Sunlight (1977) Holdings Limited Announces Details of the Proposed Listing on GEM of The Stock Exchange of Hong Kong Limited (the “SEHK”)

Sunlight

HONG KONG — Sunlight (1977) Holdings Limited (“Sunlight” or the “Group”), a leading tissue products supplier for corporate customers in Singapore, announced the details of its proposed listing of shares on GEM of SEHK under the stock code 8451.

Highlights
– Established in 1977, having around 40 years of presence in the tissue products industry, Sunlight is the 5th largest tissue products supplier in the overall tissue products market in Singapore in terms of sales revenue and the second largest tissue products supplier in the tissue products market for corporate customers in Singapore with sales revenue# reaching approximately S$12.3 million in 2016, claiming an approximately 11.7% market share*
– It operates its own conversion facilities for producing jumbo roll tissues, and it is the first and only jumbo roll tissue converter in Singapore*
– Its major customers include subsidiaries of listed companies, such as (i) a Fortune 500 company, which is the leading global developer of integrated resorts and casino operator; (ii) City Developments Limited, an international real estate operating company with global presence, and one of Singapore’s largest companies by market capitalisation, and (iii) UEM Edgenta Berhad, a leader in total asset solutions
– Sunlight plans to continue to grow its business by expanding its product portfolio to cover more tissue and hygiene-related products and extending its presence in the tissue products industry for corporate customers in ASEAN countries
#Revenue for the year ended 30 September 2016
* Source: CIC Report

Offering Details
The Group intends to offer for subscription or for sale, as the case may be, an aggregate of initially 200,000,000 Shares of nominal value of HK$0.01 per Share in the share capital of the Company (“Offer Shares”) by way of Public Offer and Placing in connection with the proposed listing of the Shares on GEM of SEHK. The indicative offer price range is between HK$0.25 and HK$0.30 per Share. After deducting underwriting fees and estimated expenses in connection with the Share Offer, assuming an Offer Price of HK$0.275 per Share (being the mid-point of the indicative Offer Price range of HK$0.25 to HK$0.30 per Share), the net proceeds which the Group will receive from the Share Offer is estimated at approximately HK$30.0 million.

The Public Offer will commence at 9:00 a.m. on 27 March 2018 (Tuesday) and end at 12:00 noon on 3 April 2018 (Tuesday). The final offer price and the allotment results are expected to be announced on or before 13 April 2018 (Friday). Trading of shares is expected to commence on the SEHK on 16 April 2018 (Monday) under the stock code 8451 and board lots of 10,000 Shares each.

Giraffe Capital Limited is the Sole Sponsor, and Pacific Foundation Securities Limited, Ruibang Securities Limited and Aristo Securities Limited are the Joint Bookrunners and Joint Lead Managers of the listing.

Corporate Highlights
A leading tissue products supplier for corporate customers in Singapore with a long history of operation and strong brand recognition
Established in 1977, having around 40 years of presence in the tissue products industry, the Group provides comprehensive services to its customers, from advising customers on the types and specifications of tissue products, to sourcing suitable products, conducting quality control, delivering to customers through its fleet of delivery trucks and providing after-sales services. Building on its long history and in-depth knowledge of the industry, the Group has established a strong reputation in the tissue products market for corporate customers in Singapore and was the second largest tissue products supplier in that market in terms of sales revenue, claiming an approximately 11.7% market share in 2016, according to the CIC Report.

Reliable and stable supply of consistent quality products to customers
In order to provide a reliable and stable supply of products to customers, the Group has implemented internal policies to maintain a healthy inventory, and it has its own conversion facilities in Singapore for producing jumbo roll tissues, which allow it to accommodate unexpected increases in orders and/or urgent orders with ease. The Group’s in-house logistics team helps to ensure timely delivery of purchase orders as well. Further, the Group visits its key suppliers and tissue paper mills that provide its raw materials regularly to ensure consistent quality of its products.

Has a portfolio of diverse tissue products and other related products to meet customer needs
Sunlight offers an extensive range of tissue products such as toilet tissues, hand towels, napkins and facial tissues, and other related products such as hygiene-related products and tissue dispensers. For each product category, it also offers different choices or combination of product choices to customers. The Group has the ability and flexibility to offer customised and diverse products, hence is apt in satisfying the multiple needs of large customers and the specific requirements of customers in different industries. Such capabilities explain the high customer loyalty the Group enjoys and equips it well for its continuous success.

Has a broad customer base and well-established long-term relationships with major customers
During the Track Record Period, the Group had long term relationships with major customers lasting between two and more than 20 years. Those major customers included subsidiaries of listed companies. In particular, the Group has a relationship of over 20 years with a subsidiary of City Developments Limited, and a relationship of approximately seven years with a subsidiary of a Fortune 500 company. Having well-established, stable and long-term business relationships with major customers from different industries have enabled the Group to capture growth opportunities in those industries, grow a stable customer base and boost its revenue stream.

An experienced and committed management team
The Group’s management team comprises highly experienced professionals in the tissue products industry. The team possesses in-depth knowledge and experience critical to the Group’s success in the tissue products industry for corporate customers. It is capable of seizing market opportunities, formulating sound business strategies, assessing and managing risks and implementing management schemes, so as to help the Group maximise shareholder value.

Future Development Strategies
With Singapore’s well-developed infrastructure and active public support for health and sanitation, which encourage the use of tissue products in public places, the consumption value of tissue products in Singapore is expected to continue to grow steadily at a CAGR of 3.5% between 2016 and 2021, reaching SGD198.1 million, and the total consumption value of tissue products for corporate customers to account for over 59% of the entire market by 2021. The consumption value of tissue products by corporate customers will continue to grow at a CAGR of 3.8% in the period to reach SGD117.0 million.

In addition, driven by continuous economic and business development in ASEAN leading to higher awareness of hygiene which in turn leads to increased usage of tissue products, the consumption value of tissue products by corporate customers in ASEAN is likely to continue to expand rapidly, reaching USD515.3 million between 2016 and 2021 at a CAGR of 5.3%. To capture more market share, enhance competitiveness and reduce procurement costs, the Group plans to increase production by upgrading its conversion line for producing jumbo roll tissues by replacing the tissue rewinder with a more advanced version from Europe. Additionally, the Group will acquire a new conversion line for producing hand towels from China. The upgrade and expansion plans and the anticipated increase in the demand for its products are going to increase inventory level, hence, the Group plans to invest in an additional factory building of approximately 3,000 sqm at Tuas, Singapore, which will be used as a warehouse to help it improve logistics and delivery efficiency. With the detailed development blueprint well in place, the Group is set to grasp a bigger market share capitalising on its established brand name and years of presence in Singapore, and will be able to extend its footprint to cover nearby countries and capture growth in the region.

Financial Highlights
Year ended 30 September 2016 Year ended 30 September 2017
S$’000 HK$’000(Note) S$’000 HK$’000(Note)
Revenue 12,343 73,441 12,186 72,507
Gross profit 3,258 19,385 3,493 20,783
Gross profit margin (%)1 26.4 28.7
Net profit margin (%)2 10.3 12.0

(Note) For illustration purpose only, the above amounts denominated in S$ have been translated to HK$ at the exchange rate of S$1.00 to HK$5.95.
1Gross profit margin for each of the year ended 30 September 2016 and 2017 was calculated based on gross profit divided by revenue for the respective year.
2Net profit margin for each of the year ended 30 September 2016 and 2017 was calculated based on net profit divided by revenue for the respective year and excluding listing expenses.

Use of Proceeds
Assuming the Offer Price is fixed at HK$0.275 per share (being the mid-point of the indicative Offer Price range), the Group intends to use the net proceeds of approximately HK$30.0 million on the following:

Items / Approximate amount (%)
Invest in an additional factory building in Singapore to be used as warehouse and purchase delivery trucks and lifting equipment: 65.0%
Upgrade conversion line in Singapore for the production of jumbo roll tissues: 20.7%
Use as working capital and for general corporate purposes: 10.0%
Acquire a new conversion line for the production of hand towels: 4.3%

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