Global Offering of 350,000,000 Shares Offer Price of HK$1.20 Per Offer Share

Investment Highlights
– The largest E&M engineering service provider in Hong Kong with a market share of approximately 9.1% in terms of revenue in 2018[1]
– Provides comprehensive E&M engineering and technology services including: (i) building services; (ii) environmental engineering; (iii) information, communications and building technologies (“ICBT”); and (iv) lifts and escalators, to a wide range of projects and sectors in Hong Kong, Mainland China and Macau
– Participated in notable projects including the Hong Kong-Zhuhai-Macao Bridge, the Stonecutters Island Sewage Treatment Plant, Hong Kong’s first organic waste treatment plant, and Hong Kong’s Automatic Passenger and Vehicle Clearance System, including the “e-Channels”
– Had been awarded 127 projects with individual awarded contract sum of exceeding HK$10 million and had completed 11 projects with individual awarded contract sum of exceeding HK$200 million (“major projects”) during the track record period and up to 18 June 2019 (the “latest practicable date”) while 17 major projects were in progress as at the latest practicable date
– Had been awarded 25 new contracts with individual contract sum over HK$10 million, with an aggregate contract sum of approximately HK$2,339.3 million from 1 January 2019 to the latest practicable date
– Recorded revenue of HK$5,966.0 million and net profit of HK$315.3 million in FY2018, representing a CAGR of 16.3% and 61.6% respectively between FY2016 and FY2018
– The Company currently intends to distribute to its shareholders no less than 50% of profits available for distribution

Analogue Holdings Limited (the “Company”, together with its subsidiaries, the “Group”), the largest E&M engineering service provider in Hong Kong which provides multi-disciplinary and comprehensive E&M engineering and technology services to a wide range of projects and sectors in Hong Kong, Macau and Mainland China, has today announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (“HKEX”).

Offering Details
The Group plans to offer a total of 350,000,000 shares under the Global Offering (subject to the over-allotment option), of which 315,000,000 shares will be for the International Placing (subject to adjustment and the over-allotment option) and 35,000,000 shares will be for the Hong Kong Public Offer (subject to adjustment). The offer price is HK$1.20 per offer share.

The Hong Kong Public Offer will commence on 28 June 2019 (Friday) and will end at noon on 4 July 2019 (Thursday). Dealing of the shares is expected to commence on the Main Board of HKEX on 12 July 2019 (Friday) under the stock code 1977. The shares will be traded in board lots of 2,000 shares each.

BOCOM International (Asia) Limited is the Sole Sponsor, while Elstone Securities Limited is the Sole Global Coordinator. Elstone Securities Limited, BOCOM International Securities Limited, China Tonghai Securities Limited and GLAM Capital Limited are the Joint Bookrunners and Joint Lead Managers of the listing.

Cornerstone Placing
The Company, the Sole Sponsor and the Sole Global Coordinator have entered into cornerstone investment agreements with each of Mr. Yu Kam Kee Lawrence and Dato Sin Just Wong (together the “Cornerstone Investors”, and each a “Cornerstone Investor”), pursuant to which Mr. Yu Kam Kee Lawrence and Dato Sin Just Wong agreed to subscribe, or cause their respective designated entities to subscribe, at the offer price, for 33,332,000 shares and 8,332,000 shares, representing approximately 9.52% and 2.38% of the offer shares, assuming that the over-allotment option is not exercised.

Investment Highlights
Leading E&M engineering service provider with in-depth experience and a proven track record
The Group is the largest E&M engineering service provider in Hong Kong with a market share of approximately 9.1% in terms of revenue in 2018 , and has substantial operations in Macau and Mainland China. The Group has been working on a large number of highly complex and sophisticated landmark projects across its four principal business segments. Some notable projects include the Hong Kong-Zhuhai-Macao Bridge, Hong Kong’s first organic waste treatment plant at Siu Ho Wan, the “e-Channel” system at boundary control points in Hong Kong, as well as supplying lifts and escalators for major developments such as transportation terminals, universities, hospitals and amusement parks in Hong Kong, and supplying escalators for subway systems in Korea, the United Kingdom, Italy and Australia. In addition to possessing a wide range of relevant licences and qualifications necessary for engagement in E&M engineering projects in Hong Kong, Mainland China and Macau, the Group’s quality and achievements have been recognised in the market through the numerous awards garnered over the years, such as Tien-yow Jeme Civil Engineering Prize (中國土木工程詹天佑獎) and China Construction and Engineering Luban Prize (中國建築工程魯班獎).

With industry expertise, a strong project track record and solid customer relationships, the Group is frequently invited to participate in tenders for major projects. According to Frost & Sullivan, a CAGR in the revenue expected for the E&M engineering industry in Hong Kong, Macau and Mainland China is approximately 7.6%, 9.3% and 7.6% respectively between 2019 and 2023. And the Group is well-positioned to capture market opportunities and achieve further revenue growth.

Comprehensive E&M engineering services for a wide range of sectors
With an operating history of more than 40 years, the Group has gained experience and capability to provide one-stop E&M engineering services for a wide range of sectors. Moreover, the Group has developed substantial expertise in various specialties such as environmental systems, data centres and healthcare facilities and infrastructure. In addition, with its integrated capabilities, the Group is able to manage major multi-disciplinary and multi-interface projects and serve clients across a broad range of market sectors presenting cross-referral opportunities, business synergies and cost savings. The Group is therefore able to secure integrated E&M engineering contracts for large-scale projects in both the government and non-government sectors.

Innovative E&M engineering technologies and culture of innovation
The Group is confident in its ability to develop innovative E&M engineering technologies which can be applied to its services and products to improve efficiency and to meet customer requirements as well as to promote a culture of innovation. Among the initiatives to develop E&M engineering technologies, the environmental engineering segment has successfully developed a compact and highly rated sedimentation process for application to waste water and sewage treatment plants. In addition, the Group has also demonstrated its innovative approach in lifts and escalators segment through designing and developing an automated pedestrian overpass system (PEDARCO) for crossing canals, railway lines and highways, which has obtained patent internationally. As at the latest practicable date, the Group has registered and possesses 27 patents and 8 registered designs internationally.

To further promote the culture of innovation, the Group has formed an innovation committee in 2017 to drive research and development (R&D) of technology innovations and process innovations, and to encourage and incubate new ideas. The Group has also been cooperating with universities in Mainland China in the R&D of environmental engineering technologies, commencing a five-year project with Shanghai Jiao Tong University to engage in the R&D of specialised waste water treatment techniques as well as collaboration with a Hong Kong-based nanotechnology and advanced materials R&D centre.

Stringent quality, safety and environmental standards and commitment to promote sustainability
Covering diverse areas in E&M engineering services, the Group operates under an integrated quality assurance and control system to ensure effective implementation, coordination and monitoring of each stage of its projects. The Group has been accredited with the ISO 9001:2015 certification for quality assurance procedures and quality management systems. Its occupational health and safety management system is certified and in compliance with OHSAS 18001:2007, and its environmental management system is recognised with an ISO 14001:2015 certification. The Group believes that the stringent quality assurance system and strong commitment to occupational health and safety, as well as sound environmental management together reinforce its reputation as a preferred E&M engineering services provider. The Group is also strongly committed to integrate corporate social responsibility (“CSR”) into its business operations and has achieved an outstanding performance under Hong Kong Quality Assurance Agency CSR Advocate Index Scheme, which targets to drive continuous improvement with regard to CSR and sustainability issues.

Extensive client network and well-established relationship with suppliers and subcontractors
The Group maintains strong business relationships with an extensive network of customers, including blue-chip property developers and leading construction companies in Hong Kong, and other major companies and organisations. Many of these relationships have been built up over decades. The client sectors cover banking, property development, education, entertainment, hospitality, information technology, data centres, transportation, and utilities, as well as departments of the Hong Kong Government responsible for E&M engineering work, architectural services, environmental projects, and hospital management. Because of the strong client relationships and goodwill, the Group is frequently invited to participate in tenders for major projects and has a high number of repeating clients. Its long-standing client base not only provides it with a stable flow of sizeable E&M engineering projects, but also enables it to obtain valuable market information and intelligence about changing customer requirements and technological trends, which in turn helps it to better serve its customers.

The Group also maintains a list of approved subcontractors and suppliers that are reliable and meet its stringent quality requirements. The Group has on average ten years of experience with most of its five largest subcontractors and suppliers during the track record period. Its industry reputation, on-time settlement of fees, and proven track record have helped to strengthen its long-term relationship with its subcontractors and suppliers. These relationships facilitate a stable supply of manpower and materials, which in turn ensure the Group can provide its customers on-time, quality services.

Highly qualified and experienced management team supported by dedicated professional teams
Most of the Group’s executive Directors have served the Group for over 30 years and most members of the senior management team have worked for the Group for over 20 years and possess in-depth knowledge and experience in the E&M engineering industry. Through the leadership of Dr. Otto Poon, founder, chairman and executive Director, and other executive Directors and the directors of the business units who are mostly qualified engineers, the Group’s business achieved sustainable growth throughout the years. The management has been supported by a loyal and dedicated team of about 200 senior executives and executive employees who, on average have been with the Group for more than 10 years, along with over 530 licensed practitioners and over 110 qualified engineers, environmental specialists, green building specialists, certified energy assessors, specialists in building information management, and registered safety officers among the more than 2,000 staff.

Future Strategies
Expand existing E&M engineering services and consolidate the Group’s leading market position
The Group intends to expand the operations of each of its business segments.

i) Building services segment: It will continue to provide a stable stream of large-scale E&M engineering projects. In particular, the Group will continue expanding the customer base of its building services segment, seeking reputable customers that demand quality, and will be selectively taking on new projects and targeting high-value, technically challenging projects with attractive profit margins and market visibility. It also intends to expand its data centres business in Hong Kong and expand its presence in Mainland China and other countries in Southeast Asia to capture the new business opportunities driven by the rise of the “Big Data” analytics, applications of the Internet of Things (IoT), and cloud computing among other trends. The Group aims to leverage its experience in healthcare and infrastructure E&M engineering projects to capture future opportunities presented by the HK$200 billion budget that the Hong Kong Government has set aside for the implementation of the 10-year hospital development plan and explore future opportunities for tendering of an increasing number of building services projects for healthcare and infrastructure facilities in Hong Kong.

ii) Environmental engineering segment: The Group plans to explore opportunities in the environmental engineering services market in Asia, with a particular focus on capturing the increasing demand for environmental engineering services in the Hong Kong and Mainland China markets. Efforts here would include acquisition of, investment in, cooperating or forming joint ventures with companies which are engaged in environmental engineering treatment and equipment to increase its competitiveness in the market, as well as additional investment in the development of advanced environmental process technologies.

iii) ICBT segment: In view of the opportunities created by the “Smart City” initiatives of the Hong Kong government, the digitalisation of building technologies and the development of the IoT, the Group plans to enhance the engineering capability of this segment, through additional investment in the development of building technologies, commencing in 2019, including the setting up of dedicated R&D teams to develop a cloud-based intelligent building platform, and IoT solutions. The Group is also exploring opportunities of acquisition of, or investment in, companies which possess innovative technology to undertake projects in IoT, Big Data, security and the Smart City.

iv) Lifts and escalators segment: The Group plans to expand existing manufacturing facilities and construct a new production plant in Nanjing, which are expected to be completed in the second half of 2019 and 2020 respectively, mainly to (i) support its expected growth in sales of lifts overseas, in Mainland China and in Hong Kong; and (ii) accommodate the development and future manufacturing of PEDARCO. The Group will also set up export sales office(s) and sales and service centres in Mainland China and conduct a marketing campaign to promote its brand and products in the relevant regions.

Develop innovative E&M engineering solutions, processes and technologies
To strive for excellence in business operations, in 2018, the Group has established its innovation roadmap, adopting a two-pronged approach. First, it focuses on pursuing process improvement in two major domains, namely smart workflow and workplace safety. Secondly, it focuses on pursuing technological developments in four major domains, namely (i) advanced environmental processes, (ii) smart and green buildings, (iii) smart and green cities, and (iv) smart and green construction process. With the establishment of its innovation roadmap, the Group targets to initiate a number of innovative projects in process improvement and technological development every year, expecting to generate positive impact in the abovementioned six major domains and thus contribute to boosting its business performance.

Increase efficiency, strengthen financial position and invest in human resources
The Group is planning to invest in new hardware and technical software, including advanced building information modeling (“BIM”) systems which generate digital representations of the physical and functional characteristics of buildings. BIM systems are used to support decision-making to plan, design, construct, operate and maintain buildings and facilities. At the same time, the Group is also implementing effective cost control measures to maximise its profitability and competitiveness. Leveraging the Group’s project experience and data on project costs and expenditures, it is able to achieve more accurate project return estimates at the early stages of project planning. The Group continues to closely monitor its capital and cash positions, particularly subcontracting fees, labour costs and material costs. In addition, the Group strives to strengthen its quality, safety and environmental department by hiring more qualified personnel and conduct more safety and quality training, on-site coaching and guidance, and is also planning to recruit additional employees and expertise to support future growth.

Financial Highlights

	Year Ended 31 December
(HK$’000)	2016	2017	2018
Revenue	4,411,712	4,965,277	5,966,046
Gross Profit	549,553	923,360	888,394
Gross Profit Margin	12.5%	18.6%	14.9%
Profit for the Year/ Period	120,832	433,577	315,282

 

Use of Proceeds

Item	Approximate Percentage
Support the expansion and development of the building services segment	20.0%
Enhance engineering capabilities in the environmental engineering segment	30.0%
Enhance engineering capabilities of the ICBT segment	20.0%
Expand and develop the lifts and escalators segment	20.0%
General working capital	10.0%

 

About Analogue Holdings Limited
Established in 1977 and headquartered in Hong Kong, the Group is the largest E&M engineering service provider in Hong Kong in terms of revenue in 2018,^[2] with substantial operations in Macau and Mainland China. The Group provides multi-disciplinary and comprehensive E&M engineering and technology services in different segments, including building services engineering, environmental engineering, ICBT solutions and lifts and escalators to a wide spectrum of customers from the banking, property development, education, entertainment, hospitality, information technology, data centres, transportation, and utilities sectors, as well as departments of the Hong Kong SAR Government. The Group also manufactures and sells lifts and escalators internationally. Nanjing Canatal Data Centre Environmental Tech Company Limited, an associate of the Group, has been listed on the main board of the Shanghai Stock Exchange since November 2017.

[1] Source: Frost & Sullivan
[2]Source: Frost & Sullivan, in terms of revenue in 2018