ended 30 September 2022 – Reversal of
impairment losses/(impairment losses) on financial assets and contract assets” above in this
section.
Finance costs, net
Our finance costs, net decreased by HK$0.1 million or 30.4%, from approximately
HK$0.5 million for FY2021 to approximately HK$0.3 million for FY2022. Such decease
was mainly due to the decrease in the interest expenses on bank borrowings and lease
liabilities. Our finance income remained at low level for FY2021 and FY2022.
Income tax expense
Our income tax expense increased by approximately HK$3.6 million or 99.8%, from
approximately HK$3.6 million for FY2021 to approximately HK$7.2 million for FY2022,
which was due to the increase in revenue and gross profit as discussed above.
Profit for the year
As a result of the foregoing factors, our profit for the year increased by approximately
HK$21.9 million or 126.5%, from approximately HK$17.3 million for FY2021 to
approximately HK$39.3 million for the FY2022, while our net profit margin increased by
approximately 4.1 percentage point, from approximately 7.6% for FY2021 to approximately
11.7% for FY2022.
FY2021 compared with FY2020
Revenue
Our revenue decreased by approximately HK$95.5 million or 29.5% from
approximately HK$324.3 million for FY2020 to approximately HK$228.8 million for
FY2021 which was mainly attributable to:
(i) Project No. #01, being our top project for FY2020 involving a private sector
commercial development located at the Hong Kong International Airport with an
estimated contract sum of approximately HK$191.4 million, with substantial
amount of works performed during FY2020 and was completed at the end of
FY2020. Project No. #01 contributed revenue of approximately HK$120.7 million
for FY2020 while no revenue was derived from Project No. #01 for FY2021; and
FINANCIAL INFORMATION
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(ii) the rescheduling of our construction site works for Project No. #02. For details,
please refer to the paragraph headed “FY2022 compared with FY2021 – Revenue”
above in this section.
Cost of services
Our cost of services decreased by approximately HK$75.9 million or 28.2% from
approximately HK$269.3 million for FY2020 to approximately HK$193.4 million for
FY2021. The decrease was primarily driven by the decrease in our revenue. Our cost of
services mainly comprised cost of materials, subcontracting fees, direct labour costs,
transportation and machinery service fees.
The following is a discussion of the changes in the key components of our cost of
services during FY2021 as compared to FY2020:
(i) Our cost of materials decreased by approximately HK$88.3 million or 58.6%,
from approximately HK$150.6 million for FY2020 to approximately HK$62.3
million for FY2021. Such decrease was mainly due to (a) the completion of
Project No. #01 at the end of FY2020 which incurred cost of materials of
approximately HK$53.0 million for FY2020 while incurring no cost of materials
for FY2021; and (b) our Group had started procuring materials for Project No.
#02 which incurred cost of materials amounted to approximately HK$40.5 million
for FY2020, in anticipation of the original commencement of our construction site
works in 2021 as well as the amount of works involved in such project;
(ii) Our subcontracting fees decreased by approximately HK$13.9 million or 18.4%,
from approximately HK$75.9 million for FY2020 to approximately HK$61.9
million for FY2021. Such decrease in subcontracting fees was mainly because
Project No. #01 was completed at the end of FY2020 and the substantial
construction site works for Project No. #02 were rescheduled to FY2022, which
resulted in the decrease in the amount of subcontracting fees incurred as
compared to FY2020;
(iii) Our direct labour costs increased by approximately HK$17.6 million or 76.5%,
from approximately HK$23.0 million for FY2020 to approximately HK$40.5
million for FY2021, which was mainly attributable to the increase in our number
of site workers. For details on the increase in our number of site workers from
FY2020 to FY2021, please refer to the paragraph headed “Business – Employees
– Number of employees” in this prospectus; and
(iv) our machinery service fees increased by approximately HK$6.3 million or
214.3%, from approximately HK$3.0 million for FY2020 to approximately
HK$9.3 million for FY2021, which was mainly attributable to the engagement of
services provider for using sizeable cranes and heavy machinery to transport our
steel products for several public infrastructure and commercial projects.
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Gross profit and gross profit margin
Our gross profit decreased by approximately HK$19.6 million or 35.6%, from
approximately HK$55.0 million for FY2020 to approximately HK$35.4 million for FY2021,
which was mainly due to the decrease in revenue as discussed above. Our gross profit
margin decreased by approximately 1.5 percentage point from 17.0% for FY2020 to
approximately 15.5% for FY2021. We recorded a relatively lower gross profit margin for
FY2021 mainly due to the unforeseen rescheduling of our construction site works for Project
No. #02 in mid-2021. Due to the unanticipated rescheduling of Project No. #02, a substantial
amount of the then available resources of our Group originally reserved for Project No. #02
such as direct labour and structural steel production capacity were rendered idle or not fully
utilised during FY2021, resulting in certain direct labour costs, manufacturing overheads and
project administrative costs incurred which amounted to approximately HK$1.9 million
during FY2021 (the “ Idle Cost ”). In accordance with the relevant accounting standard, as
the Idle Cost did not contribute to our Group’s progress in satisfying our performance
obligations amid the rescheduling of Project No. #02. Therefore, in accordance with the
relevant accounting standard, our Group did not recognise the corresponding revenue for the
Idle Cost by the time they were incurred, and such Idle Cost was not allocated to Project
No. #02 or any particular project undertaken by our Group, but were recognised as
unallocated costs in our Group’s cost of services for FY2021. As a result, the gross profit
margin of Project No. #02 was not adversely affected by the Idle Cost. Nonetheless, since
the Idle Cost had been recognised as unallocated cost of services of our Group for FY2021
and did not contribute the corresponding revenue to our Group for FY2021, our Group’s
overall gross profit margin for FY2021 was lower as compared to that of FY2020 and
FY2022.
Other income and other gain/(loss), net
Our other income and other gain/(loss), net decreased by approximately HK$1.1 million
or 79.1%, from approximately HK$1.3 million for FY2020 to approximately HK$0.3 million
for FY2021, which was mainly attributable to the decrease in government grants received by
our Group from Employment Support Scheme under Anti-Epidemic Fund. Such subsidies
were granted to our Group from June 2020 to November 2020 at approximately HK$1.2
million for FY2020 while no such subsidies were available in FY2021.
Administrative expenses
Our administrative expenses increased by approximately HK$2.0 million or 15.6%,
from approximately HK$12.7 million for FY2020 to approximately HK$14.7 million for
FY2021. Such increase was mainly attributable to (i) the increase in staff costs (including
directors’ remunerations) by approximately HK$1.0 million due to the increase in
discretionary bonuses under directors’ remunerations; and (ii) the decrease in exchange gain
recognised in relation to our PRC operation by approximately HK$0.9 million.
FINANCIAL INFORMATION
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Reversal of impairment losses on financial assets and contract assets
We recorded a reversal of impairment losses on financial assets and contract assets of
approximately HK$0.2 million for FY2020 and approximately HK$0.4 million for FY2021.
During FY2021, a specific provision was made on trade receivable (with gross carrying
amount of approximately HK$2.6 million) and retention receivable (with gross carrying
amount of approximately HK$1.5 million) from one of our customers. Our Group entered
into the contract with the said customer in March 2019 in relation to a project with contract
sum of approximately HK$30.3 million. Our Group had notified the said customer on the
completion of works in July 2020. As at 31 December 2020, the gross carrying amount of
trade receivable was approximately HK$5.8 million and the gross carrying amount of
retention receivable was approximately HK$1.5 million. In February 2021, the said customer
had committed to pay the outstanding balance by four instalments and also set out the terms
of release of retention money. During 2021, the said customer settled approximately HK$3.2
million. In December 2021, the said customer had confirmed with our Group on the
remaining amount and issued 13 post-dated cheques for such settlement. In view of the
above and having considered the expected credit loss rate, impairment losses of
approximately HK$0.5 million and HK$0.3 million were made on the gross carrying
amounts of trade receivable and retention receivable of the said customer during FY2021,
respectively.
Finance costs, net
Our finance costs, net maintained at approximately HK$0.5 million for FY2020 and
FY2021. Our finance income remained at low level for FY2020 and FY2021.
Income tax expense
Our income tax expense decreased by approximately HK$3.1 million or 46.5%, from
approximately HK$6.7 million for FY2020 to approximately HK$3.6 million for FY2021,
which was mainly due to the decrease in revenue and gross profit as discussed above.
Profit for the year
As a result of the foregoing factors, our profit for the year decreased by approximately
HK$19.4 million or 52.8%, from approximately HK$36.7 million for FY2020 to
approximately HK$17.3 million for FY2021, while our net profit margin decreased by
approximately 3.7 percentage point, from approximately 11.3% for FY2020 to approximately
7.6% for FY2021.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds have historically been our equity capital, cash generated
from our operations and bank borrowings. Our primary liquidity requirements are to finance
our working capital needs and fund our capital expenditures and growth of our operations.
Going forward, we expect these sources to continue to be our principal sources of liquidity,
and we may use a portion of the proceeds from the Share Offer to finance a portion of our
liquidity requirements.
FINANCIAL INFORMATION
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As at 31 December 2023, being the Latest Practicable Date for the purpose of the
disclosure of our liquidity position, we had cash and cash equivalents of approximately
HK$19.1 million. As at 31 December 2023, we had unutilised banking facilities of
approximately HK$43.0 million, which include a SME non-revolving loan facility amounted
to approximately HK$10.0 million which would be cancelled upon Listing.
Cash flows
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Net cash generated
from / (used in)
operating activities 8,475 11,455 79,007 68,650 (14,773)
Net cash used in
investing activities (4,200) (1,157) (6,549) (6,580) (3,931)
Net cash used in
financing activities (7,919) (13,129) (15,414) (10,754) (30,786)
Net (decrease)/
increase in cash
and cash
equivalents (3,644) (2,831) 57,044 51,316 (49,490)
Cash and cash
equivalents at
beginning of the
year/period 18,148 14,536 11,729 11,729 68,696
Exchange difference
on cash and cash
equivalents 32 24 (77) (115) (85)
Cash and cash
equivalents at end
of the year/period 14,536 11,729 68,696 62,930 19,121
Cash flows from operating activities
Our operating cash inflows are primarily derived from our revenue from undertaking
structural steelwork in Hong Kong, whereas our operating cash outflows mainly include
payment for subcontracting fees, purchase of materials, direct labour costs, as well as other
working capital needs.
FINANCIAL INFORMATION
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Net cash generated from/(used in) operating activities primarily consisted of profit
before income tax expense adjusted for depreciation of plant and equipment, depreciation of
right-of-use assets, finance income, finance costs, gain on disposal of property, plant and
equipment, gain/loss on investments in insurance contracts, net exchange differences, and
reversal of impairment losses/impairment losses on financial assets and contract assets, and
the effect of changes in working capital such as the changes in contract assets, trade and
other receivables, deposits and prepayments, trade payables, accruals and other payables,
contract liabilities and amount due from a related company.
The following table sets forth a reconciliation of our profit before income tax expense
to net cash generated from/(used in) operating activities:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Profit before income
tax expense 43,427 20,935 46,456 34,485 20,771
Adjustments for:
Depreciation of plant
and equipment 1,793 1,978 2,050 1,564 1,475
Depreciation of
right-of-use assets 2,906 3,152 3,338 2,282 3,056
Finance income (23) (39) (95) (38) (182)
Finance costs 496 526 434 281 544
Gain on disposal of
property, plant and
equipment – – (23) – 79
(Gain)/loss on
investments in
insurance contracts (112) (123) (100) (86) 461
Net exchange
differences (2,108) (1,213) 2,216 3,201 1,130
(Reversal of
impairment
losses)/impairment
losses on financial
assets and contract
assets (162) (383) 3,800 3,778 1,102
FINANCIAL INFORMATION
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For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Operating profit
before changes in
working capital 46,217 24,833 58,076 45,467 28,436
Changes in working
capital:
(Increase)/decrease in
contract assets (29,437) 15,911 6,547 15,913 (69,079)
Decrease/(increase) in
trade and other
receivables,
deposits and
prepayments 17,125 (11,120) 12,921 (13,253) (10,512)
(Decrease)/increase in
trade payables,
accruals and other
payables (8,661) (9,544) 4,666 3,237 36,663
(Decrease)/increase in
contract liabilities (10,470) (1,613) (441) 16,972 (602)
Decrease in amount
due from a related
company 480 480 480 360 405
Cash generated
from/(used in)
operations 15,254 18,947 82,249 68,696 (14,689)
Income tax paid (6,779) (7,492) (3,242) (46) (84)
Net cash generated
from/(used in)
operating activities 8,475 11,455 79,007 68,650 (14,773)
For FY2020, we recorded profit before income tax expense of approximately HK$43.4
million and net cash generated from operating activities of approximately HK$8.5 million,
which was mainly resulted from the negative adjustment due to (i) increase in contract
assets by approximately HK$29.4 million; (ii) decrease in contract liabilities by
approximately HK$10.5 million; (iii) decrease in trade payables, accruals and other payables
by approximately HK$8.7 million; (iv) income tax paid of approximately HK$6.8 million;
and partly offset by the positive adjustment due to (i) decrease in trade and other
receivables, deposits and prepayments by approximately HK$17.1 million; and (ii) the
depreciation of right-of-use assets of approximately HK$2.9 million.
FINANCIAL INFORMATION
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For FY2021, we recorded profit before income tax expense of approximately HK$20.9
million and net cash generated from operating activities of approximately HK$11.5 million,
which was mainly resulted from the negative adjustment due to (i) increase in trade and
other receivables, deposits and prepayments by approximately HK$11.1 million; (ii) decrease
in trade payables, accruals and other payables by approximately HK$9.5 million; (iii)
income tax paid of approximately HK$7.5 million; and partly offset by the positive
adjustment due to (i) decrease in contract assets by approximately HK$15.9 million; (ii) the
depreciation of right-of-use assets of approximately HK$3.2 million.
For FY2022, we recorded profit before income tax expense of approximately HK$46.5
million and net cash generated from operating activities of approximately HK$79.0 million,
which was mainly resulted from the positive adjustment due to (i) decrease in trade and
other receivables, deposits and prepayments by approximately HK$12.9 million; (ii) decrease
in contract assets by approximately HK$6.5 million; (iii) the increase in trade payables,
accruals and other payables by approximately HK$4.7 million; (iv) the impairment losses on
financial assets and contract assets of approximately HK$3.8 million; (v) the depreciation of
right-of-use assets of approximately HK$3.3 million; and partly offset by the negative
adjustment due to income tax paid of approximately HK$3.2 million.
For the nine months ended 30 September 2022, we recorded profit before income tax
expense of approximately HK$34.5 million and net cash generated from operating activities
of approximately HK$68.7 million, which was mainly resulted from the positive adjustment
due to (i) increase in contract liabilities by approximately HK$17.0 million; (ii) decrease in
contract assets by approximately HK$15.9 million; (iii) the impairment losses on financial
assets and contract assets of approximately HK$3.8 million; (iv) increase in trade payables,
accruals and other payables by approximately HK$3.2 million; (v) net exchange differences
of approximately HK$3.2 million; and partly offset by the negative adjustment due to
increase in trade and other receivables, deposits and prepayments by approximately HK$13.3
million.
For the nine months ended 30 September 2023, we recorded profit before income tax
expense of approximately HK$20.8 million and net cash used in operating activities of
approximately HK$14.8 million, which was mainly resulted from the negative adjustment
due to (i) increase in contract assets by approximately HK$69.1 million, which was mainly
attributable to the structural steelwork performed by us under certain projects but the works
had yet to be certified by the relevant customers, which mainly include Project No. O01,
Project No. O02, Project No. #12 and Project No. #13; (ii) increase in trade and other
receivables, deposits and prepayments by approximately HK$10.5 million; and partly offset
by the positive adjustment due to (i) increase in trade payables, accruals and other payables
by approximately HK$36.7 million; and (ii) the depreciation of right-of-use assets of
approximately HK$3.1 million. Going forward, our Group will (a) continue to follow up
closely with our customers in settling the respective projects’ outstanding balances for the
works we had completed; (b) prior to the commencement of each project, our project
management team will prepare forecast on the cash inflow and cash outflow for the
respective project, and negotiate with our customers in our best efforts to set out the most
favourable payment terms for our Group; (c) our project management team is responsible for
documenting expected cash inflow from customers and cash outflow to suppliers and
subcontractors and preparing cashflow plans for each project and submitting the cashflow
FINANCIAL INFORMATION
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plans to our finance and accounting staff on a monthly basis; (d) our finance and accounting
staff, led by our financial controller, will be responsible for reviewing the cashflow plans for
our projects and submitting the cashflow plans to our management for review; and (e)
closely monitor our project schedule and cash flow forecast of our projects on hand when
tendering for new projects. If our Group is awarded with a number of sizeable projects
which are expected to commence within a similar period, our Group may refrain from
tendering for new sizeable projects which are also expected to commence within a similar
timeframe in order to avoid incurring substantial amount of up-front costs concurrently and
to avoid resulting in operating cash outflow.
Cash flows from investing activities
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Purchase of plant and
equipment (3,666) (1,126) (318) (318) (1,156)
Purchase of
investments in
insurance contracts –––– (2,846)
Proceeds from
disposal of plant
and equipment – – 23 – –
Advance to a related
company (238) (343) (6,327) (6,300) (111)
Advance to a director (297) ––––
Repayment from a
director – 29 7–––
Finance income
received 1 15 73 38 182
Net cash used in
investing activities (4,200) (1,157) (6,549) (6,580) (3,931)
During the Track Record Period, our cash inflows from investing activities include
repayment from a director, proceeds from disposal of plant and equipment, and finance
income received, while our cash outflows from investing activities consist of purchase of
plant and equipment, purchase of investments in insurance contracts, advance to a related
company and advance to a director.
FINANCIAL INFORMATION
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For FY2020 and FY2021, we recorded net cash used in investing activities of
approximately HK$4.2 million and HK$1.1 million, respectively, which was mainly
attributable to the purchase of plant and equipment.
For the nine months ended 30 September 2022 and FY2022, we recorded net cash used
in investing activities of approximately HK$6.6 million and HK$6.5 million, respectively,
which was mainly attributable to the advance to a related company for repayment of
mortgage loans for its investment properties.
For the nine months ended 30 September 2023, we recorded net cash used in investing
activities of approximately HK$3.9 million, which was mainly attributable to the purchase of
investments in insurance contracts.
Cash flows from financing activities
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Proceeds from bank
borrowings 20,728 18,373 15,511 15,511 2,000
Repayments of bank
borrowings (11,308) (24,871) (11,760) (11,133) (2,246)
Dividend paid (8,200) – (8,000) (8,000) (20,000)
Payment for principal
and interest of lease
liabilities (3,597) (3,538) (2,928) (2,185) (3,155)
Payment of listing
expenses –––– (2,127)
Finance cost paid (227) (352) (316) (226) (336)
Repayment to
directors (5,315) (2,741) (7,921) (4,721) (4,922)
Net cash used in
financing activities (7,919) (13,129) (15,414) (10,754) (30,786)
FINANCIAL INFORMATION
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During the Track Record Period, our cash inflows from financing activities include
proceeds from bank borrowings, while our cash outflows from financing activities consist of
repayments of bank borrowings, dividend paid, payment for principal and interest of lease
liabilities, finance cost paid and repayment to directors.
For FY2020, we recorded net cash used in financing activities of approximately
HK$7.9 million, which was mainly attributable to (i) the repayments of bank borrowings of
approximately HK$11.3 million; (ii) dividend paid of approximately HK$8.2 million; and
(iii) the repayment to directors of approximately HK$5.3 million; while such cash outflows
were partially offset by the proceeds from bank borrowings of approximately HK$20.7
million.
For FY2021, we recorded net cash used in financing activities of approximately
HK$13.1 million, which was mainly attributable to (i) the repayments of bank borrowings of
approximately HK$24.9 million; (ii) payment for principal and interest of lease liabilities of
approximately HK$3.5 million; and (iii) the repayment to directors of approximately HK$2.7
million; while such cash outflows were partially offset by the proceeds from bank
borrowings of approximately HK$18.4 million.
For FY2022, we recorded net cash used in financing activities of approximately
HK$15.4 million, which was mainly attributable to (i) the repayments of bank borrowings of
approximately HK$11.8 million; (ii) dividend paid of approximately HK$8.0 million; and
(iii) repayment to directors of approximately HK$7.9 million; while such cash outflows were
partially offset by the proceeds from bank borrowings of approximately HK$15.5 million.
For the nine months ended 30 September 2022, we recorded net cash used in financing
activities of approximately HK$10.8 million, which was mainly attributable to (i)
repayments of bank borrowings of approximately HK$11.1 million; (ii) dividend paid of
approximately HK$8.0 million; and (iii) repayment to directors of approximately HK$4.7
million; while such cash outflows were partially offset by proceeds from bank borrowings of
approximately HK$15.5 million.
For the nine months ended 30 September 2023, we recorded net cash used in financing
activities of approximately HK$30.8 million, which was mainly attributable to (i) dividend
paid of HK$20.0 million; (ii) the repayments to directors of approximately HK$4.9 million;
and (iii) payment for principal and interest of lease liabilities of approximately HK$3.2
million; while such cash outflows were partially offset by the proceeds from bank
borrowings of HK$2.0 million.
FINANCIAL INFORMATION
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CAPITAL EXPENDITURE
Our capital expenditure primarily comprised of machinery and equipment, leasehold
improvements, furniture, fixtures and office equipment and motor vehicles during the Track
Record Period. The following sets forth our Group’s capital expenditure for the periods
indicated:
For the nine
months
ended
30 September
FY2020 FY2021 FY2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Machinery and
equipment 2,864 709 57 –
Leasehold
improvements 578 201 229 850
Furniture, fixtures
and office
equipment 145 36 32 20
Motor vehicles 79 180 – 286
Total 3,666 1,126 318 1,156
Our Group incurred capital expenditures of approximately HK$3.7 million, HK$1.1
million, HK$0.3 million and HK$1.2 million for FY2020, FY2021, FY2022 and the nine
months ended 30 September 2023, respectively. The capital expenditure on machinery and
equipment for FY2020, FY2021, FY2022 and the nine months ended 30 September 2023
amounted to approximately HK$2.9 million, HK$0.7 million, HK$57,000 and nil,
respectively. The capital expenditure on leasehold improvements for FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023 amounted approximately HK$0.6
million, HK$0.2 million, HK$0.2 million and HK$0.9 million, respectively. The capital
expenditure on furniture, fixtures and office equipment for FY2020, FY2021, FY2022 and
the nine months ended 30 September 2023 amounted approximately HK$0.1 million,
HK$36,000, HK$32,000 and HK$20,000, respectively. The capital expenditure on motor
vehicles for FY2020, FY2021, FY2022 and the nine months ended 30 September 2023
amounted to approximately HK$79,000, HK$0.2 million, nil and HK$0.3 million,
respectively. Our capital expenditure was funded by our internal resources.
SUFFICIENCY OF WORKING CAPITAL
Our Directors are of the opinion that, and the Sponsor concurs that, taking into
consideration our internal resources and banking facilities presently available to our Group,
including our existing cash and cash equivalents, cash generated from our operations,
available banking facilities, and the estimated net proceeds to be received by us from the
Listing, our Group has sufficient working capital for our present requirements for at least 12
months from the date of this prospectus.
FINANCIAL INFORMATION
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NET CURRENT ASSETS
The following table sets forth a breakdown of our Group’s current assets and liabilities
as at the dates indicated:
As at 31 December
As at
30
September
2023
As at
31
December
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(unaudited)
Current assets
Trade receivables 10,912 22,094 14,493 19,773 43,199
Contract assets 97,051 81,972 73,758 141,770 161,569
Other receivables,
deposits and
prepayments 12,165 12,775 3,651 11,116 12,620
Amounts due from
directors 29 7––– 7 5 9
Amount due from a
related company 6,308 6,171 12,018 11,724 11,627
Tax recoverable – 38 2–––
Cash and cash
equivalents 14,536 11,729 70,880 19,121 8,650
141,269 135,123 174,800 203,504 238,424
Current liabilities
Trade and retention
payables 35,269 22,895 27,280 59,655 83,624
Accruals and other
payables 4,894 7,814 7,891 12,195 17,516
Amounts due to
directors 16,653 13,912 5,991 1,069 –
Contract liabilities 4,254 2,641 2,200 1,598 3,196
Lease liabilities 3,276 2,337 4,352 3,782 2,896
Bank borrowings 11,201 4,703 10,638 8,208 9,886
Current income tax
liabilities 4,274 – 4,321 10,103 3,603
79,821 54,302 62,673 96,610 120,721
Net current assets 61,448 80,821 112,127 106,894 117,703
FINANCIAL INFORMATION
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Our net current assets increased from approximately HK$61.4 million as at 31
December 2020 to approximately HK$80.8 million as at 31 December 2021. The increase in
our net current assets was mainly due to the decrease in current liabilities by approximately
HK$25.5 million or 32.0%, in particular, the decrease in trade and retention payables by
approximately HK$12.4 million and the decrease in bank borrowings by approximately
HK$6.5 million for the repayments of bank borrowings by our Group for FY2020. Such
increase was partially offset by the decrease in current assets by approximately HK$6.1
million or 4.4%.
Our net current assets further increased to approximately HK$112.1 million as at 31
December 2022. The increase in our net current assets was mainly due to the increase in
current assets by approximately HK$39.7 million or 29.4%, in particular, the increase in
cash and cash equivalents by approximately HK$59.2 million mainly attributable to our
profitable operation. Our cash generated from operations amounted to approximately
HK$82.2 million for FY2022. Such increase was partially offset by the increase in current
liabilities by approximately HK$8.4 million or 15.4%.
Our net current assets decreased to approximately HK$106.9 million as at 30
September 2023. In particular, the increase in trade and retention payables by approximately
HK$32.4 million outweigh the increase in current assets by approximately HK$28.7 million.
Such difference was due to the difference in timing between the procurement of materials
and services from our suppliers and subcontractors and the certification of our Group’s
payment application by the respective customers as at 30 September 2023. In addition, our
Group recorded the decrease in cash and cash equivalents by approximately HK$51.8
million, which was mainly attributable to HK$20.0 million dividend paid.
As at 31 December 2023, being the latest practicable date for ascertaining our net
current assets position, our net current assets amounted to approximately HK$117.7 million.
Such increase in our net current assets was primarily attributable to the increase in trade
receivables by approximately HK$23.4 million. Such increase was due to the difference in
timing for the settlement of the outstanding balances by our customers as at the respective
period end.
DISCUSSION OF SELECTED STATEMENT OF FINANCIAL POSITION ITEMS
Further discussions of the fluctuations in the key components of our statement of
financial position are set forth in the following paragraphs:
Property, plant and equipment
Our property, plant and equipment primarily comprised machinery and equipment,
motor vehicles, leasehold improvements, and furniture, fixtures and office equipment. Our
property, plant and equipment amounted to approximately HK$9.1 million, HK$9.3 million,
HK$7.1 million and HK$6.5 million as at 31 December 2020, 2021 and 2022 and 30
September 2023, respectively. Such fluctuation was primarily due to the combined effect of
addition of property, plant and equipment and depreciation during the year/period.
FINANCIAL INFORMATION
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Right-of-use assets
The right-of-use asset is depreciated on a straight-line basis over the shorter of the
asset’s estimated useful life and the lease term. The right-of-use assets represent our Group’s
rights to use underlying leased premises, leasehold land and motor vehicle under lease
arrangements over the lease terms from two to 50 years. They are stated at cost less
accumulated depreciation and accumulated impairment losses. Details of our right-of-use
assets are summarised in note 15 to the Accountant’s Report set out in Appendix I to this
prospectus.
Investments in life insurance contracts
As at 31 December
As at
30 September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Key management
insurance
contracts 3,237 3,360 3,460 5,845
As at 31 December 2020, 2021 and 2022 and 30 September 2023, our Group held life
insurance policy for Directors of our Group. The investments in life insurance contract is
denominated in USD. Our Group has the right to surrender the insurance partially or in full
at any time after the first policy anniversary for cash surrender value. Cash surrender value
represents the account value net of surrender charges.
The value of the key management insurance contracts as at 31 December 2020, 2021
and 2022 remained relatively stable at approximately HK$3.2 million, HK$3.4 million and
HK$3.5 million, and the changes in value as at 31 December 2020, 2021 and 2022 were
driven by the increase in cash surrender value of the key management insurance contracts.
As at 30 September 2023, the value of the key management insurance contracts increased to
approximately HK$5.8 million, which was primarily attributable to an addition of key
management insurance contract of approximately HK$2.8 million bought for one of our
Directors, Mr. Eddie Chan. Such increase was partially offset by the decrease in cash
surrender value of approximately HK$0.5 million as at 30 September 2023.
Trade receivables
Our trade receivables increased from approximately HK$10.9 million as at 31
December 2020 to approximately HK$22.1 million as at 31 December 2021. Such increase
was due to the increase in the outstanding balance from a sizeable project undertaken by our
Group during FY2021, namely the gross trade receivables for Project No. #04, which
amounted to approximately HK$12.9 million (as at 31 December 2020: approximately
HK$1.8 million).
FINANCIAL INFORMATION
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Our trade receivables decreased from approximately HK$22.1 million as at 31
December 2021 to approximately HK$14.5 million as at 31 December 2022. Such decrease
was primarily attributable to the settlement of the outstanding balance from Customer C in
relation to Project No. #04, which amounted to approximately HK$12.9 million, and such
decrease was partially offset by the increase in the outstanding balance from some of our top
projects during FY2022, namely, the gross trade receivable for Project No. #09 which
amounted to HK$4.2 million, and the gross trade receivables for Project No. #10 which
amounted to HK$3.0 million.
Our trade receivables increased from approximately HK$14.5 million as at 31
December 2022 to approximately HK$19.8 million as at 30 September 2023. Such increase
was mainly due to the increase in the outstanding balance from Zenith (PMS) Limited in
relation to Project No. #11 which amounted to approximately HK$7.0 million, and such
increase was partially offset by the settlement of the outstanding balance from Customer F,
which amounted to approximately HK$4.4 million.
Trade receivables and unbilled revenue turnover days
The following table sets forth our trade receivables and unbilled revenue turnover days
during the Track Record Period:
FY2020 FY2021 FY2022
For the nine
months
ended
30 September
2023
days days days days
Trade receivables
turnover days 25.0 26.3 19.8 19.9
Trade receivables
and unbilled
revenue turnover
days 67.5 88.5 47.2 79.4
Note:
1. Trade receivables turnover days is calculated based on the average of the beginning and ending
balance of trade receivables divided by revenue for the year/period, then multiplied by the number of
days of the year/period (i.e. 365 days for a full year or 273 days for the nine months ended 30
September 2023).
2. Trade receivables and unbilled revenue turnover days is calculated based on the average of the
beginning and ending balance of trade receivables and unbilled revenue divided by revenue for the
year/period, then multiplied by the number of days of the year/period (i.e. 365 days for a full year or
273 days for the nine months ended 30 September 2023).
Our trade receivables turnover days were approximately 25.0 days, 26.3 days, 19.8
days and 19.9 days for FY2020, FY2021, FY2022 and the nine months ended 30 September
2023, respectively.
FINANCIAL INFORMATION
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Our trade receivables and unbilled revenue turnover days are longer than trade
receivables turnover days, as it includes the progress of certification by our customer. Our
Group generally submits a progress payment application to our customer on a monthly basis
with reference to the amount of works completed and our customer will examine and certify
our works done by issuing a payment certificate to us. We will then issue an invoice to our
customer. Therefore, the fluctuation in trade receivables and unbilled revenue turnover days
depends on (i) the certification process of our customers; (ii) our customers’ internal process
for approving our invoices; (iii) the credit terms granted by us to our customers; and (iv) the
amount and time of settlement by our customers.
Aging analysis and subsequent settlement
The following table sets forth the aging analysis of gross trade receivables based on the
invoice date at the end of each reporting period:
As at 31 December
As at
30 September
20232020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000
Within 90 days 4,648 16,803 14,458 12,342
91-180 days 1,370 2,464 – 6,952
Over 180 days 4,963 3,345 2,685 3,165
10,981 22,612 17,143 22,459
Up to the Latest Practicable Date, approximately 87.9% of our gross trade receivables
as at 30 September 2023 had been settled:
As at
30 September
2023
Subsequent settlement up to
the Latest Practicable Date
HK$’000 HK$’000 %
Within 90 days 12,342 12,241 99.2
91-180 days 6,952 6,952 100.0
Over 180 days 3,165 555 17.5
Total 22,459 19,748 87.9
Among our gross trade receivables as at 30 September 2023 amounted to
approximately HK$22.5 million, approximately HK$19.7 million or 87.9% of our gross trade
receivables were settled as at the Latest Practicable Date.
For our gross trade receivables as at 30 September 2023 which aged over 180 days
represented (i) approximately HK$2,555,000 of the gross trade receivables were due from
one of our customers, where our Group petitioned for winding-up of the said customer on
FINANCIAL INFORMATION
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--- page 334 ---
insolvency grounds. For further details and status of the aforesaid winding-up petition,
please refer to claim number 1 as described in the paragraph headed “Business – Litigations
and claims – (i) Ongoing civil litigation involving our Group as at the Latest Practicable
Date” in this prospectus; and (ii) another customer with outstanding gross trade receivables
of approximately HK$55,000 was involved in winding-up proceedings and the provisional
liquidator was appointed in relation to the winding-up of that customer. The impairment
losses of the outstanding receivables owning from the two aforesaid customers have been
fully provided.
For our gross trade receivables as at 30 September 2023 which aged between 91-180
days, approximately HK$7.0 million was outstanding. Up to the Latest Practicable Date,
such amount was fully settled.
Other receivables, deposits and prepayments
Our other receivables, deposits and prepayments mainly comprised prepayments for
subcontractors of structural steel fabrication works in the PRC and logistics service
providers, other tax receivables and deposits for the PRC customs declaration, utilities
services and rental of our offices.
Our other receivables, deposits and prepayments remained relatively stable at
approximately HK$12.9 million and HK$12.8 million as at 31 December 2020 and 2021,
respectively.
Our other receivables, deposits and prepayments decreased to approximately HK$4.7
million as at 31 December 2022. Such decrease was primarily due to the decrease in
prepayments for structural steelwork by approximately HK$3.8 million and other tax
receivables by approximately HK$3.7 million. Such decrease was mainly attributable to the
difference in timing of prepayments to our subcontractors of structural steel fabrication
works in the PRC and logistics services providers and the V A T refund received from the
PRC local authorities.
Our other receivables, deposits and prepayments increased to approximately HK$12.0
million as at 30 September 2023. The increase was primarily due to (i) the increase in
prepayments for structural steelwork by approximately HK$0.9 million, which was due to
difference in timing of prepayment to our subcontractors of structural steel fabrication woks
in the PRC and logistics services providers as at the respective reporting dates; (ii) the
increase in other tax receivables by approximately HK$1.5 million which was mainly
attributable to the timing difference as explained in the above paragraph; and (iii) the
incurrence of deferred listing expenses of approximately HK$3.4 million and prepayment for
listing expense of approximately HK$1.4 million as at 30 September 2023.
FINANCIAL INFORMATION
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Contract assets and contract liabilities
A contract asset represents our Group’s right to consideration from customers in
exchange for the provision of structural steelwork that our Group has transferred to the
customers that is not yet unconditional. Contract assets arise when our Group has provided
the structural steelwork under the relevant contracts but the works have yet to be certified
by architects, quantity surveyors or other representatives appointed by the customers and/or
our Group’s right to payment is still conditional on factors other than passage of time. Any
amount previously recognised as a contract asset is reclassified to trade receivable at the
point when our Group’s right to payment becomes unconditional other than passage of time.
A contract liability represents our Group’s obligation to transfer the aforesaid services
to a customer for which our Group has received consideration (or an amount of
consideration is due) from the customer.
The Group classifies these contract assets and liabilities as current because the Group
expects to realise them in its normal operating cycle.
The following table sets forth our contract assets and contract liabilities as at the dates
indicated:
As at 31 December
As at
30 September
20232020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000
Contract assets
Unbilled revenue 48,559 29,725 20,698 82,617
Retention
receivables for
structural
steelwork 50,452 53,375 55,856 63,015
Total contract
assets 99,011 83,100 76,554 145,632
Less: provision for
impairment (1,960) (1,128) (2,796) (3,862)
Contract assets, net 97,051 81,972 73,758 141,770
Contract liabilities 4,254 2,641 2,200 1,598
Unbilled revenue
Our unbilled revenue decreased from approximately HK$48.6 million as at 31
December 2020 to approximately HK$29.7 million as at 31 December 2021, and further
decreased to approximately HK$20.7 million as at 31 December 2022. Such decrease in our
unbilled revenue was primarily attributable to the decrease in size and number of contract
works that the relevant services were provided but not certified at the end of each reporting
FINANCIAL INFORMATION
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--- page 336 ---
period, such as (i) Project No. #04, where our unbilled revenue decreased from
approximately HK$10.3 million as at 31 December 2020 to approximately HK$2.0 million
as at 31 December 2021; and (ii) Project No. #02, where our unbilled revenue decreased
from approximately HK$19.7 million as at 31 December 2020 to approximately HK$17.6
million and HK$5.7 million as at 31 December 2021 and 2022, respectively.
Our unbilled revenue increased from approximately HK$20.7 million as at 31
December 2022 to approximately HK$82.6 million as at 30 September 2023. Such increase
was primarily attributable to the increase in size and number of contract works that the
relevant services were provided but not certified at the end of each reporting period, such as
(i) Project No. #13, where our unbilled revenue increased from nil as at 31 December 2022
to approximately HK$20.8 million as at 30 September 2023; (ii) Project No. #12, where our
unbilled revenue increased from nil as at 31 December 2022 to approximately HK$13.6
million as at 30 September 2023; (iii) Project No. O01, where our unbilled revenue
increased from nil as at 31 December 2022 to approximately HK$11.2 million as at 30
September 2023; and (iv) Project No. O02, where our unbilled revenue increased from nil as
at 31 December 2022 to approximately HK$8.8 million as at 30 September 2023.
Subsequent billing and settlement
Our unbilled revenue amounted to approximately HK$82.6 million as at 30 September
2023. Of the amount of approximately HK$82.6 million as at 30 September 2023,
approximately 99.1% (which amount to approximately HK$81.8 million) had been
subsequently billed up to the Latest Practicable Date.
Of such amount of approximately HK$81.8 million where subsequent billings had taken
place, 91.3% of which had been subsequently settled by the relevant customers up to the
Latest Practicable Date.
Having considered that (i) up to the Latest Practicable Date, approximately HK$0.8
million of the unbilled revenue as at 30 September 2023 remained unbilled and our
Directors expect the remaining unbilled revenue to be billed by the first quarter of 2024; (ii)
the relevant customers of the remaining unbilled revenue have not defaulted in any payment
to us during the Track Record Period; (iii) the relevant customers of the remaining unbilled
revenue have continued to bill and settle for our projects during the Track Record Period;
and (iv) our established working relationship with the relevant customers of these projects,
our executive Directors therefore considered that the expected credit losses on contract
assets were adequate.
FINANCIAL INFORMATION
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--- page 337 ---
Retention receivables for structural steelwork
Retention receivables for structural steelwork are settled in accordance with the terms
of the respective contracts. The terms and conditions in relation to the release of retention
vary from contract to contract, which is subject to practical completion, the expiry of the
defect liability period or a pre-agreed time period. In the consolidated statements of
financial position, retention receivables for structural steelwork were classified as current
assets based on its normal operating cycle.
The settlement analysis of these retention receivables for structural steelwork based on
the terms of related contracts was as follows:
As at 31 December
As at
30 September
20232020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000
To be recovered
within twelve
months 15,618 17,643 25,706 34,037
To be recovered
more than twelve
months after the
end of the
year/period 34,834 35,732 30,150 28,978
Total 50,452 53,375 55,856 63,015
Subsequent settlement of contract assets and subsequent recognition of contract
liabilities
Our retention receivables amounted to approximately HK$63.0 million as at 30
September 2023, out of which approximately 8.7% (which amounted to approximately
HK$5.5 million) had been settled up to the Latest Practicable Date. Our gross contract assets
amounted to approximately HK$145.6 million as at 30 September 2023, out of which
approximately 55.1% (which amounted to approximately HK$80.2 million) had been settled
up to the Latest Practicable Date.
Our contract liabilities amounted to approximately HK$1.6 million as at 30 September
2023, approximately 75.0% of which had been subsequently recognised as revenue as at the
Latest Practicable Date.
Loss allowances for financial assets and contract assets
Our Group applies simplified approach prescribed by HKFRS 9 to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade receivables and
contract assets.
FINANCIAL INFORMATION
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--- page 338 ---
The contract assets relate to unbilled revenue and retention receivables have
substantially the same risk characteristics as the trade receivables for the same types of
contracts. Our Group has therefore concluded that the expected loss rates for trade
receivables are a reasonable approximation of the loss rates for the contract assets.
The loss allowance provision for trade receivables and contract assets as at 31
December 2020, 2021, 2022 and 30 September 2022 and 2023 reconciles to the opening loss
allowance for that provision as follows:
Trade
receivables
Contract
assets Total
HK$’000 HK$’000 HK$’000
As at 1 January 2020 86 2,105 2,191
Reversal of impairment loss (17) (145) (162)
As at 31 December 2020 69 1,960 2,029
Provision for/(Reversal of)
impairment loss 449 (832) (383)
As at 31 December 2021 518 1,128 1,646
Provision for impairment loss 2,132 1,668 3,800
As at 31 December 2022 2,650 2,796 5,446
Reversal of impairment loss 36 1,066 1,102
As at 30 September 2023 2,686 3,862 6,548
As at 1 January 2022 518 1,128 1,646
Provision for impairment loss 2,116 1,662 3,778
As at 30 September 2022
(unaudited) 2,634 2,790 5,424
Amount due from directors
Details of our amount due from directors are summarised in note 26(d) to the
Accountant’s Report set out in Appendix I to this prospectus. Our amount due from directors
is unsecured, interest free, repayable on demand and non-trade in nature. The amount of
cash advanced to Mr. Eddie Chan of approximately HK$0.3 million during FY2020 was for
his personal use and it was subsequently repaid by Mr. Eddie Chan during FY2021.
FINANCIAL INFORMATION
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--- page 339 ---
As at 31 December 2023, our amount due from directors of approximately HK$0.8
million represented cash advanced to Mr. Kelvin Chan, Mr. Eddie Chan, Ms. Karen Chan,
Mr. WH Chan and Ms. Choi for their personal use. Such amount was settled by dividend in
January 2024.
Amount due from a related company
Details of our amount due from a related company are summarised in note 26(d) to the
Accountant’s Report set out in Appendix I to this prospectus.
Our amount due from a related company is unsecured, interest free, repayable on
demand and non-trade in nature. As at 31 December 2020, 2021 and 2022 and 30 September
2023, the amount due from a related company represented advances by our Group to
Wealthy River International Investment Limited (“ Wealthy River ”). Wealthy River is owned
as to one-third by Mr. Kelvin Chan, one-third by Mr. Eddie Chan and one-third by Ms.
Karen Chan. The principal activity of Wealthy River is properties investment. Wealthy River
held several investment properties. The advances by our Group to Wealthy River was mainly
used for repayment of mortgage loan for its investment properties.
During the Track Record Period, the Group made advances to Wealthy River of
approximately HK$6.9 million. Our amount due from Wealthy River increased from
approximately HK$6.2 million as at 31 December 2021 to approximately HK$12.0 million
as at 31 December 2022, which was mainly attributable to our Group’s repayment of
mortgage loans (the “ Mortgage Loans ”) on Wealthy River’s behalf in the amount of
approximately HK$6.1 million in FY2022. Prior to the repayment, the Mortgage Loans taken
out by Wealthy River had been secured by certain properties owned by Wealthy River (the
“Properties ”). By early 2022, the executive Directors entered into negotiation with a bank
in Hong Kong (the “ Bank”) for increasing the credit limit of the banking facilities and loans
by HK$20.6 million (the “ Banking Facilities ”) available to our Group. Based on the
negotiation between the Bank and our Group, the Bank agreed in-principle to increase the
credit limit of the banking facilities available to our Group, conditional upon the grant of
legal charges by Wealthy River over the Properties in favour of the Bank. Taking into
consideration the liquidity needs of our Group for project financing at the material time, the
executive Directors consider that it was in the interest of our Group to accept the offer. To
enable the Properties could be used as collateral for our Banking Facilities, Wealthy River
procured for the release of the former legal charges over the Properties via full repayment of
the Mortgage Loans. The funds used for repayment of the Mortgage Loans were financed by
our Group. Upon repayment of the Mortgage Loans, the former legal charges over the
Properties were simultaneously replaced by the new legal charges granted by Wealthy River
in favour of the Bank under the Banking Facilities. In January 2024, the Company declared
dividends of approximately HK$26.6 million of which approximately HK$10.0 million will
be settled by cash before the Listing and approximately HK$16.6 million was offset against
the aggregate amounts due from the Directors and the related company.
Trade and retention payables
Our trade and retention payables mainly comprised payables to subcontractors,
suppliers of construction materials and miscellaneous services.
FINANCIAL INFORMATION
– 329 –


--- page 340 ---
Our trade payables amounted to approximately HK$32.3 million, HK$18.6 million,
HK$20.1 million and HK$53.8 million as at 31 December 2020, 2021 and 2022 and 30
September 2023, respectively. Such fluctuation was partly due to the difference in credit
periods granted by different suppliers and difference in timing of payments to our suppliers.
Our retention payables to subcontractors amounted to approximately HK$3.0 million,
HK$4.3 million, HK$7.2 million and HK$5.9 million as at 31 December 2020, 2021 and
2022 and 30 September 2023. Such fluctuation depends on the practical completion, the
expiry of the defect liabilities period or a pre-agreed time period of each projects involving
retention payables to our subcontractors.
Trade payables turnover days
The following table sets forth our trade payables turnover days during the Track
Record Period:
FY2020 FY2021 FY2022
For the nine
months
ended
30 September
2023
days days days days
Trade payables
turnover days 49.0 48.0 26.2 53.6
Note: Trade payables turnover days is calculated based on the average of the beginning and ending
balance of trade payables divided by cost of services for the year/period, then multiplied by the
number of days of the year/period (i.e. 365 days for a full year or 273 days for the nine months
ended 30 September 2023).
Our trade payables turnover days were approximately 49.0 days, 48.0 days, 26.2 days
and 53.6 days for FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
respectively. During the Track Record Period, our top suppliers generally granted a credit
period ranged from 30 days to 90 days.
Aging analysis and subsequent settlement
The following table sets forth the aging analysis of trade payables based on the invoice
date as at the end of each reporting period:
As at 31 December
As at
30 September
20232020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000
Within 30 days 11,648 6,313 6,851 38,853
31 – 60 days 11,793 4,672 4,998 8,884
61 – 90 days 1,340 3,358 5,307 1,531
More than 90 days 7,472 4,240 2,949 4,507
32,253 18,583 20,105 53,775
FINANCIAL INFORMATION
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--- page 341 ---
Up to the Latest Practicable Date, approximately 87.8% of our trade payables as at 30
September 2023 had been settled:
As at
30 September
2023
Subsequent settlement up
to the Latest Practicable Date
HK$’000 HK$’000 %
Within 30 days 38,853 34,013 87.5
31-60 days 8,884 8,884 100.0
61-90 days 1,531 1,337 87.3
More than 90 days 4,507 3,000 66.6
Total 53,775 47,234 87.8
Accruals and other payables
The following table sets forth a breakdown of our Group’s accruals and other payables
as at the dates indicated:
As at 31 December
As at
30 September
20232020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000
Accrued staff costs 2,719 4,831 3,470 1,766
Accruals for listing
expenses – – – 6,681
Other accruals and
payables 2,175 2,983 4,421 3,748
Total 4,894 7,814 7,891 12,195
Our accruals and other payables increased from approximately HK$4.9 million as at 31
December 2020 to approximately HK$7.8 million as at 31 December 2021, which was
mainly due to the increase in accrued staff costs of approximately HK$2.1 million as a
result of the increase in number of employees as at 31 December 2021, as compared to 31
December 2020. Our accruals and other payables remained stable at HK$7.9 million as at 31
December 2022. Our accruals and other payables increased to approximately HK$12.2
million as at 30 September 2023, which was mainly due to (i) the decrease in accrued staff
costs and such decrease was mainly because the balance of accrued staff costs as at 31
December 2022 included both salary and bonus to be paid, while the balance of accrued
staff costs as at 30 September 2023 only included salary to be paid; (ii) the decrease in our
other accruals and payables where we recorded a decrease in the amount of accrued
subcontracting fees as at 30 September 2023; and (iii) the accruals for listing expenses of
approximately HK$6.7 million recorded as at 30 September 2023.
FINANCIAL INFORMATION
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--- page 342 ---
INDEBTEDNESS
As of 31 December 2023, being the most recent practicable date for this indebtedness
statement, save as disclosed in this paragraph headed “Indebtedness” in this section, we do
not have any other bank borrowings or any loan capital issued and outstanding or agreed to
be issued, bank overdraft, liabilities under acceptance (other than normal trade bills) or
acceptance credits, debt securities, term loans, borrowings or indebtedness in the nature of
borrowing, mortgages, charges, hire purchase commitments, contingent liabilities, debentures
or guarantees. Our Directors confirm that as of the Latest Practicable Date, there was no
material covenant on any of our outstanding debt and there was no breach of any covenant
during the Track Record Period and up to the Latest Practicable Date. Our Directors
confirmed that we had neither experienced any difficulties in obtaining or repaying of our
bank loans or other bank facilities, default in payment of bank borrowings or breach of
convenants during the Track Record Period. Our Directors confirmed that there has not been
any material change in our indebtedness or contingent liabilities since 31 December 2023
and up to the date of this prospectus. Our Directors confirmed that as at the Latest
Practicable Date, we did not have any immediate plan for additional material external debt
financing.
The following table sets forth our Group’s indebtedness as at the respective dates
indicated:
As at 31 December
As at
30
September
2023
As at
31
December
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(unaudited)
Non-current
liabilities
Lease liabilities 2,390 277 4,192 458 110
Current liabilities
Amounts due to
directors 16,653 13,912 5,991 1,069 –
Lease liabilities 3,276 2,337 4,352 3,782 2,896
Bank borrowings 11,201 4,703 10,638 8,208 9,886
31,130 20,952 20,981 13,059 12,782
33,520 21,229 25,173 13,517 12,892
FINANCIAL INFORMATION
– 332 –


--- page 343 ---
Lease liabilities
During the Track Record Period, our Group leased premises, land and motor vehicle for
its operations under leased arrangements over the leased term from two to 50 years.
Details of our leased liabilities are summarised in note 15 to the Accountant’s Report
set out in Appendix I to this prospectus.
Amounts due to directors
Details of our amounts due to directors are summarised in note 26(d) to the
Accountant’s Report set out in Appendix I to this prospectus.
Our amounts due to directors are unsecured, interest free, repayable on demand and
non-trade in nature. As at 31 December 2020, 2021 and 2022 and 30 September 2023, the
amounts due to directors represented cash advanced by Mr. Kelvin Chan, Mr. Eddie Chan,
Ms. Karen Chan, Mr. WH Chan and Ms. Choi to our Group for working capital purpose.
Bank borrowings
The following table sets forth a breakdown of our Group’s bank borrowings as at the
respective dates indicated:
As at 31 December
As at
30
September
2023
As at
31
December
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(unaudited)
Current, secured
and guaranteed
– Bank loans 7,201 1,354 7,096 8,208 9,886
– Bank overdrafts – – 2,184 – –
7,201 1,354 9,280 8,208 9,886---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current, guaranteed
– Bank loans 4,000 3,349 1,358 – –
11,201 4,703 10,638 8,208 9,886
FINANCIAL INFORMATION
– 333 –


--- page 344 ---
As at 31 December 2020, 2021 and 2022, 30 September 2023 and 31 December 2023,
(i) non-revolving loan facility amounted to approximately nil, nil, HK$6.0 million, HK$7.2
million and HK$7.0 million, and revolving loan facility amounted to approximately HK$5.6
million, nil, HK$2.2 million, nil and HK$2.0 million are guaranteed by Mr. Kelvin Chan,
Mr. Eddie Chan, Ms. Karen Chan and Mr. WH Chan, secured by properties owned by
Wealthy River International Investment Limited, and life insurance contracts owned by Mr.
Kelvin Chan and Ms. Karen Chan; (ii) SME non-revolving loan facilities amounted to
approximately HK$4.0 million, HK$3.3 million, HK$1.4 million, nil and nil are guaranteed
by HKMC Insurance Limited, Mr. Kelvin Chan and Mr. Eddie Chan; and (iii) non-revolving
loan facility amounted to approximately HK$1.6 million, HK$1.4 million, HK$1.1 million,
HK$1.0 million and HK$0.9 million are secured by the properties owned by Wealthy River
International Investment Limited, Mr. WH Chan and Ms. Choi, and guaranteed by Mr.
Kelvin Chan, Mr. Eddie Chan and Mr. WH Chan, respectively.
The personal guarantee of Mr. Kelvin Chan, Mr. Eddie Chan, Ms. Karen Chan and Mr.
WH Chan and legal charge over properties owned by Wealthy River International Investment
Limited, Mr. WH Chan and Ms. Choi will either be replaced by our Company’s corporate
guarantee upon Listing, or released before or upon Listing. For those banking facilities in
which guarantee provided by HKMC Insurance Limited, would be cancelled upon Listing.
As at 31 December 2023, being the most recent practicable date for purpose of the
disclosure of our liquidity position, we had unutilised banking facilities of approximately
HK$43.0 million, which include a SME non-revolving loan facility amounted to
approximately HK$10.0 million which would be cancelled upon Listing.
Contingent Liabilities
During the Track Record Period and up to 30 September 2023, our Group has been
subject to a number of claims due to personal injuries suffered by our employees or our
subcontractors in accidents arising out of and in the course of their employment. Details of
which are disclosed in the paragraph headed “Business – Litigation and claims” in this
prospectus. Our Directors are of the opinion that such claims are covered by insurance and
will not result in any material adverse impact on the financial position or results and
operations of our Group. No provision has been made in respect of these claims in the
historical financial information.
OFF-BALANCE-SHEET COMMITMENTS AND ARRANGEMENTS
As at the Latest Practicable Date, our Group had not entered into any material
off-balance-sheet commitments or arrangements.
FINANCIAL INFORMATION
– 334 –


--- page 345 ---
KEY FINANCIAL RATIO
FY2020
or as at
31 December
2020
FY2021
or as at
31 December
2021
FY2022
or as at
31 December
2022
Nine months
ended
30 September
2023 or as at
30 September
2023
Gross profit margin 17.0% 15.5% 19.9% 20.0%
Net profit margin 11.3% 7.6% 11.7% 6.4%
Return on equity 45.2% 17.7% 30.1% 11.9%
Return on total assets 22.4% 11.4% 19.9% 6.8%
Current ratio 1.8 times 2.5 times 2.8 times 2.1 times
Quick ratio 1.8 times 2.5 times 2.8 times 2.1 times
Trade receivables turnover
days
25.0 days 26.3 days 19.8 days 19.9 days
Trade payables turnover
days
49.0 days 48.0 days 26.2 days 53.6 days
Gearing ratio 41.3% 21.7% 19.3% 10.7%
Net debt to equity ratio 23.4% 9.7% (35.0%) (4.4%)
Interest coverage 92.8 times 44.0 times 138.0 times 58.4 times
Gross profit margin
Please refer to the paragraph headed “Period-to-period comparison of results of
operations” in this section for the reasons for the fluctuation in our gross profit margin.
Net profit margin
Our net profit margin decreased from approximately 11.3% for FY2020 to
approximately 7.6% for FY2021, but increased to approximately 11.7% for FY2022. Such
changes were mainly due to the changes in our gross profit margin, other income,
administrative expenses and impairment losses on financial assets and contract assets as
discussed in the paragraph headed “Period-to-period comparison of results of operations” in
this section.
Our net profit margin decreased from approximately 11.5% for the nine months ended
30 September 2022 to approximately 6.4% for the nine months ended 30 September 2023.
Such decrease was mainly due to the listing expenses of approximately HK$12.2 million
incurred during the nine months ended 30 September 2023. For further details, please refer
to the paragraph headed “Period-to-period comparison of results of operations” in this
section.
Return on equity
Return on equity is calculated as profit for the year/period divided by the ending total
equity as at the respective reporting dates.
FINANCIAL INFORMATION
– 335 –


--- page 346 ---
Our return on equity was approximately 45.2%, 17.7% and 30.1% for each of FY2020,
FY2021 and FY2022, respectively. Our return on equity was lower for FY2021 mainly due
to the decrease in our net profit and net profit margin primarily as a result of the decrease in
revenue and gross profit as discussed in the paragraph headed “Period-to-Period Comparison
of results of operations” in this section. As a result, our return on equity was negatively
affected for FY2021.
Our return on equity decreased from approximately 29.8% for the nine months ended
30 September 2022 to approximately 11.9% for the nine months ended 30 September 2023,
mainly due to the decrease in our net profit and net profit margin primarily as a result of the
listing expenses incurred as discussed above.
Return on total assets
Return on total assets is calculated as profit for the year/period divided by the ending
total assets as at the respective reporting dates.
Our return on total assets was approximately 22.4%, 11.4% and 19.9% for each of
FY2020, FY2021, FY2022, respectively. Our return on total assets was approximately 17.9%
and 6.8% for the nine months ended 30 September 2022 and 2023, respectively. The change
in our return on total assets over the Track Record Period was mainly due to reasons similar
to those for the change in our return on equity as discussed above.
Current ratio
Current ratio is calculated as current assets divided by current liabilities as at the
respective reporting dates.
Our current ratio increased from approximately 1.8 times as at 31 December 2020 to
approximately 2.5 times as at 31 December 2021. Such increase was mainly due to the
decrease in our current liabilities of approximately 32.0% during FY2021, which was
primarily attributable to the decrease in trade and retention payables of approximately
HK$12.4 million during FY2021. Our current ratio further increased to approximately 2.8
times as at 31 December 2022. Such increase was mainly due to the increase in our current
assets as a result of our profitable operation. Our current ratio decreased to approximately
2.1 times as at 30 September 2023 which was mainly due to the increase in current
liabilities of approximately 54.1% during the nine months ended 30 September 2023, which
was primarily attributable to the increase in trade and retention payables of approximately
HK$32.4 million.
Quick ratio
Quick ratio is calculated as current assets minus inventories, then divided by current
liabilities as at the respective reporting dates. Due to our business nature, we did not have
any inventories during the Track Record Period. As such, our quick ratio was the same as
our current ratio.
FINANCIAL INFORMATION
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--- page 347 ---
Trade receivables turnover days
Trade receivables turnover days is calculated based on the average of the beginning
and ending balance of trade receivables divided by revenue for the year/period, then
multiplied by the number of days of the year/period (i.e. 365 days for a full year or 273
days for the nine months ended 30 September 2023).
Please refer to the paragraph headed “Discussion of selected statement of financial
position items – Trade receivables – Trade receivables and unbilled revenue turnover days”
in this section for the reasons for the change in our trade receivables turnover days.
Trade payables turnover days
Trade payables turnover days is calculated based on the average of the beginning and
ending balance of trade payables divided by cost of services for the year/period, then
multiplied by the number of days of the year/period (i.e. 365 days for a full year or 273
days for the nine months ended 30 September 2023).
Please refer to the paragraph headed “Discussion of selected statement of financial
position items – Trade payables – Trade payables turnover days” in this section for the
reasons for the change in our trade payables turnover days.
Gearing ratio
Gearing ratio is calculated as total borrowings (i.e. bank borrowings, amounts due to
directors and lease liabilities) divided by the total equity as at the respective reporting dates.
Our gearing ratio decreased from approximately 41.3% as at 31 December 2020 to
approximately 21.7% as at 31 December 2021, which was mainly due to the repayment of
bank borrowings during FY2021. Our gearing ratio subsequently decreased to approximately
19.3% as at 31 December 2022. Such decrease was mainly because of the increase in total
equity during FY2022. Our gearing ratio further decreased to approximately 10.7% as at 30
September 2023. Such decrease was mainly due to the decrease in total borrowings.
Net debt to equity ratio
Net debt to equity ratio is calculated as net debts (i.e. bank borrowings, amounts due to
directors and lease liabilities, net of cash and cash equivalents) divided by total equity as at
the respective reporting dates.
Our net debt to equity ratio was approximately 23.4% and 9.7% as at 31 December
2020 and 2021, respectively. We recorded net cash positions as at 31 December 2022 and 30
September 2023, which was because we had a relatively higher level of cash and cash
equivalents as compared to the level of debt.
FINANCIAL INFORMATION
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--- page 348 ---
Interest coverage
Interest coverage is calculated as profit before finance costs, net and income tax
expense divided by finance costs, net of the respective reporting years/period.
Our interest coverage decreased from approximately 92.8 times as at 31 December
2020 to approximately 44.0 times as at 31 December 2021. Such decrease was mainly due to
the decrease in net profit during FY2021 as discussed in the paragraph headed
“Period-to-period comparison of results of operations” in this section, which resulted in a
lower interest coverage as at 31 December 2021. Our interest coverage increased to
approximately 138.0 times as at 31 December 2022. The increase in interest coverage was
mainly due to the increase in profit before interest and tax as a result of our profitable
operation.
Our interest coverage decreased from approximately 142.9 times as at 30 September
2022 to approximately 58.4 times a at 30 September 2023. Such decrease in our interest
coverage was mainly due to the increase in finance costs and the decrease in profit before
interest and tax as a result of the incurrence of listing expenses during the nine months
ended 30 September 2023.
RELATED PARTY TRANSACTIONS
Our related party transactions during the Track Record Period are summarised in note
26 to the Accountant’s Report set out in Appendix I to this prospectus. During the Track
Record Period, our transactions with related parties which have been accounted for in our
consolidated statements of comprehensive income mainly included the following:
For the nine months
ended 30 September
FY2020 FY2021 FY2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Rental paid in relation
to short-term rental
contract entered
into with Wealthy
River International
Investment Limited 480 480 480 360 405
Directors’
remunerations:
Mr. Kelvin Chan 1,461 1,683 1,683 1,012 1,012
Mr. Eddie Chan 3,144 3,596 3,653 2,270 2,248
Ms. Karen Chan 1,253 1,443 1,443 869 869
Mr. WH Chan 1,084 1,236 1,264 793 783
Ms. Choi 520 600 600 360 360
7,942 9,038 9,123 5,664 5,677
FINANCIAL INFORMATION
– 338 –


--- page 349 ---
Our Directors confirm that all transactions with related parties described in note 26 of
the Accountant’s Report were conducted on normal commercial terms determined after arm’s
length negotiation having considered the rental paid for our office is comparable to the
prevailing market rent of comparable properties in similar locations, which are considered
fair, reasonable and in the interest of the Shareholders of our Company as a whole.
FINANCIAL RISK AND CAPITAL MANAGEMENT
Our Group is exposed to credit risk, liquidity risk and market risk (including foreign
exchange risk and cash flow interest rate risk) in the normal course of business. We
regularly manages the aforementioned risks. Having considered the simplicity of our
financial structure and operations, no hedging activities is undertaken. For further details of
our financial risk management, please refer to “Business – Risk management and internal
control systems” and note 3 of the Accountant’s Report set out in Appendix I to this
prospectus.
We manage our capital to ensure that entities in our Group will be able to continue as
a going concern while maximising the return to shareholders through the optimisation of the
debt and equity balance. Our overall strategy remains unchanged through the Track Record
Period.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible
assets prepared in accordance with Rule 4.29 of the Listing Rules are set out below to
illustrate the effect of the Share Offer on the consolidated net tangible assets as at 30
September 2023 as if it had taken place on that date.
The unaudited pro forma statement of adjusted consolidated net tangible assets has
been prepared for illustrative purposes only and, because of its hypothetical nature, it may
not give a true picture of the consolidated net tangible assets of our Group attributable to
owners of our Company had the Share Offer been completed as at 30 September 2023 or
any future dates. The unaudited pro forma statement of adjusted consolidated net tangible
assets of our Group attributable to the owners of our Company is based on the consolidated
net tangible assets of our Group attributable to the owners of our Company as at 30
September 2023 as set out in the Accountant’s Report of our Company, the text of which is
set out in Appendix I to this prospectus, and adjusted as described below.
FINANCIAL INFORMATION
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--- page 350 ---
Audited
consolidated net
tangible assets of
our Group
attributable to the
owners of our
Company as at
30 September 2023
Estimated net
proceeds from the
Share Offer
Unaudited
pro forma adjusted
consolidated net
tangible assets
attributable to the
owners of our
Company as at
30 September 2023
Unaudited
pro forma adjusted
consolidated net
tangible assets
per Share
HK$’000 HK$’000 HK$’000 HK$
(Note 1) (Note 2) (Note 3)
Based on an Offer
Price of
HK$0.25 per
Share 126,529 103,484 230,013 0.12
Based on an Offer
price of
HK$0.27 per
Share 126,529 112,884 239,413 0.12
Notes:
(1) The audited consolidated net tangible assets of our Group attributable to the owners of our Company
as at 30 September 2023 is extracted from the Accountant’s Report set out in Appendix I to this
prospectus, which is based on the audited consolidated net assets of our Group attributable to the
owners of our Company as at 30 September 2023 of HK$126,529,000.
(2) The estimated net proceeds from the Share Offer are based on the indicative Offer Price of HK$0.25
and HK$0.27 per Share, respectively, after deduction of the underwriting fees and other related
expenses paid/payable by our Company (excluding listing expenses of approximately HK$12,184,000
which have been accounted in the consolidated statements of comprehensive income for prior to 30
September 2023), and takes no account of any Shares which may be issued upon the exercise of the
Over-allotment Option, any Shares that may be allotted and issued upon the exercise of any option
which may be granted under the Share Option Scheme or any Shares which may be issued or
repurchased by our Company pursuant to the general mandates.
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the
adjustments referred to in the preceding paragraph and on the basis that 2,000,000,000 Shares are
issued, assuming that the Share Offer and Capitalisation Issue have been completed on 30 September
2023 but takes no account of any Shares which may be issued upon the exercise of the
Over-allotment Option, any Shares that may be allotted and issued upon the exercise of any option
which may be granted under the Share Option Scheme or any Shares which may be issued or
repurchased by our Company pursuant to the general mandates.
(4) No adjustment has been made to reflect any trading result or other transaction of Group entered into
subsequent to 30 September 2023. The unaudited pro forma adjusted net tangible assets have not
been adjusted for dividends of HK$26,586,000 declared in January 2024. Had the dividends, totaling
HK$26,586,000, been taken into account, the unaudited pro forma adjusted net tangible asset per
Share would have been reduced to HK$0.10 and HK$0.11 based on the Offer Price of HK$0.25 and
HK$0.27 per Share respectively.
FINANCIAL INFORMATION
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--- page 351 ---
DISTRIBUTABLE RESERVE
Our Company was incorporated on 28 June 2023 and is an investment holding
company. There were no reserves available for distribution to the Shareholders as at 31
December 2020, 2021 and 2022 and 30 September 2023.
DIVIDEND
No dividend has been paid or declared by our Company for the Track Record Period.
Dividends of HK$8.2 million, nil, HK$8.0 million and HK$20.0 million were declared
and settled by the companies now comprising our Group to their then shareholders, during
each of FY2020, FY2021, FY2022 and the nine months ended 30 September 2023,
respectively.
In January 2024, the Company declared dividends of approximately HK$26.6 million
of which approximately HK$10.0 million will be settled by cash before the Listing and
approximately HK$16.6 million was offset against the aggregate amounts due from the
Directors and the related company.
LISTING EXPENSES
Our Directors estimate that the total amount of expenses in relation to the Listing is
approximately HK$34.0 million, comprising (i) underwriting-related expenses, including
underwriting commission, of approximately HK$7.8 million; and (ii)
non-underwriting-related expenses of approximately HK$26.2 million, including (a) fees paid
and payable to legal advisers and reporting accountant of approximately HK$14.7 million;
and (b) other fees and expenses, including sponsor fees, of approximately HK$11.5 million.
Out of the amount of approximately HK$34.0 million, approximately HK$13.5 million is
directly attributable to the issue of the Shares and is expected to be accounted for as a
deduction from equity upon Listing. The remaining amount of approximately HK$20.5
million, which cannot be so deducted, shall be charged to profit or loss. Of the
approximately HK$20.5 million that shall be charged to profit or loss, nil, nil, nil and
approximately HK$12.2 million has been charged for FY2020, FY2021, FY2022 and the
nine months ended 30 September 2023. The listing expenses are expected to represent
approximately 26.2% of the gross proceeds of the Share Offer, assuming an Offer Price of
HK$0.26 per Offer Share (being the mid-point of the indicative Offer Price range) and the
Over-allotment Option is not exercised. Our Group’s financial performance and results of
operations for FY2023 and FY2024 will be adversely affected by the estimated expenses in
relation to the Listing.
FINANCIAL INFORMATION
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--- page 352 ---
PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2023
Our Directors estimate, on the bases as set out in Appendix III to this prospectus and
in the absence of unforeseen circumstances, that our estimated consolidated profit
attributable to owners of our Company for the year ended 31 December 2023 to be as
follows:
Estimated consolidated profit attributable to owners of
our Company for the year ended 31 December 2023 . . not less than approximately
HK$23.0 million
Note: The estimated consolidated profit attributable to owners of our Company for the year ended 31
December 2023 has taken into account of our estimated listing expenses of approximately HK$16.0
million incurred during the year ended 31 December 2023.
The profit estimate, for which our Directors are solely responsible, has been prepared
by them based on the audited consolidated results of our Group for the nine months ended
30 September 2023 as set out in the Accountant’s Report in Appendix I to this prospectus
and the unaudited consolidated results based on the management accounts of our Group for
the three months ended 31 December 2023.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors confirm that, as at the Latest Practicable Date, they were not aware of
any circumstances which, had been required to comply with Rules 13.13 to 13.19 of the
Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19
of the Listing Rules.
MATERIAL ADVERSE CHANGE
Our Directors confirm that, save for the expenses in connection with the Listing up to
the date of this prospectus, there has been no material adverse change in our financial or
trading position or prospects since 30 September 2023, and there had been no events since
30 September 2023 which would materially affect the information shown in our consolidated
financial statements included in the Accountant’s Report set out in Appendix I to this
prospectus.
FINANCIAL INFORMATION
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--- page 353 ---
BUSINESS OBJECTIVES AND STRATEGIES
Our Group will endeavor to expand our business operations by adopting our business
strategies through the following implementation plans. For details of our business strategies,
please refer to the paragraph headed “Business – Business strategies” in this prospectus. Our
Group’s actual course of business may vary from the business objectives set out in this
prospectus. There can be no assurance that the plans of our Group will be materialised in
accordance with the expected time frame or that the business objectives of our Group will
be accomplished at all.
REASONS FOR THE LISTING
The principal business objective of our Group is to further strengthen our market
position, increase our market share and capture the growth in the Hong Kong structural
steelwork industry. We intend to achieve our business objective by expanding our scale of
operation through our intended effort in actively seeking opportunities in undertaking
additional and/or sizeable structural steelwork projects, from both our existing and potential
new customers, on top of our present scale of operation and our current projects on hand.
Our Directors believe that the Listing is beneficial to our Company and our Shareholders as
a whole because of the following reasons:
 the net proceeds from the Share Offer will provide additional financial resources
to our Group for our business plans as set out in the paragraph headed “Business
– Business strategies” of this prospectus, which will further strengthen our market
position and expand our market share in the structural steelwork industry in Hong
Kong;
 a public listing status will enhance our corporate profile and recognition and
enable our Group to be considered more favourably by our customers when
tendering for structural steelwork projects, given that a listed company is subject
to ongoing regulatory compliance for announcements, financial disclosures and
corporate governance;
 the Share Offer will provide a fund-raising platform for our Company, thereby
enabling us to raise the capital required to finance our future growth and
expansion without reliance on our Controlling Shareholders. Such platform would
allow us to gain direct access to the capital market for equity and/or debt
financing, both at the time of the Listing as well as at later stage, to fund our
existing operations and future expansion, which could be instrumental to our
expansion and improving our operating and financial performance to enhance
Shareholders’ return; and
 upon the Listing, our Shares will be freely traded on the Stock Exchange. A
public listing status will offer us a broader shareholder base which could lead to a
more liquid market in the trading of our Shares.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 354 ---
Funding needs for implementing our business strategies
As at 30 September 2023, our cash and cash equivalents, which represents our
immediately available working capital, amounted to approximately HK$19.1 million, as set
out in the paragraph headed “Financial information – Net current assets” in this prospectus.
Our Directors consider that the amount of our available working capital fluctuates from time
to time, depending on the timing of (i) payment from our customers; and (ii) payment to our
subcontractors and suppliers of materials and other services. The average monthly expenses
incurred by us, primarily comprising staff cost, subcontracting fees for structural steel
fabrication works and construction site works, cost of materials, machinery service fees,
administrative expenses and other miscellaneous expenses for our daily operations during the
Track Record Period was approximately HK$21.3 million. In light of our ability to obtain
new projects and the associated working capital requirements, our Directors consider that it
is financially prudent for us to reserve our current available cash resources for meeting our
operating expenses.
In view of the aforesaid, our current available working capital would not have room for
our further business expansion such as expanding our production capacity, expanding our
workforce and/or undertaking additional and/or sizeable projects which would inevitably
require more available cash for up-front costs and general working capital. Therefore, our
Directors consider that we will need to raise additional funding through the Share Offer to
facilitate the implementation of our future plans, while reserving our current available
working capital for our existing business operations.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, our
Company’s subsidiaries declared and settled dividends by cash of HK$8.2 million, nil,
HK$8.0 million and HK$20.0 million to their then shareholders, respectively. Our Directors
consider that it was commercially reasonable and justifiable for our Group to declare and
settle the dividends aforesaid instead of reinvesting such cash resources in our Group’s
operations during the Track Record Period, taking into consideration the followings:
(i) the declaration and settlement of dividends was mainly for rewarding the
shareholders for their ownership in the company and realising the value of and
providing a direct financial return on the investment made by the respective
shareholders. In fact, it is fairly common that listed companies in Hong Kong,
regardless of their market capitalisation or business scale, would declare and
distribute certain retained earnings as dividends to their pre-IPO shareholders as a
way to reward their past contributions to the companies prior to the listings;
(ii) our Group remained profitable throughout the Track Record Period. For FY2020,
FY2021, FY2022 and the nine months ended 30 September 2023, our Group’s
total comprehensive income for the year/period was approximately HK$35.6
million, HK$16.7 million, HK$40.7 million and HK$15.9 million, respectively;
(iii) as at 31 December 2020, 2021, 2022 and 30 September 2023, our Group recorded
retained earnings of approximately HK$81.2 million, HK$98.5 million, HK$129.8
million and HK$124.9 million, respectively. The amount of dividend declared and
FUTURE PLANS AND USE OF PROCEEDS
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--- page 355 ---
settled by our Group for FY2020, FY2021, FY2022 and the nine months ended 30
September 2023 accounted for approximately 10.1%, nil, 6.2% and 16.0% of our
retained earnings as at the end of the corresponding year/period, respectively; and
(iv) as at 31 December 2020, 2021, 2022 and the nine months ended 30 September
2023, our Group recorded amounts due to Directors of approximately HK$16.7
million, HK$13.9 million, HK$6.0 million and HK$1.1 million, respectively. Our
amounts due to Directors are non-trade in nature and represented cash advanced
by our Controlling Shareholders, also being our Directors, Mr. Kelvin Chan, Mr.
Eddie Chan, Ms. Karen Chan, Mr. WH Chan and Ms. Choi to our Group for
working capital purpose. The success of our Group is underpinned by the
continuous financial support provided by our Controlling Shareholders, which
provided the necessary working capital for project financing and business
expansion. Their contributions are vital to us in achieving the present scale of our
business as well as market presence in the Hong Kong structural steelwork
industry. According to the Industry Report, our Group ranked third in the Hong
Kong structural steelwork industry in terms of revenue in 2022, and accounted for
approximately 3.4% of the market share in 2022; and
(v) our Group represents the core family asset of our Controlling Shareholders. The
two generations of our Controlling Shareholders’ family (all being our Directors)
have devoted significant parts of their careers and resources in building up our
Group’s business. But for their contributions throughout the years, we would not
have become one of the established market players in the Hong Kong structural
steelwork industry. The distribution of dividends to our Controlling Shareholders
is an appropriate and fair way to reward their personal contributions to our
development.
USE OF PROCEEDS
We estimate that the net proceeds from the Share Offer (assuming the Over-allotment
Option is not exercised) based on the Offer Price of HK$0.26 per Offer Share, being the
mid-point of the indicative Offer Price range of HK$0.25 to HK$0.27 per Offer Share, after
deducting the related expenses, are estimated to be approximately HK$96.0 million. We
intend to apply such net proceeds in the following manner:
(a) approximately HK$59.0 million, representing approximately 61.5% of the
estimated net proceeds, will be used for financing the up-front costs of our
projects;
Based on our operation history during the Track Record Period and depending on
the scale of the projects, the average timeframe between (i) the time when we
first incur project up-front costs; and (ii) the time when our accumulated net cash
outflows in respect of a project starts to decrease from its peak is on average 11
months from the commencement of the project (the “ Up-front Period ”). In
respect of our top projects for each year/period during the Track Record Period,
we generally received the first progress payment from the relevant customer five
months after commencement of the project. Depending on our terms of
FUTURE PLANS AND USE OF PROCEEDS
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--- page 356 ---
engagement with different customers, in respect of the top projects undertaken
during the Track Record Period, the total amount of up-front costs incurred by our
Group during the Up-front Period represented on average 12% of the contract sum
of the project. The specific amount of up-front costs incurred may vary from
project to project, depending on the scale of the project, the party being
responsible for the procurement of materials, the schedule of project
implementation and the length of our business relationships with the relevant
customers. In addition, we may experience cash flow mismatch from time to time
as our projects progress, which largely depend on (i) the certification process of
our customers; (ii) our customers’ internal process for approving our invoices;
(iii) the required settlement time to our suppliers; and (iv) the number and scale
of our projects in progress. The liquidity needs of our projects would therefore
impose a constraint on the number and/or scale of the projects which we could
undertake concurrently if we solely rely on our operating cash flow to support our
expansion.
Our executive Directors have earmarked three projects which we intend to apply
our net proceeds towards fulfilling part of the relevant up-front costs. Out of the
three earmarked projects, (i) one of the projects with an estimated contract sum of
approximately HK$388.0 million involving a commercial development in
Causeway Bay, has already been secured by us in September 2023; and (ii) the
remaining two projects represent tenders submitted by our Group of which our
Directors consider that we would likely be able to secure taking into account the
latest negotiation with the relevant customer.
The following table sets forth the particulars of these earmarked projects:
Project
No. Customer
Private/
public
sector
Nature of
projects Status
Date of commencement
and completion of our
works
(Note)
Estimated
contract
sum/Tender
amount
Estimated
amount of
up-front costs
HK$’000 HK$’000
#13 Hip Hing
Group
Private Commercial Successful Commencement: Third
quarter of 2023
Completion: Fourth
quarter of 2025
388,000 46,560
T01 Customer
Group E
Public Infrastructure
and public
facilities
Submitted revised
tender based on
negotiation with
customer and
attended tender
interview
Commencement: Second
quarter of 2024
Completion: Third quarter
of 2026
201,430 24,172
FUTURE PLANS AND USE OF PROCEEDS
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--- page 357 ---
Project
No. Customer
Private/
public
sector
Nature of
projects Status
Date of commencement
and completion of our
works
(Note)
Estimated
contract
sum/Tender
amount
Estimated
amount of
up-front costs
HK$’000 HK$’000
T02 Customer
Group E
Public Infrastructure
and public
facilities
Submitted revised
tender based on
negotiation with
customer
Commencement: Second
quarter of 2024
Completion: Fourth
quarter of 2025
166,256 19,951
Total 755,686 90,683
Note: The expected commencement and completion dates are provided based on
our management’s best estimation. In making the estimation, our
management takes into account factors including the letter of award (if
applicable), the tender information available from the relevant customers
and the estimated work schedule.
In September 2023, our Group secured Project No. #13 with an estimated contract
sum of approximately HK$388.0 million, involving a commercial development in
Causeway Bay, from Hip Hing Group. Project No. #13 represents the largest
project obtained by us in terms of estimated contract sum during the Track Record
Period. In September 2023, our Group had commenced preparation works for
Project No. #13. Based on the expected work schedule of Project No. #13, our
Directors anticipated that a substantial part of works under Project No. #13 will
only be performed from the second quarter of 2024 onwards and we will incur a
substantial amount of up-front costs for the payment for the requisite materials
and subcontracting services for Project No. #13 from the second quarter of 2024.
Although our executive Directors consider that we would likely be able to secure
the tender for Project No. T01 and T02 based on their latest tender status as set
out above, there is no assurance that such tenders will eventually be awarded to
us. Should we be unable to secure such project, we will utilise the net proceeds
from the Share Offer allocated for financing the project up-front costs of other
successful projects. As at the Latest Practicable Date, our Group had 49 submitted
tenders (without taking into account Project No. T01 and T02), with an aggregate
estimated tender amount of approximately HK$1.3 billion, which were still
undergoing tender selection process and pending tender result.
In the event that the net proceeds designated by us are insufficient to fully fund
the up-front costs of those projects successfully obtained by us, we currently plan
to finance the shortfall by our internal resources and/or debt financing.
There is inherent uncertainty involved in predicting the number and scale of
projects which will eventually be awarded to us and when exactly we are required
to make available cash for project up-front costs. Further, the time required to
complete tender review process and the subsequent award of contract varies
FUTURE PLANS AND USE OF PROCEEDS
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--- page 358 ---
depending on the customer and project size. Therefore, there is no assurance that
we can accurately estimate when the results for the tenders we submitted are
released or when exactly we are required to incur the up-front costs for the
projects awarded. These timelines will depend on, among others, (i) the timetable
of the potential project which may or may not be available to us before we submit
a tender; (ii) the particular customer’s internal arrangement which may be affected
by market conditions and may or may not adhere to the original project timetable
provided to us; (iii) the scope of work of the project which may in turn affect
whether and when we are required to make payments to our subcontractors and
suppliers; and (iv) our negotiation with our customers which may in turn affect
the payment terms of our projects.
(b) approximately HK$35.0 million (equivalent to approximately RMB32.2 million),
representing approximately 36.4% of the estimated net proceeds, will be used for
acquiring a piece of land within or in proximity to Dongguan, the PRC, and
setting up a new production facility with a gross floor area of approximately
16,000 sq.m. and a maximum annual production capacity of approximately 6,600
tonnes (the “ New Production Facility ”).
The capital expenditure for the establishment of the New Production Facility is
estimated to be approximately RMB45.0 million (equivalent to approximately
HK$48.9 million) in aggregate, of which approximately RMB25.0 million
(equivalent to approximately HK$27.2 million) is for the acquisition of land and
approximately RMB20.0 million (equivalent to approximately HK$21.7 million) is
for the construction and setup of the New Production Facility.
As at the Latest Practicable Date, our Group had engaged a property agent in the
PRC for identifying suitable land for the New Production Facility based on the
following criteria: (i) being located within or in proximity to Dongguan, the PRC;
(ii) the estimated consideration for the land shall range from RMB20.0 million to
RMB25.0 million; (iii) the land is for industrial use and our Group shall be
allowed to construct production facilities, offices and ancillary facilities on the
land; (iv) having obtained valid land use certificate; (v) being free from any
subsisting or potential defects to the title of land or any third party claims; (vi)
there being no major difficulties in obtaining approval or consent from relevant
government authorities for the transfer of land; and (vii) being equipped with the
necessary infrastructural facilities such as electricity, drainage and sewage
treatment. The estimated consideration of approximately RMB25.0 million
(equivalent to approximately HK$27.2 million) for the acquisition of land is
determined with reference to the market price of similar land as informed by the
property agent in the PRC. The property agent has informed us that based on the
search and enquiry performed, at least five targets which fulfil the above criteria
are available in the market for the time being.
The capital expenditure for the setup of the New Production Facility was
determined with reference to a fee quotation obtained from a construction
contractor in the PRC for the construction and setup of the New Production
Facility. According to the fee quotation provided by the construction contractor,
FUTURE PLANS AND USE OF PROCEEDS
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--- page 359 ---
the capital expenditure for setting up the New Production Facility is
approximately RMB20.0 million (equivalent to approximately HK$21.7 million)
comprising the cost of constructing production facility buildings, basic fitting-out
and interior decorations, setting up a gantry crane and procurement of necessary
machinery and tools, mainly including cranes, cutting machines, drilling machines,
grinding machines and welding machines, etc..
Our Directors currently expect that out of the HK$48.9 million, approximately
HK$35.0 million will be financed with the net proceeds from the Share Offer and
the remaining HK$13.9 million will be financed with our internal resources and/or
debt financing; and
(c) approximately HK$2.0 million, representing approximately 2.1% of the estimated
net proceeds, will be used for further expanding and strengthening our manpower
by recruiting three project managers and one engineer.
BASIS AND ASSUMPTIONS
The implementation plan set out by our Directors is based on the following
assumptions:
 there will be no impediments, legal or otherwise, such as obtaining the relevant
land use right certificate(s) and construction permits, which would materially
disrupt our acquisition of land and/or construction of the New Production Facility;
 our Group will have sufficient financial resources to meet the planned capital
expenditure and business development requirements during the period to which
our future plans relate;
 there will be no material changes in the funding requirement for each of our
Group’s future plans described in this prospectus from the amount as estimated by
our Directors;
 there will be no material changes in existing laws and regulations, or other
governmental policies relating to our Group, or in the political, economic or
market conditions in which our Group operates;
 there will be no changes in the effectiveness of the licences, permits and
qualifications obtained by our Group, where applicable;
 there will be no material changes in the bases or rates of taxation applicable to
the activities of our Group;
 there will be no disasters, natural, political or otherwise, which would materially
disrupt the businesses or operations of our Group; and
 our Group will not be materially affected by the risk factors as set out in the
section headed “Risk factors” in this prospectus.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 360 ---
There can be no assurance that the net proceeds from the Share Offer will be sufficient
for fully implementing our business expansion plans. For instance, (i) the acquisition costs
for a piece of land within or in proximity to Dongguan, the PRC, for production facility use
and the construction costs for the New Production Facility may exceed the net proceeds
allocated for such purpose as set out above; (ii) the up-front costs requirement for projects
awarded to us may exceed the net proceeds allocated for such purpose as set out above; and
(iii) the number of additional staff we intend to recruit may not fulfil the manpower needs
as we continue to undertake additional and more sizeable projects. In the event any of the
above occurs or that the Listing becomes unsuccessful such that the net proceeds from the
Share Offer becomes unavailable to us, we may adjust the timing and scale of our business
expansion plans and/or seek alternative form of financing.
To the extent that the net proceeds are not immediately applied to the above purposes
and to the extent permitted by the applicable laws and regulations, we will deposit the net
proceeds into short-term interest-bearing deposits with licensed commercial banks in Hong
Kong and/or other authorised financial institutions (as defined under the SFO).
In the event that the Over-allotment Option is exercised in full, we estimate that we
will receive additional net proceeds from the sales of these additional Offer Shares of
approximately HK$18.3 million, after deducting the underwriting commissions and other
estimated offering expenses payable by us and assuming an Offer Price of HK$0.26 per
Share, being the mid-point of the proposed Offer Price range of HK$0.25 to HK$0.27. In the
event that the Offer Price is set at the low-end of the proposed Offer Price range and the
Over-allotment Option is exercised in full, our Company will receive additional net proceeds
of approximately HK$12.9 million. In the event that the Offer Price is set at the high-end of
the proposed Offer Price range and the Over-allotment Option is exercised in full, our
Company will receive additional net proceeds of approximately HK$23.7 million. The
allocation of the additional net proceeds will be used in the same proportions as set out
above.
Assuming the Over-allotment Option is not exercised at all, and in the event that the
Offer Price is set at the highest or lowest point of the indicative Offer Price range, the net
proceeds to be received from the Share Offer will increase or decrease by approximately
HK$4.7 million, respectively. In such event, the net proceeds will be used in the same
proportions as disclosed above.
We will issue an announcement in the event that there is any material change in the
use of proceeds of the Share Offer as described above.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 361 ---
PUBLIC OFFER UNDERWRITERS
Grande Capital Limited
Quam Securities Limited
Y uen Meta (International) Securities Limited
Eddid Securities and Futures Limited
Livermore Holdings Limited
Fortune Origin Securities Limited
Lee Go Securities Limited
Victory Securities Company Limited
Grand China Securities Limited
SBI China Capital Financial Services Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
The Public Offer
Public Offer Underwriting Agreement
Pursuant to the Public Offer Underwriting Agreement, our Company has agreed to offer
the Public Offer Shares for subscription by the public in Hong Kong on and subject to the
terms and conditions of this prospectus.
Subject to, among other conditions, the granting of the listing of, and permission to
deal in, the Shares in issue and to be issued as mentioned in this prospectus by the Listing
Committee and to certain other conditions set out in the Public Offer Underwriting
Agreement, the Public Offer Underwriters have agreed to procure subscribers for the Public
Offer Shares now being offered, or failing which, the Public Offer Underwriters shall
subscribe for the Public Offer Shares on the terms and conditions of this prospectus and the
Public Offer Underwriting Agreement.
The Public Offer Underwriting Agreement is conditional on and subject to the Placing
Underwriting Agreement having been signed and becoming unconditional and not having
been terminated in accordance with its terms.
Grounds for termination
The obligations of the Public Offer Underwriters to subscribe for, or procure
subscribers for the Public Offer Shares are subject to termination. The Overall Coordinators
shall have the absolute right by notice in writing to our Company to terminate the Public
Offer Underwriting Agreement with immediate effect at any time prior to 8:00 a.m. on the
Listing Date (the “ Termination Time ”) if any of the following events shall occur prior to
the Termination Time that did not exist prior to the date of the Public Offer Underwriting
Agreement:
UNDERWRITING
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1. There shall develop, occur, exist or come into effect:
(i) any matter or event resulting in any of the representations, warranties,
agreements and undertakings given to the Public Offer Underwriters under
the Public Offer Underwriting Agreement (the “ Warranties ”) becoming
untrue, inaccurate or misleading in any material respect when given or
repeated or there has been a breach of any of the Warranties or any other
provisions of the Public Offer Underwriting Agreement by any party to the
Public Offer Underwriting Agreement other than the Public Offer
Underwriters which, in any such cases, is considered, in the reasonable
opinion of the Overall Coordinators, to be material in the context of the
Public Offer; or
(ii) any statement contained in this prospectus has become untrue, incorrect or
misleading in any material respect which is considered, in the reasonable
opinion of the Overall Coordinators, to be material in the context of the
Public Offer; or
(iii) any event, series of events, matters or circumstances occurs or arises on or
after the date of the Public Offer Underwriting Agreement and before the
Termination Time, being events, matters or circumstances which, if it had
occurred before the date of the Public Offer Underwriting Agreement, would
have rendered any of the Warranties untrue, incorrect or misleading in any
material respect, and which is considered, in the reasonable opinion of the
Overall Coordinators to be material in the context of the Public Offer; or
(iv) any matter which, had it arisen or been discovered immediately before the
date of this prospectus and not having been disclosed in this prospectus,
would have constituted, in the reasonable opinion of the Overall
Coordinators, a material omission in the context of the Public Offer; or
(v) any event, act or omission which gives or is likely to give rise to any
liability of a material nature of our Company and any of our executive
Directors and our Controlling Shareholders arising out of or in connection
with the breach of any of the Warranties; or
(vi) any breach by any party to the Public Offer Underwriting Agreement other
than the Public Offer Underwriters of any provision of the Public Offer
Underwriting Agreement which, in the reasonable opinion of the Overall
Coordinators, is material;
UNDERWRITING
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2. There shall have developed, occurred, existed, or come into effect any event or
series of events, matters or circumstances whether occurring or continuing on and/
or after the date of the Public Offer Underwriting Agreement and including an
event or change in relation to or a development of an existing state of affairs
concerning or relating to any of the following:
(i) any new law or regulation or any change in existing laws or regulations or
any change in the interpretation or application thereof by any court or other
competent authority in Hong Kong, the PRC, the BVI, the Cayman Islands
or any of the jurisdictions in which our Group operates or has or is deemed
by any applicable law to have a presence (by whatever name called) or any
other jurisdiction relevant to the business of our Group; or
(ii) any change in, or any event or series of events or development resulting or
likely to result in any change in Hong Kong, the PRC, the BVI, the Cayman
Islands or any of the jurisdictions relevant to the business of our Group, the
local, regional or international financial, currency, political, military,
industrial, economic, stock market or other market conditions or prospects;
or
(iii) any adverse change in the conditions of Hong Kong or international equity
securities or other financial markets; or
(iv) the imposition of any moratorium, suspension or material restriction on
trading in securities generally on any of the markets operated by the Stock
Exchange due to exceptional financial circumstances; or
(v) any change or development involving a prospective change in taxation or
exchange control (or the implementation of any exchange control) in Hong
Kong, the PRC, the BVI, the Cayman Islands or any of the jurisdictions in
which our Group operates or has or is deemed by any applicable law to have
a presence (by whatever name called) or other jurisdiction relevant to our
Group’s business; or
(vi) any adverse change or prospective adverse change in the business or in the
financial or trading position or prospects of any member of our Group; or
(vii) a general moratorium on commercial banking activities in Hong Kong
declared by the relevant authorities; or
(viii) any event of force majeure including, without limiting the generality thereof,
any act of God, military action, riot, public disorder, civil commotion, fire,
flood, tsunami, explosion, epidemic, terrorism, strike or lock-out;
UNDERWRITING
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which, in the reasonable opinion of the Overall Coordinators acting in good faith:
(a) is or will be, or is likely to be, adverse, in any material respect, to the
business, financial or other condition or prospects of our Group taken as a
whole; or
(b) has or will have or is reasonably likely to have a material adverse effect on
the success of the Share Offer or the level of the Offer Shares being applied
for or accepted, or the distribution of the Offer Shares; or
(c) makes it impracticable, inadvisable or inexpedient for the Public Offer
Underwriter to proceed with the Public Offer as a whole.
For the above purpose:
(a) a change in the system under which the value of the Hong Kong currency is
linked to that of the currency of the U.S. shall be taken as an event resulting
in a change in currency conditions; and
(b) any normal market fluctuations shall not be construed as events or series of
events affecting market conditions referred to above.
Undertakings
Pursuant to Rule 10.07 of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and our Company that, except pursuant to the
Capitalisation Issue and the Share Offer, he or she or it shall not and shall procure that the
relevant registered holder(s) shall not:
1. in the period commencing on the date by reference to which disclosure of the
shareholding of the controlling shareholders is made in this prospectus and ending
on the date which is six month from the Listing Date, dispose of, nor enter into
any agreement to dispose of, or otherwise create any options, rights, interests or
encumbrances in respect of, any of the Share or securities in respect of which he
or she or it is shown by this prospectus to be the beneficial owners; and
2. in the period of six months commencing on the date on which the period
mentioned in paragraph (i) above expires, dispose of, nor enter into any
agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of, any of the Shares or securities referred to in (i) above
if, immediately following such disposal or upon the exercise or enforcement of
such options, rights, interests, or encumbrances, he or she or it would cease to be
a controlling shareholder (as defined in the Listing Rules) of our Company or a
member of a group of the Controlling Shareholders of our Company or would
together with the other Controlling Shareholders cease to be “Controlling
Shareholders” (as defined in the Listing Rules) of our Company.
UNDERWRITING
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Pursuant to Note (3) to Rule 10.07(2) of the Listing Rules, each of our Controlling
Shareholders has further undertaken to the Stock Exchange that, within the period
commencing on the date by reference to which disclosure of his or her or its shareholdings
in our Company is made in this prospectus and ending on the date which is 12 months from
the Listing Date, he or she or it will:
1. when he or she or it pledges or charges any securities or interest in the securities
of our Company beneficially owned by him or her or it in favour of any
authorised institution pursuant to Note (2) to Rule 10.07(2) of the Listing Rules,
immediately inform our Company and the Overall Coordinators in writing of such
pledge or charge together with the number of securities and nature of interests so
pledged or charged; and
2. when he or she or it receives indications, either verbal or written, from any
pledgee or chargee that any of the pledged or charged securities or interests in the
securities of our Company will be sold, transferred or disposed of, immediately
inform our Company and the Overall Coordinators in writing of such indications.
Our Company will inform the Stock Exchange as soon as we have been informed of
the matters referred to in paragraphs (a) and (b) above (if any) by our Controlling
Shareholders and disclose such matters by way of an announcement in accordance with Rule
2.07C of the Listing Rules as soon as possible.
Pursuant to the Public Offer Underwriting Agreement, our Company had undertaken to
each of the Sponsor, the Overall Coordinators, the Joint Bookrunners, the Joint Lead
Managers and the Public Offer Underwriters that, except pursuant to the Share Offer, the
Capitalisation Issue, the grant of options under the Share Option Scheme and the issue of
Shares upon exercise of any such options or as otherwise permitted under the Listing Rules,
our Company will not, and our Company, our Controlling Shareholders and each of our
executive Directors will procure, that our subsidiaries will not, unless with the prior written
consent of the Overall Coordinators, such consent not to be unreasonably withheld or
delayed, and in compliance with the requirements of the Listing Rules:
 allot or issue, or agree to allot or issue, Shares or other securities of our Company
(including warrants or other convertible or exchangeable securities) or grant or
agree to grant any options, warrants, or other rights to subscribe for or convertible
or exchangeable into Shares or other securities of our Company; or
 enter into any swap or other arrangement that transfers, in whole or in part, any
of the economic consequence of ownership of any Shares or offer to or agree to
do any of the foregoing or announce any intention to do so,
during the six months immediately following the Listing Date (the “ First Six-month
Period ”).
UNDERWRITING
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In the event of our Company doing any of the foregoing by virtue of the aforesaid
exceptions or during the period of six months immediately following the expiry of the First
Six-month Period (the “ Second Six-month Period ”), it will take all reasonable steps to
ensure that any such act will not create a disorderly or false market for any Shares or other
securities of our Company.
Pursuant to the Public Offer Underwriting Agreement, each of our Controlling
Shareholders has jointly and severally undertaken to each of the Overall Coordinators, our
Company and the Public Offer Underwriter that during the First Six-month Period, he or she
or it shall not, and shall procure that the relevant registered holder(s) and his or her or its
associates and companies controlled by him or her or it and any nominee or trustee holding
in trust for him or her or it shall not, without the prior written consent of the Overall
Coordinators unless in compliance with the requirements of the Listing Rules:
(i) offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant or agree to grant any option, right or
warrant to purchase or subscribe for, lend or otherwise transfer or dispose of,
either directly or indirectly, any of the Shares in respect of which he or she or it
is shown in this prospectus to be directly or indirectly interested (the “ Relevant
Securities ”); or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Relevant Securities,
whether any of the foregoing transactions is to be settled by delivery of the
Relevant Securities or such other securities, in cash or otherwise; or
(iii) agree (conditionally or unconditionally) to enter into or effect any transaction with
the same economic effect as any of the transactions referred to in paragraphs (i)
or (ii) above; or
(iv) announce any intention to enter into or effect any of the transactions referred to in
paragraphs (i), (ii) or (iii) above.
Each of our Controlling Shareholders has jointly and severally undertaken to the
Overall Coordinators, our Company and the Public Offer Underwriter that he or she or it
shall not, and shall procure that the relevant registered holder(s) and his or her or its
associates or companies controlled by him or her or it and any nominee or trustee holding in
trust for him or her or it shall not, without the prior written consent of the Stock Exchange
in the Second Six-month Period, dispose of, nor enter into any agreement to dispose of or
otherwise create any options, rights, interests or encumbrances in respect of, any Relevant
Securities held by him or her or it or any of his or her or its associates or companies
controlled by him or her or it or any nominee or trustee holding in trust for him or her or it
if, immediately following such disposal or upon the exercise or enforcement of such options,
rights, interests or encumbrances, he or she or it would cease to be a Controlling
Shareholder or would together with the other Controlling Shareholders cease to be, or be
regarded as, Controlling Shareholders.
UNDERWRITING
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In the event of a disposal of any of the Shares or securities of our Company directly or
indirectly beneficially owned by him or her or it or any interest therein within the Second
Six-month Period, the relevant Controlling Shareholder shall take all reasonable steps to
ensure that such a disposal will not create a disorderly or false market for any Shares or
other securities of our Company.
Pursuant to the Public Offer Underwriting Agreement, each of our Controlling
Shareholders has further undertaken to each of our Company, the Overall Coordinators and
the Public Offer Underwriter that within the first twelve months from the Listing Date, he or
she or it will:
 when he or she or it pledges or charges any securities or interests in the securities
of our Company beneficially owned by him or her or it directly or indirectly,
immediately inform our Company and the Overall Coordinators in writing of such
pledges or charges together with the number of securities and nature of interests
so pledged or charged; and
 when he or she or it receives indications, either verbal or written, from any
pledgee or chargee that any of the pledged or charged securities or interests in the
securities of our Company will be sold, transferred or disposed of, immediately
inform our Company and the Overall Coordinators in writing of such indications.
Our Company will inform the Stock Exchange as soon as we have been informed of
the matters above (if any) by our Controlling Shareholders and disclose such matters by way
of a press announcement.
The Placing
In connection with the Placing, it is expected that our Company will enter into the
Placing Underwriting Agreement with, among others, the Placing Underwriters, on terms and
conditions that are substantially similar to the Public Offer Underwriting Agreement as
described above and on the additional terms described below. Under the Placing
Underwriting Agreement, the Placing Underwriters will severally agree to subscribe or
procure subscribers for the Placing Shares being offered pursuant to the Placing.
Our Company will grant to the Placing Underwriters the Over-allotment Option,
exercisable by the Overall Coordinators at any time from the Listing Date until 30 days after
the last date for the lodging of applications under the Public Offer (being Thursday, 4 April
2024), to require our Company to allot and issue up to an aggregate of 75,000,000
additional Shares representing 15% of the number of Offer Shares initially offered under the
Share Offer, at the same price per Share under the Placing to cover, among other things,
over-allocations (if any) in the Placing. For further details on the stabilisation and the
Over-allotment Option, please refer to the section headed “Structure and conditions of the
Share Offer – Stabilisation and over-allotment” in this prospectus.
UNDERWRITING
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Commissions and expenses
The Underwriters will receive an underwriting commission at the rate of 3.0% of the
aggregate Offer Price payable for the Offer Shares (including shares to be issued pursuant to
the Over-allotment Option) (the “ Fixed Fees ”), out of which they will pay any
sub-underwriting commissions. Our Company may, at our sole discretion, pay to one or
more Underwriters an incentive fee of up to 3.0% of the Offer Price payable for the Offer
Shares (the “ Discretionary Fees ”). Assuming the Discretionary Fees are paid in full, the
ratio of Fixed Fees and Discretionary Fees payable is therefore 50:50.
Such commission, together with the Stock Exchange listing fees, the Stock Exchange
trading fees, the SFC transaction levy, AFRC transaction levy, legal and other professional
fees, printing, and other expenses relating to the Share Offer, is currently estimated to be
approximately HK$33.0 million in aggregate (based on an Offer Price of HK$0.26 per Offer
Share, being the mid-point of the indicative Offer Price range of HK$0.25 per Offer Share
and HK$0.27 per Offer Share and the assumption that the Over-allotment Option is not
exercised) and are payable by our Company with reference to the number of Offer Shares
under the Share Offer respectively.
UNDERWRITERS’ INTERESTS IN OUR COMPANY
The Sponsor will receive a sponsorship fee to the Share Offer. The Underwriters will
receive an underwriting commission. Particulars of the underwriting commission are set
forth under the paragraph headed “Commission and expenses” above.
We have appointed Grande Capital as our compliance adviser pursuant to Rule 3A.19
of the Listing Rules for the period commencing on the Listing Date and ending on the date
on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results
for the full financial year commencing after the Listing Date.
Save for their obligations under the Underwriting Agreements, and as disclosed above,
none of the Sponsor or the Underwriters is interested legally or beneficially in any shares of
any member of our Group nor has any right or option (whether legally enforceable or not) to
subscribe for or purchase or to nominate persons to subscribe for or purchase securities in
any member of our Group nor any interest in the Share Offer.
INDEPENDENCE OF THE SPONSOR
Grande Capital, being the Sponsor, satisfies the independence criteria applicable to
sponsors as set out in Rule 3A.07 of the Listing Rules.
RESTRICTIONS ON THE OFFER SHARES
No action has been taken to permit a public offering of the Offer Shares other than in
Hong Kong, or the distribution of this prospectus in any jurisdiction other than Hong Kong.
Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an
offer or invitation in any jurisdiction or in any circumstances in which such an offer or
invitation is not authorised or to any person to whom it is unlawful to make such an offer or
invitation.
UNDERWRITING
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THE SHARE OFFER
The Share Offer consists of (subject to reallocation and the Over-allotment Option):
 the Public Offer of 50,000,000 Shares (subject to reallocation as mentioned
below) as described under the section headed “Structure and conditions of the
Share Offer – The Public Offer” in this prospectus; and
 the Placing of 450,000,000 Shares (subject to reallocation as mentioned below) as
described under the section headed “Structure and conditions of the Share Offer –
The Placing” in this prospectus.
Investors may apply for the Offer Shares under the Public Offer or indicate an interest,
if qualified to do so, for the Offer Shares under the Placing, but may not do both. The
Public Offer is open to members of the public in Hong Kong as well as to institutional,
professional and other investors in Hong Kong. The Placing will involve selective marketing
of the Offer Shares to institutional, professional and other investors. The Placing
Underwriters are soliciting from prospective investors indications of interest in acquiring the
Offer Shares in the Placing. Prospective investors will be required to specify the number of
Offer Shares under the Placing they would be prepared to acquire either at different prices
or at a particular price.
The number of Offer Shares to be offered under the Public Offer and the Placing
respectively may be subject to reallocation as described in the section headed “Structure and
conditions of the Share Offer – Pricing and allocation” in this prospectus.
PRICING AND ALLOCATION
Offer Price
The Offer Price will be not more than HK$0.27 per Offer Share and is expected to be
not less than HK$0.25 per Offer Share, unless otherwise announced. Prospective investors
should be aware that the Offer Price to be determined on the Price Determination Date may
be, but is not expected to be, lower than the indicative Offer Price range stated in this
prospectus.
Price payable on application
Applicants under the Public Offer must pay, on application, the maximum indicative
Offer Price of HK$0.27 per Public Offer Share plus 1.0% brokerage, a 0.0027% SFC
transaction levy, a 0.00015% AFRC transaction levy and a 0.00565% Stock Exchange
trading fee, amounting to a total of HK$2,727.22 for one board lot of 10,000 Shares. If the
Offer Price as finally determined in the manner described below, is less than HK$0.27 per
Public Offer Share, appropriate refund payments (including the brokerage, SFC transaction
levy, AFRC transaction levy and the Stock Exchange trading fee attributable to the surplus
application monies) will be made to successful applicants without interest.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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Determining the Offer Price
The Placing Underwriters are soliciting from prospective investors indications of
interest in acquiring the Shares in the Placing. Prospective investors will be required to
specify the number of Offer Shares under the Placing they would be prepared to acquire
either at different prices or at a particular price. This process, known as “book-building”, is
expected to continue up to, and to cease on or about Tuesday, 5 March 2024.
The Offer Price is expected to be fixed by agreement between the Overall Coordinators
(for themselves and on behalf of the Underwriters) and our Company on or before 12:00
noon on the Price Determination Date, when market demand for the Offer Shares will be
determined. The Price Determination Date is expected to be on or before 12:00 noon on
Wednesday, 6 March 2024.
If, for any reason, our Company and the Overall Coordinators (for themselves and
on behalf of the Underwriters) are unable to reach agreement on the Offer Price on or
before 12:00 noon on Wednesday, 6 March 2024, the Share Offer will not proceed and
will lapse.
Reduction in indicative Offer Price range and/or number of Offer Shares
The Overall Coordinators (for themselves and on behalf of the other Underwriters)
may, where considered appropriate, based on the level of interest expressed by prospective
professional and institutional investors during the book-building process, and with the
consent of our Company, reduce the number of Offer Shares and/or the indicative Offer
Price range as stated in this prospectus at any time on or prior to the morning of the last
day for lodging applications under the Public Offer. In such case, we will, as soon as
practicable following the decision to make such reduction, and in any event not later than
the morning of the day which is the last day for lodging applications under the Public Offer,
cause to be announced on the website of our Company at www.wing-kei.com.hk and the
website of the Stock Exchange at www.hkexnews.hk , notices of the reduction, and the
cancellation of the Share Offer and relaunch of the offer at the revised number of Offer
Shares and/or the revised Offer Price.
As soon as practicable after such reduction in the number of Offer Shares and/or the
Offer Price, we will also issue a supplemental prospectus or a new prospectus updating
investors of the change in the number of Offer Shares being offered under the Share Offer
and/or the Offer Price, and giving investors at least three (3) Business Days to consider the
new information. The supplemental or new prospectus should include at least the following:
updated (i) Offer Price and market capitalisation; (ii) listing timetable and underwriting
obligations; (iii) price/earning multiple, unaudited pro forma and adjusted net tangible
assets; and (iv) use of proceeds and working capital adequacy confirmation based on the
revised proceeds.
Before submitting applications for the Public Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares
and/or the indicative Offer Price range may not be made until the day which is the last day
for lodging applications under the Public Offer, which is Tuesday, 5 March 2024. In the
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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absence of any such supplemental or new prospectus so published, the number of Offer
Shares will not be reduced and/or the Offer Price, if agreed upon by the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company, will
under no circumstances be set outside the Offer Price range as stated in this prospectus.
If there is any change to the offer size due to change in the number of Offer Shares
offered in the Share Offer (other than pursuant to the reallocation mechanism as disclosed in
this prospectus), or change to the Offer Price which leads to the resulting price falling
outside the indicative Offer Price range as stated in this prospectus, or change in the number
of Offer Shares and/or Offer Price resulting in the expected market capitalisation of our
Company falling below the minimum market capitalisation of HK$500 million prescribed
under Rule 8.09(2) of the Listing Rules or if our Company becomes aware that there has
been a significant change affecting any matter contained in this prospectus or a significant
new matter has arisen, the inclusion of information in respect of which would have been
required to be in this prospectus if it had arisen before this prospectus was issued, after the
issue of this prospectus and before the commencement of dealings in the Offer Shares as
prescribed under Rule 11.13 of the Listing Rules, our Company is required to cancel the
Share Offer and issue a supplemental prospectus or a new prospectus and subsequently
relaunched on FINI pursuant to the supplemental prospectus.
In the event of a reduction in the number of Offer Shares, the Overall Coordinators
(for themselves and on behalf of the Underwriters) may, at its discretion, reallocate the
number of Offer Shares to be offered in the Public Offer and the Placing, provided that the
number of Offer Shares comprised in the Public Offer shall not be less than 10% of the total
number of Offer Shares available under the Share Offer. The Offer Shares to be offered in
the Public Offer and the Offer Shares to be offered in the Placing may, in certain
circumstances, be reallocated between these offerings at the discretion of the Overall
Coordinators (for themselves and on behalf of the Underwriters).
Allocation
The allocation of Shares between the Public Offer and the Placing is subject to
reallocation as between these offerings at the discretion of the Overall Coordinators.
Allocation of the Public Offer Shares pursuant to the Placing will be determined by the
Overall Coordinators and will be based on a number of factors including the level and
timing of demand, total size of the relevant investor’s invested assets or equity assets in the
relevant sector and whether or not it is expected that the relevant investor is likely to buy
further, and/or hold or sell Shares after the Listing. Such allocation may be made to
professional, institutional and other investors and is intended to result in a distribution of the
Shares on a basis which would lead to the establishment of a stable shareholder base to the
benefit of our Company and the Shareholders as a whole.
Allocation of the Public Offer Shares to investors under the Public Offer will be based
solely on the level of valid applications received under the Public Offer. The basis of
allocation may vary, depending on the number of Public Offer Shares validly applied for by
applicants. The allocation of Public Offer Shares could, where appropriate, consist of
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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balloting, which would mean that some applicants may receive a higher allocation than
others who have applied for the same number of Public Offer Shares, and those applicants
who are not successful in the ballot may not receive any Public Offer Shares.
Announcement of final Offer Price and basis of allocations
The applicable final Offer Price, the level of indications of interest in the Placing and
the basis of allocations of the Public Offer Shares are expected to be announced on
Thursday, 7 March 2024 on the Stock Exchange’s website and on our Company’s website.
Results of allocations in the Public Offer, including the Hong Kong identity card
number/national identification document number/passport number/ Hong Kong business
registration numbers of successful applicants (where applicable) and the number of Public
Offer Shares successfully applied for through eWhite Form service will be made available
through a variety of channels as described in the section headed “How to apply for Public
Offer Shares – B. Publication of results” in this prospectus.
CONDITIONS OF THE PUBLIC OFFER
Acceptance of all applications for the Offer Shares pursuant to the Public Offer will be
conditional upon, among other things:
 the Listing Committee granting listing of, and permission to deal in, the Shares in
issue and to be issued pursuant to the Share Offer (including the Shares which
may be made available pursuant to the Capitalisation Issue, the exercise of the
Over-allotment Option and any Shares which may fall to be issued upon the
exercise of the options which may be granted under the Share Option Scheme);
 the Offer Price having been duly agreed on or around the Price Determination
Date;
 the execution and delivery of the Placing Underwriting Agreement on or around
the Price Determination Date; and
 the obligations of the Underwriters under each of the Placing Underwriting
Agreement and the Public Offer Underwriting Agreement having become
unconditional and not having been terminated in accordance with the terms of the
respective agreements,
in each case on or before the dates and times specified in such Underwriting Agreements
(unless and to the extent such conditions are waived on or before such dates and times) and
in any event not beyond the 30th day after the date of this prospectus.
The consummation of each of the Public Offer and the Placing is conditional upon,
among other things, the other becoming unconditional and not having been terminated in
accordance with its terms.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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If the above conditions are not fulfilled or waived prior to the dates and times
specified, the Share Offer will lapse and the Stock Exchange will be notified immediately.
We will cause the notice of the lapse of the Public Offer to be published on the Stock
Exchange’s website and on our Company’s website on the next day following such lapse.
Share certificates for the Offer Shares are expected to be issued on Thursday,
7 March 2024 but will only become valid certificates of title at 8:00 a.m. on Friday,
8 March 2024, provided that (i) the Share Offer has become unconditional in all
respects and (ii) the right of termination as described in the section headed
“Underwriting – Underwriting arrangements and expenses – The Public Offer –
Grounds for termination” in this prospectus has not been exercised.
THE PUBLIC OFFER
Number of Shares initially offered
Our Company is initially offering 50,000,000 Public Offer Shares at the Offer Price,
representing 10% of the 500,000,000 Shares initially available under the Share Offer, for
subscription by the public in Hong Kong. Subject to adjustment as mentioned below, the
number of Shares offered under the Public Offer will represent 2.5% of the total issued
share capital of our Company immediately after completion of the Share Offer (assuming
that the Over-allotment Option is not exercised). The Public Offer is open to members of the
public in Hong Kong as well as to institutional, professional and other investors. Completion
of the Public Offer is subject to the conditions as set out in the section headed “Structure
and conditions of the Share Offer – Conditions of the Public Offer” above.
Allocation
For allocation purposes only, the Public Offer Shares initially being offered for
subscription under the Public Offer (after taking into account any adjustment in the number
of Offer Shares allocated between the Public Offer and the Placing) will be divided equally
into two pools. Pool A will comprise 25,000,000 Public Offer Shares and Pool B will
comprise 25,000,000 Public Offer Shares initially, both of which are available on a fair basis
to successful applicants. All valid applications that have been received for Public Offer
Shares with a total amount (excluding brokerage fee, SFC transaction levy, AFRC
transaction levy and the Stock Exchange trading fee) of HK$5 million or below will fall into
Pool A and all valid applications that have been received for Public Offer Shares with a total
amount (excluding brokerage fee, SFC transaction levy, AFRC transaction levy and Stock
Exchange trading fee) of over HK$5 million and up to the total value of Pool B, will fall
into Pool B.
Applicants should be aware that applications in Pool A and Pool B are likely to receive
different allocation ratios. If Public Offer Shares in one pool (but not both pools) are
undersubscribed, the surplus Public Offer Shares will be transferred to the other pool to
satisfy demand in that other pool and be allocated accordingly. Applicants can only receive
an allocation of Public Offer Shares from either Pool A or Pool B but not from both pools
and may only apply for Public Offer Shares in either Pool A or Pool B. In addition, multiple
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
– 363 –


--- page 374 ---
or suspected multiple applications within either pool or between pools will be rejected. No
application will be accepted from applicants for more than 25,000,000 Public Offer Shares
(being 50% of the initial number of Public Offer Shares).
Allocation of the Offer Shares to investors under the Public Offer will be based solely
on the level of valid applications received under the Public Offer. The basis of allocation
may vary, depending on the number of Public Offer Shares validly applied for by applicants.
The allocation of Public Offer Shares could, where appropriate, consist of balloting, which
means that some applicants may receive a higher allocation than others who have applied for
the same number of Public Offer Shares, and those applicants who are not successful in the
ballot may not receive any Public Offer Shares.
Reallocation
The allocation of Offer Shares between the Public Offer and the Placing is at the
discretion of the Overall Coordinators, subject to adjustment. According to Chapter 4.14 of
the Guide For New Listing Applicants issued by the Stock Exchange and paragraph 4.2 of
Practice Note 18 of the Listing Rules, a clawback mechanism shall be put in place which
would have the effect of increasing the number of Offer Shares under the Public Offer to a
certain percentage of the total number of Offer Shares offered under the Share Offer if the
Placing is fully or over-subscribed and certain prescribed total demand levels are reached as
further described below:
(a) Where the Placing Shares are fully subscribed or oversubscribed:
(i) if the Public Offer Shares are undersubscribed, the Overall Coordinators
have the authority to reallocate all or any unsubscribed Public Offer Shares
to the Placing, in such proportions as the Overall Coordinators deem
appropriate;
(ii) if the Public Offer Shares are not undersubscribed but the number of Offer
Shares validly applied for under the Public Offer represents less than 15
times the number of the Offer Shares initially available for subscription
under the Public Offer, then up to 50,000,000 Offer Shares may be
reallocated to the Public Offer from the Placing, so that the total number of
the Offer Shares available under the Public Offer will be increased to
100,000,000 Offer Shares, representing 20% of the number of the Offer
Shares initially available under the Share Offer (before any exercise of the
Over-allotment Option);
(iii) if the number of Offer Shares validly applied for under the Public Offer
represents 15 times or more but less than 50 times the number of the Offer
Shares initially available for subscription under the Public Offer, then
100,000,000 Offer Shares will be reallocated to the Public Offer from the
Placing, so that the total number of the Offer Shares available under the
Public Offer will be increased to 150,000,000 Offer Shares, representing
30% of the number of the Offer Shares initially available under the Share
Offer (before any exercise of the Over-allotment Option);
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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--- page 375 ---
(iv) if the number of Offer Shares validly applied for under the Public Offer
represents 50 times or more but less than 100 times the number of the Offer
Shares initially available for subscription under the Public Offer, then
150,000,000 Offer Shares will be reallocated to the Public Offer from the
Placing, so that the number of the Offer Shares available under the Public
Offer will be increased to 200,000,000 Offer Shares, representing 40% of the
number of the Offer Shares initially available under the Share Offer (before
any exercise of the Over-allotment Option); and
(v) if the number of Offer Shares validly applied for under the Public Offer
represents 100 times or more the number of the Offer Shares initially
available for subscription under the Public Offer, then 200,000,000 Offer
Shares will be reallocated to the Public Offer from the Placing, so that the
number of the Offer Shares available under the Public Offer will be
increased to 250,000,000 Offer Shares, representing 50% of the number of
the Offer Shares initially available under the Share Offer (before any
exercise of the Over-allotment Option).
(b) Where the Placing Shares are undersubscribed:
(i) if the Public Offer Shares are undersubscribed, the Share Offer will not
proceed unless the Underwriter would subscribe or procure subscribers for
their respective applicable proportions of the Offer Shares being offered
which are not taken up under the Share Offer on the terms and conditions of
this prospectus and the Underwriting Agreements; and
(ii) if the Public Offer Shares are fully subscribed or oversubscribed irrespective
of the number of times the number of Offer Shares initially available for
subscription under the Public Offer, then up to 50,000,000 Offer Shares may
be reallocated to the Public Offer from the Placing, so that the total number
of the Offer Shares available under the Public Offer will be increased to
100,000,000 Offer Shares, representing 20% of the number of the Offer
Shares initially available under the Share Offer (before any exercise of the
Over-allotment Option).
In the event of reallocation of Offer Shares from the Placing to the Public Offer in the
circumstances where (a) the Placing Shares are fully subscribed or oversubscribed and the
Public Offer Shares are fully subscribed or oversubscribed by less than 15 times under
paragraph (a)(ii) above; or (b) the Placing Shares are undersubscribed and the Public Offer
Shares are fully subscribed or oversubscribed under paragraph (b)(ii) above, the final Offer
Price shall be fixed at the low-end of the indicative Offer Price range (i.e. HK$0.25 per
Offer Share) stated in this prospectus.
In addition, the Overall Coordinators may reallocate Offer Shares from the Placing to
the Public Offer to satisfy valid applications under the Public Offer. In accordance with
Chapter 4.14 of the Guide For New Listing Applicants issued by the Stock Exchange, if
such reallocation is done other than pursuant to Practice Note 18 of the Listing Rules, the
maximum total number of Offer Shares that may be reallocated to the Public Offer following
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
– 365 –


--- page 376 ---
such reallocation shall be not more than double the initial allocation to the Public Offer (i.e.
100,000,000 Offer Shares); and the final Offer Price shall be fixed at the low end of the
indicated Offer Price range stated in this prospectus (i.e. HK$0.25 per Offer Share). In all
cases, the number of Offer Shares allocated to the Placing will be correspondingly reduced.
Applications
The Overall Coordinators (for themselves and on behalf of the Underwriters) may
require any investor who has been offered Shares under the Placing, and who has made an
application under the Public Offer to provide sufficient information to the Overall
Coordinators so as to allow them to identify the relevant applications under the Public Offer
and to ensure that it is excluded from any application for Shares under the Public Offer.
Each applicant under the Public Offer will also be required to give an undertaking and
confirmation in the application submitted by him that he and any person for whose benefit
he is making the application have not applied for or taken up, or indicated an interest for,
and will not apply for or take up, or indicate an interest for, any Offer Shares under the
Placing, and such applicant’s application is liable to be rejected if the said undertaking or
confirmation is breached or untrue (as the case may be) or if such applicant has been or will
be placed or allocated Offer Shares under the Placing.
References in this prospectus to applications, application monies or to the procedure
for application relate solely to the Public Offer.
THE PLACING
Number of Offer Shares offered
Subject to the reallocation as described above, the number of Offer Shares to be
initially offered for subscription under the Placing will be 450,000,000 Shares, representing
90% of the total number of Offer Shares initially available under the Share Offer. The
Placing is subject to the Public Offer being unconditional.
Allocation
Pursuant to the Placing, the Placing Underwriter will conditionally place the Placing
Shares with institutional, professional and other investors expected to have a sizeable
demand for the Placing Shares in Hong Kong. Allocation of Placing Shares pursuant to the
Placing will be effected in accordance with the “book-building” process described in the
paragraph headed “Pricing and allocation” above.
OVER-ALLOTMENT OPTION
Our Company is expected to grant to the Placing Underwriters the Over-allotment
Option, exercisable by the Overall Coordinators at any time and from time to time from the
Listing Date, up to (and including) the date which is the 30th day after the last day for
lodging applications under the Public Offer. A press announcement will be made in the event
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
– 366 –


--- page 377 ---
that the Over-allotment Option is exercised. Pursuant to the Over-allotment Option, our
Company may be required to allot and issue up to 75,000,000 Shares, representing 15% of
the number of Offer Shares initially available under the Share Offer, at the Offer Price.
STOCK BORROWING AGREEMENT
The Stabilising Manager, or any person acting for it may choose to borrow 75,000,000
Shares from WK (BVI) under the Stock Borrowing Agreement, or acquire Shares from other
sources, including the exercising of the Over-allotment Option. The Stock Borrowing
Agreement will not be subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules
provided that the requirements set out in Rule 10.07(3) of the Listing Rules are to be
complied with as follows:
– such stock borrowing arrangement with WK (BVI) will only be effected by the
Stabilising Manager for settlement of over-allocations in the Placing and covering
any short position prior to the exercise of the Over-allotment Option;
– the maximum number of Shares borrowed from WK (BVI) under the Stock
Borrowing Agreement will be limited to the maximum number of Shares which
may be issued upon the exercise of the Over-allotment Option;
– the same number of Shares so borrowed must be returned to WK (BVI) or its
nominees on or before the third business day following the earlier of (i) the last
day on which the Over-allotment Option may be exercised, (ii) the date on which
the Over-allotment Option is exercised in full and the relevant over-allocation
shares have been allocated, and (iii) such earlier time as the parties may from
time to time agree in writing;
– the stock borrowing arrangement under the Stock Borrowing Agreement will be
effected in compliance with all applicable laws, listing rules and regulatory
requirements; and
– no payment will be made to WK (BVI) by the Stabilising Manager or its
authorised agents in relation to such stock borrowing arrangement.
STABILISATION AND OVER-ALLOTMENT
In connection with the Share Offer, the Stabilising Manager, or any person acting for
it, on behalf of the Underwriters, may, to the extent permitted by applicable laws of Hong
Kong or elsewhere, over-allocate or effect any other transactions with a view to stabilising
or maintaining the market price of the Shares at a level higher than that which might
otherwise prevail in the open market for a limited period after the Listing Date. Any market
purchases of Shares will be effected in compliance with all applicable laws and regulatory
requirements. However, there is no obligation on the Stabilising Manager or any person
acting for it to conduct any such stabilising activity, which if commenced, will be done at
the absolute discretion of the Stabilising Manager or any person acting for it and may be
discontinued at any time. Any such stabilising activity is required to be brought to an end
within 30 days of the last day for the lodging of applications under the Public Offer (being
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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--- page 378 ---
Thursday, 4 April 2024). The number of Shares that may be over-allocated will not exceed
the number of Shares that may be sold under the Over-allotment Option, namely, 75,000,000
Shares, which is 15% of the number of Offer Shares initially available under the Share
Offer.
Stabilising action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) includes: (i) over-allocation
for the purpose of preventing or minimising any reduction in the market price of the Shares;
(ii) selling or agreeing to sell the Shares so as to establish a short position in them for the
purpose of preventing or minimising any reduction in the market price of the Shares; (iii)
purchasing or subscribing for, or agreeing to purchase or subscribe for, the shares pursuant
to the Over-allotment Option in order to close out any position established under (i) or (ii)
above; (iv) purchasing, or agreeing to purchase, any of the Shares for the sole purpose of
preventing or minimising any reduction in the market price of the Shares; (v) selling or
agreeing to sell any Shares in order to liquidate any position held as a result of those
purchases; and (vi) offering or attempting to do anything described in (ii), (iii), (iv) or (v).
Specifically, prospective applicants for and investors in the Shares should note that:
 the Stabilising Manager, or any person acting for it, may, in connection with the
stabilising action, maintain a long position in the Shares;
 there is no certainty regarding the extent to which and the time period for which
the Stabilising Manager, or any person acting for it, will maintain such a position;
 liquidation of any such long position by the Stabilising Manager may have an
adverse impact on the market price of the Shares;
 no stabilising action can be taken to support the price of the Shares for longer
than the stabilising period which will begin on the Listing Date following
announcement of the Offer Price, and is expected to expire on the last day falling
within 30 days after the last date for lodging applications under the Public Offer
(being Thursday, 4 April 2024). After this date, when no further stabilising action
may be taken, demand for the Shares, and therefore the price of the Shares, could
fall;
 the price of the Shares cannot be assured to stay at or above the Offer Price either
during or after the stabilising period by taking of any stabilising action; and
 stabilising bids may be made or transactions effected in the course of the
stabilising action at any price at or below the Offer Price, which means that
stabilising bids may be made or transactions effected at a price below the price
paid by applicants for, or investors in, the Shares.
Our Company will ensure or procure that a public announcement in compliance with
the Securities and Futures (Price Stabilizing) Rules will be made within seven days of the
expiration of the stabilising period. Such stabilisation action, if commenced, may be effected
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
– 368 –


--- page 379 ---
in all jurisdictions where it is permissible to do so, in each case in compliance with all
applicable laws, rules and regulatory requirements, including the Securities and Futures
(Price Stabilizing) Rules, as amended, made under the SFO.
In connection with the Share Offer, the Stabilising Manager may over-allocate up to
and not more than an aggregate of 75,000,000 additional Shares and cover such
over-allocations by exercising the Over-allotment Option, or by making purchases in the
secondary market at prices that do not exceed the Offer Price or through stock borrowing
arrangements or a combination of these means. In particular, for the purpose of settlement of
over-allocations in connection with the Placing, the Stabilising Manager may borrow up to
75,000,000 Shares from WK (BVI), equivalent to the maximum number of Shares to be
issued on full exercise of the Over-allotment Option, under the Stock Borrowing Agreement.
SHARES WILL BE ELIGIBLE FOR CCASS
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS. If the Stock Exchange grants the listing of, and permission to deal in, the Shares
and our Company complies with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares on the Stock
Exchange or any other date HKSCC chooses. Settlement of transactions between participants
of the Stock Exchange is required to take place in CCASS on the second settlement day
after any trading day. All activities under CCASS are subject to the General Rules of
HKSCC and HKSCC Operational Procedures in effect from time to time.
DEALING ARRANGEMENTS
Assuming that the Public Offer becomes unconditional at or before 8:00 a.m. in Hong
Kong on Friday, 8 March 2024, it is expected that dealings in the Shares on the Stock
Exchange will commence at 9:00 a.m. on Friday, 8 March 2024. The Shares will be traded
in board lots of 10,000 Shares.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
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--- page 380 ---
IMPORTANT NOTICE TO INVESTORS
OF PUBLIC OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Public Offer and
below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews> New Listings> New Listing Information”
section, and our website at www.wing-kei.com.hk.
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR PUBLIC OFFER SHARES
1. Who Can Apply
Y ou can apply for Public Offer Shares if you or the person(s) for whose benefit you
are applying for:
/L50188are 18 years of age or older; and
/L50188have a Hong Kong address (for the eWhite Form service only) .
Unless permitted by the Listing Rules, you cannot apply for any Public Offer Shares if
you or the person(s) for whose benefit you are applying for:
/L50188are an existing Shareholder or close associates; or
/L50188are a Director or any of his/ her close associates.
2. Application Channels
The Public Offer period will begin at 9:00 a.m. on Thursday, 29 February 2024
and end at 12:00 noon on Tuesday, 5 March 2024 (Hong Kong time).
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 381 ---
To apply for Public Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
eWhite Form
service
www.ewhiteform.com.hk
Enquiries:
+852 2153 1688
Investors who would like to
receive a physical Share
certificate. Public Offer Shares
successfully applied for will be
allotted and issued in your own
name.
From 9:00 a.m. on
Thursday, 29
February 2024 to
11:30 a.m. on
Tuesday, 5 March
2024, Hong Kong
time.
The latest time for
completing full
payment of
application monies
will be 12:00 noon
on Tuesday, 5
March 2024, Hong
Kong time.
HKSCC EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit an
EIPO application on your
behalf through HKSCC’s
FINI system in accordance
with your instruction
Investors who would not like to
receive a physical Share
certificate. Public Offer Shares
successfully applied for will be
allotted and issued in the name
of HKSCC Nominees, deposited
directly into CCASS and
credited to your designated
HKSCC Participant’s stock
account.
Contact your
broker or custodian
for the earliest and
latest time for
giving such
instructions, as this
may vary by
broker or
custodian.
The eWhite Form service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interruptions and you are advised not to wait until
the last day of the application period to apply for Public Offer Shares.
For those applying through the eWhite Form service, once you complete payment in
respect of any application instructions given by you or for your benefit through the eWhite
Form service to make an application for Public Offer Shares, an actual application shall be
deemed to have been made. If you are a person for whose benefit the electronic application
instructions are given, you shall be deemed to have declared that only one set of electronic
application instructions has been given for your benefit. If you are an agent for another
person, you shall be deemed to have declared that you have only given one set of electronic
application instructions for the benefit of the person for whom you are an agent and that
you are duly authorized to give those instructions as an agent.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 382 ---
For the avoidance of doubt, giving an application instruction under the eWhite Form
service more than once and obtaining different payment reference numbers without effecting
full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the eWhite Form service, you are deemed to have authorized the
eWhite Form service to apply on the terms and conditions in this prospectus, as
supplemented and amended by the terms and conditions of the eWhite Form service.
By instructing your broker or custodian to apply for the Public Offer Shares on your
behalf through the HKSCC EIPO Channel, you (and, if you are joint applicants, each of you
jointly and severally) are deemed to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply for
Public Offer Shares on your behalf and to do on your behalf all the things stated in this
prospectus and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be
deemed to have been made for any application instructions given by you or for your benefit
to HKSCC (in which case an application will be made by HKSCC Nominees on your behalf)
provided such application instruction has not been withdrawn or otherwise invalidated before
the closing time of the Hong Kong Public Offer.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken
by HKSCC or HKSCC Nominees on your behalf to apply for Public Offer Shares or for any
breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 383 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual Applicants For Corporate Applicants
/L50188Full name(s) 2 as shown on your
identity document
/L50188Identity document’s issuing
country or jurisdiction
/L50188Identity document type, with
order of priority:
i. HKID card; or
ii. National identification
document; or
iii. Passport; and
/L50188Identity document number
/L50188Full name(s)
2 as shown on your
identity document
/L50188Identity document’s issuing country
or jurisdiction
/L50188Identity document type, with order of
priority:
i. Legal Entity Identifier (“LEI”)
registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate;
or
iv. Other equivalent document; and
/L50188Identity document number
Notes:
1. If you are applying through the eWhite Form service, you are required to provide a valid e-mail
address, a contact telephone number and a Hong Kong Address. Y ou are also required to declare
that the identity information provided by you follows the requirements as described in Note 2
below. In particular, where you cannot provide a HKID number, you must confirm that you do not
hold a HKID card.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s
identity document contains both an English and Chinese name, both English and Chinese names
must be used. Otherwise, either English or Chinese names will be accepted. The order of priority
of the applicant’s identity document type must be strictly followed and where an individual
applicant has a valid HKID card, the HKID number must be used when making an application to
subscribe for shares in a public offer. Similarly for corporate applicants, a LEI number must be
used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“CID”) of the trustee, as set out above,
will be required. If the applicant is an investment fund (i.e. a collective investment scheme, or
CIS), the CID of the asset management company or the individual fund, as appropriate, which has
opened a trading account with the broker will be required, as above.
4. The maximum number of joint account holders on FINI is capped at 4
1 in accordance with market
practice.
1 Subject to change, if the Company’s Articles of Incorporation and applicable company law prescribe a lower
cap.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 384 ---
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type;
and (ii), the identity document number, for each of the beneficial owners or, in the case(s) of joint
beneficial owners, for each joint beneficial owner. If you do not include this information, the
application will be treated as being made for your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is
dealing in securities; and (ii) you exercise statutory control over that company, then the
application will be treated as being for your benefit and you should provide the required
information in your application as stated above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or
any other stock exchange.
“Statutory control” means you:
/L50188control the composition of the board of directors of the company;
/L50188control more than half of the voting power of the company; or
/L50188hold more than half of the issued share capital of the company (not counting any part of it
which carries no right to participate beyond a specified amount in a distribution of either
profits or capital).
For those applying through HKSCC EIPO channel, and making an application under a
power of attorney, we and the Overall Coordinators, as our agent, have discretion to
consider whether to accept it on any conditions we think fit, including evidence of the
attorney’s authority.
Failing to provide any required information may result in your application being
rejected.
4. Permitted Number of Public Offer Shares for Application
Board lot size : 10,000
Permitted number of
Public Offer Shares for
application and amount
payable on application/
successful allotment
: Public Offer Shares are available for application in
specified board lot sizes only. Please refer to the
amount payable associated with each specified
board lot size in the table below.
The maximum Offer Price is HK$0.27 per Share.
If you are applying through the HKSCC EIPO
channel, you are required to pre-fund your
application based on the amount specified by your
broker or custodian, as determined based on the
applicable laws and regulations in Hong Kong.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 385 ---
By instructing your broker or custodian to apply for
the Public Offer Shares on your behalf through the
HKSCC EIPO Channel, you (and, if you are joint
applicants, each of you jointly and severally) are
deemed to have instructed and authorized HKSCC
to cause HKSCC Nominees (acting as nominee for
the relevant HKSCC Participants) to arrange
payment of the final Offer Price, brokerage, SFC
transaction levy, the Stock Exchange trading fee and
the AFRC transaction levy by debiting the relevant
nominee bank account at the Designated Bank for
your broker or custodian.
If you are applying through the eWhite Form
service, you may refer to the table below for the
amount payable for the number of Shares you have
selected. Y ou must pay the respective maximum
amount payable on application in full upon
application for Public Offer Shares.
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
Number of Public
Offer Shares
applied for
Amount
payable (2)
on application
HK$ HK$ HK$
10,000 2,727.22 300,000 81,816.89 5,000,000 1,363,614.76
20,000 5,454.47 350,000 95,453.03 6,000,000 1,636,337.70
30,000 8,181.69 400,000 109,089.18 7,000,000 1,909,060.66
40,000 10,908.92 450,000 122,725.32 8,000,000 2,181,783.60
50,000 13,636.14 500,000 136,361.48 9,000,000 2,454,506.56
60,000 16,363.38 1,000,000 272,722.96 10,000,000 2,727,229.50
70,000 19,090.61 1,500,000 409,084.43 12,500,000 3,409,036.88
80,000 21,817.83 2,000,000 545,445.90 15,000,000 4,090,844.26
90,000 24,545.07 2,500,000 681,807.38 17,500,000 4,772,651.63
100,000 27,272.30 3,000,000 818,168.86 20,000,000 5,454,459.00
150,000 40,908.44 3,500,000 954,530.33 22,500,000 6,136,266.38
200,000 54,544.59 4,000,000 1,090,891.80 25,000,000
(1) 6,818,073.76
250,000 68,180.73 4,500,000 1,227,253.28
(1) Maximum number of Public Offer Shares you may apply for.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 386 ---
(2) This is 50% of the Public Offer Shares initially offered, and the amount payable is inclusive of
brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC transaction levy. If your
application is successful, brokerage will be paid to the Exchange Participants (as defined in the Listing
Rules) or to the Hong Kong Branch Share Registrar (for applications made through the eWhite Form
service) while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy
will be paid to the SFC, the Stock Exchange and the AFRC, respectively.
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying
investor in your application as required under the paragraph headed “– A. Applications for
Public Offer Shares – 3. Information Required to Apply” in this section. If you are
suspected of submitting or cause to submit more than one application, all of your
applications will be rejected.
Multiple applications made either through (i) the eWhite Form service, (ii) HKSCC
EIPO channel, or (iii) both channels concurrently are prohibited and will be rejected. If you
have made an application through the eWhite Form service or HKSCC EIPO channel, you
or the person(s) for whose benefit you have made the application shall not apply for any
Placing Shares.
6. Terms and Conditions of An Application
By applying for Public Offer Shares through the eWhite Form service or HKSCC
EIPO channel, you (or as the case may be, HKSCC Nominees will do the following things
on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or
the Overall Coordinators, as our agents, to execute any documents for you and to
do on your behalf all things necessary to register any Public Offer Shares
allocated to you in your name or in the name of HKSCC Nominees as required by
the Articles of Association, and (if you are applying through the HKSCC EIPO
channel) to deposit the allotted Public Offer Shares directly into CCASS for the
credit of your designated HKSCC Participant’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and
application procedures set out in this prospectus and the designated website of the
eWhite Form service (or as the case may be, the agreement you entered into with
your broker or custodian), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the
arrangements, undertakings and warranties under the participant agreement
between your broker or custodian and HKSCC and observe the General Rules of
HKSCC and the HKSCC Operational Procedures for giving application
instructions to apply for Public Offer Shares;
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 387 ---
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out
in this prospectus and they do not apply to you, or the person(s) for whose benefit
you have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have
relied only on the information and representations contained therein in making
your application (or as the case may be, causing your application to be made) and
will not rely on any other information or representations;
(vi) agree that the Relevant Persons
(2), the Hong Kong Branch Share Registrar and
HKSCC will not be liable for any information and representations not in this
prospectus and any supplement to it;
(vii) agree to disclose the details of your application and your personal data and any
other personal data which may be required about you and the person(s) for whose
benefit you have made the application to us, the Relevant Persons, the Hong Kong
Branch Share Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the
SFC and any other statutory regulatory or governmental bodies or otherwise as
required by laws, rules or regulations, for the purposes under the paragraph
headed “G. Personal Data – 3. Purposes and 4. Transfer of personal data” in this
section;
(viii) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Branch
Share Registrar by way of publication of the results at the time and in the manner
as specified in the paragraph headed “B. Publication of Results” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “C.
Circumstances In Which Y ou Will Not Be Allocated Public Offer Shares” in this
section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of
it and the resulting contract will be governed by and construed in accordance with
the laws of Hong Kong;
2 Relevant Persons would include the Sponsor, the Joint Representatives, the Overall Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any of their or the Company’s respective directors,
officers, employees, partners, agents, advisers and any other parties involved in the Share Offer.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 388 ---
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any
place outside Hong Kong that apply to your application and that neither we nor
the Relevant Persons will breach any law inside and/ or outside Hong Kong as a
result of the acceptance of your offer to purchase, or any action arising from your
rights and obligations under the terms and conditions contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by the Company, any of the directors, chief
executives, substantial shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their respective close associates; and (b) you are
not accustomed or will not be accustomed to taking instructions from the
Company, any of the directors, chief executives, substantial shareholder(s) or
existing shareholder(s) of the Company or any of its subsidiaries or any of their
respective close associates in relation to the acquisition, disposal, voting or other
disposition of the Shares registered in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Overall Coordinators will rely on
your declarations and representations in deciding whether or not to allocate any
Public Offer Shares to you and that you may be prosecuted for making a false
declaration;
(xvi) agree to accept Public Offer Shares applied for or any lesser number allocated to
you under the application;
(xvii) declare and represent that this is the only application made and the only
application intended by you to be made to benefit you or the person for whose
benefit you are applying;
(xviii) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the application channel of
the Hong Kong Branch Share Registrar or by any one as your agent or by any
other person; and
(xix) (if you are making the application as an agent for the benefit of another person)
warrant that (1) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC and (2)
you have due authority to give electronic application instructions on behalf of that
other person as its agent.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 389 ---
B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Public Offer Shares
through:
Platform Date/ Time
Applying through eWhite Form service or HKSCC EIPO channel :
Website The designated results of
allocation at
www.ewhiteform.com.hk/
results with a “search by ID
Number” function.
The full list of (i) wholly or
partially successful applicants
using the eWhite Form service
and HKSCC EIPO channel,
and (ii) the number of Offer
Shares conditionally allotted to
them, among other things, will
be displayed at
www.ewhiteform.com.hk/
eAnnouncement/ .
24 hours, from 11:00 p.m. on
Thursday, 7 March 2024 to
12:00 midnight on Thursday,
14 March 2024 (Hong Kong
time)
The Stock Exchange’s website
at www.hkexnews.hk and our
website at
www.wing-kei.com.hk which
will provide links to the above
mentioned websites of the
Hong Kong Branch Share
Registrar.
No later than 11:00 p.m. on
Thursday, 7 March 2024 (Hong
Kong time).
Telephone +852 2153 1688 – the
allocation results telephone
enquiry line provided by the
Hong Kong Branch Share
Registrar
between 9:00 a.m. and 6:00
p.m., from Friday, 8 March
2024 to Thursday, 14 March
2024 (Hong Kong time) on a
business day
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Wednesday, 6 March 2024 (Hong Kong time)
HKSCC Participants can log into FINI and review the allotment result from 6:00
p.m. on Wednesday, 6 March 2024 on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 390 ---
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications
of interest in the Share Offer, the level of applications in the Public Offer and the basis
of allocations of Public Offer Shares on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.wing-kei.com.hk by no later than 11:00
p.m. on Thursday, 7 March 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED PUBLIC
OFFER SHARES
Y ou should note the following situations in which Public Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf
may be revoked pursuant to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Branch Share Registrar and their
respective agents and nominees have full discretion to reject or accept any application,
or to accept only part of any application, without giving any reasons.
3. If the allocation of Public Offer Shares is void:
The allocation of Public Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
/L50188within three weeks from the closing date of the application lists; or
/L50188within a longer period of up to six weeks if the Stock Exchange notifies us
of that longer period within three weeks of the closing date of the
application lists.
4. If:
/L50188you make multiple applications or suspected multiple applications. Y ou may
refer to the paragraph headed “A. Applications for Public Offer Shares – 5.
Multiple Applications Prohibited” in this section on what constitutes multiple
applications;
/L50188your application instruction is incomplete;
/L50188your payment (or confirmation of funds, as the case may be) is not made
correctly;
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 391 ---
/L50188the Underwriting Agreements do not become unconditional or are terminated;
/L50188we or the Overall Coordinators believe that by accepting your application, it
or we would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
Designated Bank before balloting. After balloting of Public Offer Shares, the Receiving
Bank will collect the portion of these funds required to settle each HKSCC
Participant’s actual Public Offer Share allotment from their Designated Bank.
There is a risk of money settlement failure. In the extreme event of money
settlement failure by a HKSCC Participant (or its Designated Bank), who is acting on
your behalf in settling payment for your allotted shares, HKSCC will contact the
defaulting HKSCC Participant and its Designated Bank to determine the cause of
failure and request such defaulting HKSCC Participant to rectify or procure to rectify
the failure.
However, if it is determined that such settlement obligation cannot be met, the
affected Public Offer Shares will be reallocated to the Share Offer. Public Offer Shares
applied for by you through the broker or custodian may be affected to the extent of the
settlement failure. In the extreme case, you will not be allocated any Public Offer
Shares due to the money settlement failure by such HKSCC Participant. None of us,
the Relevant Persons, the Hong Kong Branch Share Registrar and HKSCC is or will be
liable if Public Offer Shares are not allocated to you due to the money settlement
failure.
D. DESPATCH OF SHARE CERTIFICATES AND REFUND OF APPLICATION
MONIES
Y ou will receive one Share certificate for all Public Offer Shares allotted to you under
the Public Offer (except pursuant to applications made through the HKSCC EIPO channel
where the Share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid at 8:00 a.m. on Friday, 8 March 2024 (Hong
Kong time), provided that the Share Offer has become unconditional and the right of
termination described in the section headed “Underwriting” has not been exercised. Investors
who trade Shares prior to the receipt of Share certificates or the Share certificates becoming
valid do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 392 ---
The following sets out the relevant procedures and time:
eWhite Form service HKSCC EIPO channel
Despatch of Share certificate 3
For application of
Public Offer Shares
Y our Share certificate(s) will
be sent to the address
specified in your application
instructions by ordinary post
at your own risk
Date: Thursday, 7 March
2024
Share certificate(s) will be
issued in the name of
HKSCC Nominees,
deposited into CCASS and
credited to your designated
HKSCC Participant’s stock
account
No action by you is required
Refund mechanism for surplus application monies paid by you
Date Friday, 8 March 2024 Subject to the arrangement
between you and your
broker or custodian
Responsible party Hong Kong Branch Share
Registrar
Y our broker or custodian
Application monies
paid through single
bank account
e-Refund payment
instructions to your
designated bank account
Y our broker or custodian
will arrange refund to your
designated bank account
subject to the arrangement
between you and itApplication monies
paid through
multiple bank
accounts
Refund cheque(s) will be
despatched to the address as
specified in your application
instructions by ordinary post
at your own risk
3 Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning and/or
an “extreme conditions” announcement issued after a super typhoon in force in Hong Kong in the morning on
the Friday, 8 March 2024 rendering it impossible for the relevant share certificates to be dispatched to HKSCC
in a timely manner, the Company shall procure the Hong Kong Branch Share Registrar to arrange for delivery
of the supporting documents and share certificates in accordance with the contingency arrangements as agreed
between them. Y ou may refer to “E. Severe Weather Arrangements” in this section.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 393 ---
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Tuesday, 5 March 2024 if, there is:
/L50188a tropical cyclone warning signal number 8 or above;
/L50188a black rainstorm warning; and/or
/L50188an “extreme conditions” announcement issued after a super typhoon (“ Extreme
Conditions ”),
(collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 5 March
2024.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon
on the next business day which does not have Severe Weather Signals in force at any time
between 9:00 a.m. and 12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of
the application lists may result in a delay in the Listing Date. Should there be any changes
to the dates mentioned in the section headed “Expected Timetable” in this prospectus, an
announcement will be made and published on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.wing-kei.com.hk of the revised timetable.
If a Severe Weather Signal is hoisted on Thursday, 7 March 2024, the Hong Kong
Branch Share Registrar will make appropriate arrangements for the delivery of the share
certificates to the CCASS Depository’s service counter so that they would be available for
trading on Friday, 8 March 2024.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 394 ---
If a Severe Weather Signal is hoisted on Thursday, 7 March 2024:
/L50188for physical share certificates of Offer Shares issued under your own name,
despatch will be made by ordinary post when the post office re-opens after the
Severe Weather Signal is lowered or cancelled (e.g. in the afternoon of Thursday,
7 March 2024 or on Friday, 8 March 2024).
Prospective investors should be aware that if they choose to receive physical share
certificates issued in their own name, there may be a delay in receiving the share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and
settlement in CCASS with effect from the date of commencement of dealings in the Shares
or any other date HKSCC chooses. Settlement of transactions between Exchange Participants
is required to take place in CCASS on the second settlement Day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of
the settlement arrangement as such arrangements may affect your rights and interests.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 395 ---
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the Hong Kong Branch Share Registrar, the receiving
bank and the Relevant Persons about you in the same way as it applies to personal data
about applicants other than HKSCC Nominees. This personal data may include client
identifier(s) and your identification information. By giving application instructions to
HKSCC, you acknowledge that you have read, understood and agree to all of the terms of
the Personal Information Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder
of, Public Offer Shares, of the policies and practices of the Company and the Hong Kong
Branch Share Registrar in relation to personal data and the Personal Data (Privacy)
Ordinance (Chapter 486 of the Laws of Hong Kong).
2. REASONS FOR THE COLLECTION OF YOUR PERSONAL DATA
It is necessary for applicants and registered holders of Public Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Branch Share
Registrar is accurate and up-to-date when applying for Public Offer Shares or transferring
Public Offer Shares into or out of their names or in procuring the services of the Hong
Kong Branch Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Public Offer Shares being rejected, or in the delay or the inability of the
Company or the Hong Kong Branch Share Registrar to effect transfers or otherwise render
their services. It may also prevent or delay registration or transfers of Public Offer Shares
which you have successfully applied for and/or the despatch of Share certificate(s) to which
you are entitled.
It is important that applicants for and holders of Public Offer Shares inform the
Company and the Hong Kong Branch Share Registrar immediately of any inaccuracies in the
personal data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means)
for the following purposes:
/L50188processing your application and refund cheque and e-Refund payment
instruction(s), where applicable, verification of compliance with the terms and
application procedures set out in this prospectus and announcing results of
allocation of Public Offer Shares;
/L50188compliance with applicable laws and regulations in Hong Kong and elsewhere;
/L50188registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 396 ---
/L50188maintaining or updating the register of members of the Company;
/L50188verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
/L50188facilitating Public Offer Shares balloting;
/L50188establishing benefit entitlements of holders of the Shares, such as dividends,
rights issues, bonus issues, etc.;
/L50188distributing communications from the Company and its subsidiaries;
/L50188compiling statistical information and profiles of the holder of the Shares;
/L50188disclosing relevant information to facilitate claims on entitlements; and
/L50188any other incidental or associated purposes relating to the above and/or to enable
the Company and the Hong Kong Branch Share Registrar to discharge their
obligations to applicants and holders of the Shares and/or regulators and/or any
other purposes to which applicants and holders of the Shares may from time to
time agree.
4. Transfer of personal data
Personal data held by the Company and the Hong Kong Branch Share Registrar
relating to the applicants for and holders of Public Offer Shares will be kept confidential but
the Company and the Hong Kong Branch Share Registrar may, to the extent necessary for
achieving any of the above purposes, disclose, obtain or transfer (whether within or outside
Hong Kong) the personal data to, from or with any of the following:
/L50188the Company’s appointed agents such as financial advisers, receiving bank and
overseas principal share registrar;
/L50188HKSCC or HKSCC Nominees, who will use the personal data and may transfer
the personal data to the Hong Kong Branch Share Registrar for the purposes of
providing its services or facilities or performing its functions in accordance with
its rules or procedures and operating FINI and CCASS (including where
applicants for the Public Offer Shares request a deposit into CCASS);
/L50188any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Branch Share Registrar in connection with their respective business
operation;
/L50188the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the
SFC’s performance of its statutory functions; and
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 397 ---
/L50188any persons or institutions with which the holders of Public Offer Shares have or
propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
5. Retention of personal data
The Company and the Hong Kong Branch Share Registrar will keep the personal data
of the applicants and holders of Public Offer Shares for as long as necessary to fulfil the
purposes for which the personal data were collected. Personal data which is no longer
required will be destroyed or dealt with in accordance with the Personal Data (Privacy)
Ordinance (Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Public Offer Shares have the right to ascertain whether
the Company or the Hong Kong Branch Share Registrar hold their personal data, to obtain a
copy of that data, and to correct any data that is inaccurate. The Company and the Hong
Kong Branch Share Registrar have the right to charge a reasonable fee for the processing of
such requests. All requests for access to data or correction of data should be addressed to
the Company and the Hong Kong Branch Share Registrar, at their registered address
disclosed in the section headed “Corporate information” in this prospectus or as notified
from time to time, for the attention of the company secretary, or the Hong Kong Branch
Share Registrar for the attention of the privacy compliance officer.
HOW TO APPLY FOR PUBLIC OFFER SHARES
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--- page 398 ---
The following is the text of a report set out on pages I-1 to I-3, received from the
Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants,
Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and
addressed to the directors of the Company and to the Sponsor pursuant to the requirements
of HKSIR 200 Accountants’ Reports on Historical Financial Information in Investment
Circulars issued by the Hong Kong Institute of Certified Public Accountants.
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF WK GROUP (HOLDINGS) LIMITED AND GRANDE CAPITAL
LIMITED
Introduction
We report on the historical financial information of WK Group (Holdings) Limited (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-63, which
comprises the consolidated statements of financial position as at 31 December 2020, 2021
and 2022 and 30 September 2023, the Company’s statement of financial position as at 30
September 2023, and the consolidated statements of comprehensive income, the consolidated
statements of changes in equity and the consolidated statements of cash flows for each of
the years ended 31 December 2020, 2021 and 2022 and the nine months ended 30
September 2023 (the “Track Record Period”) and material accounting policy information and
other explanatory information (together, the “Historical Financial Information”). The
Historical Financial Information set out on pages I-4 to I-63 forms an integral part of this
report, which has been prepared for inclusion in the prospectus of the Company dated 29
February 2024 (the “Prospectus”) in connection with the initial listing of shares of the
Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical
Financial Information that gives a true and fair view in accordance with the basis of
presentation and preparation set out in Notes 1.3 and 2 to the Historical Financial
Information, and for such internal control as the directors determine is necessary to enable
the preparation of Historical Financial Information that is free from material misstatement,
whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and
to report our opinion to you. We conducted our work in accordance with Hong Kong
Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on
APPENDIX I ACCOUNTANT’S REPORT
– I-1 –


--- page 399 ---
Historical Financial Information in Investment Circulars issued by the Hong Kong Institute
of Certified Public Accountants (“HKICPA”). This standard requires that we comply with
ethical standards and plan and perform our work to obtain reasonable assurance about
whether the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountant’s judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountant considers internal control relevant to the entity’s
preparation of Historical Financial Information that gives a true and fair view in accordance
with the basis of presentation and preparation set out in Notes 1.3 and 2 to the Historical
Financial Information in order to design procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Our work also included evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the Historical Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the financial position of the Company as at 30
September 2023 and the consolidated financial position of the Group as at 31 December
2020, 2021 and 2022 and 30 September 2023 and of its consolidated financial performance
and its consolidated cash flows for the Track Record Period in accordance with the basis of
presentation and preparation set out in Notes 1.3 and 2 to the Historical Financial
Information.
Review of stub period comparative financial information
We have reviewed the stub period comparative financial information of the Group
which comprises the consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the nine
months ended 30 September 2022 and other explanatory information (the “Stub Period
Comparative Financial Information”). The directors of the Company are responsible for the
presentation and preparation of the Stub Period Comparative Financial Information in
accordance with the basis of presentation and preparation set out in Notes 1.3 and 2 to the
Historical Financial Information. Our responsibility is to express a conclusion on the Stub
Period Comparative Financial Information based on our review. We conducted our review in
accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued by the
HKICPA. A review consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with Hong Kong
Standards on Auditing and consequently does not enable us to obtain assurance that we
APPENDIX I ACCOUNTANT’S REPORT
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--- page 400 ---
would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion. Based on our review, nothing has come to
our attention that causes us to believe that the Stub Period Comparative Financial
Information, for the purposes of the accountant’s report, is not prepared, in all material
respects, in accordance with the basis of presentation and preparation set out in Notes 1.3
and 2 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up
and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to note 13 to the Historical Financial Information which states that no
dividends have been paid by WK Group (Holdings) Limited in respect of the Track Record
Period.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of
incorporation.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
29 February 2024
APPENDIX I ACCOUNTANT’S REPORT
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--- page 401 ---
I HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part
of this accountant’s report.
The financial statements of the Group for the Track Record Period, on which the
Historical Financial Information is based, were audited by PricewaterhouseCoopers in
accordance with Hong Kong Standards on Auditing issued by the HKICPA
(“Underlying Financial Statements ”).
The Historical Financial Information is presented in HK dollars (“ HK$”) and all
values are rounded to the nearest thousand (HK$’000) except when otherwise indicated.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 402 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Y ear ended 31 December
Nine months
ended 30 September
Notes 2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Revenue 5 324,292 228,776 336,384 251,561 235,038
Cost of services 7 (269,254) (193,359) (269,445) (202,279) (188,044)
Gross profit 55,038 35,417 66,939 49,282 46,994
Other income 6 1,283 133 2,611 2,579 40
Other gain/(loss), net 6 112 159 123 86 (540)
Administrative expenses 7 (12,695) (14,670) (19,078) (13,441) (12,075)
Listing expenses –––– (12,184)
Reversal of impairment
losses/(impairment losses)
on financial assets and
contract assets 3.1(a) 162 383 (3,800) (3,778) (1,102)
Operating profit 43,900 21,422 46,795 34,728 21,133---------- ---------- ---------- ---------- ----------
Finance income 10 23 39 95 38 182
Finance costs 10 (496) (526) (434) (281) (544)
Finance costs, net (473) (487) (339) (243) (362) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Profit before income tax expense 43,427 20,935 46,456 34,485 20,771
Income tax expense 11 (6,721) (3,599) (7,191) (5,629) (5,656)
Profit for the year/period
attributable to owners of the
Company 36,706 17,336 39,265 28,856 15,115
Earnings per share attributable
to owners of the Company
Basic and diluted (expressed in
HK$’000 per share) (Note) 12 36,706 17,336 39,265 28,856 15,115
Profit for the year/period 36,706 17,336 39,265 28,856 15,115---------- ---------- ---------- ---------- ----------
Other comprehensive (losses)/
income:
Item that may be reclassified to
profit or loss:
Currency translation differences (1,149) (636) 1,482 1,829 826
Total comprehensive income for
the year/period attributable to
owners of the Company 35,557 16,700 40,747 30,685 15,941
Note: The earnings per share presented above has not been taken into account the proposed capitalisation issue
pursuant to the resolutions in writing of the shareholders passed on 5 February 2024 because the proposed
capitalisation issue has not become effective as at the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 403 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 December
As at
30
September
Notes 2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Assets
Non-current assets
Property, plant and equipment 14 9,132 9,296 7,100 6,471
Right-of-use assets 15 8,426 4,798 10,546 6,139
Deferred income tax assets 16 715 – 534 765
Investments in life insurance contracts 20 3,237 3,360 3,460 5,845
Deposits 18 758 67 1,013 873
22,268 17,521 22,653 20,093---------- ---------- ---------- ----------
Current assets
Trade receivables 18 10,912 22,094 14,493 19,773
Contract assets 19 97,051 81,972 73,758 141,770
Other receivables, deposits and prepayments 18 12,165 12,775 3,651 11,116
Amount due from a director 26 2 9 7–––
Amount due from a related company 26 6,308 6,171 12,018 11,724
Tax recoverable – 382 – –
Cash and cash equivalents 21 14,536 11,729 70,880 19,121
141,269 135,123 174,800 203,504----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets 163,537 152,644 197,453 223,597
Equity
Equity attributable to owners of
the Company
Share capital 22 –––– *
Capital reserve 22 1,700 1,700 1,700 1,700
Reserves (1,723) (2,359) (877) (51)
Retained earnings 81,164 98,500 129,765 124,880
Total equity 81,141 97,841 130,588 126,529----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Non-current liabilities
Lease liabilities 15 2,390 277 4,192 458
Deferred income tax liabilities 16 185 224 – –
2,575 501 4,192 458---------- ---------- ---------- ----------
* The amount is below HK$1,000.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 404 ---
As at 31 December
As at
30
September
Notes 2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Current liabilities
Trade and retention payables 23 35,269 22,895 27,280 59,655
Accruals and other payables 23 4,894 7,814 7,891 12,195
Amounts due to directors 26 16,653 13,912 5,991 1,069
Contract liabilities 19 4,254 2,641 2,200 1,598
Lease liabilities 15 3,276 2,337 4,352 3,782
Bank borrowings 24 11,201 4,703 10,638 8,208
Current income tax liabilities 4,274 – 4,321 10,103 ---------- ---------- ---------- ----------
79,821 54,302 62,673 96,610----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 82,396 54,803 66,865 97,068----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total equity and liabilities 163,537 152,644 197,453 223,597
APPENDIX I ACCOUNTANT’S REPORT
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--- page 405 ---
STATEMENT OF FINANCIAL POSITION OF THE COMPANY
Notes
As at
30 September
2023
HK$’000
Assets
Non-current assets
Investment in subsidiary (Note) 150,360------------------
Current assets
Prepayments 18 4,787---------------------------------------------------------------------------------------
Total assets 155,147
Equity
Equity attributable to the owners of the Company
Share capital 22 –*
Capital reserve 22 150,360
Accumulated losses 22 (12,184)
Total equity 138,176
Liabilities
Current liabilities
Accruals and other payables 23 6,681
Amounts due to subsidiaries 26 10,290
16,971
Total equity and liabilities 155,147
Note: The investment in subsidiary represents the carrying amount of the share of the equity items shown in the
separate financial statements of Wing Kei Hong Kong. (Note 1.2).
* The amount is below HK$1,000.
APPENDIX I ACCOUNTANT’S REPORT
– I-8 –


--- page 406 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Company
Note
Share
capital
(Note 22)
Capital
reserve
(Note 22)
Exchange
reserve
Retained
earnings Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 January 2020 – 1,700 (574) 52,658 53,784
Profit for the year – – – 36,706 36,706
Other comprehensive losses for the year – – (1,149) – (1,149)
Total comprehensive income for the year – – (1,149) 36,706 35,557-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dividend 13 – – – (8,200) (8,200)
Balance at 31 December 2020 – 1,700 (1,723) 81,164 81,141
Balance at 1 January 2021 – 1,700 (1,723) 81,164 81,141
Profit for the year – – – 17,336 17,336
Other comprehensive losses for the year – – (636) – (636)
Total comprehensive income for the year – – (636) 17,336 16,700-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Balance at 31 December 2021 – 1,700 (2,359) 98,500 97,841
Balance at 1 January 2022 – 1,700 (2,359) 98,500 97,841
Profit for the year – – – 39,265 39,265
Other comprehensive income for the year – – 1,482 – 1,482
Total comprehensive income for the year – – 1,482 39,265 40,747-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dividend 13 – – – (8,000) (8,000)
Balance at 31 December 2022 – 1,700 (877) 129,765 130,588
APPENDIX I ACCOUNTANT’S REPORT
– I-9 –


--- page 407 ---
Attributable to owners of the Company
Note
Share
capital
(Note 22)
Capital
reserve
(Note 22)
Exchange
reserve
Retained
earnings Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 January 2022 – 1,700 (2,359) 98,500 97,841
Profit for the period – – – 28,856 28,856
Other comprehensive income for the
period – – 1,829 – 1,829
Total comprehensive income for the period – – 1,829 28,856 30,685-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dividend 13 – – – (8,000) (8,000)
Balance at 30 September 2022 (Unaudited) – 1,700 (530) 119,356 120,526
Balance at 1 January 2023 – 1,700 (877) 129,765 130,588
Profit for the period – – – 15,115 15,115
Other comprehensive losses for the period – – 826 – 826
Total comprehensive income for the period – – 826 15,115 15,941-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dividend 13 – – – (20,000) (20,000)
Issuance of share of the Company* –* –––– *
Balance at 30 September 2023 – 1,700 (51) 124,880 126,529
* The amount is below HK$1,000.
APPENDIX I ACCOUNTANT’S REPORT
– I-10 –


--- page 408 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended 31 December
Nine months ended
30 September
Notes 2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Cash flows from operating
activities
Cash generated from/(used in)
operations 25(a) 15,254 18,947 82,249 68,696 (14,689)
Income tax paid (6,779) (7,492) (3,242) (46) (84)
Net cash generated from/(used in)
operating activities 8,475 11,455 79,007 68,650 (14,773)----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing
activities
Purchase of plant and equipment 14 (3,666) (1,126) (318) (318) (1,156)
Purchase of investments in
insurance contracts 20 –––– (2,846)
Proceeds from disposal of plant
and equipment – – 23 – –
Advance to a related company (238) (343) (6,327) (6,300) (111)
Advance to a director (297) ––––
Repayment from a director – 29 7–––
Finance income received 1 15 73 38 182
Net cash used in investing
activities (4,200) (1,157) (6,549) (6,580) (3,931) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities
Proceeds from bank borrowings 25(b) 20,728 18,373 15,511 15,511 2,000
Repayments of bank borrowings 25(b) (11,308) (24,871) (11,760) (11,133) (2,246)
Dividend paid 13 (8,200) – (8,000) (8,000) (20,000)
Payment for principal and interest
of lease liabilities 25(b) (3,597) (3,538) (2,928) (2,185) (3,155)
Payments of listing expenses –––– (2,127)
Finance cost paid 25(b) (227) (352) (316) (226) (336)
Repayment to directors 25(b) (5,315) (2,741) (7,921) (4,721) (4,922)
Net cash used in financing
activities (7,919) (13,129) (15,414) (10,754) (30,786)----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash
and cash equivalents (3,644) (2,831) 57,044 51,316 (49,490)
Cash and cash equivalents at
beginning of the year/period 18,148 14,536 11,729 11,729 68,696
Exchange difference on cash and
cash equivalents 32 24 (77) (115) (85)
Cash and cash equivalents at
end of the year/period 21
14,536 11,729 68,696 62,930 19,121
APPENDIX I ACCOUNTANT’S REPORT
– I-11 –


--- page 409 ---
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 General information, reorganisation and basis of presentation
1.1 General information
WK Group (Holdings) Limited (the “Company”) was incorporated in the Cayman Islands on 28 June 2023
as an exempted company with limited liability under Companies Act (as revised) of the Cayman Islands. The
address of the Company’s registered office is Suite 102, Cannon Place, P .O. Box 712, North Sound Rd., George
Town, Grand Cayman KY1-9006, Cayman Islands.
The Company is an investment holding company. The Company and its subsidiaries (collectively referred to
as the “Group”) are engaged in the provision of structural steelwork in Hong Kong (the “Listing Business”). The
ultimate holding company of the Company is WK (BVI) Limited (“WK (BVI)”), a limited liability company
incorporated in the British Virgin Islands (the “BVI”). The ultimate controlling shareholders of the Group are Mr.
Chan Kam Kei, Mr. Chan Kam Kong, Mr. Chan Wing Hong, Ms. Choi Chick Cheong and Ms. Chan Suk Man
(together the “Controlling Shareholders”).
1.2 Reorganisation
Prior to the incorporation of the Company and the completion of the reorganisation (the “Reorganisation”)
as described below, the Listing Business was carried out by Wing Kei Structural Metalworks Company Limited
(“Wing Kei Hong Kong”), a limited liability company established in Hong Kong, and Dongguan Y ongji Metal
Component Manufacturing Co., Ltd (“Wing Kei Dongguan”), a limited liability company established in the
People’s Republic of China, (collectively known as the “Operating Entities”). Immediately before the
Reorganisation, the entire equity interest of Wing Kei Dongguan was directly wholly-owned by Wing Kei Hong
Kong. Wing Kei Hong Kong was held as to 100% by the Controlling Shareholders.
In preparation for the initial public offering and listing of the Company’s shares on the Main Board of The
Stock Exchange of Hong Kong Limited (the “Listing”), the Group underwent the Reorganisation to incorporate the
Company as the holding company of the companies which now comprise the Group to conduct the Listing
Business. The Reorganisation involved the following steps:
(1) Incorporation of the ultimate holding company in the BVI
On 26 June 2023, WK (BVI) was incorporated in the BVI with limited liability. As at the date of
incorporation, WK (BVI) was authorised to issue a maximum of 50,000 shares of a single class with a par
value of United States dollar (“US$”) 1 each.
On the date of its incorporation, WK (BVI) allotted and issued 30 shares, 30 shares, 15 shares, 15
shares and 10 shares with a par value of US$1 each as fully paid to Mr. Chan Kam Kei, Mr. Chan Kam
Kong, Mr. Chan Wing Hong, Ms. Choi Chick Cheong and Ms. Chan Suk Man, respectively, representing
30%, 30%, 15%, 15% and 10% of the issued share capital of WK (BVI).
(2) Incorporation of the Company
On 28 June 2023, the Company was incorporated in the Cayman Islands as an exempted company
with limited liability. As at the date of incorporation, the authorised share capital of the Company was Hong
Kong Dollar (“HK$”) 380,000 divided into 38,000,000 ordinary shares with a par value of HK$0.01 each.
On the date of its incorporation, the Company allotted and issued one share at par and credited as
fully paid to an independent nominee subscriber, which was then transferred to WK (BVI) pursuant to an
instrument of transfer. Upon completion of such allotment and issue, the Company became directly
wholly-owned by WK (BVI).
APPENDIX I ACCOUNTANT’S REPORT
– I-12 –


--- page 410 ---
(3) Incorporation of an offshore subsidiary in the BVI
On 4 July 2023, WK Development Group Limited (“WK Development”) was incorporated in the BVI
with limited liability as an intermediate holding company of the Group. As at the date of incorporation, WK
Development was authorised to issue a maximum of 50,000 shares of a single class with a par value of
US$1 each. On the date of incorporation, 100 ordinary share of WK Development was allotted and issued
to the Company. Upon completion of such allotment and issue, WK Development become directly
wholly-owned by the Company.
(4) Acquisition of share capital of Wing Kei Hong Kong from its then shareholders by WK
Development
On 21 July 2023, the Company and WK Development entered into a sale and purchase agreement
with the Controlling Shareholders, pursuant to which WK Development acquired 510,000 ordinary shares,
510,000 ordinary shares, 255,000 ordinary shares, 255,000 ordinary shares and 170,000 ordinary shares in
Wing Kei Hong Kong from Mr. Chan Kam Kei, Mr. Chan Kam Kong, Mr. Chan Wing Hong, Ms. Choi
Chick Cheong and Ms. Chan Suk Man, respectively, representing 30%, 30%, 15%, 15% and 10% of the
issued share capital of Wing Kei Hong Kong, respectively. Subsequently, WK Development allotted and
issued 100 shares of US$1 each as fully paid to the Company at the direction of Mr. Chan Kam Kei, Mr.
Chan Kam Kong, Mr. Chan Wing Hong, Ms. Choi Chick Cheong and Ms. Chan Suk Man.
Upon completion of the above transactions, Wing Kei Hong Kong and Wing Kei Dongguan became
wholly-owned subsidiaries of WK Development.
Upon completion of the Reorganisation and as at the date of this report, the Company had direct or indirect
interests in the following subsidiaries:
Name of subsidiaries
Place and
date of
incorporation
Principal activities
and place of
operations
Issued and fully
paid up share
capital/paid up
capital
Attributable
equity interest of
the Group as at
31 December
2020, 2021,
2022 and
30 September
2023
As at the date
of this report Notes
Direct interests
WK Development The BVI,
4 July 2023
Investment holding,
the BVI
US$200/US$200 30 September
2023: 100%
(31 December
2020, 2021 and
2022: N/A)
100% (a)
Indirect interests
Wing Kei Hong Kong Hong Kong,
28 July 1999
Supply and installation
of structural steel
works, Hong Kong
HK$1,700,000/
HK$1,700,000
100% 100% (b)
Wing Kei Dongguan The People’s
Republic of
China (“PRC”),
6 July 2015
Supply and fabrication
of structural steel
works, the PRC
US$1,200,000/
US$1,200,000
100% 100% (c)
Wing Kei Management
Limited (“Wing Kei
Management”)
Hong Kong,
28 March 2023
Provision of
administrative services
for the Group, Hong
Kong
HK$10,000/
HK$10,000
30 September
2023: 100%
(31 December
2020, 2021 and
2022: N/A)
100% (a)
APPENDIX I ACCOUNTANT’S REPORT
– I-13 –


--- page 411 ---
Notes:
(a) No audited statutory financial statements have been prepared for these subsidiaries as they were
newly incorporated or there are no statutory audit requirements under the applicable law in the place
of incorporation of the entities.
(b) Statutory financial statements for the years ended 31 December 2020, 2021 and 2022 were audited by
Global Vision CPA Limited.
(c) Statutory financial statements for the years ended 31 December 2020, 2021 and 2022 were audited by
Wuyige Certified Public Accountants (LLP) Guangdong Branch.
1.3 Basis of presentation
Immediately prior to and after the Reorganisation, the Listing Business were mainly conducted through the
Operating Entities, and ultimately controlled by the Controlling Shareholders. Pursuant to the Reorganisation, the
Operating Entities were transferred to and held indirectly by the Company. As the Company had not been involved
in any other business prior to the Reorganisation and do not meet the definition of a business, the Reorganisation
is merely a recapitalisation of the Listing Business with no change in business substance, management of such
business and the ultimate controlling shareholders of the Operating Entities remain the same. Accordingly, the
Group resulting from the Reorganisation is regarded as a continuation of the Listing Business under the Operating
Entities, and, for the purpose of this report, the Historical Financial Information has been prepared and presented
as a continuation of the consolidated financial statements of Wing Kei Hong Kong and its subsidiaries, with the
assets and liabilities of the Group recognised and measured at the carrying amounts of the Listing Business under
the consolidated financial statements of Wing Kei Hong Kong and its subsidiaries for all periods presented.
Inter-company transactions, balances and unrealised gains/losses on transactions among group companies are
eliminated on combination.
2 Basis of preparation
The principal accounting policies applied in the preparation of the consolidated financial information are set
out below. These policies have been consistently applied to all the years/periods presented, unless otherwise
stated.
The principal accounting policies applied in the preparation of the consolidated financial information which
are in accordance with the Hong Kong Financial Reporting Standards (“HKFRS”) issued by the HKICPA are set
out below. The consolidated financial information have been prepared under the historical cost convention, except
for the investments in life insurance contracts, which have been measured at cash surrender value.
The preparation of the consolidated financial information in conformity with HKFRS requires the use of
certain critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated financial information are disclosed in
Note 4.
The following amendments to standards, and interpretation that have been issued, but are not yet effective
for the Track Record Period and have not been early adopted by the Group:
Effective for
annual periods
beginning on or
after
HK Int 5 (Revised) Hong Kong Interpretation 5 (Revised) Presentation
of Financial Statements – Classification by the
Borrower of a Term Loan that Contains a
Repayment on Demand Clause (HK Int 5
(Revised))
1 January 2024
Amendments to HKAS 1 Classification of Liabilities as Current or
Non-current
1 January 2024
APPENDIX I ACCOUNTANT’S REPORT
– I-14 –


--- page 412 ---
Effective for
annual periods
beginning on or
after
Amendments to HKAS 1 Non-current Liabilities with Covenants 1 January 2024
Amendments to HKFRS 7
and HKAS 7
Supplier Finance Arrangements 1 January 2024
Amendments to HKFRS 16 Lease Liability in a Sale and Leaseback 1 January 2024
Amendments to HKAS 21 Lack of Exchangeability 1 January 2025
Amendments to HKFRS 10
and HKAS 28
Sales or Contribution of Assets Between an
Investor and its Associate or Joint V enture
To be determined
The Group has already commenced an assessment of the impact of these amended standards and
interpretation. According to the preliminary assessment made by the directors of the Company now comprising the
Group, no significant impact on the financial performance and positions of the Group is expected when they
become effective.
3 Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk
and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s
financial performance.
Management regularly manages the financial risks of the Group. Because of the simplicity of the financial
structure and the current operations of the Group, no hedging activity is undertaken by management.
(a) Credit risk
(i) Risk management
The carrying amounts of cash and cash equivalents, investments in life insurance contracts,
trade receivables, amount due from a director, amount due from a related company, deposits and
other receivables and contract assets included in the consolidated statements of financial position
represent the Group’s maximum exposure to credit risk in relation to its financial assets.
Management considers the Group has limited credit risk with its banks which are leading and
reputable and their external credit ratings are of investment grades. Majority of bank balances and the
key management insurance contracts are deposited with and insured by reputable banks or financial
institution. The Group has not incurred significant loss from non-performance by these parties in the
past and management does not expect so in the future.
The Group trades only with recognised and creditworthy third parties. It is the Group’s policy
that all customers who wish to trade on credit terms are subject to credit verification procedures. The
procedures focus on the evaluations on the customer’s past history of making payments when due and
current ability to pay, and take into account information specific to the customer, such as its financial
position, past experience and other factors, as well as pertaining to the economic environment in
which the customer operates. In addition, receivable balances are monitored on an ongoing basis with
the result that the Group’s exposure to bad debts is not significant.
As at 31 December 2020, 2021 and 2022 and 30 September 2023, the Group is exposed to
concentration of credit risk on trade receivables and contract assets from the Group’s five largest
customers amounting to approximately HK$78,471,000, HK$79,945,000, HK$69,423,000 and
HK$149,078,000 and accounted for approximately 71%, 76%, 74% and 89% of the total gross trade
APPENDIX I ACCOUNTANT’S REPORT
– I-15 –


--- page 413 ---
receivables and contract assets balances respectively. The major customers of the Group are reputable
organisations and with good repayment history. Management considers that the credit risk is limited
in this regard.
The Group’s other financial assets at amortised cost are considered to be low risk.
Management has closely monitored the credit qualities and the collectability.
(ii) Impairment of assets
The Group has six types of assets that are subject to the expected credit loss model:
 trade receivables;
 contract assets;
 other receivables and deposits at amortised cost;
 amount due from a director
 amount due from a related company; and
 cash and cash equivalents.
While cash and cash equivalents are also subject to the impairment requirements of HKFRS 9,
the identified impairment loss was immaterial as the relevant banks’ external credit ratings are of
investment grades.
Trade receivables and contract assets
The Group applies simplified approach prescribed by HKFRS 9 to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade receivables and
contract assets.
The contract assets relate to unbilled revenue and retention receivables have
substantially the same risk characteristics as the trade receivables for the same types of
contracts. The Group has therefore concluded that the expected loss rates for trade receivables
are a reasonable approximation of the loss rates for the contract assets.
Management consider the nature of business of its customers, the default rates given by
external researches over the expected lives of the debtors, repayment and default histories of
different customers or industries to assess the credit risk characteristics and the likelihood of
loss allowance of its customers. The Group uses probability of default (PD), exposure at
default (EAD) and loss given default (LGD) to measure the credit risk and expected credit loss
rates for its customers.
The historical loss rates are also adjusted to reflect current and forward-looking
information on macroeconomic factors (i.e. GDP and employment rate) affecting the ability of
the customers to settle the receivables.
The credit period granted by the Group to its customers mainly ranged from 30 to 60
days.
APPENDIX I ACCOUNTANT’S REPORT
– I-16 –


--- page 414 ---
Trade receivables as at 31 December 2020
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.055% 1,816 (1)
B3 to Baa1 0.526% 7,611 (40)
C to Caa1 1.802% 1,554 (28)
10,981 (69)
Trade receivables as at 31 December 2021
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
B3 to Baa1 0.070% 20,057 (14)
C to Caa1 19.726% 2,555 (504)
22,612 (518)
Trade receivables at 31 December 2022
Credit rating
Average
loss rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.023% 4,346 (1)
B3 to Baa1 0.383% 10,187 (39)
Default 100% 2,610 (2,610)
17,143 (2,650)
Trade receivables at 30 September 2023
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.014% 7,173 (1)
B3 to Baa1 0.178% 5,069 (9)
C to Caa1 0.868% 7,607 (66)
Default 100% 2,610 (2,610)
22,459 (2,686)
APPENDIX I ACCOUNTANT’S REPORT
– I-17 –


--- page 415 ---
Contract assets at 31 December 2020
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.009% 11,449 (1)
B3 to Baa1 1.391% 76,505 (1,064)
C to Caa1 8.094% 11,057 (895)
99,011 (1,960)
Contract assets at 31 December 2021
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.108% 922 (1)
B3 to Baa1 1.027% 80,662 (828)
C to Caa1 19.723% 1,516 (299)
83,100 (1,128)
Contract assets at 31 December 2022
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.112% 4,483 (5)
B3 to Baa1 0.416% 66,885 (278)
C to Caa1 25.647% 3,595 (922)
Default 100% 1,591 (1,591)
76,554 (2,796)
Contract assets at 30 September 2023
Credit rating
Average loss
rate
Gross
carrying
amount
Impairment
loss
allowance
HK$’000 HK$’000
A3 to Aaa 0.033% 12,109 (4)
B3 to Baa1 1.019% 107,816 (1,099)
C to Caa1 4.843% 24,116 (1,168)
Default 100% 1,591 (1,591)
145,632 (3,862)
APPENDIX I ACCOUNTANT’S REPORT
– I-18 –


--- page 416 ---
The fluctuation of the average loss rate was mainly due to the change in credit rating of
the individual customers and the composition of the customers’ profile within the category
during the Track Record Period.
The increase in average loss rate for trade receivables with credit rating of C to Caa1 as
at 31 December 2021 was due to the higher credit risk among the customers within the C to
Caa1 category. For average loss rate of contract assets with credit rating of C to Caa1, the
increase as at 31 December 2021 and 2022 was due to the higher credit risk among the
customers within the C to Caa1 category, which was impacted by the forward-looking
information on macroeconomics factors and credit quality of the customers. The decrease as at
30 September 2023 was primarily due to the improved credit rating of a customer within the C
to Caa1 category.
The loss allowance provision for trade receivables and contract assets as at 31 December
2020, 2021, 2022 and 30 September 2022 and 2023 reconciles to the opening loss allowance
for that provision as follows:
Trade
receivables
Contract
assets Total
HK$’000 HK$’000 HK$’000
As at 1 January 2020 86 2,105 2,191
Reversal of impairment loss (17) (145) (162)
As at 31 December 2020 69 1,960 2,029
Provision for/(Reversal of) impairment
loss 449 (832) (383)
As at 31 December 2021 518 1,128 1,646
Provision for impairment loss 2,132 1,668 3,800
As at 31 December 2022 2,650 2,796 5,446
Provision for impairment loss 36 1,066 1,102
As at 30 September 2023 2,686 3,862 6,548
As at 1 January 2022 518 1,128 1,646
Provision for impairment loss 2,116 1,662 3,778
As at 30 September 2022 (unaudited) 2,634 2,790 5,424
Other receivables and deposits at amortised cost
The credit qualities of other receivables and deposits at amortised cost have been
assessed with reference to historical information about the counterparties default rates and
financial position of the counterparties. Management is of the opinion that the credit risk of
other receivables and deposits at amortised cost are low due to the sound collection history of
the receivables and deposits. The impairment provision is determined based on the 12-month
expected credit loss which is immaterial.
Amounts due from a director and related company
The directors consider the credit risk on the amounts due from a director and related
company is low as no default payment was noted. Management considers that its credit risk
has not increased significantly since initial recognition with reference to the counterparty
historical default rate and current financial position. The impairment provision is determined
based on the 12-month expected credit loss which is immaterial.
APPENDIX I ACCOUNTANT’S REPORT
– I-19 –


--- page 417 ---
(b) Market risk
(i) Foreign exchange risk
The Group is subject to foreign exchange rate risk arising from the PRC operation which are
denominated in a currency other than its functional currency. The Group currently does not hedge its
foreign currency exposure.
(ii) Cash flow interest rate risk
The Group’s interest rate risk arises from cash at banks and bank borrowings. Bank borrowings
issued at variable rates expose the Group to cash flow interest rate risk which is offset by the bank
deposits. The interest rate profile of bank deposit and bank borrowings are disclosed in Note 21 and
Note 24 respectively. The bank deposits and bank borrowings generate and incur interest at the
prevailing market interest rates.
At 31 December 2020, 2021, 2022 and 30 September 2023, if interest rates had been 50 basis
points higher/lower with all other variables held constant, the Group’s post-tax profit for the years/
period then ended would have been approximately HK$14,000, HK$29,000, HK$251,000 and
HK$46,000 higher/lower respectively, mainly as a result of higher/lower net interest income on bank
deposits.
(c) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due, resulting
from amount and maturity mismatches of assets and liabilities.
The Group employs projected cash flow analysis to manage liquidity risk by forecasting the amount
of cash required and monitoring the Group’s working capital to ensure that all liabilities due and known
funding requirements could be met. In order to meet their liquidity requirements in the short and longer
term, the Group may adjust the amount of dividends paid to shareholders and drawdown available bank
facilities. Further, management performs monthly review of receivables and payables ageing analysis to
ensure the Group is able to maintain sufficient financial resources to meet its liquidity requirements and to
follow up on any overdue balances.
The table below analyses the financial liabilities of the Group into relevant maturity groupings based
on the remaining period at the date of the consolidated statements of financial position to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including
interests payments computed using contractual rates, or if floating, based on the current rates at the
period-end date). Where the loan agreement contains a repayable on demand clause which gives the lender
the unconditional right to call the loan at any time, the amounts repayable are classified in the earliest time
bracket in which the lender could demand repayment.
APPENDIX I ACCOUNTANT’S REPORT
– I-20 –


--- page 418 ---
On demand
or less than
1 year
From
1 year to 2
years
Over
2 years Total
HK$’000 HK$’000 HK$’000 HK$’000
As at 31 December 2020
Trade and retention payables 35,269 – – 35,269
Accruals and other payables 2,175 – – 2,175
Amounts due to directors 16,653 – – 16,653
Lease and interest payments 3,445 2,251 184 5,880
Bank borrowings 11,201 – – 11,201
68,743 2,251 184 71,178
As at 31 December 2021
Trade and retention payables 22,895 – – 22,895
Accruals and other payables 2,983 – – 2,983
Amounts due to directors 13,912 – – 13,912
Lease and interest payments 2,387 260 19 2,666
Bank borrowings 4,703 – – 4,703
46,880 260 19 47,159
As at 31 December 2022
Trade and retention payables 27,280 – – 27,280
Accruals and other payables 4,421 – – 4,421
Amounts due to directors 5,991 – – 5,991
Lease and interest payments 4,586 3,850 419 8,855
Bank borrowings 10,638 – – 10,638
52,916 3,850 419 57,185
As at 30 September 2023
Trade and retention payables 59,655 – – 59,655
Accruals and other payables 10,429 – – 10,429
Amounts due to directors 1,069 – – 1,069
Lease and interest payments 4,118 463 – 4,581
Bank borrowings 8,208 – – 8,208
83,479 463 – 83,942
APPENDIX I ACCOUNTANT’S REPORT
– I-21 –


--- page 419 ---
The table below summarises the maturity analysis of bank borrowings of the Group based on agreed
scheduled repayments set out in the loan agreements without considering the repayment on demand clause.
The amounts include interest payments computed using contractual rates.
Less than
1 year
From
1 year to 2
years
From
2 year to 5
years
Over
5 years Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 31 December 2020 6,763 2,321 2,099 523 11,706
As at 31 December 2021 2,509 1,637 661 323 5,130
As at 31 December 2022 4,987 1,475 4,240 1,033 11,735
As at 30 September 2023 1,840 1,793 5,282 470 9,385
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. The Group mainly uses equity to finance its operations. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt or repay borrowings when cash received
from non-trade receivables. Also, the Group continues to monitor and maintain the sufficiency of banking facilities
for its operations.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This
ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings, amounts due to
directors and lease liabilities less cash and cash equivalents. Total capital is calculated as “equity” as shown in the
consolidated statements of financial position.
The gearing ratio at 31 December 2020, 2021, 2022 and 30 September 2023 were as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
Note HK$’000 HK$’000 HK$’000 HK$’000
Bank borrowings 24 11,201 4,703 10,638 8,208
Lease liabilities 15 5,666 2,614 8,544 4,240
Amounts due to directors 26 16,653 13,912 5,991 1,069
Less: Cash and cash equivalents 21 (14,536) (11,729) (70,880) (19,121)
Net debt/(cash) 18,984 9,500 (45,707) (5,604)
Total capital 81,141 97,841 130,588 126,529
Gearing ratio 23% 10% N/A N/A
3.3 Fair value estimation
The different levels of financial instruments carried at fair value have been defined as follows:
 Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
 Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
APPENDIX I ACCOUNTANT’S REPORT
– I-22 –


--- page 420 ---
 Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The carrying value of the Group’s financial assets and liabilities are reasonable approximation to
their fair values due to the relatively short-term nature of these financial instruments.
The carrying amounts of the Group’s financial assets, including trade receivables, deposits and other
receivables, amount due from a director, amount due from a related company and cash and cash equivalents,
and financial liabilities, including trade and retention payables, other payables, amounts due to directors,
bank borrowings and lease liabilities, approximate to their fair values.
3.4 Offsetting financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where the
companies now comprising the Group currently has a legally enforceable right to offset the recognised amounts,
and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. It has
also entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts to
be set off in certain circumstances, such as bankruptcy or the termination of a contract.
The following table presents the recognised financial instruments that are offset as at 31 December 2020,
2021, 2022 and 30 September 2023.
Gross amounts
Gross amounts
set off in the
consolidated
statement of
financial
position
Net amounts
presented
in the
consolidated
statement of
financial
position
HK$’000 HK$’000 HK$’000
As at 31 December 2020
Financial assets
Other receivables and deposits 7,736 (1,712) 6,024
Financial liabilities
Trade and retention payables 36,981 (1,712) 35,269
As at 31 December 2021
Financial assets
Other receivables and deposits 6,486 (2,840) 3,646
Financial liabilities
Trade and retention payables 25,735 (2,840) 22,895
As at 31 December 2022
Financial assets
Other receivables and deposits 6,874 (3,943) 2,931
Financial liabilities
Trade and retention payables 31,223 (3,943) 27,280
As at 30 September 2023
Financial assets
Other receivables and deposits 6,935 (3,805) 3,130
Financial liabilities
Trade and retention payables 63,460 (3,805) 59,655
APPENDIX I ACCOUNTANT’S REPORT
– I-23 –


--- page 421 ---
Note: As at 31 December 2020, 2021, 2022 and 30 September 2023, other receivables from subcontractors
which represents labour costs of site workers directly settled by the Group, are offset against trade
and retention payables to the same subcontractor pursuant to the arrangements with subcontractors,
as well as industry practice.
4 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below.
(a) Revenue recognition
The Group recognises revenue according to the progress towards complete satisfaction of
performance obligation of the individual contract of structural steelwork. The progress is determined by the
aggregated cost for the individual performance obligation incurred at the end of the reporting period
compared with the estimated budgeted cost. Management’s estimation of the cost incurred to date which
contributes to the Group’s progress in satisfying the performance obligation and the budgeted cost is
primarily based on construction contract budget and actual cost summary prepared by internal quantity
surveyors, where applicable. Corresponding revenue from contract work is also estimated by management
based on the progress. Because of the nature of the activities undertaken in the construction contracts, the
date at which the contract activity is entered into and the date when the activity is completed usually fall
into different accounting periods. The Group regularly reviews and revises the estimation of contract cost in
the budget prepared for each construction contract as the contract progresses.
Significant judgement is required in estimating the progress of performance and total contract costs
which may have an impact on percentage of completion of the construction contracts and the contract
revenue and profit to be recognised in an accounting period. In addition, actual outcome in terms of total
revenue or costs may be higher or lower than estimation at the end of the reporting period, which would
affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.
(b) Impairment of trade receivables and contract assets
The Group follows the guidance of HKFRS 9 to determine whether trade receivables and contract
assets are impaired. Significant judgement is exercised on the assessment of the risk of default and expected
credit losses from each customer. In making the judgement, management considers a wide range of factors
such as results of follow-up procedures, customer payment trends including subsequent payments,
customers’ financial positions and expected future change of credit risks, including consideration of factors
such as general economy measure, changes in macro-economic indicators, etc. Details of assumptions and
inputs used are discussed in Note 3.1(a)(ii).
5 Revenue and segment information
The executive directors are identified as the chief operating decision makers (“CODM”) of the Group who
review the Group’s internal reporting in order to assess performance and allocate resources.
The Group’s revenue is derived from provision of structural steelwork in Hong Kong and accordingly, there
is only one single operating segment for the Group under HKFRS 8.
APPENDIX I ACCOUNTANT’S REPORT
– I-24 –


--- page 422 ---
(a) Revenue
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Structural steelwork 324,292 228,776 336,384 251,561 235,038
All of the Group’s revenue is recognised over time for the Track Record Period.
(b) Revenue from major customers
Revenue individually generated from the following customers contributed more than 10% of the total
revenue of the Group:
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Customer 1 120,694 N/A* N/A* N/A* N/A*
Customer 2 93,679 88,966 214,167 165,283 87,965
Customer 3 N/A* 62,627 N/A* N/A* 30,383
Customer 4 N/A* 45,640 N/A* N/A* N/A*
Customer 5 N/A* N/A* N/A* N/A* 34,323
Customer 6 N/A* N/A* N/A* N/A* 32,092
* Represent less than 10% of revenue for the respective year/period.
All of the Group’s revenue are generated in Hong Kong.
(c) Segment assets and liabilities
The Group monitors its total assets and liabilities centrally in one single operating segment. The total
non-current assets other than financial instruments and deferred income tax assets amounted to
HK$6,655,000, HK$5,700,000, HK$6,666,000 and HK$4,739,000 were located in Hong Kong and
HK$10,903,000, HK$8,394,000, HK$10,980,000 and HK$7,871,000 were located in the PRC as at 31
December 2020, 2021, 2022 and 30 September 2023 respectively.
APPENDIX I ACCOUNTANT’S REPORT
– I-25 –


--- page 423 ---
(d) Revenue recognised in relation to contract liabilities
The following table shows the revenue recognised during the Track Record Period related to
carried-forward contract liabilities.
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Revenue recognised
that was included
in the contract
liability balance at
the beginning of
the year/period
– Structural
steelwork 14,724 4,254 2,641 2,641 2,200
(e) Unsatisfied long-term construction contracts
The following table shows unsatisfied performance obligations resulting from long-term construction
contracts.
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Aggregate amount of the transaction
price allocated to long-term
construction contracts that are
unsatisfied as at year/period end 505,333 425,866 253,464 668,926
Management expects that the transaction prices regarding the unsatisfied contracts at the end of year/
period will be recognised as revenue by referencing to the schedule below:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Within 1 year 212,139 279,517 183,256 356,806
Over 1 year 293,194 146,349 70,208 312,120
505,333 425,866 253,464 668,926
APPENDIX I ACCOUNTANT’S REPORT
– I-26 –


--- page 424 ---
(f) Accounting policies of revenue recognition
(a) Revenue from provision of structural steelwork
The Group recognises revenue upon the transfer of control of promised goods or services to
customers, measured at the fair value of the consideration received or receivable, and represents
amounts for the construction service rendered in the ordinary course of the Group’s activities. The
Group is acting as a principal rather than as an agent given that the Group integrates the materials,
labor and equipment into the deliverables promised to the customers.
Revenue is recognised over time as the Group’s performance does not create an asset with an
alternative use and the Group has an enforceable right to payment for performance completed to date.
The Group has applied the input method in recognising the revenue from construction contracts over
time by reference to the Group’s efforts or inputs to the satisfaction on a performance obligation (for
example, subcontracting fees and cost of materials) relative to the total expected inputs to the
satisfaction of the performance obligation, that best depict the Group’s performance in transferring
control of goods or services. When the Group is not able to reasonably measure its performance
progress, the Group recognises revenue only to the extent of the recoverable amount of costs incurred
until such time that it can reasonably measure the performance progress.
Contracts
The Group derives revenue primarily from provision of structural steelwork, including
supply, fabrication and installation of structural steel for construction projects in Hong Kong
under contracts with customers, subject to modification or variation orders.
Performance Obligations
A performance obligation is a contractual promise to transfer a distinct good or service
to a customer and is the unit of account under HKFRS 15. Contracts of the Group often
require significant services to integrate materials and various activities (which are closely
related and inter-dependent) into a single deliverable and are therefore generally accounted for
as a single performance obligation. Contract amendments or variation orders, which are
generally not distinct from the existing contract, are typically accounted for as a modification
of the existing contract and performance obligation.
V ariable considerations
The nature of the Group’s contracts give rise to certain of variable consideration,
including variation orders. The Group recognises amount of variable consideration (for
example, scope changes, performance bonus or claims, if any), which it will be entitled using
the expected value method, in the transaction price only to the extent that is highly probable
that such an inclusion will not result in a significant revenue reversal in the future when the
uncertainty associated with the variable consideration is subsequently resolved.
Factors to be considered in determining whether revenue associated with variable
considerations should be recognised include whether there is evidence supporting the variable
consideration to be reasonable, objective and reliably estimated.
When there is change in circumstances, the Group updates the estimated transaction
price (including updating its assessment of whether an estimate of variable consideration is
constrained) to better predict the circumstances present at the end of the reporting period and
the changes in circumstances during the reporting period.
APPENDIX I ACCOUNTANT’S REPORT
– I-27 –


--- page 425 ---
Transaction price
Transaction price should be adjusted whenever the contract includes a significant
financing component. Amount retained by the customer in a long-term arrangement, referred to
as retention, are usually intended to provide the customer with a form of security that the
Group will perform as specified under the contract, rather than to provide the customer with a
significant financing benefit.
The payment terms differed for different customers due to the variety of projects. Most
of the payment is payable according to the stage of construction with credit term of 30 to 60
days. 10% of the value of work done, subject to a cap of 5% of the total contract sum, may be
withheld by the customers and recognised as retention receivables, which would be paid after
the retention period expires. Retention receivables, prior to expiration of defect liability period,
are classified as contract assets. The Group does not intend to give financing to customers and
the Group makes efforts to collect the receivables and timely monitor the credit risk. The
contract does not have a significant financing component as the payments are in accordance
with the typical payment terms of the relevant industry, which has a primary purpose other
than financing. The Group does not expect to have any other significant contracts where the
period between the transfer of the promised goods or services to the customer and payment by
the customer exceeds one year. As a consequence, the Group does not adjust transaction prices
for the time value of money.
Contract modifications
The Group accounts for a modification if the customer to a contract approves a change
in the scope or price of a contract. A contract modification is approved when the modification
creates or changes the enforceable rights and obligations of the customer to the contract.
6 Other income and other gain/(loss), net
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Other income
Government grants
(Note a) 1,283 133 2,611 2,579 40
Other gain/(loss), net
Change in value of life
insurance contracts
(Note 20) 112 123 100 86 (461)
Gain/(loss) on disposal of
property, plant and
equipment – – 23 – (79)
Others – 3 6–––
112 159 123 86 (540)
1,395 292 2,734 2,665 (500)
APPENDIX I ACCOUNTANT’S REPORT
– I-28 –


--- page 426 ---
Note:
(a) The amount mainly represents wage subsidy granted under Employment Support Scheme under the
Anti-Epidemic Fund. Subsidies are offered to employers who have employed regular employees and
paid MPF for them. Wage subsidies were granted to the Group for the use of paying wages and MPF
of regular employees from June 2020 to November 2020 and from May 2022 to July 2022.
Grants from the government are recognised at their fair value where there is a reasonable assurance
that the grant will be received and the Group will comply with all attached conditions.
7 Expenses by nature
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Cost of materials 150,560 62,266 73,708 48,694 85,938
Subcontracting fees 75,859 61,933 105,302 83,890 62,831
Employee benefit expenses
(including directors’
remunerations) (Note 8) 32,539 51,038 45,800 33,490 27,363
Auditor’s remunerations –
audit services 98 98 98 74 74
Depreciation of plant and
equipment (Note 14) 1,793 1,978 2,050 1,564 1,475
Depreciation of
right-of-use assets
(Note 15) 2,906 3,152 3,338 2,282 3,056
Expense relating to
short-term leases
(Note 15) 494 554 955 711 486
Transportation expenses 4,461 5,457 12,037 9,906 3,627
Consultancy fees 385 955 1,510 1,288 361
Testing expenses 4,263 3,055 3,175 1,954 2,636
Machinery service fees 2,956 9,290 28,411 21,429 6,500
Legal and professional fees 207 257 357 276 228
Other expenses 5,428 7,996 11,782 10,162 5,544
Total cost of services and
administrative expenses 281,949 208,029 288,523 215,720 200,119
APPENDIX I ACCOUNTANT’S REPORT
– I-29 –


--- page 427 ---
8 Employee benefit expenses (including directors’ remunerations)
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Salaries, wages and
bonuses 30,932 47,743 43,163 31,252 25,265
Pension costs – defined
contribution plan 774 1,374 1,280 1,087 1,077
Other welfare and
allowances 833 1,921 1,357 1,151 1,021
32,539 51,038 45,800 33,490 27,363
Representing:
Cost of services 22,950 40,502 35,021 26,722 20,302
Administrative expenses 9,589 10,536 10,779 6,768 7,061
32,539 51,038 45,800 33,490 27,363
During the years ended 31 December 2020, 2021, 2022 and nine months ended 30 September 2022 and
2023, no forfeited contributions were utilised by the Group to reduce its contributions. There is no balance
available as at 31 December 2020, 2021, 2022 and 30 September 2022 and 2023 to reduce future contributions.
APPENDIX I ACCOUNTANT’S REPORT
– I-30 –


--- page 428 ---
9 Benefits and interests of directors
(a) Directors’ emoluments
The remuneration of each director paid/payable for each of the years ended 31 December 2020, 2021,
2022 and nine months ended 30 September 2022 and 2023 were set out below:
Name of directors Fees Salaries
Discretionary
bonuses
Allowance
and benefits
in kind
Employer’s
contribution
to a
retirement
benefit
scheme
Other
emoluments
paid or
receivable in
respect of
director’s
other services
in connection
with the
management
of the affairs
of the Listing
Business Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended
31 December 2020
Executive director
Mr. Chan Kam Kei – 1,332 111 – 18 – 1,461
Mr. Chan Kam Kong 368 2,546 212 – 18 – 3,144
Ms. Chan Suk Man – 1,140 95 – 18 – 1,253
Non-executive director
Mr. Chan Wing Hong 1,014 – 7 0––– 1,084
Ms. Choi Chick
Cheong 480 – 4 0––– 5 2 0
Total 1,862 5,018 528 – 54 – 7,462
APPENDIX I ACCOUNTANT’S REPORT
– I-31 –


--- page 429 ---
Name of directors Fees Salaries
Discretionary
bonuses
Allowance
and benefits
in kind
Employer’s
contribution
to a
retirement
benefit
scheme
Other
emoluments
paid or
receivable in
respect of
director’s
other services
in connection
with the
management
of the affairs
of the Listing
Business Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended
31 December 2021
Executive director
Mr. Chan Kam Kei – 1,332 333 – 18 – 1,683
Mr. Chan Kam Kong 395 2,546 637 – 18 – 3,596
Ms. Chan Suk Man – 1,140 285 – 18 – 1,443
Non-executive director
Mr. Chan Wing Hong 1,026 – 21 0––– 1,236
Ms. Choi Chick
Cheong 480 – 12 0––– 6 0 0
Total 1,901 5,018 1,585 – 54 – 8,558
Name of directors Fees Salaries
Discretionary
bonuses
Allowance
and benefits
in kind
Employer’s
contribution
to a
retirement
benefit
scheme
Other
emoluments
paid or
receivable in
respect of
director’s
other services
in connection
with the
management
of the affairs
of the Listing
Business Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended
31 December 2022
Executive director
Mr. Chan Kam Kei – 1,332 333 – 18 – 1,683
Mr. Chan Kam Kong 452 2,546 637 – 18 – 3,653
Ms. Chan Suk Man – 1,140 285 – 18 – 1,443
Non-executive director
Mr. Chan Wing Hong 1,054 – 21 0––– 1,264
Ms. Choi Chick
Cheong 480 – 12 0––– 6 0 0
Total 1,986 5,018 1,585 – 54 – 8,643
APPENDIX I ACCOUNTANT’S REPORT
– I-32 –


--- page 430 ---
Name of directors Fees Salaries
Discretionary
bonuses
Allowance
and benefits
in kind
Employer’s
contribution
to a
retirement
benefit
scheme
Other
emoluments
paid or
receivable in
respect of
director’s
other services
in connection
with the
management
of the affairs
of the Listing
Business Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the nine months
ended 30
September 2022
(Unaudited)
Executive director
Mr. Chan Kam Kei – 998 – – 14 – 1,012
Mr. Chan Kam Kong 346 1,910 – – 14 – 2,270
Ms. Chan Suk Man – 855 – – 14 – 869
Non-executive director
Mr. Chan Wing Hong 79 3––––– 7 9 3
Ms. Choi Chick
Cheong 36 0––––– 3 6 0
Total 1,499 3,763 – – 42 – 5,304
Name of directors Fees Salaries
Discretionary
bonuses
Allowance
and benefits
in kind
Employer’s
contribution
to a
retirement
benefit
scheme
Other
emoluments
paid or
receivable in
respect of
director’s
other services
in connection
with the
management
of the affairs
of the Listing
Business Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the nine months
ended 30
September 2023
Executive director
Mr. Chan Kam Kei – 998 – – 14 – 1,012
Mr. Chan Kam Kong 324 1,910 – – 14 – 2,248
Ms. Chan Suk Man – 855 – – 14 – 869
Non-executive director
Mr. Chan Wing Hong 78 3––––– 7 8 3
Ms. Choi Chick
Cheong 36 0––––– 3 6 0
Total 1,467 3,763 – – 42 – 5,272
APPENDIX I ACCOUNTANT’S REPORT
– I-33 –


--- page 431 ---
The remunerations shown above represent remunerations received from the Operating Entities by
these directors in their capacity as employees to Operating Entities and no directors waived any emoluments
during each of the years ended 31 December 2020, 2021, 2022 and nine months ended 30 September 2022
and 2023.
(b) Directors’ termination benefits
No payment was made to the directors as compensation for the early termination of the appointment
during the Track Record Period.
(c) Consideration provided to third parties for making available directors’ services
No payment was made to the former employer of the directors for making available the services of
them as a director of the Company or Operating Entities during the Track Record Period.
(d) Information about loans, quasi-loans and other dealings in favour of directors, controlled bodies
corporate by and connected entities with such directors
Other than those disclosed in Note 26, there were no loans, quasi-loans and other dealings in favour
of directors, controlled bodies corporate by and connected entities with such directors during the Track
Record Period.
(e) Directors’ material interests in transactions, arrangements or contracts
Other than those disclosed in Note 26, no significant transactions, arrangements and contracts in
relation to the Group’s business to which the Company or Operating Entities were a party and in which
directors of the Company had a material interest, whether directly or indirectly, subsisted at the end of each
reporting period or at any time during the Track Record Period.
(f) Five highest paid individuals
For each of the years ended 31 December 2020, 2021, 2022 and nine months ended 30 September
2022 and 2023, the 5 individuals whose emoluments were the highest in the Group include 4 directors,
whose emoluments were reflected in Note 9(a). The emoluments paid to the remaining 1 individual are as
follows:
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Salaries, wages and
bonuses 800 785 834 486 535
Pension costs – defined
contribution plan 14 18 – 14 14
814 803 834 500 549
APPENDIX I ACCOUNTANT’S REPORT
– I-34 –


--- page 432 ---
The emoluments of above individual are within the following band:
Number of individual
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
(Unaudited)
Emolument band
Within
HK$1,000,000 11111
No incentive payment for joining the Group or compensation for loss of office was paid or payable
to any of the five highest paid individuals during the Track Record Period.
10 Finance costs, net
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Finance income:
– Interest income from
bank deposits (1) (15) (73) (21) (159)
– Unwinding of discount
impact (22) (24) (22) (17) (23)
(23) (39) (95) (38) (182)------------ ------------ ------------ ------------ ------------
Finance costs:
– Interest expense on bank
borrowings 227 352 316 226 336
– Interest expense on lease
liabilities (Note 15) 269 174 118 55 208
496 526 434 281 544---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Finance costs, net 473 487 339 243 362
11 Income tax expense
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Current income tax 7,469 2,835 7,946 6,300 5,888
Deferred income tax
(Note 16) (748) 764 (755) (671) (232)
6,721 3,599 7,191 5,629 5,656
APPENDIX I ACCOUNTANT’S REPORT
– I-35 –


--- page 433 ---
Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Company
and WK Development are not subject to any income tax in the Cayman Islands and the British Virgin Islands.
Wing Kei Hong Kong and Wing Kei Management are subject to Hong Kong profits tax. Hong Kong profits
tax is calculated at 16.5% of the estimated assessable profits during the Track Record Period, except for one entity
that is qualified under the two-tiered profits tax rate regime, under which the first HK$2.0 million of its
assessable profits are taxed at 8.25% and the remaining assessable profits are taxed at 16.5%.
Provision for Mainland China corporate income tax is calculated at the statutory rate of 25% on the
assessable income of Wing Kei Dongguan during the Track Record Period.
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Profit before income tax 43,427 20,935 46,456 34,485 20,771
Tax calculated at domestic
tax rates applicable to
profits in the respective
countries/places of
business 6,615 3,552 7,358 6,039 5,594
Tax effects of:
Income not subject to tax (230) (20) (430) (419) (25)
Expenses not deductible
for tax purpose 336 67 263 9 87
6,721 3,599 7,191 5,629 5,656
12 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the
weighted average number of ordinary shares in issue during the years ended 31 December 2020, 2021, 2022 and
nine months ended 30 September 2022 and 2023.
In determining the weighted average number of shares in issue during the years ended 31 December 2020,
2021, 2022 and nine months ended 30 September 2022 and 2023, 1 share was deemed to have been issued on 1
January 2020 as if the Company has been incorporated by then.
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Profit attributable to
owners of the Company
(HK$’000) 36,706 17,336 39,265 28,856 15,115
Weighted average number
of ordinary shares in
issue 11111
Basic and diluted earnings
per share (in HK$’000) 36,706 17,336 39,265 28,856 15,115
Diluted earnings per share for the years ended 31 December 2020, 2021, 2022 and nine months ended 30
September 2022 and 2023 were the same as the basic earnings per share as there were no dilutive potential
ordinary shares outstanding during the years/periods.
The earnings per share presented above has not been taken into account the proposed capitalisation issue
pursuant to the resolution in writing of the shareholders passed on 5 February 2024 because the proposed
capitalisation issue has not become effective as at the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
– I-36 –


--- page 434 ---
13 Dividend
No dividend has been paid or declared by the Company for the Track Record Period.
Dividends of HK$8,200,000, nil, HK$8,000,000 and HK$20,000,000 were declared and settled by the
companies now comprising the Group during the years ended 31 December 2020, 2021 and 2022 and nine months
ended 30 September 2023, respectively.
14 Property, plant and equipment
Machinery
and
equipment
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2020
Cost 4,319 1,883 557 6,727 13,486
Accumulated depreciation (1,664) (905) (390) (3,634) (6,593)
Net book amount 2,655 978 167 3,093 6,893
Y ear ended 31 December 2020
Opening net book amount 2,655 978 167 3,093 6,893
Addition for the year 2,864 578 145 79 3,666
Depreciation charge (Note 7) (520) (548) (120) (605) (1,793)
Currency translation 296 48 3 19 366
Closing net book amount 5,295 1,056 195 2,586 9,132
At 31 December 2020
Cost 7,611 2,582 714 6,825 17,732
Accumulated depreciation (2,316) (1,526) (519) (4,239) (8,600)
Net book amount 5,295 1,056 195 2,586 9,132
Y ear ended 31 December 2021
Opening net book amount 5,295 1,056 195 2,586 9,132
Addition for the year 709 201 36 180 1,126
Depreciation charge (Note 7) (808) (417) (82) (671) (1,978)
Reclassification from right-of-use
assets (Note) – – – 805 805
Currency translation 176 25 2 8 211
Closing net book amount 5,372 865 151 2,908 9,296
At 31 December 2021
Cost 8,589 2,858 764 7,821 20,032
Accumulated depreciation (3,217) (1,993) (613) (4,913) (10,736)
Net book amount 5,372 865 151 2,908 9,296
Note: During the year ended 31 December 2021, a motor vehicle has been transferred from right-of-use
assets upon the end of the finance lease.
APPENDIX I ACCOUNTANT’S REPORT
– I-37 –


--- page 435 ---
Machinery
and
equipment
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Y ear ended 31 December 2022
Opening net book amount 5,372 865 151 2,908 9,296
Addition for the year 57 229 32 – 318
Depreciation charge
(Note 7) (799) (482) (74) (695) (2,050)
Currency translation (404) (43) (3) (14) (464)
Closing net book amount 4,226 569 106 2,199 7,100
At 31 December 2022
Cost 7,965 2,897 763 7,135 18,760
Accumulated depreciation (3,739) (2,328) (657) (4,936) (11,660)
Net book amount 4,226 569 106 2,199 7,100
Nine months ended 30
September 2023
Opening net book amount 4,226 569 106 2,199 7,100
Addition for the period – 850 20 286 1,156
Depreciation charge
(Note 7) (513) (406) (48) (508) (1,475)
Disposal – – – (79) (79)
Currency translation (196) (30) (1) (4) (231)
Closing net book amount 3,517 983 77 1,894 6,471
At 30 September 2023
Cost 7,561 3,604 762 6,464 18,391
Accumulated depreciation (4,044) (2,621) (685) (4,570) (11,920)
Net book amount 3,517 983 77 1,894 6,471
Nine months ended 30
September 2022 (unaudited)
Opening net book amount 5,372 865 151 2,908 9,296
Addition for the period 57 229 32 – 318
Depreciation charge
(Note 7) (623) (361) (58) (522) (1,564)
Currency translation (504) (47) (3) (19) (573)
Closing net book amount 4,302 686 122 2,367 7,477
At 30 September 2022
(unaudited)
Cost 7,774 2,844 753 7,787 19,158
Accumulated depreciation (3,472) (2,158) (631) (5,420) (11,681)
Net book amount 4,302 686 122 2,367 7,477
APPENDIX I ACCOUNTANT’S REPORT
– I-38 –


--- page 436 ---
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the consolidated statements of
comprehensive income during the financial year in which they are incurred.
Depreciation on assets is calculated using the straight-line method to allocate their costs net of their
residual values over their estimated useful lives, as follows:
Machinery and equipment 3 to 10 years
Leasehold improvements Shorter of lease term or 10 years
Furniture, fixtures and office equipment 5 years
Motor vehicles 4 – 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognised in the consolidated statements of comprehensive income.
15 Leases
This note provides information for leases where the Group is a lessee.
(i) Amounts recognised in the consolidated statements of financial position
The consolidated statements of financial position shows the following amounts relating to leases:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Right-of-use assets
Leased premises 7,220 4,508 9,515 5,190
Leasehold land 291 290 258 238
Motor vehicle 915 – 773 711
8,426 4,798 10,546 6,139
Lease liabilities
Current portion 3,276 2,337 4,352 3,782
Non-current portion 2,390 277 4,192 458
5,666 2,614 8,544 4,240
Additions to the right-of-use assets during the years ended 31 December 2020, 2021, 2022 and nine
months ended 30 September 2022 and 2023 were HK$1,298,000, HK$218,000, HK$9,637,000,
HK$2,518,000 and nil respectively.
APPENDIX I ACCOUNTANT’S REPORT
– I-39 –


--- page 437 ---
(ii) Amounts recognised in the consolidated statements of comprehensive income
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Depreciation of
right-of-use assets
as included in:
– Cost of services 2,608 2,963 3,166 2,160 2,907
– Administrative
expenses 298 189 172 122 149
2,906 3,152 3,338 2,282 3,056
Interest expenses on
lease liabilities for
the year/period
(Note 10) 269 174 118 55 208
Expenses relating to
short-term leases
(included in cost
of services)
(Note 7) 494 554 955 711 486
The interest rate of each lease contract is fixed at its contract date, and the interest rate of all the
lease liabilities ranged from 2.5% to 4.2% per annum as at 31 December 2020, 2021, 2022 and 30
September 2023.
The total cash outflows for leases including payments of short-term leases, lease liabilities and
payments of interest expenses on leases for the years ended 31 December 2020, 2021, 2022 and nine
months ended 30 September 2022 and 2023 were approximately HK$4,091,000, HK$4,092,000,
HK$3,883,000, HK$2,896,000 and HK$3,641,000, respectively.
(iii) The Group’s leasing activities and how these are accounted for
The right-of-use assets represent the Group’s rights to use underlying leased premises, leasehold land
and motor vehicle under lease arrangements over the lease terms from 2 to 50 years. They are stated at cost
less accumulated depreciation and accumulated impairment losses.
An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the
Group determines that the arrangement conveys a right to control the use of an identified asset for a period
of time in exchange for consideration. Such determination is made on an evaluation of the substance of the
arrangement, regardless of whether the arrangements take the legal form of a lease.
APPENDIX I ACCOUNTANT’S REPORT
– I-40 –


--- page 438 ---
Leases are initially recognised as a right-of-use asset and corresponding liability at the date of which
the leased asset is available for use by the Group. Each lease payment is allocated between the principal
and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use
asset is depreciated on a straight-line basis over the shorter of the asset’s estimated useful life and the lease
term.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
 fixed payments (including in-substance fixed payments), less any lease incentives receivable;
 variable lease payment that are based on an index or a rate;
 amounts expected to be payable by the lessee under residual value guarantees;
 the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option;
 payments of penalties for terminating the lease, if the lease term reflects the lessee exercising
that option; and
 lease payments to be made under reasonably certain extension options are also included in the
measurement of lease liabilities.
The lease payments are discounted using the interest rate implicit in the lease, if that rate cannot be
readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing
rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions.
Right-of-use assets are measured at cost comprising the following:
 the amount of the initial measurement of lease liabilities;
 any lease payments made at or before the commencement date, less any lease incentive
received; and
 any initial direct costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense. Short-term leases are leases with a lease term of 12 months or less.
Some of the property leases include extension options. These terms are used to maximise operational
flexibility in terms of managing contracts. The extension options held are exercisable only by the Group
and not by the respective lessor. The Group considers all facts and circumstances that create an economic
incentive to exercise an extension option in determining the lease term. The assessment is revised if a
significant event or a significant change in circumstances occurs which affects the assessment.
APPENDIX I ACCOUNTANT’S REPORT
– I-41 –


--- page 439 ---
16 Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current income tax recoverable against current income tax liabilities and when the deferred income tax assets and
liabilities relate to income tax levied by the same taxation authority on either the taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis. The offset amounts are as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Deferred income tax assets 2,153 730 2,496 1,989
Set-off of deferred tax liabilities pursuant
to set-off provisions (1,438) (730) (1,962) (1,224)
715 – 534 765
Deferred income tax liabilities 1,623 954 1,962 1,224
Set-off of deferred tax liabilities pursuant
to set-off provisions (1,438) (730) (1,962) (1,224)
185 224 – –
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Deferred income tax assets to be
recovered within 12 months 715 – 94 50
Deferred income tax assets to be
recovered after more than 12 months – – 440 715
715 – 534 765
Deferred income tax liabilities to be settled
within 12 months 22 65 – –
Deferred income tax liabilities to be settled
more than 12 months 163 159 – –
185 224 – –
APPENDIX I ACCOUNTANT’S REPORT
– I-42 –


--- page 440 ---
The movements in deferred income tax assets during the Track Record Period, without taking into
consideration the offsetting of balances within the same tax jurisdiction, are as follows:
Tax loss Provision
Lease
liabilities Total
HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2020 – 360 1,610 1,970
Credited/(charged) to the consolidated
statements of comprehensive income 730 (25) (628) 77
Exchange difference 41 – 65 106
At 31 December 2020 and 1 January 2021 771 335 1,047 2,153
Charged to the consolidated statements of
comprehensive income (783) (63) (613) (1,459)
Exchange difference 12 – 24 36
At 31 December 2021 and 1 January 2022 – 272 458 730
Credited to the consolidated statements of
comprehensive income – 627 1,210 1,837
Exchange difference – – (71) (71)
At 31 December 2022 and 1 January 2023 – 899 1,597 2,496
Credited/(charged) to the consolidated
statements of comprehensive income – 182 (631) (449)
Exchange difference – – (58) (58)
At 30 September 2023 – 1,081 908 1,989
At 31 December 2021 and 1 January 2022 – 272 458 730
Credited/(charged) to the consolidated
statements of comprehensive income – 623 (388) 235
Exchange difference – – (20) (20)
At 30 September 2022 (unaudited) – 895 50 945
APPENDIX I ACCOUNTANT’S REPORT
– I-43 –


--- page 441 ---
The movements in deferred income tax liabilities during the Track Record Period, without taking into
consideration the offsetting of balances within the same tax jurisdiction, are as follows:
Accelerated
tax
depreciation
Right-of-use
assets Total
HK$’000 HK$’000 HK$’000
At 1 January 2020 (622) (1,605) (2,227)
Credited to the consolidated statements of comprehensive
income 102 569 671
Exchange difference – (67) (67)
At 31 December 2020 and 1 January 2021 (520) (1,103) (1,623)
Credited to the consolidated statements of comprehensive
income 85 610 695
Exchange difference – (26) (26)
At 31 December 2021 and 1 January 2022 (435) (519) (954)
Credited/(charged) to the consolidated statements of
comprehensive income 65 (1,147) (1,082)
Exchange difference – 74 74
At 31 December 2022 and 1 January 2023 (370) (1,592) (1,962)
Credited to the consolidated statements of comprehensive
income 39 642 681
Exchange difference – 57 57
At 30 September 2023 (331) (893) (1,224)
At 31 December 2021 and 1 January 2022 (435) (519) (954)
(Charged)/credited to the consolidated statements of
comprehensive income (15) 451 436
Exchange difference – 22 22
At 30 September 2022 (unaudited) (450) (46) (496)
The Group has certain undistributed earnings which, if paid out as dividends, would be subject to tax in the
hands of the recipient. An assessable temporary difference exists, but no deferred tax liability has been recognised
as the Group is able to control the timing of distribution from its PRC subsidiary and is not expected to distribute
these profits in the foreseeable future. Except for the above, as at 31 December 2020, 2021, 2022 and 30
September 2023, there is no significant unrecognised deferred tax for the Group.
APPENDIX I ACCOUNTANT’S REPORT
– I-44 –


--- page 442 ---
17 Financial instruments by category
The Group
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Assets as per consolidated statements of
financial position
Financial assets measured at amortised cost
– Trade receivables (Note 18) 10,912 22,094 14,493 19,773
– Other receivables and deposits (excluding
prepayments and tax receivables)
(Note 18) 6,024 3,646 2,931 3,130
– Amount due from a director (Note 26) 2 9 7–––
– Amount due from a related company
(Note 26) 6,308 6,171 12,018 11,724
– Cash and cash equivalents (Note 21) 14,536 11,729 70,880 19,121
Total 38,077 43,640 100,322 53,748
Liabilities as per consolidated statements
of financial position
Financial liabilities measured at amortised
cost
– Trade and retention payables (Note 23) 35,269 22,895 27,280 59,655
– Accruals and other payables (excluding
non-financial liabilities) (Note 23) 2,175 2,983 4,421 10,429
– Amounts due to directors (Note 26) 16,653 13,912 5,991 1,069
– Bank borrowings (Note 24) 11,201 4,703 10,638 8,208
– Lease liabilities (Note 15) 5,666 2,614 8,544 4,240
Total 70,964 47,107 56,874 83,601
The Company
As at
30 September
2023
HK$000
Liabilities as per statement of financial position of the Company
Financial liabilities measured at amortised cost
– Accruals for listing expense 6,681
APPENDIX I ACCOUNTANT’S REPORT
– I-45 –


--- page 443 ---
18 Trade and other receivables
(a) Trade receivables
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Trade receivables 10,981 22,612 17,143 22,459
Less: provision for impairment (69) (518) (2,650) (2,686)
Trade receivables, net 10,912 22,094 14,493 19,773
The ageing analysis of the trade receivables based on invoice date is as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Within 90 days 4,648 16,803 14,458 12,342
91-180 days 1,370 2,464 – 6,952
Over 180 days 4,963 3,345 2,685 3,165
10,981 22,612 17,143 22,459
The credit terms provided to customers mainly range from 30 to 60 days. The Group’s trade
receivables are denominated in HK$.
(b) Other receivables, deposits and prepayments
The Group
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Prepayments for structural steelwork 1,419 4,620 820 1,698
Other prepayments 190 169 156 124
Other receivables 222 172 158 43
Other tax receivables 5,290 4,407 757 2,250
Deposits 5,802 3,474 2,773 3,087
Deferred listing expenses (Note) – – – 3,430
Prepayment for listing expenses – – – 1,357
12,923 12,842 4,664 11,989
Less: Non-current deposits (758) (67) (1,013) (873)
Current portion 12,165 12,775 3,651 11,116
APPENDIX I ACCOUNTANT’S REPORT
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The Company
As at
30 September
2023
HK$’000
Deferred listing expenses (Note) 3,430
Prepayment for listing fee 1,357
4,787
Note: Deferred listing expense will be deducted from equity upon listing of the Group.
The other receivables and deposits are denominated in HK$. None of the other receivables and
deposits was impaired.
The carrying amounts of trade and other receivables approximate to their fair values. The maximum
exposure to credit risk at the end of each reporting period is carrying amount of each class of trade and
other receivables mentioned above.
Trade receivables are amounts due from customers for services performed in the ordinary course of
business. If collection of trade and other receivables is expected in one year or less (or in the normal
operating cycle of the business if longer), they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional, unless
they contain significant financing components, when they are recognised at fair value. Other receivables are
recognised initially at fair value. The Group holds the trade and other receivables with the objective of
collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the
effective interest method, less allowance for impairment.
19 Contract assets and contract liabilities
Included in contract assets/liabilities are the following:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Contract assets
Unbilled revenue 48,559 29,725 20,698 82,617
Retention receivables for structural
steelwork (Note c) 50,452 53,375 55,856 63,015
Total contract assets 99,011 83,100 76,554 145,632
Less: provision for impairment (1,960) (1,128) (2,796) (3,862)
Contract assets, net 97,051 81,972 73,758 141,770
Contract liabilities 4,254 2,641 2,200 1,598
Note:
(a) The Group classifies these contract assets and liabilities as current because the Group expects to
realise them in its normal operating cycle.
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(b) The settlement analysis of unbilled revenue and contract liabilities based on project cycle was as
follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Unbilled revenue:
To be recovered within twelve
months 48,559 29,725 20,698 82,617
Contract liabilities:
To be recognised within twelve
months 4,254 2,641 2,200 1,598
(c) Retention receivables are settled in accordance with the terms of the respective contracts. The terms
and conditions in relation to the release of retention vary from contract to contract, which is subject
to practical completion, the expiry of the defect liability period or a pre-agreed time period. In the
consolidated statements of financial position, retention receivables were classified as current assets
based on its normal operating cycle. The settlement analysis of these retention receivables based on
the terms of related contracts was as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
To be recovered within twelve
months 15,618 17,643 25,706 34,037
To be recovered more than twelve
months after the end of the
year/period 34,834 35,732 30,150 28,978
50,452 53,375 55,856 63,015
Significant changes in contract assets and contract liabilities
The changes in contract assets of the Group were due to the timing difference in provision of
construction services and the right to payment upon receiving certification from quality surveyors for
construction contracts. The Group also applied the simplified approach to provide for expected credit
losses prescribed by HKFRS 9, which requires the use of the lifetime expected loss provision for
contract assets. Please refer to Note 3.1(a)(ii) for the credit risk of contract assets.
Contract liabilities for the construction contracts decreased due to the reduction in receipt in
advance on overall contract activities.
Accounting policies of contract assets and contract liabilities
A contract asset represents the Group’s right to consideration from customers in exchange for
the provision of structural steelwork that the Group has transferred to the customers that is not yet
unconditional. Contract assets arise when the Group has provided the structural steelwork under the
relevant contracts but the works have yet to be certified by architects, quantity surveyors or other
representatives appointed by the customers and/or the Group’s right to payment is still conditional on
APPENDIX I ACCOUNTANT’S REPORT
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factors other than passage of time. Any amount previously recognised as a contract asset is
reclassified to trade receivable at the point when the Group’s right to payment becomes unconditional
other than passage of time.
In accordance with the terms of the contracts entered into with customers, the Group
periodically submits to customers progress payment applications for the value of work done under the
contracts along with any variation orders performed. Upon receiving the Group’s progress payment
applications, customer will examine and certify the works done by issuing payment certificate to the
Group. The Group will then issue invoices to the customers for settlement. The credit term granted
by the Groups to the customers generally ranges from 30 to 60 days from the issue of invoices.
Customers usually retain an amount up to 10% of the value of work done, subject to a cap of 5% of
the total contract sum as retention money for the contract. The terms and conditions in relation to the
release of retention vary from contract to contract, which is subject to practical completion, the
expiry of the defect liability period and the discussion of final accounts.
Contract assets are assessed for impairment under the same approach adopted for impairment
assessment of trade receivables.
A contract liability represents the Group’s obligation to transfer the aforesaid services to a
customer for which the Group has received consideration (or an amount of consideration is due) from
the customer.
20 Investments in life insurance contracts
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Key management insurance contracts
As at 1 January 3,125 3,237 3,360 3,460
Addition – – – 2,846
Change in cash surrender value (Note 6) 112 123 100 (461)
As at 31 December/30 September 3,237 3,360 3,460 5,845
As at 31 December 2020, 2021 and 2022 and 30 September 2023, the Group held life insurance policy for
directors of the Group. The investments in life insurance contract is denominated in USD. The Group has the right
to surrender the insurance partially or in full at any time after the first policy anniversary for cash surrender
value. Cash surrender value represents the account value net of surrender charges.
The Group invests in certain key management life insurance contracts, which contain both investment and
insurance elements. The life insurance contracts are initially recognised at the amount of premium paid, and
subsequently measured at each balance sheet date at its cash surrender value. Changes to the cash surrender value
at each balance sheet date will be recognised in consolidated statements of comprehensive income as “other gain/
(loss), net”. In the event of death of the insured person, the surrender of the policies, or the policies mature, the
investment will be derecognised and any resulting gains/losses will be recognised in profit or loss.
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21 Cash and cash equivalents
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Cash at bank and on hand
– Cash at bank 14,471 11,585 70,778 19,054
– Cash on hand 65 144 102 67
14,536 11,729 70,880 19,121
Maximum exposure to credit risk 14,471 11,585 70,778 19,054
Cash and cash equivalents are denominated in the following currencies:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
HK$ 13,933 10,702 69,698 17,202
RMB 603 1,027 1,182 1,919
Total 14,536 11,729 70,880 19,121
Bank balances of the Group amounting to HK$538,000, HK$883,000, HK$1,080,000 and HK$1,852,000
were placed with certain banks in the Mainland China as at 31 December 2020, 2021, 2022 and 30 September
2023. The remittance of these balances is subject to the foreign exchange control restrictions imposed by the PRC
government.
The above figures reconcile to the amount of cash shown in the consolidated statements of cash flows at the
end of each year/period as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Balances as above 14,536 11,729 70,880 19,121
Bank overdrafts (Note 24) – – (2,184) –
Balances per consolidated statements of
cash flows 14,536 11,729 68,696 19,121
In the consolidated statements of cash flows, cash and cash equivalents include cash on hand, deposits held
at call with banks and bank deposits with original maturities of three months or less, and bank overdrafts. In the
consolidated statements of financial position, bank overdrafts are shown within “bank borrowings” in current
liabilities.
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22 Share capital, capital reserve and reserves of the Company
(a) Share capital
Number of
ordinary
shares
Equivalent
nominal value
of ordinary
share
HK$
Authorised:
Ordinary shares of HK$0.01 each upon incorporation
on 28 June 2023 38,000,000 380,000
Balance at 30 September 2023 38,000,000 380,000
Issued and fully paid:
Upon incorporation on 28 June 2023 1 0.01
Balance at 30 September 2023 1 0.01
(b) Capital reserve
The capital reserve of the Group represented combined share capital of the subsidiaries now
comprising the Group after elimination of inter-company investments (Note 1.2).
(c) Reserves movement of the Company
The reserves movement of the Company is as follows:
Capital
reserve
(note)
Accumulated
losses Total
HK$’000 HK$’000 HK$’000
Balance as at 28 June 2023
(date of incorporation) – – –
Comprehensive loss
Loss for the period – (12,184) (12,184)
Total comprehensive loss – (12,184) (12,184)
Transaction with owners in their
capacity as owners
Effect of Reorganisation (Note 1.2) 150,360 – 150,360
Total transaction with owners in their
capacity as owners 150,360 – 150,360
Balance at 30 September 2023 150,360 (12,184) 138,176
APPENDIX I ACCOUNTANT’S REPORT
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Note: Capital reserve of the Company represents the carrying amount of the share of the equity
items shown in the separate financial statements of Wing Kei Hong Kong acquired during the
Reorganisation.
23 Trade, retention, accruals and other payables
The Group
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Trade payables 32,253 18,583 20,105 53,775
Retention payables 3,016 4,312 7,175 5,880
35,269 22,895 27,280 59,655
Accruals and other payables
– Accrued staff cost 2,719 4,831 3,470 1,766
– Accruals for listing expenses – – – 6,681
– Other accruals and payables 2,175 2,983 4,421 3,748
4,894 7,814 7,891 12,195
The trade, retention, accruals and other payables are mainly denominated in HK$ and the carrying amounts
approximate to their fair values.
As at 31 December 2020, 2021, 2022 and 30 September 2023, the ageing analysis of the trade payables
based on invoice date is as follows:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Within 30 days 11,648 6,313 6,851 38,853
31 – 60 days 11,793 4,672 4,998 8,884
61 – 90 days 1,340 3,358 5,307 1,531
More than 90 days 7,472 4,240 2,949 4,507
32,253 18,583 20,105 53,775
The Company
As at
30 September
2023
HK$’000
Accruals for listing expense 6,681
The accruals are denominated in HK$ and the carrying amounts approximate to their fair values.
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24 Bank borrowings
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Current, secured and guaranteed
– Bank loans (Notes a and b) 7,201 1,354 7,096 8,208
– Bank overdrafts (Note b) – – 2,184 –
7,201 1,354 9,280 8,208------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current, guaranteed
– Bank loans (Notes a and b) 4,000 3,349 1,358 –
11,201 4,703 10,638 8,208
The bank overdrafts and other bank loans are denominated in HK$ and bear interest at floating rates that
are market dependent.
(a) The table below analyses the bank borrowings of the Group into relevant maturity groupings based
on the remaining period at the year end to the contractual maturity date without taking into
consideration the effect of repayment on demand clause.
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Bank borrowings repayable:
Within one year 6,498 2,213 4,640 1,443
Between 1 to 2 years 2,213 1,583 1,201 1,474
Between 2 to 5 years 1,992 594 3,785 4,830
Over 5 years 498 313 1,012 461
11,201 4,703 10,638 8,208
The carrying amounts of the bank borrowings approximate to their fair values. The weighted average
interest rates are 3.19%, 2.87%, 4.03% and 4.73% per annum as at 31 December 2020, 2021, 2022
and 30 September 2023, respectively.
APPENDIX I ACCOUNTANT’S REPORT
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(b) As at 31 December 2020, 2021, 2022 and 30 September 2023, (i) non-revolving loan facility
amounted to nil, nil, HK$5,965,000 and HK$7,246,000 and revolving loan facility amounted to
HK$5,630,000, nil, HK$2,184,000 and nil are guaranteed by Mr. Chan Kam Kei, Mr. Chan Kam
Kong, Ms. Chan Suk Man and Mr. Chan Wing Hong, secured by properties owned by Wealthy River
International Investment Limited, a related company of the Group and life insurance contracts owned
by Mr. Chan Kam Kei and Ms. Chan Suk Man; (ii) SME non-revolving loan facilities amounted to
HK$4,000,000, HK$3,349,000, HK$1,358,000 and nil are guaranteed by HKMC Insurance Limited,
Mr. Chan Kam Kei and Mr. Chan Kam Kong; and (iii) non-revolving loan facility amounted to
HK$1,571,000, HK$1,354,000, HK$1,131,000, HK$962,000 are secured by the properties owned by
Wealthy River International Investment Limited, Mr. Chan Wing Hong and Ms. Choi Chick Cheong,
and guaranteed by Mr. Chan Kam Kong, Mr. Chan Kam Kei and Mr. Chan Wing Hong respectively.
The above personal guarantee and pledged properties will be replaced by the Company’s corporate
guarantee or released upon Listing.
The Group has the following undrawn bank facilities consisting of bank overdrafts and revolving
loan:
As at 31 December
As at
30
September
2020 2021 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000
Floating rate 16,870 22,500 32,816 45,000
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in the consolidated statements of comprehensive
income over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the period-end date.
APPENDIX I ACCOUNTANT’S REPORT
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25 Cash flows information
(a) Cash generated from/(used in) operations:
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Profit before income tax expense 43,427 20,935 46,456 34,485 20,771
Adjustments for:
Depreciation of plant and equipment 1,793 1,978 2,050 1,564 1,475
Depreciation of right-of-use assets 2,906 3,152 3,338 2,282 3,056
Finance income (23) (39) (95) (38) (182)
Finance costs 496 526 434 281 544
Gain on disposal of property, plant
and equipment – – (23) – 79
(Gain)/loss on investments in
insurance contracts (112) (123) (100) (86) 461
Net exchange differences (2,108) (1,213) 2,216 3,201 1,130
(Reversal of impairment losses)/
impairment losses on financial
assets and contract assets (162) (383) 3,800 3,778 1,102
Operating profit before changes in
working capital 46,217 24,833 58,076 45,467 28,436
Changes in working capital:
(Increase)/decrease in contract assets (29,437) 15,911 6,547 15,913 (69,079)
Decrease/(increase) in trade and
other receivables, deposits and
prepayments 17,125 (11,120) 12,921 (13,253) (10,512)
(Decrease)/increase in trade
payables, accruals and other
payables (8,661) (9,544) 4,666 3,237 36,663
(Decrease)/increase in contract
liabilities (10,470) (1,613) (441) 16,972 (602)
Decrease in amount due from
a related company 480 480 480 360 405
Cash generated from/(used in)
operations 15,254 18,947 82,249 68,696 (14,689)
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(b) Cash flow information – financing activities
The movements of liabilities from financing activities for each of the years ended 31 December 2020,
2021, 2022 and nine months ended 30 September 2022 and 2023:
Other assets Liabilities from financing activities
Cash and
cash
equivalents
Borrowings
–
excluding
bank
overdrafts
Lease
liabilities
Amounts
due to
directors Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 1 January 2020 18,148 (1,781) (7,441) (21,952) (13,026)
Cash flows (3,644) (9,193) 3,597 5,315 (3,925)
Non-cash movements:
Inception of lease contracts – – (1,298) – (1,298)
Interest expenses – (227) (269) – (496)
Exchange realignment 32 – (255) (16) (239)
As at 31 December 2020 14,536 (11,201) (5,666) (16,653) (18,984)
As at 1 January 2021 14,536 (11,201) (5,666) (16,653) (18,984)
Cash flows (2,831) 6,850 3,538 2,741 10,298
Non-cash movements:
Inception of lease contracts – – (217) – (217)
Interest expenses – (352) (174) – (526)
Exchange realignment 24 – (95) – (71)
As at 31 December 2021 11,729 (4,703) (2,614) (13,912) (9,500)
As at 1 January 2022 11,729 (4,703) (2,614) (13,912) (9,500)
Cash flows 57,044 (3,435) 2,928 7,921 64,458
Non-cash movements:
Inception of lease contracts – – (9,637) – (9,637)
Interest expenses – (316) (118) – (434)
Lease termination – – 317 – 317
Exchange realignment (77) – 580 – 503
As at 31 December 2022 68,696 (8,454) (8,544) (5,991) 45,707
APPENDIX I ACCOUNTANT’S REPORT
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Other assets Liabilities from financing activities
Cash and
cash
equivalents
Borrowings
–
excluding
bank
overdrafts
Lease
liabilities
Amounts
due to
directors Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 1 January 2022
(Unaudited) 11,729 (4,703) (2,614) (13,912) (9,500)
Cash flows 51,316 (4,152) 2,185 4,721 54,070
Non-cash movements:
Inception of lease concepts – – (2,518) – (2,518)
Interest expenses – (226) (55) – (281)
Lease termination – – 317 – 317
Exchange realignment (115) – 104 – (11)
As at 30 September 2022
(Unaudited) 62,930 (9,081) (2,581) (9,191) 42,077
As at 1 January 2023 68,696 (8,454) (8,544) (5,991) 45,707
Cash flows (49,490) 582 3,155 4,922 (40,831)
Non-cash movements:
Interest expenses – (336) (208) – (544)
Lease termination – – 1,124 – 1,124
Exchange realignment (85) – 233 – 148
As at 30 September 2023 19,121 (8,208) (4,240) (1,069) 5,604
26 Related party transactions
Parties are considered to be related to the Group if the party has the ability, directly or indirectly, to
exercise significant influence over the Group in making financial and operating decisions. Related parties may be
individuals (being members of key management personnel, significant shareholder and/or their close family
members) or other entities and include entities which are under the significant influence of related parties of the
Group where those parties are individuals. Parties are also considered to be related if they are subject to common
control.
(a) The directors of the Company are of the view that the following parties/company were related parties
that had transactions or balances with the Group during the Track Record Period:
Name of related parties Relationship with the Group
Mr. Chan Kam Kong Controlling shareholder and executive director
Mr. Chan Kam Kei Controlling shareholder and executive director
Ms. Chan Suk Man Controlling shareholder and executive director
Mr. Chan Wing Hong Controlling shareholder and non-executive director
Ms. Choi Chick Cheong Controlling shareholder and non-executive director
Wealthy River International Investment
Limited
Controlled by Mr. Chan Kam Kong, Mr. Chan Kam Kei
and Ms. Chan Suk Man
APPENDIX I ACCOUNTANT’S REPORT
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(b) The following transactions were carried out with related parties:
Save as disclosed in Note 24 of this report during the Track Record Period, the following
transactions were carried out with related parties:
Y ear ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Rental paid in relation to short-term
rental contract entered into with
Wealthy River International
Investment Limited 480 480 480 360 405
The transactions were conducted in the normal course of business at prices and terms as agreed
between the Group and the related parties.
(c) Key management compensation
Key management includes the directors of the Group. The compensation paid or payable to key
management for employee services is disclosed in Note 9.
(d) Amounts due from/to a related company and directors
As at 31 December 2020, 2021, 2022 and 30 September 2023, the balances with a related company
and directors of the Company were unsecured, interest-free, repayable on demand, non-trade in nature and
approximate to their fair values. During the year ended 31 December 2021, the amount due from a director
has been fully settled. In January 2024, the balance with a related company was settled in full through
dividend.
During the years ended 31 December 2020, 2021, 2022 and nine months ended 30 September 2023,
the maximum amounts due from a related company were HK$6,550,000, HK$6,308,000, HK$12,260,000
and HK$12,033,000, respectively.
During the years ended 31 December 2020, 2021, 2022 and nine months ended 30 September 2023,
the maximum amount due from a director were HK$297,000, HK$297,000, nil and nil, respectively.
The balances with a related company and directors are denominated in HK$.
(e) Guarantee provided to a related company
As at 31 December 2020 and 2021, a subsidiary of the Group provided guarantee to the mortgage
loans of a related company. During the year ended 31 December 2022, the guarantee was released upon
repayment of loan by the related company.
(f) Amounts due to subsidiaries
As at 30 September 2023, non-trade payables balances due to subsidiaries of the Company were
unsecured, interest-free and repayable on demand, approximate to their fair value and denominated in HK$.
27 Contingent liabilities
During the Track Record Period and in the ordinary course of the Group’s business, the Group has been
subject to a number of claims due to personal injuries suffered by employees of the Group or the Group’s
subcontractors in accidents arising out of and in the course of their employment. The directors of the Company
APPENDIX I ACCOUNTANT’S REPORT
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are of the opinion that such claims are covered by insurance and will not result in any material adverse impact on
the financial position or results and operations of the Group. No provision has been made in respect of these
claims in the Historical Financial Information.
28 Commitment
The Group did not have any material commitment as at 31 December 2020, 2021 and 2022 and 30
September 2023.
29 Subsequent events
In January 2024, the Company declared dividends of approximately HK$26,586,000 of which approximately
HK$10,000,000 will be settled by cash and approximately HK$16,586,000 was offset against the aggregate
amounts due from the Directors and the related company.
Other than the above subsequent events, there have been no other material events subsequent to the Track
Record Period which require adjustment or disclosure in accordance with HKFRS.
30 Summary of other accounting policies
30.1 Subsidiaries
30.1.1 Consolidation
A subsidiary is an entity (including a structured entity) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
Intra-group transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
30.1.2 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable
costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend
received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from
these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the
dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds
the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
30.2 Segment reporting
Operating segment is reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the executive directors of the Group that
makes strategic decisions.
30.3 Foreign currency translation
(a) Functional and presentation currency
Items included in the consolidated financial information of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial information is presented in Hong Kong dollars (“HK$”), which is the
Company’s functional and the Group’s presentation currency.
APPENDIX I ACCOUNTANT’S REPORT
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(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated statements of comprehensive income
within “administrative expenses”.
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
30.4 Impairment of non-financial assets
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.
30.5 Financial assets
(a) Classification
The Group classifies its financial assets as at amortised cost only if both of the following criteria are
met:
(a) The asset is held within a business model whose objective is to collect the contractual cash
flows; and
(b) The contractual terms give rise to cash flows that are solely payments of principal and interest.
Management determines the classification of its financial assets at initial recognition. The Group
reclassifies debt investments when and only when its business model for managing the assets changes.
If collection of the amounts is expected in one year or less they are classified as current assets. If
not, they are presented as non-current assets. The Group’s financial assets comprise trade receivables, other
receivables and deposits, amount due from a director, amount due from a related company and cash and
cash equivalents.
(b) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which
the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to
receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (“FVPL”), transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial asset carried at fair value
through profit or loss are expensed in the consolidated statements of comprehensive income.
Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payments of principal and interest.
APPENDIX I ACCOUNTANT’S REPORT
– I-60 –


--- page 458 ---
(d) Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by HKFRS 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables.
For other financial assets at amortised cost, including deposits and other receivables, management
considers that their credit risks have not increased significantly since initial recognition with reference to
the counterparty historical default rate and current financial position. The impairment provision is
determined based on the 12-month expected credit losses which is close to zero.
30.6 Financial liabilities
(a) Recognition and measurement
Financial liabilities are classified as financial liabilities at amortised cost. Financial liabilities at
amortised cost are recognised initially at fair value net of transaction costs incurred and subsequently stated
at amortised cost. Any difference between proceeds net of transaction costs and the redemption value is
recognised in the consolidated statements of comprehensive income over the period of the financial
liabilities using the effective interest method.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the end of the reporting period.
(b) Derecognition
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expired. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such as exchange or
modification is treated as a derecognition of the original liability and a recognition of a new liability, and
the difference between the respective carrying amounts is recognised in the consolidated statements of
comprehensive income.
30.7 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current
liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.
30.8 Current and deferred income tax
The income tax expense or credit for the year is the tax payable on the current year’s taxable income based
on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the Company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation and considers whether it is
APPENDIX I ACCOUNTANT’S REPORT
– I-61 –


--- page 459 ---
probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax
balances either based on the most likely amount or the expected value, depending on which method
provides a better prediction of the resolution of the uncertainty.
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current
tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
30.9 Employee benefits
(a) Retirement benefit obligations
The Group operates a defined contribution Mandatory Provident Fund Scheme (the “MPF Scheme”)
which is registered under the Mandatory Provident Fund Schemes Ordinance in Hong Kong and participates
in employee social security plan as required by the relevant local regulations in PRC. In Hong Kong, both
the Group and the staff are required to contribute 5% of the employees’ relevant income with a ceiling of
HK$1,500 per month to the MPF scheme. The assets of the MPF Scheme are held in a separately
administered fund. The Group’s contributions to the MPF scheme are expensed as incurred. In PRC, the
Company is required to make contributions to the plan which are based on a certain percentage of the
eligible employee’s relevant income. The Company has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expenses when they are
due.
(b) Bonus
The Group recognises a liability and an expense for where contractually obliged or where there is a
past practice that has created a constructive obligation.
30.10 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has
been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the
likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
APPENDIX I ACCOUNTANT’S REPORT
– I-62 –


--- page 460 ---
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
Onerous contracts
An onerous contract exists when the Group has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits expected to be received from the
contract. The unavoidable costs under a contract reflect the least net cost of exiting from the contract,
which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil
it.
30.11 Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing:
/L50188the profit attributable to owners of the Company, excluding any costs of servicing equity other
than ordinary shares
/L50188by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding treasury
shares.
(b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account:
/L50188the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
/L50188the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
30.12 Dividend distribution
Dividend distribution to the shareholders of the Company or the companies now comprising the Group is
recognised as a liability in the consolidated financial statements in the period in which the dividends are approved
by the shareholders or directors, where appropriate.
Dividend proposed or declared after the reporting period but before the financial statements are authorised
for issue, are disclosed as a non-adjusting event and are not recognised as liability at the end of the reporting
period.
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the
companies now comprising the Group in respect of any period subsequent to 30 September
2023 and up to the date of this report. Save as disclosed in Note 29, no other dividend or
distribution has been declared or made by the Company or any of the companies now
comprising the Group in respect of any period subsequent to 30 September 2023.
APPENDIX I ACCOUNTANT’S REPORT
– I-63 –


--- page 461 ---
The information set forth in this Appendix does not form part of the Accountant’s
Report received from the Company’s reporting accountant, PricewaterhouseCoopers,
Certified Public Accountants, Hong Kong, as set forth in Appendix I to this prospectus, and
is included herein for illustrative purpose only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this prospectus and the Accountant’s Report set
forth in Appendix I to this prospectus.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible
assets prepared in accordance with Rule 4.29 of the Listing Rules are set out below to
illustrate the effect of the Share Offer on the consolidated net tangible assets as at 30
September 2023 as if it had taken place on that date.
The unaudited pro forma statement of adjusted consolidated net tangible assets has
been prepared for illustrative purposes only and, because of its hypothetical nature, it may
not give a true picture of the consolidated net tangible assets of the Group attributable to
owners of the Company had the Share Offer been completed as at 30 September 2023 or any
future dates. The unaudited pro forma statement of adjusted consolidated net tangible assets
of the Group attributable to the owners of the Company is based on the consolidated net
tangible assets of the Group attributable to the owners of the Company as at 30 September
2023 as set out in the Accountant’s Report of the Company, the text of which is set out in
Appendix I to this prospectus, and adjusted as described below.
Audited
consolidated
net tangible
assets of the
Group
attributable to
the owners of
the Company
as at
30 September
2023
Estimated net
proceeds from
the Share
Offer
Unaudited
pro forma
adjusted
consolidated
net tangible
assets
attributable to
the owners of
the Company
as at
30 September
2023
Unaudited
pro forma
adjusted
consolidated
net tangible
assets per
Share
HK$’000 HK$’000 HK$’000 HK$
(Note 1) (Note 2) (Note 3)
Based on an
Offer price
of HK$0.25
per share 126,529 103,484 230,013 0.12
Based on an
Offer price
of HK0.27
per share 126,529 112,884 239,413 0.12
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 462 ---
Notes:
(1) The audited consolidated net tangible assets of the Group attributable to the owners of the Company
as at 30 September 2023 is extracted from the Accountant’s Report set out in Appendix I to this
prospectus, which is based on the audited consolidated net assets of the Group attributable to the
owners of the Company as at 30 September 2023 of HK$126,529,000.
(2) The estimated net proceeds from the Share Offer are based on the indicative Offer Price of HK$0.25
and HK$0.27 per share, respectively, after deduction of the underwriting fees and other related
expenses paid/payable by the Company (excluding listing expenses of approximately HK$12,184,000
which have been accounted in the consolidated statements of comprehensive income for prior to 30
September 2023), and takes no account of any Shares which may be issued upon the exercise of the
Over-allotment Option, any Shares that may be allotted and issued upon the exercise of any option
which may be granted under the Share Option Scheme or any Shares which may be issued or
repurchased by the Company pursuant to the general mandates.
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the
adjustments referred to in the preceding paragraph and on the basis that 2,000,000,000 Shares are
issued, assuming that the Share Offer and Capitalisation Issue have been completed on 30 September
2023 but takes no account of any Shares which may be issued upon the exercise of the
Over-allotment Option, any Shares that may be allotted and issued upon the exercise of any option
which may be granted under the Share Option Scheme or any Shares which may be issued or
repurchased by the Company pursuant to the general mandates.
(4) No adjustment has been made to reflect any trading result or other transaction of the Group entered
into subsequent to 30 September 2023. The unaudited pro forma adjusted net tangible assets have not
been adjusted for dividends of HK$26,586,000 declared in January 2024. Had the dividends, totaling
HK$26,586,000, been taken into account, the unaudited pro forma adjusted net tangible asset per
Share would have been reduced to HK$0.10 and HK$0.11 based on the Offer Price of HK$0.25 and
HK$0.27 per Share respectively.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 463 ---
The following is the text of a report received from PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of WK Group (Holdings) Limited
We have completed our assurance engagement to report on the compilation of
unaudited pro forma financial information of WK Group (Holdings) Limited (the
“Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company
(the “Directors”) for illustrative purposes only. The unaudited pro forma financial
information consists of the unaudited pro forma statement of adjusted consolidated net
tangible assets of the Group as at 30 September 2023 and related notes (the “Unaudited Pro
Forma Financial Information”) as set out on pages II-1 to II-2 of the Company’s prospectus
dated 29 February 2024, in connection with the proposed initial public offering of the shares
of the Company (the “Prospectus”). The applicable criteria on the basis of which the
Directors have compiled the Unaudited Pro Forma Financial Information are described on
pages II-1 to II-2 of the Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors to
illustrate the impact of the proposed initial public offering on the Group’s financial position
as at 30 September 2023 as if the proposed initial public offering had taken place at 30
September 2023. As part of this process, information about the Group’s financial position
has been extracted by the Directors from the Group’s financial information for the period
ended 30 September 2023, on which an accountant’s report has been published.
Directors’ Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with
reference to Accounting Guideline 7, Preparation of Pro Forma Financial Information for
Inclusion in Investment Circulars, (“AG 7”) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”).
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on
fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 464 ---
Our firm applies Hong Kong Standard on Quality Management (HKSQM) 1, Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements , issued by the HKICPA, which requires the firm
to design, implement and operate a system of quality management including policies or
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion
to you. We do not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the Unaudited Pro Forma Financial
Information beyond that owed to those to whom those reports were addressed by us at the
dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus , issued by the HKICPA. This standard
requires that the reporting accountant plans and performs procedures to obtain reasonable
assurance about whether the Directors have compiled the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Listing Rules and with reference to
AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Unaudited
Pro Forma Financial Information, nor have we, in the course of this engagement, performed
an audit or review of the financial information used in compiling the Unaudited Pro Forma
Financial Information.
The purpose of unaudited pro forma financial information included in a prospectus is
solely to illustrate the impact of a significant event or transaction on unadjusted financial
information of the entity as if the event had occurred or the transaction had been undertaken
at an earlier date selected for purposes of the illustration. Accordingly, we do not provide
any assurance that the actual outcome of the proposed initial public offering at 30
September 2023 would have been as presented.
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly compiled on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used by the
directors in the compilation of the unaudited pro forma financial information provide a
reasonable basis for presenting the significant effects directly attributable to the event or
transaction, and to obtain sufficient appropriate evidence about whether:
/L50188The related pro forma adjustments give appropriate effect to those criteria; and
/L50188The unaudited pro forma financial information reflects the proper application of
those adjustments to the unadjusted financial information.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 465 ---
The procedures selected depend on the reporting accountant’s judgment, having regard
to the reporting accountant’s understanding of the nature of the company, the event or
transaction in respect of which the unaudited pro forma financial information has been
compiled, and other relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by
the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing
Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 29 February 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 466 ---
Our estimate of the consolidated profit for the year ended 31 December 2023 is set out
in “Financial information – Profit estimate for the year ended 31 December 2023” of this
prospectus.
(A) PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2023
Our Directors have prepared the estimate of the consolidated profit attributable to
owners of the Company for the year ended 31 December 2023 (the “ Profit Estimate ”) based
on the audited consolidated results of our Group for the nine months ended 30 September
2023 and the unaudited consolidated results based on the management accounts of our
Group for the three months ended 31 December 2023. The Profit Estimate has been prepared
on the basis of the accounting policies consistent in all material aspects with those currently
adopted by our Group as summarised in the Accountant’s Report, the text of which is set out
in Appendix I to this prospectus.
Profit estimate for the year ended 31 December 2023
Estimated consolidated profit attributable to owners of
our Company for the year ended 31 December 2023 . . not less than approximately
HK$23.0 million
Note: The estimated consolidated profit attributable to owners of our Company for the year ended 31
December 2023 has taken into account of our estimated listing expenses of approximately HK$16.0
million incurred during the year ended 31 December 2023.
APPENDIX III PROFIT ESTIMATE
– III-1 –


--- page 467 ---
(B) LETTER FROM THE REPORTING ACCOUNTANT
The following is the text of a letter received from PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
The Board of Directors
WK Group (Holdings) Limited
Grande Capital Limited
29 February 2024
Dear Sirs,
WK Group (Holdings) Limited (the “Company”)
Profit Estimate for Y ear Ended 31 December 2023
We refer to the estimate of the consolidated profit attributable to owners of the
Company for the year ended 31 December 2023 (the “ Profit Estimate ”) set forth in the
section headed Financial Information in the prospectus of the Company dated 29 February
2024 (the “ Prospectus ”).
Directors’ Responsibilities
The Profit Estimate has been prepared by the directors of the Company based on the
audited consolidated results of the Company and its subsidiaries (collectively referred to as
the “ Group ”) for the nine months ended 30 September 2023 and the unaudited consolidated
results based on the management accounts of the Group for the remaining three months
ended 31 December 2023.
The Company’s directors are solely responsible for the Profit Estimate.
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public
Accountants (“ HKICPA”), which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and professional
behaviour.
APPENDIX III PROFIT ESTIMATE
– III-2 –


--- page 468 ---
Our firm applies Hong Kong Standard on Quality Management 1 (HKSQM), Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements, issued by the HKICPA, which requires the firm
to design, implement and operate a system of quality management including policies or
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion on the accounting policies and calculations
of the Profit Estimate based on our procedures.
We conducted our engagement in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 500, Reporting on Profit Forecasts, Statements of
Sufficiency of Working Capital and Statements of Indebtedness and with reference to Hong
Kong Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information issued by the HKICPA. Those
standards require that we plan and perform our work to obtain reasonable assurance as to
whether, so far as the accounting policies and calculations are concerned, the Company’s
directors have properly compiled the Profit Estimate in accordance with the bases adopted
by the directors and as to whether the Profit Estimate is presented on a basis consistent in
all material respects with the accounting policies normally adopted by the Group. Our work
is substantially less in scope than an audit conducted in accordance with Hong Kong
Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit
opinion.
Opinion
In our opinion, so far as the accounting policies and calculations are concerned, the
Profit Estimate has been properly compiled in accordance with the bases adopted by the
directors as set out in Appendix III of the Prospectus and is presented on a basis consistent
in all material respects with the accounting policies normally adopted by the Group as set
out in our accountant’s report dated 29 February 2024, the text of which is set out in
Appendix I of the Prospectus.
Y ours faithfully,
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
APPENDIX III PROFIT ESTIMATE
– III-3 –


--- page 469 ---
(C) LETTER FROM THE SPONSOR
The following is the text of a letter , prepared for the inclusion in this prospectus,
received from Grande Capital Limited, the Sponsor , in relation to our Group’s profit
estimate for the year ended 31 December 2023.
Room 2701, 27/F, Tower 1
Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong
29 February 2024
The Directors
WK Group (Holdings) Limited
Dear Sirs,
We refer to the estimate of consolidated profit attributable to owners of WK Group
(Holdings) Limited (the “ Company ”) and its subsidiaries (collectively referred to as the
“Group ”) for the year ended 31 December 2023 (the “ Profit Estimate ”), for which the
directors of the Company (the “ Directors ”) are solely responsible, as set out in the section
headed “Financial Information – Profit estimate for the year ended 31 December 2023” in
the prospectus of the Company dated 29 February 2024 (the “ Prospectus ”).
The Profit Estimate has been prepared by the Directors based on the audited
consolidated results of the Group for the nine months ended 30 September 2023 and the
unaudited consolidated results based on the management accounts of the Group for the three
months ended 31 December 2023.
We have reviewed and discussed with the Directors the bases made by the Directors as
set out in Appendix III to the Prospectus, upon which the Profit Estimate has been made. We
have also considered and relied upon the letter dated 29 February 2024 addressed to the
Directors and ourselves from the Company’s reporting accountant, PricewaterhouseCoopers,
regarding the accounting policies and calculations upon which the Profit Estimate has been
made.
On the basis of the information comprising the Profit Estimate and on the basis of the
accounting policies and calculations adopted by the Directors and reviewed by
PricewaterhouseCoopers, we are of the opinion that the Profit Estimate, for which the
Directors are solely responsible, has been made after due and careful enquiry.
For and on behalf of
Grande Capital Limited
APPENDIX III PROFIT ESTIMATE
– III-4 –


--- page 470 ---
Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of our Company and of certain aspects of Cayman Islands company law.
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 28 June 2023 under the Companies Act. Our Company’s constitutional
documents consist of our Amended and Restated Memorandum of Association
(Memorandum ) and our Amended and Restated Articles of Association ( Articles ).
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum provides, inter alia, that the liability of members of our
Company is limited and that the objects for which our Company is established are
unrestricted (and therefore include acting as an investment company), and that our
Company shall have and be capable of exercising any and all of the powers at any
time or from time to time exercisable by a natural person or body corporate
whether as principal, agent, contractor or otherwise and, since our Company is an
exempted company, that our Company will not trade in the Cayman Islands with
any person, firm or corporation except in furtherance of the business of our
Company carried on outside the Cayman Islands.
(b) By special resolution our Company may alter the Memorandum with respect to
any objects, powers or other matters specified in it.
2. ARTICLES OF ASSOCIATION
The Articles were adopted on 5 February 2024. A summary of certain provisions of the
Articles is set out below.
(a) Shares
(i) Classes of shares
The share capital of our Company consists of ordinary shares.
(ii) V ariation of rights of existing shares or classes of shares
Subject to the Companies Act, if at any time the share capital of our
Company is divided into different classes of shares, all or any of the special
rights attached to any class of shares may (unless otherwise provided for by the
terms of issue of the shares of that class) be varied, modified or abrogated either
with the consent in writing of the holders of not less than three-fourths in nominal
value of the issued shares of that class or with the sanction of a special resolution
passed at a separate general meeting of the holders of the shares of that class. The
provisions of the Articles relating to general meetings shall mutatis mutandis
apply to every such separate general meeting, but so that the necessary quorum
(other than at an adjourned meeting) shall be not less than two persons together
holding (or, in the case of our member being a corporation, by its duly authorized
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LA W
–I V - 1–


--- page 471 ---
representative) or representing by proxy not less than one-third in nominal value
of the issued shares of that class. Every holder of shares of the class shall be
entitled on a poll to one vote for every such share held by him, and any holder of
shares of the class present in person or by proxy may demand a poll.
Any special rights conferred upon the holders of any shares or class of
shares shall not, unless otherwise expressly provided in the rights attaching to the
terms of issue of such shares, be deemed to be varied by the creation or issue of
further shares ranking pari passu therewith.
(iii) Alteration of capital
Our Company may, by an ordinary resolution of our members: (a) increase
our share capital by the creation of new shares of such amount as we think
expedient; (b) consolidate or divide all or any of our share capital into shares of
larger or smaller amount than our existing shares; (c) divide our unissued shares
into several classes and attach to such shares any preferential, deferred, qualified
or special rights, privileges or conditions; (d) subdivide our shares or any of them
into shares of an amount smaller than that fixed by the Memorandum; (e) cancel
any shares which, at the date of the resolution, have not been taken or agreed to
be taken by any person and diminish the amount of our share capital by the
amount of the shares so cancelled; (f) make provision for the allotment and issue
of shares which do not carry any voting rights; and (g) change the currency of
denomination of our share capital.
(iv) Transfer of shares
Subject to the Companies Act and the requirements of The Stock Exchange
of Hong Kong Limited (the “ Stock Exchange ”), all transfers of shares shall be
effected by an instrument of transfer in the usual or common form or in such
other form as our Board may approve and may be under hand or, if the transferor
or transferee is a Clearing House or its nominee(s), under hand or by machine
imprinted signature, or by such other manner of execution as our Board may
approve from time to time.
Execution of the instrument of transfer shall be by or on behalf of the
transferor and the transferee, provided that our Board may dispense with the
execution of the instrument of transfer by the transferor or transferee or accept
mechanically executed transfers. The transferor shall be deemed to remain the
holder of a share until the name of the transferee is entered in the register of
members of our Company in respect of that share.
Our Board may, in our absolute discretion, at any time and from time to
time remove any share on the principal register to any branch register or any
share on any branch register to the principal register or any other branch register.
Unless our Board otherwise agrees, no shares on the principal register shall be
removed to any branch register nor shall shares on any branch register be
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removed to the principal register or any other branch register. All removals and
other documents of title shall be lodged for registration and registered, in the case
of shares on any branch register, at the relevant registration office and, in the case
of shares on the principal register, at the place at which the principal register is
located.
Our Board may, in our absolute discretion, decline to register a transfer of
any share (not being a fully paid up share) to a person of whom it does not
approve or on which our Company has a lien. It may also decline to register a
transfer of any share issued under any share option scheme upon which a
restriction on transfer subsists or a transfer of any share to more than four joint
holders.
Our Board may decline to recognise any instrument of transfer unless a
certain fee, up to such maximum sum as the Stock Exchange may determine to be
payable, is paid to our Company, the instrument of transfer is properly stamped
(if applicable), is in respect of only one class of share and is lodged at the
relevant registration office or the place at which the principal register is located
accompanied by the relevant share certificate(s) and such other evidence as our
Board may reasonably require is provided to show the right of the transferor to
make the transfer (and if the instrument of transfer is executed by some other
person on his behalf, the authority of that person so to do).
The register of members may, subject to the Listing Rules, be closed at such
time or for such period not exceeding in the whole 30 days in each year as our
Board may determine.
Fully paid shares shall be free from any restriction on transfer (except when
permitted by the Stock Exchange) and shall also be free from all liens.
(v) Power of our Company to purchase our own shares
Our Company may purchase our own shares subject to certain restrictions
and our Board may only exercise this power on behalf of our Company subject to
any applicable requirement imposed from time to time by the Articles or any,
code, rules or regulations issued from time to time by the Stock Exchange and/or
the Securities and Futures Commission of Hong Kong.
(vi) Power of any subsidiary of our Company to own shares in our Company
There are no provisions in the Articles relating to the ownership of shares in
our Company by a subsidiary.
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(vii) Calls on shares and forfeiture of shares
Our Board may, from time to time, make such calls as we thinks fit upon
our members in respect of any monies unpaid on the shares held by them
respectively (whether on account of the nominal value of the shares or by way of
premium) and not by the conditions of allotment of such shares made payable at
fixed times. A call may be made payable either in one sum or by instalments. If
the sum payable in respect of any call or instalment is not paid on or before the
day appointed for payment thereof, the person or persons from whom the sum is
due shall pay interest on the same at such rate not exceeding 20% per annum as
our Board shall fix from the day appointed for payment to the time of actual
payment, but our Board may waive payment of such interest wholly or in part.
Our Board may, if we think fit, receive from any member willing to advance the
same, either in money or money’s worth, all or any part of the money uncalled
and unpaid or instalments payable upon any shares held by him, and in respect of
all or any of the monies so advanced our Company may pay interest at such rate
(if any) not exceeding 20% per annum as our Board may decide.
If our member fails to pay any call or instalment of a call on the day
appointed for payment, our Board may, for so long as any part of the call or
instalment remains unpaid, serve not less than 14 days’ notice on our member
requiring payment of so much of the call or instalment as is unpaid, together with
any interest which may have accrued and which may still accrue up to the date of
actual payment. The notice shall name a further day (not earlier than the
expiration of 14 days from the date of the notice) on or before which the payment
required by the notice is to be made, and shall also name the place where
payment is to be made. The notice shall also state that, in the event of
non-payment at or before the appointed time, the shares in respect of which the
call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in
respect of which the notice has been given may at any time thereafter, before the
payment required by the notice has been made, be forfeited by a resolution of our
Board to that effect. Such forfeiture will include all dividends and bonuses
declared in respect of the forfeited share and not actually paid before the
forfeiture.
A person whose shares have been forfeited shall cease to be our member in
respect of the forfeited shares but shall, nevertheless, remain liable to pay to our
Company all monies which, at the date of forfeiture, were payable by him to our
Company in respect of the shares together with (if our Board shall in our
discretion so require) interest thereon from the date of forfeiture until payment at
such rate not exceeding 20% per annum as our Board may prescribe.
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(b) Directors
(i) Appointment, retirement and removal
At any time or from time to time, our Board shall have the power to appoint
any person as a Director either to fill a casual vacancy on our Board or as an
additional Director to the existing Board subject to any maximum number of
Directors, if any, as may be determined by our members in general meeting. Any
Director so appointed to fill a casual vacancy shall hold office only until the first
annual general meeting of our Company after his appointment and be subject to
re-election at such meeting. Any Director so appointed as an addition to the
existing Board shall hold office only until the first annual general meeting of our
Company after his appointment and be eligible for re-election at such meeting.
Any Director so appointed by our Board shall not be taken into account in
determining our Directors or the number of Directors who are to retire by rotation
at an annual general meeting.
At each annual general meeting, one third of our Directors for the time
being shall retire from office by rotation. However, if the number of Directors is
not a multiple of three, then the number nearest to but not less than one third
shall be the number of retiring Directors. Our Directors to retire in each year shall
be those who have been in office longest since their last re-election or
appointment but, as between persons who became or were last re-elected Directors
on the same day, those to retire shall (unless they otherwise agree among
themselves) be determined by lot.
No person, other than a retiring Director, shall, unless recommended by our
Board for election, be eligible for election to the office of Director at any general
meeting, unless notice in writing of the intention to propose that person for
election as a Director and notice in writing by that person of his willingness to be
elected has been lodged at the head office or at the registration office of our
Company. The period for lodgment of such notices shall commence no earlier
than the day after despatch of the notice of the relevant meeting and end no later
than seven days before the date of such meeting and the minimum length of the
period during which such notices may be lodged must be at least seven days.
A Director is not required to hold any shares in our Company by way of
qualification nor is there any specified upper or lower age limit for Directors
either for accession to or retirement from our Board.
A Director may be removed by an ordinary resolution of our members before
the expiration of his term of office (but without prejudice to any claim which
such Director may have for damages for any breach of any contract between him
and our Company) and our Company may by an ordinary resolution appoint
another in his place. Any Director so appointed shall be subject to the “retirement
by rotation” provisions. The number of Directors shall not be less than two.
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The office of our Director shall be vacated if he:
(aa) resigns;
(bb) dies;
(cc) is declared to be of unsound mind and our Board resolves that his
office be vacated;
(dd) becomes bankrupt or has a receiving order made against him or
suspends payment or compounds with his creditors generally;
(ee) is prohibited from being or ceases to be a director by operation of law;
(ff) without special leave, is absent from meetings of our Board for six
consecutive months, and our Board resolves that his office is vacated;
(gg) has been required by the stock exchange of the Relevant Territory (as
defined in the Articles) to cease to be a Director; or
(hh) is removed from office by the requisite majority of our Directors or
otherwise pursuant to the Articles.
From time to time our Board may appoint one or more of our body to be
managing director, joint managing director or deputy managing director or to hold
any other employment or executive office with our Company for such period and
upon such terms as our Board may determine, and our Board may revoke or
terminate any of such appointments. Our Board may also delegate any of our
powers to committees consisting of such Director(s) or other person(s) as our
Board thinks fit, and from time to time it may also revoke such delegation or
revoke the appointment of and discharge any such committees either wholly or in
part, and either as to persons or purposes, but every committee so formed shall, in
the exercise of the powers so delegated, conform to any regulations that may from
time to time be imposed upon it by our Board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Act, the Memorandum and
Articles and without prejudice to any special rights conferred on the holders of
any shares or class of shares, any share may be issued with or have attached to it
such rights, or such restrictions, whether with regard to dividend, voting, return of
capital or otherwise, as our Company may by an ordinary resolution determine
(or, in the absence of any such determination or so far as the same may not make
specific provision, as our Board may determine). Any share may be issued on
terms that, upon the happening of a specified event or upon a given date and
either at the option of our Company or the holder of the share, it is liable to be
redeemed.
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Our Board may issue warrants to subscribe for any class of shares or other
securities of our Company on such terms as it may from time to time determine.
Where warrants are issued to bearer, no certificate in respect of such
warrants shall be issued to replace one that has been lost unless our Board is
satisfied beyond reasonable doubt that the original certificate has been destroyed
and our Company has received an indemnity in such form as our Board thinks fit
with regard to the issue of any such replacement certificate.
Subject to the provisions of the Companies Act, the Articles and, where
applicable, the rules of any stock exchange of the Relevant Territory (as defined
in the Articles) and without prejudice to any special rights or restrictions for the
time being attached to any shares or any class of shares, all unissued shares in
our Company shall be at the disposal of our Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times, for such
consideration and on such terms and conditions as it in our absolute discretion
thinks fit, but so that no shares shall be issued at a discount.
Neither our Company nor our Board shall be obliged, when making or
granting any allotment of, offer of, option over or disposal of shares, to make, or
make available, any such allotment, offer, option or shares to members or others
whose registered addresses are in any particular territory or territories where, in
the absence of a registration statement or other special formalities, this is or may,
in the opinion of our Board, be unlawful or impracticable. However, no member
affected as a result of the foregoing shall be, or be deemed to be, a separate class
of members for any purpose whatsoever.
(iii) Power to dispose of the assets of our Company or any of our subsidiaries
While there are no specific provisions in the Articles relating to the disposal
of the assets of our Company or any of our subsidiaries, our Board may exercise
all powers and do all acts and things which may be exercised or done or approved
by our Company and which are not required by the Articles or the Companies Act
to be exercised or done by our Company in general meeting, but if such power or
act is regulated by our Company in general meeting, such regulation shall not
invalidate any prior act of our Board which would have been valid if such
regulation had not been made.
(iv) Borrowing powers
Our Board may exercise all the powers of our Company to raise or borrow
money, to mortgage or charge all or any part of the undertaking, property and
uncalled capital of our Company and, subject to the Companies Act, to issue
debentures, debenture stock, bonds and other securities of our Company, whether
outright or as collateral security for any debt, liability or obligation of our
Company or of any third party.
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(v) Remuneration
Our Directors shall be entitled to receive, as ordinary remuneration for their
services, such sums as shall from time to time be determined by our Board or our
Company in general meeting, as the case may be, such sum (unless otherwise
directed by the resolution by which it is determined) to be divided among our
Directors in such proportions and in such manner as they may agree or, failing
agreement, either equally or, in the case of any Director holding office for only a
portion of the period in respect of which the remuneration is payable, pro rata.
Our Directors shall also be entitled to be repaid all expenses reasonably incurred
by them in attending any Board meetings, committee meetings or general
meetings or otherwise in connection with the discharge of their duties as
Directors. Such remuneration shall be in addition to any other remuneration to
which a Director who holds any salaried employment or office in our Company
may be entitled by reason of such employment or office.
Any Director who, at the request of our Company, performs services which
in the opinion of our Board goes beyond the ordinary duties of a Director may be
paid such special or extra remuneration as our Board may determine, in addition
to or in substitution for any ordinary remuneration as a Director. An executive
Director appointed to be a managing director, joint managing director, deputy
managing director or other executive officer shall receive such remuneration and
such other benefits and allowances as our Board may from time to time decide.
Such remuneration shall be in addition to his ordinary remuneration as a Director.
Our Board may establish, either on our own or jointly in concurrence or
agreement with subsidiaries of our Company or companies with which our
Company is associated in business, or may make contributions out of our
Company’s monies to, any schemes or funds for providing pensions, sickness or
compassionate allowances, life assurance or other benefits for employees (which
expression as used in this and the following paragraph shall include any Director
or former Director who may hold or have held any executive office or any office
of profit with our Company or any of our subsidiaries) and former employees of
our Company and their dependents or any class or classes of such persons.
Our Board may also pay, enter into agreements to pay or make grants of
revocable or irrevocable, whether or not subject to any terms or conditions,
pensions or other benefits to employees and former employees and their
dependents, or to any of such persons, including pensions or benefits additional to
those, if any, to which such employees or former employees or their dependents
are or may become entitled under any such scheme or fund as mentioned above.
Such pension or benefit may, if deemed desirable by our Board, be granted to an
employee either before and in anticipation of, or upon or at any time after, his
actual retirement.
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(vi) Compensation or payments for loss of office
Payments to any present Director or past Director of any sum by way of
compensation for loss of office or as consideration for or in connection with his
retirement from office (not being a payment to which our Director is contractually
or statutorily entitled) must be approved by our Company in general meeting.
(vii) Loans and provision of security for loans to Directors
Our Company shall not directly or indirectly make a loan to a Director or a
director of any holding company of our Company or any of their respective close
associates, enter into any guarantee or provide any security in connection with a
loan made by any person to a Director or a director of any holding company of
our Company or any of their respective close associates, or, if any one or more of
our Directors hold(s) (jointly or severally or directly or indirectly) a controlling
interest in another company, make a loan to that other company or enter into any
guarantee or provide any security in connection with a loan made by any person
to that other company.
(viii) Financial assistance to purchase Shares
Subject to the Companies Act, or any other law or so far as not prohibited
by any law and subject to any rights conferred on the holders of any class of
Shares, our Company shall have the power to give, directly or indirectly, by
means of a loan, a guarantee, an indemnity, the provision of security or otherwise
howsoever, financial assistance for the purpose of or in connection with a
purchase or other acquisition made or to be made by any person of any Shares or
warrants or other securities in our Company or any company which is a holding
company of our Company.
(ix) Disclosure of interest in contracts with our Company or any of our
subsidiaries
With the exception of the office of auditor of our Company, a Director may
hold any other office or place of profit with our Company in conjunction with his
office of Director for such period and upon such terms as our Board may
determine, and may be paid such extra remuneration for that other office or place
of profit, in whatever form, in addition to any remuneration provided for by or
pursuant to any other Articles. A Director may be or become a director, officer or
member of any other company in which our Company may be interested, and
shall not be liable to account to our Company or our members for any
remuneration or other benefit received by him as a director, officer or member of
such other company. Our Board may also cause the voting power conferred by the
shares in any other company held or owned by our Company to be exercised in
such manner in all respects as we think fit, including the exercise in favour of
any resolution appointing our Directors or any of them to be directors or officers
of such other company.
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No Director or intended Director shall be disqualified by his office from
contracting with our Company, nor shall any such contract or any other contract
or arrangement in which any Director is in any way interested be liable to be
avoided, nor shall any Director so contracting or being so interested be liable to
account to our Company for any profit realised by any such contract or
arrangement by reason only of such Director holding that office or the fiduciary
relationship established by it. A Director who is, in any way, materially interested
in a contract or arrangement or proposed contract or arrangement with our
Company shall declare the nature of his interest at the earliest meeting of our
Board at which he may practically do so.
There is no power to freeze or otherwise impair any of the rights attaching
to any share by reason that the person or persons who are interested directly or
indirectly in that share have failed to disclose their interests to our Company.
A Director shall not vote or be counted in the quorum on any resolution of
our Board in respect of any contract or arrangement or proposal in which he or
any of his close associate(s) has/have a material interest, and if he shall do so his
vote shall not be counted nor shall he be counted in the quorum for that
resolution, but this prohibition shall not apply to any of the following matters:
(aa) the giving of any security or indemnity to our Director or his close
associate(s) in respect of money lent or obligations incurred or
undertaken by him or any of them at the request of or for the benefit of
our Company or any of our subsidiaries;
(bb) the giving of any security or indemnity to a third party in respect of a
debt or obligation of our Company or any of our subsidiaries for which
our Director or his close associate(s) has/have himself/themselves
assumed responsibility in whole or in part whether alone or jointly
under a guarantee or indemnity or by the giving of security;
(cc) any proposal concerning an offer of shares, debentures or other
securities of or by our Company or any other company which our
Company may promote or be interested in for subscription or purchase,
where our Director or his close associate(s) is/are or is/are to be
interested as a participant in the underwriting or sub-underwriting of
the offer;
(dd) any proposal or arrangement concerning the benefit of employees of
our Company or any of our subsidiaries, including the adoption,
modification or operation of either: (i) any employees’ share scheme or
any share incentive or share option scheme under which our Director or
his close associate(s) may benefit; or (ii) any of a pension fund or
retirement, death or disability benefit scheme which relates to
Directors, their close associates and employees of our Company or any
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of our subsidiaries and does not provide in respect of any Director or
his close associate(s) any privilege or advantage not generally accorded
to the class of persons to which such scheme or fund relates; and
(ee) any contract or arrangement in which our Director or his close
associate(s) is/are interested in the same manner as other holders of
shares, debentures or other securities of our Company by virtue only of
his/their interest in those shares, debentures or other securities.
(x) Proceedings of our Board
Our Board may meet anywhere in the world for the despatch of business and
may adjourn and otherwise regulate our meetings as we think fit. Questions
arising at any meeting shall be determined by a majority of votes. In the case of
an equality of votes, the chairman of the meeting shall have a second or casting
vote.
(c) Alterations to the constitutional documents and our Company’s name
To the extent that the same is permissible under Cayman Islands law and subject
to the Articles, the Memorandum and Articles of our Company may only be altered or
amended, and the name of our Company may only be changed, with the sanction of a
special resolution of our Company.
(d) Meetings of member
(i) Special and ordinary resolutions
A special resolution of our Company must be passed by a majority of not
less than three-fourths of the votes cast by such members as, being entitled so to
do, vote in person or by proxy or, in the case of members which are corporations,
by their duly authorised representatives or, where proxies are allowed, by proxy at
a general meeting of which notice specifying the intention to propose the
resolution as a special resolution has been duly given.
Under the Companies Act, a copy of any special resolution must be
forwarded to the Registrar of Companies in the Cayman Islands within 15 days of
being passed.
An “ordinary resolution”, by contrast, is a resolution passed by a simple
majority of the votes of such members of our Company as, being entitled to do
so, vote in person or, in the case of members which are corporations, by their
duly authorised representatives or, where proxies are allowed, by proxy at a
general meeting of which notice has been duly given.
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A resolution in writing signed by or on behalf of all members shall be
treated as an ordinary resolution duly passed at a general meeting of our
Company duly convened and held, and where relevant as a special resolution so
passed.
(ii) V oting rights and right to demand a poll
Subject to any special rights, restrictions or privileges as to voting for the
time being attached to any class or classes of shares at any general meeting: (a)
on a poll every member present in person or by proxy or, in the case of our
member being a corporation, by our duly authorised representative shall have one
vote for every share which is fully paid or credited as fully paid registered in his
name in the register of members of our Company but so that no amount paid up
or credited as paid up on a share in advance of calls or instalments is treated for
this purpose as paid up on the share; and (b) on a show of hands every member
who is present in person (or, in the case of our member being a corporation, by
our duly authorised representative) or by proxy shall have one vote. Where more
than one proxy is appointed by our member which is a Clearing House (as
defined in the Articles) or our nominee(s), each such proxy shall have one vote on
a show of hands. On a poll, our member entitled to more than one vote need not
use all his votes or cast all the votes he does use in the same way.
At any general meeting a resolution put to the vote of the meeting is to be
decided by poll save that the chairman of the meeting may, pursuant to the
Listing Rules, allow a resolution to be voted on by a show of hands. Where a
show of hands is allowed, before or on the declaration of the result of the show
of hands, a poll may be demanded by (in each case by members present in person
or by proxy or by a duly authorised corporate representative):
(A) at least two members;
(B) any member or members representing not less than one-tenth of the
total voting rights of all our members having the right to vote at the
meeting; or
(C) our member or members holding shares in our Company conferring a
right to vote at the meeting on which an aggregate sum has been paid
equal to not less than one-tenth of the total sum paid up on all the
shares conferring that right.
Should a Clearing House or its nominee(s) be a member of our Company,
such person or persons may be authorised as it thinks fit to act as its
representative(s) at any meeting of our Company or at any meeting of any class
of members of our Company provided that, if more than one person is so
authorised, the authorisation shall specify the number and class of shares in
respect of which each such person is so authorised. A person authorised in
accordance with this provision shall be deemed to have been duly authorised
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without further evidence of the facts and be entitled to exercise the same rights
and powers on behalf of the Clearing House or its nominee(s) as if such person
were an individual member including the right to vote and the right to speak.
Where our Company has knowledge that any member is, under the Listing
Rules, required to abstain from voting on any particular resolution or restricted to
voting only for or only against any particular resolution, any votes cast by or on
behalf of such member in contravention of such requirement or restriction shall
not be counted.
(iii) Annual general meetings
Our Company must hold an annual general meeting each financial year other
than the financial year of our Company’s adoption of the Articles. Such annual
general meeting must be held within six (6) months after the end of our
Company’s financial year (unless a longer period would not infringe the Listing
Rules, if any) and shall be held in the Relevant Territory or elsewhere as may be
determined by our Board and at such time and place as our Board shall appoint.
(iv) Requisition of general meetings
Extraordinary general meetings may be convened on the requisition of one or
more members holding, at the date of deposit of the requisition, not less than one
tenth of the paid up capital of our Company having the right of voting at general
meetings. Such requisition shall be made in writing to our Board or the secretary
of our Company for the purpose of requiring an extraordinary general meeting to
be called by our Board for the transaction of any business specified in such
requisition. Such meeting shall be held within two months after the deposit of
such requisition. If within 21 days of such deposit, our Board fails to proceed to
convene such meeting, the requisitionist(s) himself (themselves) may do so in the
same manner, and all reasonable expenses incurred by the requisitionist(s) as a
result of the failure of our Board shall be reimbursed to the requisitionist(s) by
our Company.
(v) Notices of meetings and business to be conducted
An annual general meeting of our Company shall be called by at least 21
days’ notice in writing, and any other general meeting of our Company shall be
called by at least 14 days’ notice in writing. The notice shall be exclusive of the
day on which it is served or deemed to be served and of the day for which it is
given, and must specify the time, place and agenda of the meeting and particulars
of the resolution(s) to be considered at that meeting and, in the case of special
business, the general nature of that business.
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Except where otherwise expressly stated, any notice or document (including
a share certificate) to be given or issued under the Articles shall be in writing,
and may be served by our Company on any member personally, by post to such
member’s registered address or (in the case of a notice) by advertisement in the
newspapers. Any member whose registered address is outside Hong Kong may
notify our Company in writing of an address in Hong Kong which shall be
deemed to be his registered address for this purpose. Subject to the Companies
Act and the Listing Rules, a notice or document may also be served or delivered
by our Company to any member by electronic means.
Although a meeting of our Company may be called by shorter notice than as
specified above, such meeting may be deemed to have been duly called if it is so
agreed:
(i) in the case of an annual general meeting, by all members of our
Company entitled to attend and vote thereat; and
(ii) in the case of any other meeting, by a majority in number of our
members having a right to attend and vote at the meeting holding not
less than 95% of the total voting rights in our Company.
All business transacted at an extraordinary general meeting shall be deemed
special business. All business shall also be deemed special business where it is
transacted at an annual general meeting, with the exception of certain routine
matters which shall be deemed ordinary business.
(vi) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, and continues to be present until
the conclusion of the meeting.
The quorum for a general meeting shall be two members present in person
(or in the case of our member being a corporation, by its duly authorised
representative) or by proxy and entitled to vote. In respect of a separate class
meeting (other than an adjourned meeting) convened to sanction the modification
of class rights the necessary quorum shall be two persons holding or representing
by proxy not less than one-third in nominal value of the issued shares of that
class.
(vii) Proxies
Any member of our Company entitled to attend and vote at a meeting of our
Company is entitled to appoint another person as his proxy to attend and vote
instead of him. A member who is the holder of two or more shares may appoint
more than one proxy to represent him and vote on his behalf at a general meeting
of our Company or at a class meeting. A proxy need not be a member of our
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Company and shall be entitled to exercise the same powers on behalf of our
member who is an individual and for whom he acts as proxy as such member
could exercise. In addition, a proxy shall be entitled to exercise the same powers
on behalf of our member which is a corporation and for which he acts as proxy as
such member could exercise if it were an individual member. On a poll or on a
show of hands, votes may be given either personally (or, in the case of our
member being a corporation, by its duly authorized representative) or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the
appointor or of his attorney duly authorised in writing, or if the appointor is a
corporation, either under seal or under the hand of a duly authorised officer or
attorney. Every instrument of proxy, whether for a specified meeting or otherwise,
shall be in such form as our Board may from time to time approve, provided that
it shall not preclude the use of the two-way form. Any form issued to our member
for appointing a proxy to attend and vote at an extraordinary general meeting or
at an annual general meeting at which any business is to be transacted shall be
such as to enable our member, according to his intentions, to instruct the proxy to
vote in favour of or against (or, in default of instructions, to exercise his
discretion in respect of) each resolution dealing with any such business.
(viii) Right to Speak
All our members have the right to (a) speak at a general meeting; and (b)
vote at a general meeting except where our member is required, by the Listing
Rules, to abstain from voting to approve the matter under consideration.
(e) Accounts and audit
Our Board shall cause proper books of account to be kept of the sums of money
received and expended by our Company, and of the assets and liabilities of our
Company and of all other matters required by the Companies Act (which include all
sales and purchases of goods by the company) necessary to give a true and fair view of
the state of our Company’s affairs and to show and explain our transactions.
The books of accounts of our Company shall be kept at the head office of our
Company or at such other place or places as our Board decides and shall always be
open to inspection by any Director. No member (other than a Director) shall have any
right to inspect any account, book or document of our Company except as conferred by
the Companies Act or ordered by a court of competent jurisdiction or authorised by our
Board or our Company in general meeting.
Our Board shall from time to time cause to be prepared and laid before our
Company at our annual general meeting balance sheets and profit and loss accounts
(including every document required by law to be annexed thereto), together with a
copy of our Directors’ report and a copy of the auditors’ report, not less than 21 days
before the date of the annual general meeting. Copies of these documents shall be sent
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to every person entitled to receive notices of general meetings of our Company under
the provisions of the Articles together with the notice of annual general meeting, not
less than 21 days before the date of the meeting.
Subject to the rules of the stock exchange of the Relevant Territory (as defined in
the Articles), our Company may send summarized financial statements to members who
have, in accordance with the rules of the stock exchange of the Relevant Territory,
consented and elected to receive summarized financial statements instead of the full
financial statements. The summarized financial statements must be accompanied by any
other documents as may be required under the rules of the stock exchange of the
Relevant Territory, and must be sent to those members that have consented and elected
to receive the summarised financial statements not less than 21 days before the general
meeting.
Our members may by an ordinary resolution appoint auditor(s) to hold office until
the conclusion of the next annual general meeting on such terms and with such duties
as may be agreed with our Board. Our auditors’ remuneration shall be fixed by our
members in general meeting by an ordinary resolution or in such manner as our
members may determine.
Our members may, at a general meeting remove the auditor(s) by an ordinary
resolution at any time before the expiration of the term of office of the auditor(s) and
shall, by an ordinary resolution, at that meeting appoint new auditor(s) in place of the
removed auditor(s) for the remainder of the term.
Our auditors shall audit the financial statements of our Company in accordance
with generally accepted accounting principles of Hong Kong, the International
Accounting Standards or such other standards as may be permitted by the Stock
Exchange.
(f) Dividends and other methods of distribution
Our Company in general meeting may declare dividends in any currency to be
paid to our members but no dividend shall be declared in excess of the amount
recommended by our Board.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide:
(i) all dividends shall be declared and paid according to the amounts paid up on
the shares in respect of which the dividend is paid, although no amount paid
up on a share in advance of calls shall for this purpose be treated as paid up
on the share;
(ii) all dividends shall be apportioned and paid pro rata in accordance with the
amount paid up on the shares during any portion(s) of the period in respect
of which the dividend is paid; and
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(iii) our Board may deduct from any dividend or other monies payable to any
member all sums of money (if any) presently payable by him to our
Company on account of calls, instalments or otherwise.
Where our Board or our Company in general meeting has resolved that a
dividend should be paid or declared, our Board may resolve:
(aa) that such dividend be satisfied wholly or in part in the form of an
allotment of shares credited as fully paid up, provided that our
members entitled to such dividend will be entitled to elect to receive
such dividend (or part thereof) in cash in lieu of such allotment; or
(bb) that our members entitled to such dividend will be entitled to elect to
receive an allotment of shares credited as fully paid up in lieu of the
whole or such part of the dividend as our Board may think fit.
Upon the recommendation of our Board, our Company may by an ordinary
resolution in respect of any one particular dividend of our Company determine that it
may be satisfied wholly in the form of an allotment of shares credited as fully paid up
without offering any right to members to elect to receive such dividend in cash in lieu
of such allotment.
Any dividend, bonus or other sum payable in cash to the holder of shares may be
paid by cheque or warrant sent through the post. Every such cheque or warrant shall be
made payable to the order of the person to whom it is sent and shall be sent at the
holder’s or joint holders’ risk and payment of the cheque or warrant by the bank on
which it is drawn shall constitute a good discharge to our Company. Any one of two or
more joint holders may give effectual receipts for any dividends or other monies
payable or property distributable in respect of the shares held by such joint holders.
Whenever our Board or our Company in general meeting has resolved that a
dividend be paid or declared, our Board may further resolve that such dividend be
satisfied wholly or in part by the distribution of specific assets of any kind.
Our Board may, if we think fit, receive from any member willing to advance the
same, and either in money or money’s worth, all or any part of the money uncalled and
unpaid or instalments payable upon any shares held by him, and in respect of all or
any of the monies so advanced may pay interest at such rate (if any) not exceeding
20% per annum, as our Board may decide, but a payment in advance of a call shall not
entitle our member to receive any dividend or to exercise any other rights or privileges
as our member in respect of the share or the due portion of the shares upon which
payment has been advanced by such member before it is called up.
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All dividends, bonuses or other distributions unclaimed for one year after having
been declared may be invested or otherwise used by our Board for the benefit of our
Company until claimed and our Company shall not be constituted a trustee in respect
thereof. All dividends, bonuses or other distributions unclaimed for six years after
having been declared may be forfeited by our Board and, upon such forfeiture, shall
revert to our Company.
No dividend or other monies payable by our Company on or in respect of any
share shall bear interest against our Company.
Our Company may exercise the power to cease sending cheques for dividend
entitlements or dividend warrants by post if such cheques or warrants remain uncashed
on two consecutive occasions or after the first occasion on which such a cheque or
warrant is returned undelivered.
(g) Inspection of corporate records
For so long as any part of the share capital of our Company is listed on the Stock
Exchange, any member may inspect any register of members of our Company
maintained in Hong Kong (except when the register of members is closed) without
charge and require the provision to him of copies or extracts of such register in all
respects as if our Company were incorporated under and were subject to the Hong
Kong Companies Ordinance.
(h) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles concerning the rights of minority members
in relation to fraud or oppression. However, certain remedies may be available to
members of our Company under Cayman Islands law, as summarized in paragraph 3(f)
of this Appendix.
(i) Procedures on liquidation
A resolution that our Company be wound up by the court or be wound up
voluntarily shall be a special resolution.
Subject to any special rights, privileges or restrictions as to the distribution of
available surplus assets on liquidation for the time being attached to any class or
classes of shares:
(i) if our Company is wound up, the surplus assets remaining after payment to
all creditors shall be divided among our members in proportion to the capital
paid up on the shares held by them respectively; and
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(ii) if our Company is wound up and the surplus assets available for distribution
among our members are insufficient to repay the whole of the paid-up
capital, such assets shall be distributed, subject to the rights of any shares
which may be issued on special terms and conditions, so that, as nearly as
may be, the losses shall be borne by our members in proportion to the
capital paid up on the shares held by them, respectively.
If our Company is wound up (whether the liquidation is voluntary or compelled
by the court), the liquidator may, with the sanction of a special resolution and any
other sanction required by the Companies Act, divide among our members in specie or
kind the whole or any part of the assets of our Company, whether the assets consist of
property of one kind or different kinds, and the liquidator may, for such purpose, set
such value as he deems fair upon any one or more class or classes of property to be so
divided and may determine how such division shall be carried out as between our
members or different classes of members and our members within each class. The
liquidator may, with the like sanction, vest any part of the assets in trustees upon such
trusts for the benefit of members as the liquidator thinks fit, but so that no member
shall be compelled to accept any shares or other property upon which there is a
liability.
(j) Subscription rights reserve
Provided that it is not prohibited by and is otherwise in compliance with the
Companies Act, if warrants to subscribe for shares have been issued by our Company
and our Company does any act or engages in any transaction which would result in the
subscription price of such warrants being reduced below the par value of the shares to
be issued on the exercise of such warrants, a subscription rights reserve shall be
established and applied in paying up the difference between the subscription price and
the par value of such shares.
3. CAYMAN ISLANDS COMPANY LA W
Our Company was incorporated in the Cayman Islands as an exempted company on 28
June 2023 subject to the Companies Act. Certain provisions of Cayman Islands company law
are set out below but this section does not purport to contain all applicable qualifications
and exceptions or to be a complete review of all matters of the Companies Act and taxation,
which may differ from equivalent provisions in jurisdictions with which interested parties
may be more familiar.
(a) Company operations
An exempted company such as our Company must conduct our operations mainly
outside the Cayman Islands. An exempted company is also required to file an annual
return each year with the Registrar of Companies of the Cayman Islands and pay a fee
which is based on the amount of its authorised share capital.
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(b) Share capital
Under the Companies Act, a Cayman Islands company may issue ordinary,
preference or redeemable shares or any combination thereof. Where a company issues
shares at a premium, whether for cash or otherwise, a sum equal to the aggregate
amount or value of the premiums on those shares shall be transferred to an account, to
be called the “share premium account”. At the option of a company, these provisions
may not apply to premiums on shares of that company allotted pursuant to any
arrangements in consideration of the acquisition or cancellation of shares in any other
company and issued at a premium. The share premium account may be applied by the
company subject to the provisions, if any, of its memorandum and articles of
association, in such manner as the company may from time to time determine
including, but without limitation, the following:
(i) paying distributions or dividends to members;
(ii) paying up unissued shares of the company to be issued to members as fully
paid bonus shares;
(iii) any manner provided in section 37 of the Companies Act;
(iv) writing-off the preliminary expenses of the company; and
(v) writing-off the expenses of, or the commission paid or discount allowed on,
any issue of shares or debentures of the company.
Notwithstanding the foregoing, no distribution or dividend may be paid to
members out of the share premium account unless, immediately following the date on
which the distribution or dividend is proposed to be paid, the company will be able to
pay its debts as they fall due in the ordinary course of business.
Subject to confirmation by the court, a company limited by shares or a company
limited by guarantee and having a share capital may, if authorised to do so by its
articles of association, by special resolution reduce its share capital in any way.
(c) Financial assistance to purchase shares of a company or its holding company
There are no statutory prohibitions in the Cayman Islands on the granting of
financial assistance by a company to another person for the purchase of, or subscription
for, its own, its holding company’s or a subsidiary’s shares. Therefore, a company may
provide financial assistance provided the directors of the company, when proposing to
grant such financial assistance, discharge their duties of care and act in good faith, for
a proper purpose and in the interests of the company. Such assistance should be on an
arm’s-length basis.
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(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a
share capital may, if so authorised by its articles of association, issue shares which are
to be redeemed or are liable to be redeemed at the option of the company or a member
and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares
to be varied, subject to the provisions of the company’s articles of association, so as to
provide that such shares are to be or are liable to be so redeemed. In addition, such a
company may, if authorised to do so by its articles of association, purchase its own
shares, including any redeemable shares; an ordinary resolution of the company
approving the manner and terms of the purchase will be required if the articles of
association do not authorise the manner and terms of such purchase. A company may
not redeem or purchase its shares unless they are fully paid. Furthermore, a company
may not redeem or purchase any of its shares if, as a result of the redemption or
purchase, there would no longer be any issued shares of the company other than shares
held as treasury shares. In addition, a payment out of capital by a company for the
redemption or purchase of its own shares is not lawful unless, immediately following
the date on which the payment is proposed to be made, the company shall be able to
pay its debts as they fall due in the ordinary course of business.
Shares that have been purchased or redeemed by a company or surrendered to the
company shall not be treated as cancelled but shall be classified as treasury shares if
held in compliance with the requirements of Section 37A(1) of the Companies Act.
Any such shares shall continue to be classified as treasury shares until such shares are
either cancelled or transferred pursuant to the Companies Act.
A Cayman Islands company may be able to purchase its own warrants subject to
and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. Thus there is no requirement under Cayman Islands law that a company’s
memorandum or articles of association contain a specific provision enabling such
purchases. The directors of a company may under the general power contained in its
memorandum of association be able to buy, sell and deal in personal property of all
kinds.
A subsidiary may hold shares in its holding company and, in certain
circumstances, may acquire such shares.
(e) Dividends and distributions
Subject to a solvency test, as prescribed in the Companies Act, and the provisions,
if any, of the company’s memorandum and articles of association, a company may pay
dividends and distributions out of its share premium account. In addition, based upon
English case law which is likely to be persuasive in the Cayman Islands, dividends
may be paid out of profits.
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For so long as a company holds treasury shares, no dividend may be declared or
paid, and no other distribution (whether in cash or otherwise) of the company’s assets
(including any distribution of assets to members on a winding up) may be made, in
respect of a treasury share.
(f) Protection of minorities and shareholders’ suits
It can be expected that the Cayman Islands courts will ordinarily follow English
case law precedents (particularly the rule in the case of Foss v. Harbottle and the
exceptions to that rule) which permit a minority member to commence a representative
action against or derivative actions in the name of the company to challenge acts which
are ultra vires, illegal, fraudulent (and performed by those in control of a company)
against the minority, or represent an irregularity in the passing of a resolution which
requires a qualified (or special) majority which has not been obtained.
Where a company (not being a bank) is one which has a share capital divided into
shares, the court may, on the application of members holding not less than one-fifth of
the shares of the company in issue, appoint an inspector to examine the affairs of the
company and, at the direction of the court, to report on such affairs. In addition, any
member of a company may petition the court, which may make a winding up order if
the court is of the opinion that it is just and equitable that the company should be
wound up.
In general, claims against a company by its members must be based on the
general laws of contract or tort applicable in the Cayman Islands or be based on
potential violation of their individual rights as members as established by a company’s
memorandum and articles of association.
(g) Disposal of assets
There are no specific restrictions on the power of directors to dispose of assets of
a company, however, the directors are expected to exercise certain duties of care,
diligence and skill to the standard that a reasonably prudent person would exercise in
comparable circumstances, in addition to fiduciary duties to act in good faith, for
proper purpose and in the best interests of the company under English common law
(which the Cayman Islands courts will ordinarily follow).
(h) Accounting and auditing requirements
A company must cause proper records of accounts to be kept with respect to: (i)
all sums of money received and expended by it; (ii) all sales and purchases of goods
by it and (iii) its assets and liabilities.
Proper books of account shall not be deemed to be kept if there are not kept such
books as are necessary to give a true and fair view of the state of the company’s
affairs and to explain its transactions.
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If a company keeps its books of account at any place other than at its registered
office or any other place within the Cayman Islands, it shall, upon service of an order
or notice by the Tax Information Authority pursuant to the Tax Information Authority
Act (2013 Revision) of the Cayman Islands, make available, in electronic form or any
other medium, at its registered office copies of its books of account, or any part or
parts thereof, as are specified in such order or notice.
(i) Exchange control
There are no exchange control regulations or currency restrictions in effect in the
Cayman Islands.
(j) Taxation
The Cayman Islands currently levy no taxes on individuals or corporations based
upon profits, income, gains or appreciations and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to our
Company levied by the Government of the Cayman Islands save for certain stamp
duties which may be applicable, from time to time, on certain instruments.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman
Islands companies save for those which hold interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision prohibiting the making of loans by a company to
any of its directors. However, the company’s articles of association may provide for the
prohibition of such loans under specific circumstances.
(m) Inspection of corporate records
The members of a company have no general right to inspect or obtain copies of
the register of members or corporate records of the company. They will, however, have
such rights as may be set out in the company’s articles of association.
(n) Register of members
A Cayman Islands exempted company may maintain its principal register of
members and any branch registers in any country or territory, whether within or outside
the Cayman Islands, as the company may determine from time to time. There is no
requirement for an exempted company to make any returns of members to the Registrar
of Companies in the Cayman Islands. The names and addresses of the members are,
accordingly, not a matter of public record and are not available for public inspection.
However, an exempted company shall make available at its registered office, in
electronic form or any other medium, such register of members, including any branch
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register of member, as may be required of it upon service of an order or notice by the
Tax Information Authority pursuant to the Tax Information Authority Act (2013
Revision) of the Cayman Islands.
(o) Register of Directors and officers
Pursuant to the Companies Act, our Company is required to maintain at our
registered office a register of directors, alternate directors and officers which is not
available for inspection by the public. A copy of such register must be filed with the
Registrar of Companies in the Cayman Islands and any change must be notified to the
Registrar within 30 days of any change in such directors or officers, including a change
of the name of such directors or officers.
(p) Winding up
A Cayman Islands company may be wound up by: (i) an order of the court; (ii)
voluntarily by its members; or (iii) under the supervision of the court.
The court has authority to order winding up in a number of specified
circumstances including where, in the opinion of the court, it is just and equitable that
such company be so wound up.
A voluntary winding up of a company (other than a limited duration company, for
which specific rules apply) occurs where the company resolves by special resolution
that it be wound up voluntarily or where the company in general meeting resolves that
it be wound up voluntarily because it is unable to pay its debt as they fall due. In the
case of a voluntary winding up, the company is obliged to cease to carry on its
business from the commencement of its winding up except so far as it may be
beneficial for its winding up. Upon appointment of a voluntary liquidator, all the
powers of the directors cease, except so far as the company in general meeting or the
liquidator sanctions their continuance.
In the case of a members’ voluntary winding up of a company, one or more
liquidators are appointed for the purpose of winding up the affairs of the company and
distributing its assets.
As soon as the affairs of a company are fully wound up, the liquidator must make
a report and an account of the winding up, showing how the winding up has been
conducted and the property of the company disposed of, and call a general meeting of
the company for the purposes of laying before it the account and giving an explanation
of that account.
When a resolution has been passed by a company to wind up voluntarily, the
liquidator or any contributory or creditor may apply to the court for an order for the
continuation of the winding up under the supervision of the court, on the grounds that:
(i) the company is or is likely to become insolvent; or (ii) the supervision of the court
will facilitate a more effective, economic or expeditious liquidation of the company in
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the interests of the contributories and creditors. A supervision order takes effect for all
purposes as if it was an order that the company be wound up by the court except that a
commenced voluntary winding up and the prior actions of the voluntary liquidator shall
be valid and binding upon the company and its official liquidator.
For the purpose of conducting the proceedings in winding up a company and
assisting the court, one or more persons may be appointed to be called an official
liquidator(s). The court may appoint to such office such person or persons, either
provisionally or otherwise, as it thinks fit, and if more than one person is appointed to
such office, the court shall declare whether any act required or authorized to be done
by the official liquidator is to be done by all or any one or more of such persons. The
court may also determine whether any and what security is to be given by an official
liquidator on his appointment; if no official liquidator is appointed, or during any
vacancy in such office, all the property of the company shall be in the custody of the
court.
(q) Reconstructions
Reconstructions and amalgamations may be approved by (i) 75% in value of the
members or class of members or (ii) a majority in number representing 75% in value of
the creditors or class of creditors, depending on the circumstances, as are present at a
meeting called for such purpose and thereafter sanctioned by the courts. Whilst a
dissenting member has the right to express to the court his view that the transaction for
which approval is being sought would not provide the members with a fair value for
their shares, the courts are unlikely to disapprove the transaction on that ground alone
in the absence of evidence of fraud or bad faith on behalf of management, and if the
transaction were approved and consummated the dissenting member would have no
rights comparable to the appraisal rights (i.e. the right to receive payment in cash for
the judicially determined value of their shares) ordinarily available, for example, to
dissenting members of a United States corporation.
(r) Take-overs
Where an offer is made by a company for the shares of another company and,
within four months of the offer, the holders of not less than 90% of the shares which
are the subject of the offer accept, the offeror may, at any time within two months after
the expiration of that four-month period, by notice require the dissenting members to
transfer their shares on the terms of the offer. A dissenting member may apply to the
Cayman Islands courts within one month of the notice objecting to the transfer. The
burden is on the dissenting member to show that the court should exercise its
discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith
or collusion as between the offeror and the holders of the shares who have accepted the
offer as a means of unfairly forcing out minority members.
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(s) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of
association may provide for indemnification of officers and directors, save to the extent
any such provision may be held by the court to be contrary to public policy, for
example, where a provision purports to provide indemnification against the
consequences of committing a crime.
4. GENERAL
Appleby, our Company’s legal adviser on Cayman Islands law, has sent to our
Company a letter of advice which summarises certain aspects of Cayman Islands company
law. This letter, together with a copy of the Companies Act, is available on display as
referred to in the paragraph headed “Documents Available on Display” in Appendix VI. Any
person wishing to have a detailed summary of Cayman Islands company law or advice on
the differences between it and the laws of any jurisdiction with which he is more familiar is
recommended to seek independent legal advice.
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A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of our Company
Our Company was incorporated in the Cayman Islands under the Companies Act as an
exempted company with limited liability on 28 June 2023.
Our Company was registered as a non-Hong Kong company under Part 16 of the
Companies Ordinance on 19 July 2023 and the principal place of business in Hong Kong is
Room 1510-1511, 15th Floor, Fortune Commercial Building, 362 Sha Tsui Road, Tsuen Wan,
New Territories, Hong Kong. In connection with such registration, our Company has
appointed Ms. Karen Chan and Mr. Tam Hon Fai of Room 1510-1511, 15th Floor, Fortune
Commercial Building, 362 Sha Tsui Road, Tsuen Wan, New Territories, Hong Kong as the
authorised representatives for the acceptance of service of process and notices on our behalf
in Hong Kong.
As our Company was incorporated in the Cayman Islands, we are subject to the
Companies Act and our constitution, which comprises the Memorandum and the Articles. A
summary of the relevant aspects of the Companies Act and certain provisions of the Articles
is set out in Appendix IV to this prospectus.
2. Changes in the share capital of our Company
(a) As at the date of incorporation, the authorised share capital of our Company was
HK$380,000 divided into 38,000,000 ordinary shares of a nominal or par value of
HK$0.01 each. Upon incorporation, one subscriber share in our Company with a
par value of HK$0.01 was allotted and issued as fully paid to a nominee
subscriber. On the same date, the said one subscriber share with a nominal or par
value of HK$0.01 was transferred to WK (BVI) for a consideration of HK$0.01.
Upon completion of the above transfer and share issue, WK (BVI) became our
sole Shareholder.
(b) On 5 February 2024, the authorised share capital of our Company was increased
from HK$380,000 divided into 38,000,000 ordinary shares of a nominal or par
value of HK$0.01 each to HK$100,000,000 divided into 10,000,000,000 ordinary
shares of a nominal or par value of HK$0.01 each by the creation of
9,962,000,000 new Shares. Such Shares shall rank equally in all respects with the
existing issued Shares.
Immediately after the completion of the Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the exercise of
the Over-allotment Option or any option which may be granted under the Share Option
Scheme), the authorised share capital of our Company will be HK$100,000,000 divided into
10,000,000,000 Shares with a nominal or par value of HK$0.01 each, of which
2,000,000,000 Shares with a nominal or par value of HK$0.01 each will be allotted and
issued fully paid or credited as fully paid and 8,000,000,000 Shares with a nominal or par
value of HK$0.01 each will remain unissued.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 1–


--- page 497 ---
Other than pursuant to the general mandate to allot and issue Shares as referred to in
the paragraphs headed “A. Further information about our Group – 5. Written resolutions of
our sole Shareholder passed on 5 February 2024” and “A. Further information about our
Group – 6. Repurchase of our Shares” under this appendix, the exercise of the
Over-allotment Option or the options that may be granted under the Share Option Scheme,
our Directors do not have any present intention to allot and issue any of the authorised but
unissued share capital of our Company and, without prior approval of our Shareholders in a
general meeting, no issue of Shares will be made which would effectively alter the control
of our Company.
Save as disclosed in this appendix and the paragraph headed “History, development and
Reorganisation – Reorganisation” in this prospectus, there has been no alteration in our
Company’s share capital since incorporation.
3. Reorganisation
Our Group underwent the Reorganisation in preparation for the Listing. Further details
of which are set out in the paragraph headed “History, development and Reorganisation –
Reorganisation” in this prospectus.
4. Changes in the share capital of the subsidiaries of our Company
The subsidiaries of our Company are listed in the Accountant’s Report.
Save as disclosed in the paragraph headed “History, development and Reorganisation –
Reorganisation” in this prospectus, there has been no alteration in the share capital or
registered capital of any of the subsidiaries of our Company within the two years
immediately preceding the date of this prospectus.
5. Written resolutions of our sole Shareholder passed on 5 February 2024
Written resolutions of our sole Shareholder were passed on 5 February 2024 approving,
amongst others, the following:
(a) the Memorandum and the Articles were adopted as the memorandum of
association and the articles of association of our Company;
(b) the authorised share capital of our Company was increased from HK$380,000
divided into 38,000,000 Shares to HK$100,000,000 divided into 10,000,000,000
Shares by the creation of additional 9,962,000,000 Shares, all of which shall rank
equally in all respects with the existing Shares in issue; and
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 2–


--- page 498 ---
(c) conditional upon the same conditions to be satisfied and/or waived as stated in the
section headed “Structure and conditions of the Share Offer” in this prospectus:
(i) the Share Offer and the grant of the Over-allotment Option by our Company
were approved and our Directors were authorised to (aa) allot and issue the
Offer Shares and such number of Shares as may be required to be allotted
and issued upon the exercise of the Over-allotment Option on and subject to
the terms and conditions stated in this prospectus; (bb) implement the Share
Offer and the listing of Shares on the Stock Exchange; and (cc) do all things
and execute all documents in connection with or incidental to the Share
Offer and the Listing with such amendments or modifications (if any) as our
Directors may consider necessary or appropriate;
(ii) conditional upon the share premium account of our Company being credited
as a result of the Share Offer, our Directors were authorised to capitalise the
amount of HK$14,999,999.99 from the amount standing to the credit of the
share premium account of our Company by applying such sum to pay up in
full at par a total of 1,499,999,999 Shares for allotment and issue to the
holders of Shares whose names appear on the register of members of our
Company at the close of business on even date, or as each of them may
direct in writing, in proportion (subject to rounding to avoid fractions and
odd lots) to their then existing respective shareholdings in our Company and
the Shares to be allotted and issued pursuant to this resolution shall rank
equally in all respects with the then existing Shares in issue;
(iii) the rules of the Share Option Scheme were approved and adopted and our
Board or any committee thereof established by our Board was authorised, at
its sole discretion, to (aa) administer the Share Option Scheme; (bb) modify
or amend the rules of the Share Option Scheme from time to time as may be
acceptable or not objected to by the Stock Exchange; (cc) grant options to
subscribe for Shares thereunder and to allot, issue and deal with the Shares
pursuant to the exercise of subscription rights attaching to any option(s)
granted thereunder; and (dd) take all such actions as it considers necessary
or desirable to implement or give effect to the Share Option Scheme;
(iv) a general unconditional mandate was given to our Directors to exercise all
the powers of our Company to allot, issue and deal with (including the
power to make an offer or agreement, or grant securities which would or
might require Shares to be allotted and issued), otherwise than by way of
rights issue, scrip dividend schemes or similar arrangements providing for
allotment and issue of Shares in lieu of the whole or in part of any cash
dividend in accordance with the Articles, or pursuant to, or in consequence
of, the Capitalisation Issue, the Share Offer, the exercise of the
Over-allotment Option or any option which may be granted under the Share
Option Scheme, Shares in aggregate not exceeding (1) 20% of the total
number of Shares in issue immediately after completion of the Capitalisation
Issue and the Share Offer (assuming the Over-allotment Option is not
exercised) and without taking into account any Share that may be allotted
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 3–


--- page 499 ---
and issued upon the exercise of any option which may be granted under the
Share Option Scheme); and (2) the total number of Shares in issue which
may be purchased by our Company pursuant to the authority granted to our
Directors as referred to in sub-paragraph (v) below, until the conclusion of
the next annual general meeting of our Company, or the date by which the
next annual general meeting is required by the Articles or any applicable
law(s) to be held, or the passing of an ordinary resolution by our
Shareholders in a general meeting revoking, renewing or varying the
mandate given to our Directors, whichever occurs first;
(v) a general unconditional mandate was given to our Directors to exercise all
the powers of our Company to repurchase, on the Stock Exchange and/or on
any other stock exchange on which the securities of our Company may be
listed and which is recognised by the SFC and the Stock Exchange for this
purpose in accordance with all applicable laws and requirements of the Stock
Exchange (or of such other stock exchange), Shares in aggregate not
exceeding 10% of the total number of Shares in issue immediately after
completion of the Capitalisation Issue and the Share Offer (assuming the
Over-allotment Option is not exercised and without taking into account any
Share that may be allotted and issued upon the exercise of any option which
may be granted under the Share Option Scheme), until the conclusion of our
Company’s next annual general meeting, or the date by which the next
annual general meeting is required by the Articles or any applicable law(s)
to be held, or the passing of an ordinary resolution by Shareholders in a
general meeting revoking, renewing or varying the mandate given to our
Directors, whichever occurs first; and
(vi) a general unconditional mandate mentioned in sub-paragraph (iv) above was
extended by the addition to the total number of Shares in issue which may
be allotted and issued or agreed (conditionally or unconditionally) to be
allotted or issued by our Directors pursuant to such general mandate of an
amount representing the total number of Shares repurchased by our Company
pursuant to the mandate to repurchase Shares referred to in sub-paragraph
(v) above, provided that such extended amount shall not exceed 10% of the
total number of Shares in issue immediately after the completion of the
Capitalisation Issue and the Share Offer (assuming the Over-allotment
Option is not exercised and without taking into account any Share that may
be allotted and issued upon the exercise of any option which may be granted
under the Share Option Scheme).
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 4–


--- page 500 ---
6. Repurchase of our Shares
This paragraph sets out information required by the Stock Exchange to be included in
this prospectus concerning the repurchase by our Company of its own securities.
(a) Provisions of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock Exchange
to purchase their own securities on the Stock Exchange subject to certain restrictions,
the most important of which are summarised below:
(i) Shareholders’ approval
All proposed repurchases of securities (which must be fully paid in the case
of shares) by a company with a primary listing on the Stock Exchange must be
approved in advance by an ordinary resolution of the shareholders, either by way
of general mandate or by specific approval of a particular transaction.
Note: Pursuant to the written resolutions of our sole Shareholder passed on 5 February 2024,
conditional upon the same conditions to be satisfied and/or waived as stated in the
section headed “Structure and conditions of the Share Offer” in this prospectus, a
general unconditional mandate (the “ Repurchase Mandate ”) was given to our
Directors to exercise all the powers of our Company to repurchase, on the Stock
Exchange and/or on any other stock exchange on which the securities of our Company
may be listed and which is recognised by the SFC and the Stock Exchange for this
purpose in accordance with all applicable laws and requirements of the Stock Exchange
(or of such other stock exchange), Shares in aggregate not exceeding 10% of the total
number of Shares in issue immediately after completion of the Capitalisation Issue and
the Share Offer (assuming the Over-allotment Option is not exercised and without
taking into account any Share that may be allotted and issued upon the exercise of any
option which may be granted under the Share Option Scheme). The Repurchase
Mandate will remain effective until the conclusion of the next annual general meeting
of our Company, or the date by which the next annual general meeting of our Company
is required by the Articles or any applicable law(s) to be held, or the passing of an
ordinary resolution by our Shareholders in a general meeting revoking, renewing or
varying the mandate given to our Directors, whichever occurs first.
(ii) Source of funds
Repurchases must be funded out of funds legally available for the purpose in
accordance with the Articles, the Listing Rules and the applicable laws of Hong
Kong and the Companies Act. A listed company must not repurchase its own
securities on the Stock Exchange for a consideration other than cash or for
settlement otherwise than in accordance with the trading rules of the Stock
Exchange. Subject to the foregoing, any repurchase by our Company may be
made out of profits of our Company, out of share premium, or out of the proceeds
of a fresh issue of shares made for the purpose of the repurchase or, subject to the
Companies Act, out of capital. Any amount of premium payable on the purchase
over the par value of the shares to be repurchased must be out of profits of our
Company, out of our Company’s share premium account before or at the time the
Shares are repurchased, or, subject to the Companies Act, out of capital.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 5–


--- page 501 ---
(iii) Trading restrictions
The total number of shares which a listed company may repurchase on the
Stock Exchange is the number of shares representing up to a maximum of 10% of
the aggregate number of shares in issue. A company may not issue or announce a
proposed issue of new securities for a period of 30 days immediately following a
repurchase (other than an issue of securities pursuant to an exercise of warrants,
share options or similar instruments requiring the company to issue securities
which were outstanding prior to such repurchase) without the prior approval of
the Stock Exchange.
Further, a listed company is prohibited from repurchasing its shares on the
Stock Exchange if the purchase price is 5% or more than the average closing
market price for the five preceding days on which its shares were traded on the
Stock Exchange.
In addition, the Listing Rules prohibit a listed company from repurchasing
its securities which are in the hands of the public falling below the relevant
minimum percentage prescribed by the Stock Exchange. A company is required to
procure that the broker appointed by it to effect a repurchase of securities
discloses to the Stock Exchange such information with respect to the repurchase
as the Stock Exchange may require.
(iv) Status of repurchased shares
All repurchased securities (whether effected on the Stock Exchange or
otherwise) will be automatically delisted and the certificates for those securities
must be cancelled and destroyed.
Under the Companies Act, a company’s repurchased shares may be treated as
cancelled and, if so cancelled, the amount of that company’s issued share capital
shall be reduced by the aggregate nominal value of the repurchased shares
accordingly although the authorised share capital of the company will not be
reduced.
(v) Suspension of repurchase
A listed company may not make any repurchase of securities after inside
information has come to its knowledge until the inside information has been made
publicly available. In particular, during the period of one month immediately
preceding the earlier of: (aa) the date of the board meeting (as such date is first
notified to the Stock Exchange in accordance with the Listing Rules) for the
approval of a listed company’s results for any year, half-year, quarterly or any
other interim period (whether or not required under the Listing Rules); and (bb)
the deadline for the publication of an announcement of a listed company’s results
for any year or half-year under the Listing Rules, or quarterly or any other
interim period (whether or not required under the Listing Rules) and ending on
the date of the results announcement, the listed company may not repurchase its
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 6–


--- page 502 ---
shares on the Stock Exchange other than in exceptional circumstances. In
addition, the Stock Exchange may prohibit a repurchase of securities on the Stock
Exchange if a listed company has breached the Listing Rules.
(vi) Reporting requirements
Certain information relating to the repurchases of securities on the Stock
Exchange or otherwise must be submitted for publication to the Stock Exchange
not later than 30 minutes before the earlier of the commencement of the morning
trading session or any pre-opening session on the following business day.
In addition, a listed company’s annual report is required to disclose details
regarding the repurchases of securities made during the year, including a monthly
analysis of the number of securities repurchased, the purchase price per share or
the highest and lowest price paid for all such purchases, where relevant, and the
aggregate prices paid.
(vii) Connected parties
A listed company is prohibited from knowingly repurchasing securities on
the Stock Exchange from a “core connected person”, which includes a director,
chief executive or substantial shareholder of the company or any of its
subsidiaries or an associate of any of them and a core connected person shall not
knowingly sell his or its securities to the company.
(b) Reasons for repurchase
Our Directors believe that it is in the best interests of our Company and our
Shareholders for our Directors to have a general authority from our Shareholders to
enable our Company to repurchase Shares in the market. Such repurchases may,
depending on market conditions and funding arrangements at the time, lead to an
enhancement of the net asset value per Share and/or earnings per Share and will only
be made when our Directors believe that such repurchases will benefit our Company
and our Shareholders.
(c) Funding of repurchase
In repurchasing Shares, our Company may only apply funds legally available for
such purpose in accordance with the Articles, the Listing Rules and the applicable laws
of Hong Kong and the Cayman Islands.
On the basis of our Company’s current financial position as disclosed in this
prospectus and taking into account the current working capital position, our Directors
consider that, if the Repurchase Mandate were to be exercised in full, it might have a
material adverse effect on the working capital and/or the gearing position as compared
with the position disclosed in this prospectus. However, our Directors do not propose
to exercise the Repurchase Mandate to such an extent as would, in the circumstances,
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 7–


--- page 503 ---
have a material adverse effect on the working capital requirements or the gearing levels
which in the opinion of our Directors are from time to time appropriate for our
Company.
(d) General
None of our Directors nor, to the best of their knowledge having made all
reasonable enquiries, any of their close associates currently intends to sell any Share to
our Company or our subsidiaries. Our Directors have confirmed that, so far as the same
may be applicable, they will exercise the Repurchase Mandate in accordance with the
Listing Rules, the Articles and the applicable laws of Hong Kong and the Cayman
Islands, and that neither the explanatory statement nor the Repurchase Mandate has any
unusual features.
If, as a result of a repurchase of Shares, a Shareholder’s proportionate interest in
our Company’s voting rights increases, such increase will be treated as an acquisition
for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of
Shareholders acting in concert (within the meaning of the Takeovers Code), depending
on the level of increase of our Shareholders’ interest, could obtain or consolidate
control of our Company and become obliged to make a mandatory offer in accordance
with Rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of
any consequence which would arise under the Takeovers Code as a result of any
repurchase pursuant to the Repurchase Mandate.
Our Directors will not exercise the Repurchase Mandate if the repurchase would
result in the number of Shares which are in the hands of the public falling below 25%
of the total number of Shares in issue (or such other percentage as may be prescribed
as the minimum public float under the Listing Rules).
Our Company has not made any repurchases of our own securities since our
incorporation.
No core connected person has notified our Company that he has a present
intention to sell our Shares to our Company, or has undertaken not to do so, if the
Repurchase Mandate is exercised.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 8–


--- page 504 ---
B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR GROUP
1. Summary of material contracts
The following contracts (not being contracts entered into in the ordinary course of
business) have been entered into by members of our Group within the two years
immediately preceding the date of this prospectus and are or may be material:
(a) a sale and purchase agreement dated 21 July 2023 entered into among Mr. Kelvin
Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan (as
vendors), WK Development (as purchaser) and our Company, pursuant to which
WK Development acquired 510,000 ordinary shares, 510,000 ordinary shares,
255,000 ordinary shares, 255,000 ordinary shares and 170,000 ordinary shares in
Wing Kei Hong Kong from Mr. Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan,
Ms. Choi and Ms. Karen Chan, respectively, representing 30%, 30%, 15%, 15%
and 10% of the issued share capital of Wing Kei Hong Kong, respectively, the
consideration of which was settled by WK Development allotting and issuing 100
shares of US$1 each, credited as fully paid, to the Company at the direction of
Mr. Kelvin Chan, Mr. Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan;
(b) the Deed of Indemnity; and
(c) the Public Offer Underwriting Agreement.
2. Intellectual property rights
(a) Trademarks
As at the Latest Practicable Date, our Group had registered the following
trademarks which are, in the opinion of our Directors, material to our Group’s
business:
Trademark
Registered
owner Class
Place of
registration
Trademark
number
Registration
date Expiry date
Wing Kei
Hong Kong
6, 16, 37 Hong Kong 306299380 20 July 2023 19 July 2033
Wing Kei
Hong Kong
6, 16, 37 Hong Kong 306342985 7 September
2023
6 September
2033
Wing Kei
Hong Kong
6, 16, 37 Hong Kong 306342994 7 September
2023
6 September
2033
Wing Kei
Hong Kong
6, 16, 37 Hong Kong 306343001 7 September
2023
6 September
2033
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 9–


--- page 505 ---
(b) Domain name
As at the Latest Practicable Date, our Group had registered the following domain
name which is, in the opinion of our Directors, material to our Group’s business:
Domain Name Registered owner
Registration
Date Expiry Date
www.wing-kei.com.hk Wing Kei Hong
Kong
11 April 2003 12 April 2026
C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
1. Disclosure of Interests
(a) Interests and short positions of our Directors and chief executive of our
Company in our Shares, underlying Shares and debentures of our Company and
our associated corporations after completion of the Capitalisation Issue and the
Share Offer
Immediately after the completion of the Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the
exercise of the Over-allotment Option or any option which may be granted under the
Share Option Scheme), the interests or short positions of our Directors and chief
executive of our Company in our Shares, underlying Shares or debentures of our
Company or any of our associated corporations (within the meaning of Part XV of the
SFO) which will have to be notified to our Company and the Stock Exchange pursuant
to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in
which they are taken or deemed to have under such provisions of the SFO), or which
will be required, pursuant to section 352 of the SFO, to be entered in the register as
referred to therein, or which will be required to be notified to our Company and the
Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers contained in the Listing Rules, will be as follows:
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-10 –


--- page 506 ---
(i) Interest in our Company
Name of Director/
chief executive
Capacity/
Nature of interest Number of Shares
Approximate
percentage of
shareholding
(Note 1)
Mr. Kelvin Chan Interest in a controlled
corporation (Note 2)
1,500,000,000 (L) 75%
Mr. Eddie Chan Interest in a controlled
corporation (Note 2)
1,500,000,000 (L) 75%
Ms. Karen Chan Interest in a controlled
corporation (Note 2)
1,500,000,000 (L) 75%
Mr. WH Chan Interest in a controlled
corporation/Interest of
spouse (Notes 2 and 3)
1,500,000,000 (L) 75%
Ms. Choi Interest in a controlled
corporation/Interest of
spouse (Notes 2 and 3)
1,500,000,000 (L) 75%
Notes:
1. The letter “L” denotes a person’s “long position” (as defined under Part XV of the SFO)
in such Shares.
2. Our Company will be owned as to 75% by WK (BVI) immediately after the completion
of the Capitalisation Issue and the Share Offer (without taking into account any Share
that may be allotted and issued upon the exercise of the Over-allotment Option or any
option which may be granted under the Share Option Scheme). WK (BVI) is owned as
to 30% by Mr. Kelvin Chan, 30% by Mr. Eddie Chan, 15% by Mr. WH Chan, 15% by
Ms. Choi and 10% by Ms. Karen Chan. By virtue of the SFO, Mr. Kelvin Chan, Mr.
Eddie Chan, Mr. WH Chan, Ms. Choi and Ms. Karen Chan are deemed to be interested
in the same number of Shares held by WK (BVI).
3. Mr. WH Chan and Ms. Choi are spouse. Under the SFO, Mr. WH Chan is deemed to be
interested in the same number of Shares in which Ms. Choi is interested, and Ms. Choi
is deemed to be interested in the same number of Shares in which Mr. WH Chan is
interested.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 1 1–


--- page 507 ---
(ii) Interest in the associated corporation of our Company
Name of
Director/ chief
executive
Capacity/
Nature of interest
Name of
associated
corporation
Number of
shares in the
associated
corporation
Approximate
percentage of
shareholding in
the associated
corporation
(Note)
Mr. Kelvin Chan Beneficial owner WK (BVI) 30 (L) 30%
Mr. Eddie Chan Beneficial owner WK (BVI) 30 (L) 30%
Mr. WH Chan Beneficial owner WK (BVI) 15 (L) 15%
Ms. Choi Beneficial owner WK (BVI) 15 (L) 15%
Ms. Karen Chan Beneficial owner WK (BVI) 10 (L) 10%
Note: The letter “L” denotes a person’s “long position” (as defined under Part XV of the
SFO) in such shares.
(b) Interests and/or short positions of the substantial shareholders under the SFO
Please refer to the section headed “Substantial Shareholders” in this prospectus
for details of the persons (other than a Director or a chief executive of our Company)/
corporations who/which will have an interest or short position in our Shares and
underlying Shares which would fall to be disclosed to our Company pursuant to
Divisions 2 and 3 of Part XV of the SFO, or who/which is, directly or indirectly, to be
interested in 10% or more of the issued voting shares of any other member of our
Group.
Our Directors are not aware of any persons who will immediately after the
completion of the Share Offer and the Capitalisation Issue (without taking into account
any Share that may be allotted and issued upon the exercise of the Over-allotment
Option or any option which may be granted under the Share Option Scheme) have a
notifiable interest (for the purposes of the SFO) in our Shares or, having such a
notifiable interest, have any short positions (within the meaning of the SFO) in our
Shares, other than those as disclosed above.
2. Particulars of Directors’ service agreements and appointment letters
(a) Executive Directors
Each of our executive Directors has entered into a service agreement with our
Company for an initial fixed term of three years commencing from the Listing Date.
The term of service shall be renewed and extended automatically by three years on the
expiry of such initial term and on the expiry of every successive period of three years
thereafter, unless terminated by either party thereto giving at least three months’
written notice of non-renewal before the expiry of the then existing term.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-12 –


--- page 508 ---
(b) Non-executive Directors and Independent non-executive Directors
Each of our non-executive Directors and independent non-executive Directors has
entered into an appointment letter with our Company for an initial fixed term of one
year commencing from the Listing Date. The term of service shall be renewed and
extended automatically by one year on the expiry of such initial term and on the expiry
of every successive period of one year thereafter, unless terminated by either party
thereto giving at least one month’s written notice of non-renewal before the expiry of
the then existing term.
Save as disclosed in this prospectus, none of our Directors has or is proposed to
have entered into any service agreement or letter of appointment with any member of
our Group (excluding agreements expiring or determinable by any member of our
Group within one year without the payment of compensation other than statutory
compensation).
3. Remuneration of our Directors
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
aggregate emoluments paid and benefits in kind granted by our Group to our Directors were
approximately HK$7.5 million, HK$8.6 million, HK$8.6 million and HK$5.3 million,
respectively.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
aggregate contributions to pension schemes for our Directors were approximately
HK$54,000, HK$54,000, HK$54,000 and HK$42,000, respectively.
For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, the
aggregate bonuses paid to or receivable by our Directors which are discretionary or are
based on our Company’s, our Group’s or any member of our Group’s performance were
approximately HK$0.5 million, HK$1.6 million, HK$1.6 million and nil, respectively.
Under the arrangements currently in force, our Company estimates that the aggregate
remunerations payable to, and benefits in kind receivable by, our Directors (including our
independent non-executive Directors) for FY2023 will be approximately HK$9.0 million.
None of our Directors or any past director(s) of any member of our Group has been
paid any sum of money for each of FY2020, FY2021, FY2022 and the nine months ended
30 September 2023, (a) as an inducement to join or upon joining our Company; or (b) for
loss of office as a director of any member of our Group or of any other office in connection
with the management of the affairs of any member of our Group.
There has been no arrangement under which a Director has waived or agreed to waive
any emolument for each of FY2020, FY2021, FY2022 and the nine months ended 30
September 2023.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-13 –


--- page 509 ---
Under the arrangements currently proposed, conditional upon the Listing, the basic
annual remuneration (excluding payment pursuant to any discretionary benefit or bonus or
other fringe benefits) payable by our Company to each of our Directors will be as follows:
HK$
Executive Directors
Mr. Kelvin Chan 1,440,000
Mr. Eddie Chan 2,400,000
Ms. Karen Chan 1,440,000
Non-executive Directors
Mr. WH Chan 1,200,000
Ms. Choi 600,000
Independent non-executive Directors
Mr. Cha Ho Wa 150,000
Mr. Y u Chun Kit 150,000
Mr. Liu Chi Kwun Albert 150,000
Each of our executive Directors, non-executive Directors and independent
non-executive Directors is entitled to the reimbursement of all necessary and reasonable
out-of-pocket expenses properly incurred in relation to all business and affairs carried out by
our Company from time to time or for providing services to our Company or executing their
functions in relation to our Company’s business and operations.
Save as disclosed above, no other emoluments have been paid or are payable, in
respect of each of FY2020, FY2021, FY2022 and the nine months ended 30 September 2023
by our Company to our Directors.
4. Related Party Transactions
Details of the related party transactions are set out under note 26 to the Accountant’s
Report.
5. Disclaimers
(a) save as disclosed in the paragraph headed “C. Further information about our
Directors and substantial shareholders – 1. Disclosure of Interests” in this
appendix, none of our Directors or chief executive has any interest or short
position in any of the Shares, underlying Shares or debentures of our Company or
any of the associated corporation(s) (within the meaning of Part XV of the SFO),
immediately after the completion of the Capitalisation Issue and the Share Offer,
without taking into account any Share that may be allotted and issued upon the
exercise of the Over-allotment Option or any option which may be granted under
the Share Option Scheme, which will have to be notified to our Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which any of them is deemed to have under such
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-14 –


--- page 510 ---
provisions of the SFO) or which will be required, pursuant to section 352 of the
SFO, to be entered into the register as referred to therein or which will be
required to be notified to our Company and the Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers, in each
case once the Shares are listed;
(b) save as disclosed in the paragraph headed “C. Further information about our
Directors and substantial shareholders – 1. Disclosure of Interests” in this
appendix, our Directors are not aware of any person (other than our Directors or
the chief executive of our Company) who will, immediately after the completion
of the Capitalisation Issue and the Share Offer (without taking into account any
Share that may be allotted and issued upon the exercise of the Over-allotment
Option or any option which may be granted under the Share Option Scheme) have
an interest or short position in our Shares or underlying Shares which will have to
be notified to our Company and the Stock Exchange pursuant to Divisions 2 and
3 of Part XV of the SFO, or who will, directly or indirectly, be interested in 10%
or more of the nominal value of any class of share capital carrying rights to vote
in all circumstances at a general meeting of any other member of our Group;
(c) none of our Directors or the experts under the paragraph headed “E. Other
information – 7. Qualifications of experts” in this appendix has been directly or
indirectly interested in the promotion of, or in any asset(s) which has or have
been, within the two years immediately preceding the date of this prospectus,
acquired or disposed of by or leased to any member of our Group, or are
proposed to be acquired or disposed of by or leased to any member of our Group;
(d) none of our Directors nor the experts named under the paragraph headed “E.
Other information – 7. Qualifications of experts” in this appendix below is
materially interested in any contract or arrangement subsisting at the date of this
prospectus which is significant in relation to our Company’s business;
(e) none of the experts named under the paragraph headed “E. Other information – 7.
Qualifications of experts” in this appendix below has any shareholding in any
member of our Group or the right (whether legally enforceable or not) to
subscribe for or to nominate persons to subscribe for securities in any member of
our Group; and
(f) so far as is known to our Directors, none of our Directors, their respective close
associates or Shareholders who are interested in more than 5% of the share capital
has any interests in the five largest customers or the five largest suppliers of our
Group.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-15 –


--- page 511 ---
D. SHARE OPTION SCHEME
1. Summary of terms of the Share Option Scheme
(a) Purpose of the Share Option Scheme
The purpose of the Share Option Scheme is to enable our Group to grant options
to the eligible participants as incentives or rewards for their contributions to our Group
and/or to enable our Group to recruit and retain high-calibre employees and attract
human resources that are valuable to our Group.
(b) Who may join
Our Directors shall, in accordance with the provisions of the Share Option
Scheme and the Listing Rules, be entitled but shall not be bound at any time within a
period of 10 years commencing from the date of the adoption of the Share Option
Scheme to make an offer to any of the following classes:
(i) any Directors and employees of our Group (including persons who are
granted options under the Share Option Scheme as an inducement to enter
into employment contracts with any member of our Group) (the “ Employee
Participants ”);
(ii) directors and employees of the holding companies, fellow subsidiaries or
associated companies of our Company (the “ Related Entity Participants ”);
and
(iii) persons who provide services to our Group on a continuing or recurring
basis in its ordinary and usual course of business which are in the interests
of the long term growth of our Group, which may include persons who work
for the member of our Group as independent contractors where the
continuity and frequency of his/her service is akin to those of employees
(the “ Service Providers ”), but excluding any (i) placing agents or financial
advisers providing advisory services for fundraising, mergers or acquisitions;
and (ii) professional service providers such as auditors or valuers who
provide assurance, or are required to perform their services with impartiality
and objectivity.
and, for the purpose of the Share Option Scheme, the offer for the grant of an
option may be made to any company wholly owned by one or more eligible
participants.
For the avoidance of doubt, the grant of any option by our Company for the
subscription of Shares or other securities of our Group to any person who falls within
any of the above classes of eligible participants shall not, by itself, unless our
Directors otherwise determine, be construed as a grant of option under the Share
Option Scheme.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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--- page 512 ---
The eligibility of any of the eligible participants to an offer under the Share
Option Scheme shall be determined by our Directors from time to time on the basis of
our Directors’ opinion as to such eligible participant’s experience in the business of
our Group, the length of his/her service with our Group, his/her contribution to the
development and growth of our Group and other factors as our Directors may at their
discretion consider appropriate. In assessing the eligibility of any Service Provider and
whether such Service Provider provides services on a continuing or recurring basis in
the ordinary and usual course of business of our Group, our Directors shall consider all
relevant factors as appropriate from time to time, including (i) the experience of the
Service Provider; (ii) the types of services that the Service Provider had provided to
our Group; (iii) the period of engagement of the Service Provider; (iv) the contribution
and/or future contribution of the Service Provider to the development and growth of
our Group.
(c) Maximum number of Shares
(i) The total number of Shares which may be allotted and issued in respect of
all options to be granted under the Share Option Scheme and any other share
option schemes and share award schemes of our Group shall not in aggregate
exceed 10% of the total number of Shares (assuming that the Over-allotment
Option is not exercised) in issue at the time dealings in our Shares first
commence on the Stock Exchange, being 200,000,000 Shares (the “ Scheme
Mandate Limit ”) unless our Company obtains an approval from our
Shareholders pursuant to paragraphs (iii) and (iv) below. The options which
are cancelled or lapsed in accordance with the terms of the Share Option
Scheme and any other share option scheme(s) or share award scheme(s) of
our Company shall be regarded as utilised for the purpose of calculating the
Scheme Mandate Limit.
(ii) Subject to paragraph (i), the total number of Shares which may be allotted
and issued in respect of all options to be granted under the Share Option
Scheme and any other share option scheme(s) and share award scheme(s) of
our Group to Service Providers shall be within the Scheme Mandate Limit
and must not in aggregate exceed one (1) per cent of the total number of
Shares (assuming the Over-allotment Option (as defined in this prospectus))
in issue at the time dealings in the Shares first commence on the Stock
Exchange (the “ Service Provider Sublimit ”) unless our Company obtains an
approval from our Shareholders pursuant to paragraphs (iii) and (iv) below.
(iii) Without prejudice to (iv) below, our Company may seek approval of our
Shareholders in a general meeting to refresh the Scheme Mandate Limit and
Service Provider Sublimit after three years from the approval of our
Shareholders for the adoption of the Share Option Scheme or the last
refreshment.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-17 –


--- page 513 ---
(iv) Any refreshment within any three year period must be approved by our
Shareholders subject to:
(a) any controlling shareholders and their associates (or if there is no
controlling shareholder, Directors (excluding independent non-executive
Directors) and the chief executive of our Company and their respective
associates) must abstain from voting in favour of the relevant resolution
at the general meeting; and
(b) our Company must comply with the requirements under Rules 13.39(6)
and (7), 13.40, 13.41 and 13.42 of the Listing Rules.
The requirements under paragraphs (a) and (b) above do not apply if the
refreshment is made immediately after an issue of securities by our Company
to our Shareholders on a pro rata basis as set out in Rule 13.36(2)(a) of the
Listing Rules such that the unused part of the scheme mandate (as a
percentage of the relevant class of shares in issue) upon refreshment is the
same as the unused part of the scheme mandate immediately before the issue
of securities, rounded to the nearest whole share.
(v) The total number of Shares which may be allotted and issued upon the
exercise of all options to be granted under the Share Option Scheme and any
other share option scheme and share award schemes of our Company under
the Scheme Mandate Limit as refreshed shall not exceed 10% of the Shares
in issue as at the date of the approval of the limit.
(vi) Our Company may seek separate Shareholders’ approval in a general
meeting to grant options under the Share Option Scheme beyond the Scheme
Mandate Limit, or if applicable, the extended limit referred to in (iii) or (iv)
above to eligible participants identified by our Company before such
approval is sought. The number and terms of options or awards to be granted
to such eligible participants must be fixed before Shareholders’ approval. In
respect of any options to be granted, the date of the board meeting for
proposing such grant should be taken as the date of grant for the purpose of
calculating the subscription price.
(d) Maximum entitlement of each eligible participant
Subject to (e) below, the total number of Shares issued and which may fall to be
issued upon exercise of any option which may be granted under the Share Option
Scheme and any option or award which may be granted under any other share option
scheme(s) and share award scheme(s) of our Group (including both exercised or
outstanding options but excluding any options and awards lapsed in accordance with
the terms of the scheme) to each grantee in any 12-month period up to and including
the date of such grant shall not exceed 1% of the issued share capital of our Company
for the time being (the “ 1% Individual Limit ”). Where any further grant of options
under the Share Option Scheme to a grantee under the Share Option Scheme would
result in the Shares issued and to be issued upon exercise of all options and awards
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-18 –


--- page 514 ---
granted and proposed to be granted to such person (including exercised, cancelled and
outstanding options but excluding any options and awards lapsed in accordance with
the terms of the scheme) under the Share Option Scheme and any other share option
scheme(s) and share award scheme(s) of our Group in the 12-month period up to and
including the date of such further grant exceeding the 1% Individual Limit, such
further grant must be separately approved by our Shareholders in a general meeting of
our Company with such grantee and his close associates (or his associates if the
participant is a connected person) abstaining from voting. The number and terms of the
options to be further granted to such Grantee must be fixed before Shareholders’
approval. In respect of any options to be further granted, the date of the board meeting
for proposing such further grant should be taken as the date of grant for the purpose of
calculating the subscription price.
(e) Grant of options to core connected persons
(i) Without prejudice to (ii) below, the making of an offer under the Share
Option Scheme to any Director, chief executive or substantial shareholder of
our Company or any of their respective associates must be approved by our
independent non-executive Directors (excluding any independent
non-executive Director who is the grantee of an option under the Share
Option Scheme).
(ii) Without prejudice to (i) above, where any grant of options under the Share
Option Scheme to an independent non-executive Director or a substantial
shareholder or any of their respective associates, would result in the Shares
issued and to be issued upon exercise of all options under the Share Option
Scheme already granted and to be granted (including options exercised,
cancelled and outstanding but excluding any options and awards lapsed in
accordance with the terms of the scheme) to such person in the 12-month
period up to and including the date of such grant representing in aggregate
over 0.1% of our Shares in issue.
Such further grant of options must be approved by our Shareholders in a general
meeting. The grantee, his/her associates and all core connected persons of our
Company must abstain from voting in favour at such general meeting. Any change in
the terms of options granted to a participant who is a Director, chief executive or
substantial shareholder of our Company, or any of their respective associates, must be
approved by our Shareholders in the manner as set out in this paragraph if the initial
grant of the options requires such approval (except where the changes take effect
automatically under the existing terms of the Share Option Scheme).
For the purpose of seeking the approval from our Shareholders under paragraphs
(c), (d) and (e) above, our Company must send a circular to our Shareholders
containing the information required under the Listing Rules and where the Listing
Rules shall so require, the vote at our Shareholders’ meeting convened to obtain the
requisite approval shall be taken on a poll with those persons required under the
Listing Rules abstaining from voting.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-19 –


--- page 515 ---
(f) Time of acceptance and exercise of an option
An offer under the Share Option Scheme may remain open for acceptance by the
eligible participants concerned (and by no other person) for a period of up to 21 days
from the date, which must be a Business Day, on which the offer is made.
An option may be exercised in accordance with the terms of the Share Option
Scheme at any time during a period to be determined and notified by our Directors to
the grantee but in any event shall not be more than ten (10) years from the offer date
of that option.
An offer shall have been accepted by an eligible participant in respect of all
Shares which are offered to such eligible participant when the duplicate letter
comprising acceptance of the offer duly signed by the eligible participant together with
a remittance in favour of our Company of HK$1.00 by way of consideration for the
grant thereof is received by our Company within such time as may be specified in the
offer (which shall not be later than 21 days from the offer date). Such remittance shall
in no circumstances be refundable.
Any offer may be accepted by an eligible participant in respect of less than the
number of Shares which are offered provided that it is accepted in respect of a board
lot for dealings in our Shares on the Main Board or an integral multiple thereof and
such number is clearly stated in the duplicate letter comprising acceptance of the offer
duly signed by such eligible participant and received by our Company together with a
remittance in favour of our Company of HK$1.00 by way of consideration for the grant
thereof within such time as may be specified in the offer (which shall not be later than
21 days from the offer date). Such remittance shall in no circumstances be refundable.
(g) V esting Period and performance targets
The vesting period for options shall be determined by the Board and in any case,
shall not be less than twelve (12) months. A shorter vesting period may be granted to
an Employee Participant at the discretion of the Board in the following circumstances:
(i) grants of “make-whole” options to new joiners to replace the share awards
they forfeited when leaving the previous employer;
(ii) grants of options to an Employee Participant whose employment is
terminated due to death or disability or occurrence of any out of control
event;
(iii) grants of options with performance-based vesting conditions in lieu of
time-based vesting criteria;
(iv) grants of options that are made in batches during a year for administrative
and compliance reasons;
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-20 –


--- page 516 ---
(v) grants of options with a mixed or accelerated vesting schedule such as where
the options may vest evenly over a period of 12 months; and
(vi) grants of options with a total vesting and holding period of more than 12
months.
The Board may determine and set any performance targets, which shall be stated
in the offer to the grantee, to be attained before the exercise of an option granted to the
grantee as the Board may think fit. Such performance targets may include: (i) aggregate
amount of revenue or business generated by the specific grantee during a financial
year; (ii) annual growth on the revenue of our Group as compared to the immediately
preceding financial year; or (iii) any measurable performance benchmark which the
Board considers is relevant to the grantee.
(h) Subscription price for Shares
The subscription price in respect of any option shall, subject to any adjustment
made pursuant to paragraph(s) below, be at the discretion of our Directors, provided
that it shall not be less than the highest of:
(i) the closing price of our Shares as stated in the Stock Exchange’s daily
quotations sheet for trade in one or more board lots of our Shares on the
offer date;
(ii) the average closing price of our Shares as stated in the Stock Exchange’s
daily quotations sheets for the five Business Days immediately preceding the
offer date; and
(iii) the nominal value of a Share.
(i) Ranking of Shares
Shares to be allotted and issued upon the exercise of an option will be subject to
all the provisions of the Articles of Association of our Company for the time being in
force and will rank equally in all respects with the then existing fully paid Shares in
issue on the date on which the option is duly exercised or, if that date falls on a day
when the register of members of our Company is closed, the first day of the re-opening
of the register of members (the “ Exercise Date ”) and accordingly will entitle the
holders thereof to participate in all dividends or other distributions paid or made on or
after the Exercise Date other than any dividend or other distribution previously
declared or recommended or resolved to be paid or made if the record date therefor
shall be before the Exercise Date. A Share allotted and issued upon the exercise of an
option shall not carry voting rights until the name of the grantee has been duly entered
on the register of members of our Company as the holder thereof.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-21 –


--- page 517 ---
(j) Restrictions on the time of grant of options
For so long as our Shares are listed on the Stock Exchange, an offer may not be
made after inside information has come to our Company’s knowledge until it has
announced the information. In particular, during the period commencing one month
immediately preceding the earlier of (i) the date of the board meeting (as such date is
first notified to the Stock Exchange in accordance with the Listing Rules) for the
approval of our Company’s result for any year, half-year, quarter-year or any other
interim period (whether or not required under the Listing Rules); and (ii) the deadline
for our Company to announce its results for any year, half-year, quarter-year period or
any other interim period (whether or not required under the Listing Rules), and ending
on the date of the results announcement, no offer for the grant of option may be made.
Our Directors may not make any offer to an eligible participant who is a Director
during the periods or times in which our Directors are prohibited from dealing in
Shares under such circumstances as prescribed by the Listing Rules or any
corresponding code or securities dealing restrictions adopted by our Company.
(k) Period of the Share Option Scheme
The Share Option Scheme will remain in force for a period of 10 years
commencing on the date on which the Share Option Scheme is adopted.
(l) Rights of ceasing employment
If the grantee is an Employee Participant and in the event of his ceasing to be an
Employee Participant for any reason other than his death, ill-health or retirement in
accordance with his contract of employment or the termination of his employment on
one or more of the grounds specified in (n) below before exercising the option in full,
the option (to the extent not already exercised) shall lapse on the date of cessation or
termination and not be exercisable unless our Directors otherwise determine in which
event the grantee may exercise the option (to the extent not already exercised) in whole
or in part within such period as our Directors may determine following the date of such
cessation or termination. The date of cessation or termination as aforesaid shall be the
last day on which the grantee was actually at work with our Company or the relevant
subsidiary(ies) whether salary is paid in lieu of notice or not.
(m) Rights on death, ill-health or retirement
If the grantee is an Employee Participant and in the event of his ceasing to be an
Employee Participant by reason of his death, ill-health or retirement in accordance with
his contract of employment before exercising the option in full, his personal
representative(s) or, as appropriate, the grantee may exercise the option (to the extent
not already exercised) in whole or in part within a period of 12 months following the
date of cessation of employment which date shall be the last day on which the grantee
was at work with our Company or the relevant subsidiary whether salary is paid in lieu
of notice or not.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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--- page 518 ---
(n) Rights on dismissal
In respect of a grantee who is an Employee Participant, the date on which the
grantee ceases to be an Employee Participant by reason of the termination of his
employment on the grounds that he has been guilty of persistent or serious misconduct,
or has committed any act of bankruptcy or has become insolvent or has made any
arrangement or composition with his creditors generally, or has been convicted of any
criminal offence (other than an offence which in the opinion of our Directors does not
bring the grantee or our Group into disrepute), such option (to the extent not already
exercised) shall lapse automatically and shall not in any event be exercisable on or
after the date of his/her cessation to be an Employee Participant.
(o) Rights on breach of contracts
In respect of a grantee other than an Employee Participant, the date on which our
Directors shall at their absolute discretion determine that (1) such grantee has
committed any breach of any contract entered into between such grantee on the one
part and our Group on the other part; or (2) such grantee has committed any act of
bankruptcy or has become insolvent or is subject to any winding-up, liquidation or
analogous proceedings or has made any arrangement or composition with his creditors
generally; or (3) such grantee could no longer make any contribution to the growth and
development of our Group by reason of the cessation of its relations with our Group or
by any other reason whatsoever, the option shall lapse as a result of any event
specified in sub-paragraphs (1) to (3).
(p) Rights on a general offer, a compromise or an arrangement
If a general or partial offer, whether by way of take-over offer, share re-purchase
offer, or scheme of arrangement or otherwise in like manner is made to all the holders
of our Shares, or all such holders other than the offeror and/or any person controlled
by the offeror and/or any person acting in association or concert with the offeror, our
Company shall use all reasonable endeavours to procure that such offer is extended to
all the grantees on the same terms, mutatis mutandis, and assuming that they will
become, by the exercise in full of the options granted to them, our Shareholders. If
such offer becomes or is declared unconditional or such scheme of arrangement is
formally proposed to our Shareholders, the grantee shall, notwithstanding any other
terms on which his/her option was granted, be entitled to exercise the option (to the
extent not already exercised) to its full extent or to the extent specified in the grantee’s
notice to our Company in exercise of his/her option at any time thereafter and up to
the close of such offer (or any revised offer) or the record date for entitlements under
scheme of arrangement, as the case may be. Subject to the above, an option will lapse
automatically (to the extent not exercised) on the date on which such offer (or, as the
case may be, revised offer) closes.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-23 –


--- page 519 ---
(q) Rights on winding-up
In the event of a resolution being proposed for the voluntary winding-up of our
Company during the option period, the grantee may, subject to the provisions of all
applicable laws, by notice in writing to our Company at any time not less than two
Business Days before the date on which such resolution is to be considered and/or
passed, exercise his/her option (to the extent not already exercised) either to its full
extent or to the extent specified in such notice in accordance with the provisions of the
Share Option Scheme and our Company shall allot and issue to the grantee the Shares
in respect of which such grantee has exercised his/her option not less than one
Business Day before the date on which such resolution is to be considered and/or
passed whereupon he/she shall accordingly be entitled, in respect of the Shares allotted
and issued to him/her in the aforesaid manner, to participate in the distribution of the
assets of our Company available in liquidation equally with the holders of our Shares
in issue on the day prior to the date of such resolution. Subject thereto, all options then
outstanding shall lapse and determine on the commencement of the winding-up of our
Company.
(r) Grantee being a company wholly owned by eligible participants
If the grantee is a company wholly owned by one or more eligible participants:
(i) the provisions of paragraphs (l), (m), (n) and (o) above shall apply to the
grantee and to the option granted to such grantee, mutatis mutandis, as if
such option had been granted to the relevant eligible participant, and such
option shall accordingly lapse or fall to be exercisable after the event(s)
referred to in paragraphs (l), (m), (n) and (o) above shall occur with respect
to the relevant eligible participant; and
(ii) the options granted to the grantee shall lapse and determine on the date the
grantee ceases to be wholly owned by the relevant eligible participant
provided that our Directors may in their absolute discretion decide that such
options or any part thereof shall not so lapse or determine subject to such
conditions or limitations as they may impose.
(s) Adjustment to the subscription price
In the event of any alteration in the capital structure of our Company whilst any
option remains exercisable or the Share Option Scheme remains in effect, and such
event arises from a capitalisation issue, rights issue, consolidation or sub-division of
the Shares, or reduction of the share capital of our Company, then, in any such case
our Company shall instruct our auditors or an independent financial adviser to certify
in writing the adjustment, if any, that ought in their opinion fairly and reasonably to be
made either generally or as regards any particular grantee, to:
(i) the number or nominal amount of Shares to which the Share Option Scheme
or any option(s) relate(s) (insofar as it is/they are unexercised); and/or
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-24 –


--- page 520 ---
(ii) the subscription price of any option; and/or
(iii) (unless the relevant grantee elects to waive such adjustment) the number of
Shares comprised in an option or which remain comprised in an option,
and an adjustment as so certified by our auditors or such independent financial
adviser shall be made, provided that:
(i) any such adjustment shall give the grantee the same proportion of the issued
share capital of our Company (as interpreted in accordance with the
supplemental guidance attached to the letter from the Stock Exchange dated
5 September 2005 to all issuers relating to share option schemes), rounded to
the nearest whole share, for which such grantee would have been entitled to
subscribe had he/she exercised all the options held by him/her immediately
prior to such adjustment;
(ii) no such adjustment shall be made the effect of which would be to enable a
Share to be issued at less than its nominal value;
(iii) the issue of Shares or other securities of our Group as consideration in a
transaction shall not be regarded as a circumstance requiring any such
adjustment; and
(iv) any such adjustment shall be made in compliance with the Listing Rules and
such rules, codes and guidance notes of the Stock Exchange from time to
time.
In respect of any adjustment referred to above, other than any adjustment made on
a capitalisation issue, our auditors or such independent financial adviser must confirm
to our Directors in writing that the adjustments satisfy the relevant provisions of the
Listing Rules and the supplemental guidance attached to the letters from the Stock
Exchange dated 5 September 2005 to all issuers relating to share option schemes.
(t) Cancellation of options
Subject to the provisions in the Share Option Scheme and the Listing Rules, any
option granted may not be cancelled except with the prior written consent of the
relevant grantee and the approval of our Directors.
Where our Company cancels any option granted to a grantee but not exercised
and issues new option(s) to the same grantee, the issue of such new option(s) may only
be made with the available Scheme Mandate Limit, the Service Provider Sublimit or
the limits approved by our Shareholders pursuant to paragraph (c)(iii) or (c)(iv) above
(excluding, for this purpose, the options so cancelled).
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-25 –


--- page 521 ---
(u) Termination of the Share Option Scheme
Our Company by an ordinary resolution in a general meeting may at any time
terminate the operation of the Share Option Scheme and in such event no further
options will be offered but in all other respects the provision of the Share Option
Scheme shall remain in force to the extent necessary to give effect to the exercise of
any option (to the extent not already exercised) granted prior thereto or otherwise as
may be required in accordance with the provisions of the Share Option Scheme and
options (to the extent not already exercised) granted prior to such termination shall
continue to be valid and exercisable in accordance with the Share Option Scheme.
(v) Rights are personal to grantee
An option shall be personal to the grantee and shall not be transferable or
assignable, and no grantee shall in any way sell, transfer, charge, mortgage, encumber
or otherwise dispose of or create any interest whatsoever in favour of any third party
over or in relation to any option or enter into any agreement so do so, unless a waiver
is granted by the Stock Exchange allowing the transfer of the option to a vehicle for
the benefit of the grantee and any family members of such grantee for estate planning
and tax planning purposes that would continue to meet the purpose of the Share Option
Scheme and the Listing Rules. Any breach of the foregoing by a grantee shall entitle
our Company to cancel any option granted to such grantee to the extent not already
exercised.
(w) Lapse of option
An option shall lapse automatically (to the extent not already exercised) on the
earliest of (i) the expiry of the option period in respect of such option; (ii) the expiry
of the periods or dates referred to in paragraphs (l), (m), (n), (o), (p), (q) and (r)
above; or (iii) the date on which our Directors exercise our Company’s right to cancel
the option by reason of paragraph (v) above.
(x) Others
(i) The Share Option Scheme is conditional upon:
(1) the Stock Exchange granting the listing of and permission to deal in
such number of Shares representing the Scheme Mandate Limit to be
allotted and issued by our Company pursuant to the exercise of options
in accordance with the terms and conditions of the Share Option
Scheme; and
(2) the passing of the necessary resolutions to approve and adopt the Share
Option Scheme in a general meeting or by way of written resolution of
our Shareholders.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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--- page 522 ---
(ii) Any alterations to the provisions of the Share Option Scheme relating to the
matters governed by Rule 17.03 of the Listing Rules to the advantage of
grantees or prospective grantees must be approved by our Shareholders in
general meeting, provided that no such alteration shall operate to affect
adversely the terms of issue of any option granted or agreed to be granted
prior to such alteration except with the consent or sanction of such majority
of the grantees as would be required of the holders of the Shares under the
Articles of Association for the time being of our Company for a variation of
the rights attached to the Shares.
(iii) Subject to paragraph (v) below, any alterations to the terms of options
granted to a participant must be approved by the Board, the Remuneration
Committee, the independent non-executive Directors and/or our Shareholders
(as the case may be) if the initial grant of the options was approved by the
Board, the Remuneration Committee, the independent non-executive
Directors and/or our Shareholders (as the case may be) except where the
alterations take effect automatically under the existing terms of the Share
Option Scheme.
(iv) The terms of the Share Option Scheme and/or any option amended must
comply with the applicable requirements of the Listing Rules.
(v) Any change to the authority of our Directors or the administrators of the
Share Option Scheme in relation to any alteration to the terms of the Share
Option Scheme must be approved by our Shareholders in a general meeting.
2. Present status of the Share Option Scheme
Application has been made to the Stock Exchange for the listing of and permission to
deal in the Shares within the Scheme Mandate Limit pursuant to the exercise of options
which may be granted under the Share Option Scheme.
As at the date of this prospectus, no option has been granted or agreed to be granted
under the Share Option Scheme.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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E. OTHER INFORMATION
1. Tax and other indemnities
Our Controlling Shareholders (collectively, the “ Indemnifiers ”) have, under a Deed of
Indemnity as referred to in paragraph (b) of the paragraph headed “B. Further Information
about the Business of our Group – 1. Summary of material contracts” in this appendix,
given joint and several indemnities to our Company (for ourselves and as trustee for and on
behalf of our Company’s subsidiaries) in connection with, among other things:
(a) any taxation (including estate duty) falling on any member of our Group resulting
from or by reference to any income, profits, gains, transactions (including but not
limited to any transactions involved in the Reorganisation), events, matters or
things earned, accrued, received, entered into (or deemed to be so earned,
accrued, received or entered into) or occurring on or before the date on which the
Share Offer becomes unconditional; and
(b) all costs which any member of our Group may incur, suffer or accrue, directly or
indirectly, from or on the basis of or in connection with (i) any litigation,
arbitrations, claims (including counter-claims), complaints, demands and/or legal
proceedings instituted by or against any member of our Group in relation to
events occurred on or before the date on which the Share Offer becomes
unconditional and (ii) any alleged or actual violation or breach or non-compliance
by any member of our Group with any laws, regulations, rules or administrative
orders or measures in Hong Kong or other applicable jurisdictions on or before
the date on which the Share Offer becomes unconditional, if any.
The Indemnifiers will, however, not be liable under the Deed of Indemnity to the
extent that, among others:
/L50188in relation to items (a) and (b) above, provision has been made for such
liability in the audited consolidated accounts of our Company or any member
of our Group for the Track Record Period;
/L50188in relation to item (a) above, the taxation liability arises or is incurred as a
result of a retrospective change in law or a retrospective increase in tax rates
coming into force after the date on which the Share Offer becomes
unconditional; or
/L50188in relation to item (a) above, the taxation liability arises in the ordinary
course of business of any member of our Group after the date on which the
Share Offer becomes unconditional.
Our Directors have been advised that no material liability for estate duty under the
laws of the Cayman Islands and BVI is likely to fall on our Group, and the estate duty
under the laws of Hong Kong has been abolished.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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2. Legal proceedings / Litigation
To the best knowledge of our Directors, save as disclosed in the paragraph headed
“Business – Litigations and claims” in this prospectus, as at the Latest Practicable Date,
neither our Company nor any of our Company’s subsidiaries was engaged in any litigation,
arbitration or claim of material importance, and no litigation, arbitration or claim of material
importance is known to our Directors to be pending or threatened by or against our
Company or any member of our Group, that would have a material adverse effect on the
results of operations or financial condition.
3. Application for listing of Shares
Our Company has applied to the Listing Committee for the listing of, and the
permission to deal in, the Shares in issue and to be issued pursuant to the Capitalisation
Issue and the Share Offer as mentioned herein (including the additional Shares which may
be issued upon full exercise of the Over-allotment Option) and the Shares to be issued upon
the exercise of any option which may be granted under the Share Option Scheme). All
necessary arrangements have been made to enable the securities to be admitted into CCASS.
4. Compliance adviser
In accordance with the requirements of the Listing Rules, our Company has appointed
Grande Capital Limited as our compliance adviser to provide advisory services to our
Company to ensure compliance with the Listing Rules for a period commencing on the
Listing Date and ending on the date on which our Company complies with Rule 13.46 of the
Listing Rules in respect of the financial results for the first full financial year commencing
after the Listing Date.
5. Preliminary expenses
The estimated preliminary expenses amounted to approximately HK$46,000 and has
been paid by our Company.
6. Promoter
(a) We do not have any promoter.
(b) Within the two years immediately preceding the date of this prospectus, no
amount or benefit has been paid or given to any promoter of our Company in
connection with the Share Offer or the related transactions described in this
prospectus.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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7. Qualifications of experts
The following are the qualifications of the experts who have given opinion or advice
which are contained in this prospectus, and have given and have not withdrawn their written
consent to the issue of this prospectus with the inclusion of their letter, report, and/or
valuation certificate opinion and/or references to their names (as the case may be), all of
which are dated the date of this prospectus, in the form and context in which they
respectively appear in this prospectus:
Name Qualifications
Appleby Legal advisers to our Company as to Cayman
Islands law
China Commercial Law Firm Legal advisers to our Company as to PRC law
Frost & Sullivan Limited Industry consultant
Grande Capital Limited A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated activities
as defined under the SFO
Ms. Queenie W.S. Ng Barrister-at-law in Hong Kong
PricewaterhouseCoopers Certified Public Accountants under the
Professional Accountant Ordinance (Chapter 50 of
the Laws of Hong Kong) and Registered Public
Interest Entity Auditor under the Accounting and
Financial Reporting Council Ordinance (Chapter
588 of the Laws of Hong Kong)
8. Consents of experts
Each of the abovementioned experts has given and has not withdrawn their respective
consent to the issue of this prospectus with the inclusion of its reports, letters, opinions or
summaries of opinions (as the case may be) and reference to its name included in the form
and context in which it respectively appears.
As at the Latest Practicable Date, none of the experts referred to above had any
shareholding interest in our Company or any of our subsidiaries or the right (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our
Company or any of our subsidiaries.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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9. Fees of the Sponsor
The Sponsor will receive a sponsorship, financial advisory and documentation fee of a
total amount of HK$5.8 million in relation to the Listing and will be reimbursed for their
expenses.
10. Independence of the Sponsor
Neither the Sponsor nor any of its close associates has accrued any material benefit as
a result of the successful outcome of the Share Offer, other than the following:
(a) by way of sponsorship, financial advisory and documentation fee to be paid to the
Sponsor for acting as the sponsor of the Listing; and
(b) by way of the compliance advisory fee to be paid to Grande Capital Limited as
our Company’s compliance adviser pursuant to the requirements under Rule 3A.19
of the Listing Rules.
No director or employee of the Sponsor who is involved in providing advice to our
Company has or may have, as a result of the Listing, any interest in any class of securities
of our Company or any of our Company’s subsidiaries. None of the directors and employees
of the Sponsor has any directorship in our Company or any member of our Group. The
Sponsor is independent from our Group under Rule 3A.07 of the Listing Rules.
11. Binding effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all of the provisions (other than the penal
provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance so far as applicable.
12. Miscellaneous
Save as disclosed herein:
(a) within the two years immediately preceding the date of this prospectus:
(i) Save as disclosed in the section headed “History, development and
Reorganisation” in this prospectus, no share or loan capital of our Company
or any of its subsidiaries has been allotted and issued, agrees to be allotted
and issued or is proposed to be allotted and issued fully or partly paid either
for cash or for a consideration other than cash;
(ii) Save as disclosed in the section headed “Underwriting” in this prospectus,
no commission, discounts, brokerages or other special terms have been
granted in connection with the issue or sale of any Share or loan capital of
our Company or any of our Company’s subsidiaries and no commission
APPENDIX V STATUTORY AND GENERAL INFORMATION
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(excluding sub-underwriters’ commission) has been paid or payable for
subscribing or agreeing to subscribe or procuring or agreeing to procure
subscription for any Share or any of our Company’s subsidiaries; and
(iii) Save as disclosed in the section headed “Underwriting” in this prospectus,
no commission has been paid or payable for subscribing or agreeing to
subscribe, or procuring or agreeing to procure subscription, for any Share or
shares of any member of our Group.
(b) No founder, management or deferred shares of our Company has been allotted and
issued or agreed to be allotted and issued.
(c) Save as disclosed in the paragraph headed “D. Share Option Scheme” in this
appendix, no share, warrant or loan capital of our Company or any of its
subsidiaries is under option or is agreed conditionally or unconditionally to be put
under option.
(d) Our Company has no outstanding convertible debt securities.
(e) There is no arrangement under which future dividends are waived or agreed to be
waived.
(f) Our Directors confirm that, save for the expenses in connection with the Listing,
up to the date of this prospectus, there has been no material adverse change in the
financial or trading position or prospects of our Group since 30 September 2023,
which would materially affect the information shown in our consolidated financial
statements included in the Accountant’s Report.
(g) Our Directors confirm that there has not been any interruption in the business of
our Group which may have or have had a significant effect on the financial
position of our Group in the 12 months immediately preceding the date of this
prospectus.
13. Bilingual Prospectus
Pursuant to section 4 of the Companies (Exemption of Companies and Prospectuses
from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), the
English language and Chinese language versions of this prospectus are being published
separately but are available to the public at the same time at each place where this
prospectus is distributed by or on behalf of our Company.
APPENDIX V STATUTORY AND GENERAL INFORMATION
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DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG
KONG
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
1. copies of the material contracts as referred to in the paragraph headed “B. Further
information about the business of our Group – 1. Summary of material contracts”
in Appendix V to this prospectus; and
2. the written consents as referred to in the paragraph headed “E. Other information
– 8. Consents of experts” in Appendix V to this prospectus.
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the
Stock Exchange at www.hkexnews.hk and our website at www.wing-kei.com.hk up to and
including the date which is 14 days from the date of this prospectus:
1. the Memorandum and the Articles of Association;
2. the Accountant’s Report from PricewaterhouseCoopers in respect of the historical
financial information for FY2020, FY2021, FY2022 and the nine months ended 30
September 2023, the text of which is set out in Appendix I to this prospectus;
3. the audited consolidated financial statements of our Group for FY2020, FY2021,
FY2022 and the nine months ended 30 September 2023;
4. the report from PricewaterhouseCoopers on the unaudited pro forma financial
information of our Group, the text of which is set out in Appendix II to this
prospectus;
5. the letter from PricewaterhouseCoopers in respect of our Group’s profit estimate
for the year ended 31 December 2023 prepared by our Directors, the text of
which are set out in Appendix III to this prospectus;
6. the letter from the Sponsor in respect of our Group’s profit estimate for the year
ended 31 December 2023 prepared by our Directors, the text of which are set out
in Appendix III to this prospectus;
7. the letter of advice prepared by Appleby summarising certain aspects of Cayman
Islands company law as referred to in Appendix IV to this prospectus;
8. the legal opinion prepared by the Hong Kong Legal Counsel;
9. the legal opinion prepared by the PRC Legal Advisers;
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VI-1 –


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10. the industry report prepared by Frost & Sullivan;
11. the Companies Act;
12. the rules of the Share Option Scheme;
13. the material contracts as referred to in the paragraph headed “B. Further
information about the business of our Group – 1. Summary of material contracts”
in Appendix V to this prospectus;
14. the service agreements and letters of appointment as referred to in the paragraph
headed “C. Further information about our Directors and substantial shareholders –
2. Particulars of Directors’ service agreements and appointment letters” in
Appendix V to this prospectus; and
15. the written consents as referred to in the paragraph headed “E. Other information
– 8. Consents of experts” in Appendix V to this prospectus.
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
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WK Group (Holdings) Limited
泓基集團（控股） 有限公司
