SMC Electric Limited (“SMC Electric” or the “Company”, together with its subsidiaries, collectively referred as the “Group”) has recently announced the details of the proposed listing of its shares on Main Board of The Stock Exchange of Hong Kong Limited (“HKEx”) (the “Share Offer”).
Investment Highlights
– Long history in the PRC-based electric tools and electric fans export industry.
– Stringent quality control.
– Established relationships with reputable overseas customers.
– Close relationships with customers and reliable suppliers.
– Cost effective production operations.
– Highly experienced professional management team.
SMC Electric plans to offer a total of 500,000,000 shares, subject to re-allocation, comprising 50,000,000 Public Offer Shares and 450,000,000 Placing Shares (comprising 225,000,000 sale Shares), at an Offer Price HK$0.25 per Offer Share. The Public Offer opened at 09:00 a.m. on Tuesday, 19 May 2020 and will close at 12:00 noon on Friday, 22 May 2020. The allotment results will be announced on Monday, 1 June 2020. Dealings in shares on HKEx are expected to commence on Tuesday, 2 June 2020, under the stock code 2381.
Red Sun Capital Limited is the Sole Sponsor. Elstone Securities Limited acts as Sole Global Coordinator. Joint Bookrunners and Joint Lead Managers are Elstone Securities Limited, CMBC Securities Company Limited, Essence International Securities (Hong Kong) Limited, First Fidelity Capital (International) Limited, Kingkey Securities Group Limited, SPDB International Capital Limited, Zhongtai International Securities Limited, Conrad Investment Services Limited, Realord Asia Pacific Securities Limited, KGI Asia Limited and Innovest Securities Investment Limited.
Company Overview
SMC Electric engages in the (i) manufacturing and selling of rechargeable electric tools and (ii) sourcing and selling of electric fans. The Group is headquartered in Hong Kong with its manufacturing operations in the PRC. SMC Electric sells a range of rechargeable products including fans, work lights, vacuum cleaners and other electric tools.
Business Model
SMC Electric manufactures and sells a wide range of rechargeable electric tools including cordless fans, work lights, vacuum cleaners and other electric tools mainly to the U.S. and sources and sells electric fans for oversea customers and under the Group’s own brand name, “SMC”.
SMC Electric chooses to manufacture rechargeable electric tools sold to the U.S. customer due to the relatively more stringent quality standard required by its customers, and a relatively higher level of technical difficulty needed in the products’ production process. However, as the design and production of the Group’s electric fans have matured and stabilised, SMC Electric has outsourced the production process to its suppliers, who are manufacturers, to help produce such electric fans.
Financial Highlights
The total revenue of the Group was approximately HK$251.0 million, HK$266.1 million and HK$278.0 million for FY2017, FY2018 and FY2019, respectively. The net profit of the Group was approximately HK$31.2 million, HK$34.6 million and HK$45.4 million for FY2017, FY2018 and FY2019, respectively. The net profit margin increased from approximately 13.0% in FY2018 to approximately 16.3% in FY2019.
Competitive Strengths
The Group believes that its success is attributable to the following competitive strengths:
Firstly, the Group is one of the long-established suppliers of electric fans in the PRC electric fans industry, and therefore is well positioned in capitalising on the growth in overseas fans market. Moreover, SMC Electric has established its own brand of electric fans, “SMC”, since the 1950s. Through the Group’s sales and marketing of the “SMC” brand over the years, SMC Electric has been able to expand the sales of such electric fans to different overseas markets, including different parts of Asia, Africa and Oceania.
In addition, the Group places top priority on the quality of its products. SMC Electric has developed and implemented stringent quality control procedures to ensure that every stage of production adheres to its high quality standards, including tests on raw materials, work-in-progress as well as finished products.
The Group also maintains long-term business relationships with various large-scale customers. Such long-term relationships with its customers, supported by its strong positioning in export of rechargeable electric tools, distinguish the Group from its competitors in the PRC which similarly manufacture and export electric tools to overseas markets.
Moreover, the Group believes that its dedication to quality rechargeable electric tools and electric fans and competitive pricing over the years have contributed to its long-term relationships with its customers. In relation to the Group’s top five customers, the Group has had a working relationship ranging from approximately 11 to 19 years. The Directors believe that the Group can leverage on its established relationship with its customers to further develop new business opportunities in the rechargeable electric tools and electric fans industries.
Besides, the Group has electric tools production facilities in Shunde, Foshan, Guangdong Province, the PRC. The Directors believe that the Group’s operation allows it to maintain a highly competitive cost structure as it is able to benefit from economies of scale, cost effectiveness and efficiencies in its operations. The Group’s efficiency in its purchasing of raw materials including electric motors and moulds enhances the Group’s bargaining power to negotiate better prices on such raw materials.
Last but not least, the Group’s senior management team has extensive industry experience including raw materials sourcing, manufacturing, staff training and development, sales and marketing, and corporate governance. The Directors believe that the depth and breadth of the complementary experience of the management team enhances the Group’s capability in delivering quality products and providing high calibre services to its customers, which in turn help to achieve its business objectives.
Mr. Yung Kwok Kee Billy, Non-Executive Director and Chairman of SMC Electric concluded, “We are pleased to witness this significant milestone in the Group’s history. Through our listing on the Main Board of HKEx, we will tap into the international capital markets. This will not only broaden our capital and shareholder base, but will also provide us with capital to fund our expansion plan, which will finally strengthen our position in the industry and further enhance our competitive advantages, thereby driving the Group’s long-term development.”
For further enquiries, please contact Bright Communications International Limited:
Ms. Ashley Kung
Mobile: (852) 6608 9927
Email: ashley.kung@brightcommns.com
Factsheet
Details of Share Offer:
Number of Offer Shares: 500,000,000 Shares
Number of Public Offer Shares: 50,000,000 Shares (subject to re-allocation)
Number of Placing Shares: 450,000,000 Shares (comprising 225,000,000 Sale Shares) (subject to re-allocation)
Offer Price: HK$0.25 per Offer Share
Board Lot Size: 10,000 Shares
Nominal Value: HK$0.01 per Share
Public Offer Period: Tuesday,19 May 2020 – Friday, 22 May 2020
Announcement of Allotment Results: Monday, 1 June 2020
Expected Listing Date: Tuesday, 2 June 2020
Stock Code: 2381
Use of Proceeds:
The aggregate net proceeds from the Share Offer (after deducting underwriting fees and estimated expenses payable by the Group in connection with the Share Offer), assuming an Offer Price of HK$0.25 per Offer Share, will be approximately HK$42.5 million. The Group currently intends to apply the net proceeds from the Share Offer in the following manner:
Use of Proceeds / % of Net Proceeds
Improvement of the Group’s efficiencies in its daily operations: Approximately 14.8 %
Strategically expanding the Group’s manufacturing capabilities: approximately 60.9 %
Devoting resources on new products and applications: Approximately 24.3 %
Track Record:
For the year ended/as at 31 December
FY2017 FY2018 FY2019
HKD000′ HKD000′ HKD000′
Revenue 250,982 266,056 277,974
Gross profit 71,055 80,739 87,459
Gross profit margin 28.3% 30.3% 31.5%
Profit before tax 38,876 44,778 57,007
Profit for the year 31,206 34,628 45,367
Net profit margin 12.4% 13.0% 16.9%
Listing expenses – 5,340 9,147
Profit before listing expenses 31,206 39,968 54,514