Offers 200,000,000 Shares,
Offer Price Range between HK$0.65 and HK$0.75 per Share
Kwan Yong Holdings Limited (“Kwan Yong” or the “Company”, together with its subsidiaries, the “Group”), a main contractor in the provision of building construction works in Singapore, has announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”).
Offering Details
Kwan Yong intends to offer a total of 200,000,000 shares (subject to the over-allotment option), of which 180,000,000 shares are for International Placing (subject to reallocation and over-allotment option) and 20,000,000 shares are for Hong Kong Public Offering (subject to reallocation). The indicative Offer Price range is between HK$0.65 and HK$0.75 per Offer Share.
The Hong Kong Public Offering commences on 24 December 2019 (Tuesday) at 9:00 a.m. and will end at noon on 31 December 2019 (Tuesday). The final Offer Price and allotment results are expected to be announced on 7 January 2020 (Tuesday). Dealing of Kwan Yong’s shares is expected to commence on the Main Board of SEHK on 8 January 2020 (Wednesday) under the stock code 9998. Shares will be traded in board lots of 5,000 shares each.
SPDB International Capital Limited is the Sole Sponsor and Sole Global Coordinator, while SPDB International Capital Limited, Easy Securities Limited, Chuenman Securities Limited, GLAM Capital Limited and Great Roc Capital Securities Limited are the Joint Bookrunners and Joint Lead Managers of the Global Offering.
Four cornerstone investors demonstrate confidence in the Group
The Group has entered into cornerstone investment agreements with four cornerstone investors, namely, SG-Bogen Pte Ltd, Mr. Tay Wah Seng, Mr. Tan Cheng Chuan and Mr. Charles Antonny Melati, pursuant to which the cornerstone investors have agreed to subscribe for such number of Shares (rounded down to nearest whole board lot of 5,000 Shares) at the Offer Price, which may be purchased with an aggregate amount of approximately HK$35.9 million. Introducing the cornerstone investors to the Global Offering and securing the subscription of a significant number of Offer Shares will set a solid platform for the launch of the Global Offering by demonstrating the cornerstone investors’ confidence in the Global Offering.
Investment Highlights
Proven track record of delivering quality building construction works to customers
Kwan Yong is known for its quality of work, especially in building construction works for the public sector. The Group ranked fourth among contractors in the institutional sector in Singapore in terms of the average institution CONQUAS score in 2018 . Owing to the Group’s commitment to providing high quality building construction works, all of its completed public sector projects during the Track Record Period achieved a CONQUAS score of over 90 points out of 100 points, with one project completed during FY2018 scoring as high as 96.8 CONQUAS score.
It also placed strong emphasis on the timeliness of its works. With its experienced and professional execution team as well as its ability to adopt new construction technologies and capability to offer valued-added engineering solutions to customers, the Group has managed to complete all of its projects on time or ahead of schedule during the Track Record Period.
Long-term relationship with customers, suppliers and subcontractors
The Group enjoys the benefits of having a long-term relationship with its customers as well as suppliers and subcontractors. Kwan Yong was awarded its first education institution building construction project by Singapore Government Agency A in 1997. Since then and up to the Latest Practicable Date, Kwan Yong has been awarded 38 education institution new construction or A&A projects by Singapore Government Agency A. For each of the three years ended 30 June 2019, the average length of business relationship with Kwan Yong’s top five suppliers was 9.6 years, 6.6 years and 9.6 years respectively, while the average length of business relationship with the top five subcontractors was 8.1 years, 9.2 years and 3.5 years respectively.
Commitment to adopting new construction technologies to enhance productivity, quality and safety, and providing value-added engineering solutions
The Group is committed to adopting new construction technologies to enhance its productivity, quality and safety. In addition to adopting new construction technologies, the Group’s project teams also seek to provide customers with value-added engineering solutions with a view to enhance productivity, site safety and quality, shorten construction schedule, and reduce costs.
Experienced senior management team with comprehensive industry, market and technical knowledge and a proven track record
With over 30 years of experience in the construction industry, the Group has established a strong management team with comprehensive industry, market and technical knowledge. Led by the experienced team, the Group’s revenue increased by approximately 104.8% from approximately SGD53.9 million for FY2018 to approximately SGD110.4 million for FY2019.
As at the Latest Practicable Date, the Group had 10 ongoing building construction projects with a total contract sum of approximately SGD405.9 million (A&A works: SGD88.3 million; new construction: SGD317.6 million), in relation to which approximately SGD190.9 million and SGD49.7 million of revenue arising from these projects is expected to be recognised for FY2020 and FY2021, respectively.
Future Strategies
According to Ipsos Report, the overall gross output value of building construction works in Singapore from 2018 to 2022 is expected to grow at a CAGR of 5.9% from SGD19.1 billion to SGD24.0 billion. While the gross output value of building construction works for the private sector is expected to grow at a CARG of 3.6% from SGD11.8 billion in 2018 to SGD13.6 billion in 2022 only, the gross output value of building construction works for the public sector is expected to grow at a CARG of 9.3% from SGD7.3 billion to SGD10.4 billion during the same period, mainly supported by the Singapore Government’s initiatives to upgrade public flats, healthcare facilities, and certain major infrastructure projects. Additionally, A&A works for schools are also expected to stay on an increasing trend fueled by merging of schools and upgrading of education institutions in Singapore.
In order to strengthen the Group’s market position and overall competitiveness as a main contractor in the provision of building construction works in Singapore, Kwan Yong will strengthen its financial capabilities to undertake new construction and A&A projects of larger contract value. The Group will also purchase new machinery and equipment and upgrade and replace existing machinery and equipment to enhance its productivity and quality. In addition, it intends to strengthen its technical capability and productivity through investment in new construction technology, and enhance and expand its workforce to cope with its business expansion.
Use of Proceeds
The net proceeds of the Global Offering, based on an Offer Price of HK$0.70 per share (being the mid-point of the indicative Offer Price range), after deduction of underwriting fees and other estimated expenses in connection with the Global Offering and assuming the over-allotment option is not exercised, are estimated at approximately HK$97.4 million and will be used as follows:
Use / Percentage
– Strengthening technical capability and productivity through investment in new technology: 39.5%
– Purchasing new machinery and equipment and upgrading and enhancing existing machinery and equipment to enhance productivity and quality: 27.9%
– Part of the initial capital requirement of Project A: 23.6%
– Enhancing and expanding workforce to cope with business expansion: 8.5%
– General working capital: 0.4%
Financial Performance
Year Ended 30 Jun
2017 2018 2019 CAGR
SGD’000 HKD’000 SGD’000 HKD’000 SGD’000 HKD’000
Revenue 78,664 452,318 53,883 309,827 110,364 634,593 18.5%
Gross profit 9,291 53,423 9,989 57,437 14,373 82,645 24.4%
Adjusted net profit for the year 5,204 29,923 6,256 35,972 8,313 47,800 26.4%
Notes:
1. The adjusted net profit for FY2019 represents profit for the year excluding one-off listing expenses
2. The conversion of SGD into HK$ is based on the approximate exchange rate of SGD1.00 to HK$5.75
Dividend Policy
Upon Listing, the Directors intend to recommend dividends which would amount in total to not less than 30% of the net profit from ordinary activities attributable to shareholders of the Company for full financial year subject to various factors such as the operations, earnings, and financial conditions.
About Kwan Yong Holdings Limited
Kwan Yong Holdings Limited is a main contractor in the provision of building construction works in Singapore which is known for quality of work, especially in building construction works for the public sector. The Group ranked fourth among contractors in the institutional sector in Singapore in terms of the average institution CONQUAS score in 20181. It has more than 30 years of experience in building construction works for various types of buildings including institutional buildings, commercial buildings as well as industrial and residential buildings which can be categorized into (i) new construction and (ii) A&A works.
Website: www.kwanyong.com.sg
Media Enquiries:
Strategic Financial Relations Limited
Mandy Go Tel: (852) 2864 4812 Email: mandy.go@sprg.com.hk
Fanny Yuen Tel: (852) 2864 4853 Email: fanny.yuen@sprg.com.hk
Website: www.sprg.com.hk