Centenary United Holdings Limited Announces Proposed Listing on the Main Board of the HKEX

The largest 4S dealership group in Zhongshan, Guangdong province of the PRC, Centenary United Holdings Limited (Centenary United or the Group) today announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (HKEX) under stock code 1959.HK.

The Group intends to offer an aggregate of 125,000,000 shares (Offer Shares)(subject to over-allotment option), 90% of which are for International Placing (subject to reallocation and over-allotment option) and 10% are for Hong Kong Public Offer (subject to reallocation). The indicative Offer Price range is between HK$1.01 and HK$1.23 per Offer Share. After deduction of relevant expenses and assuming an Offer Price of HK$1.12 per Offer Share (being the mid-point of the indicative Offer Price range) and assuming the over-allotment option is not exercised, the net proceeds are estimated at approximately HK$107.5 million.

The Hong Kong Public Offer will begin at 9:00 a.m. on 30 September 2019 (Monday) and ends at 12:00 noon on 11 October 2019 (Friday). The final Offer Price and allotment results will be announced on 17 October 2019 (Thursday). Dealing of Shares will commence on the Main Board of SEHK on 18 October 2019 (Friday). Shares will be traded in board lots of 2,000 Shares each.

Fortune Financial Capital Limited is the Sole Sponsor; Fortune (HK) Securities Limited, Mason Securities Limited and Shanxi Securities International Limited are the Joint Global Coordinators; Fortune (HK) Securities Limited, Mason Securities Limited, Shanxi Securities International Limited and Essence International Securities (Hong Kong) Limited are the Joint Bookrunners and Joint Lead Managers; Livermore Holdings Limited and CNI Securities Group Limited are the Co-Lead Managers of the Global Offering.

Investment Highlights

– A leading 4S dealership group positioned to capture opportunities in relatively higher growth markets in the PRC

The Group is a long standing 4S dealership group and one with the largest and most established sales and services network in Zhongshan, the Group has majority market share in Zhongshan in terms of sales volume for its major brands such as Dongfeng Venucia, Beijing Hyundai, Dongfeng Nissan and Chevrolet, etc.

According to the ACMR Report, Zhongshan is a high growth city in term of economic growth and passenger vehicles market growth, as compared to Guangdong province and the PRC, Zhongshan has experienced higher growth in the number of new passenger vehicle registration with CAGR of 13.9% and 14.0% respectively in terms of units and sales revenue from 2013 to 2018. ACMR expects the rapid growth to continue in the following years. The Group believes, its strategic focus and market-leading position in Zhongshan and the Group’s familiarity of the Zhongshan market well-positions it to capture strong growth potential for sales of motor vehicles and other integrated auto services in Zhongshan and in nearby regions.

In addition, the Group’s experienced sales, repair and maintenance workforce, large sales and service network and other integrated service offerings allow the Group to maintain a competitive and captive ecosystem that attend to a wide spectrum of the auto needs of new potential customers and existing customers. The Group believes such one-stop ecosystem has helped the Group in converting owners of motor vehicles from other dealerships to purchase motor vehicles from the Group, to subscribe to the Group’s services and improved stickiness of existing customers.

– Extensive network, large customer base and high profitability integrated auto services business

The Group offers customers a comprehensive array of automobile-related products and services including the sales of motor vehicles (both new and used vehicles) and other integrated auto services, that is, repair services (including the repair and maintenance services, the sales of spare parts, car care services and used vehicle warranty services), the sales of accessories, insurance agency services and other value-added services. The Group has accumulated extensive experience in the provision of other integrated auto services in the past and achieved growth during the Track Record Period. The Group believes that its combination of sales and other integrated auto services is unique in the mid-to-high end sino-foreign and international vehicle brand market in Zhongshan, taking into account its years of experience in sales of motor vehicles and repair services and the number of 4S dealership outlets in Zhongshan.

As other integrated auto services entail higher gross profit margins, these services not only generating an increasing amount of recurring revenue but also contribute significantly to the Group’s overall profitability. Established stable and long-term relationships with leading manufacturers of mid-to-high end passenger vehicles, Centenary United has established a stable and long-term business relationship with many leading automobile manufacturers. During the Track Record Period, the Group operated 4S dealership outlets in Zhongshan dedicated to the following brands: Dongfeng Nissan, Beijing Hyundai, FAW Toyota, FAW Volkswagen, Dongfeng Venucia, Chevrolet and Buick as authorized by respective automobile manufacturers. The Group’s proven ability to generate sales and profits helps strengthen on-going relationships with these manufacturers and provides the Group credibility to be strategically desirable.

The Group’s existing dealerships have established a proven track record and have received a number of significant awards from automobile manufacturers, such as the Nissan Global Award granted to Zhongshan New Century Jucheng Automobile Co., Ltd. in 2017, and the Outstanding New 4S Dealership Outlet Award granted by Dongfeng Nissan to Zhongshan New Century Mingcheng Automobile Co., Ltd in 2017. The Group believes that its established stable and long-term relationships with leading manufacturers is one of the key competitive advantages in obtaining new dealership authorizations to further expand its dealership network.

– Provide high quality customer services

Centenary United’s operational expertise is encompassed by its high-quality customer service, as evidenced by the various awards granted by the automobile manufacturers to the Group’s subsidiaries. The Group has a dedicated customer relations department that actively engages with customers through the collection of customer feedback and the delivery of targeted communications and promotions to encourage return visits for vehicle maintenance and purchases of new vehicles. Customers can give feedback through the conduct of customer surveys, customer service hotlines or the Group’s website.

– An experienced management team and a stable pool of skilled personnel

The Group are led by a capable management team with extensive industry experience and strong professional background. The executive management team includes Mr. Law Hau Kit (Chairman and Executive Director), Mr. Chen Shaoxing (Executive Director) and Ms. Li Huifang (Executive Director and Co-head of operation of the Group). The Group’s senior management has been with the Group for more than ten years, and the long tenure of the management team serves as a testament of the consistency of the Group’s culture. The Group also believes that management’s operational experience with the Group has given them in-depth knowledge of its business and customers and contributed significantly to the Group’s success.

Future Development Strategies

United Centenary will continue to focus expansion on areas in Zhongshan and in the Greater Bay Area. The Group believes that, its mid-to-high end sino-foreign and international auto brands and integrated auto service strategies will continue to appeal to the mass market in Zhongshan and in the nearby regions. The Group plans to expand motor vehicle sale and service network through organic growth or selective acquisition. Of which, the Group’s new Jaguar and Land Rover 4S dealership outlet has commenced operation in the second quarter of 2019. The Group plans to expand sales network by opening new dealership outlets, namely, the new outlet for Cadillac, the new JETTA brand outlet (which is a new brand of FAW Volkswagen) and the new energy vehicle megastore in locations that will complement its existing sales and services network.

Whilst the Group derives a significant portion of its revenue from its sales network from sales of motor vehicles, however, the Group also generates significantly more gross profits from the provision of other integrated auto services to customers. Meanwhile, customers who use the Group’s other integrated auto services will in turn form the customer base of new customers of sales of motor vehicles. It is one of the Group’s core strategies to integrate a comprehensive array of auto services to increase stickiness of customers and to improve the overall profitability of the Group’s business as a whole. The Group believes this strategy is unique and it maintains a one-stop ecosystem to best serve customers’ auto needs.

Furthermore, the Group plans to focus on automating certain aspect of its data collection and analysis tools into an information technology service provider and information technology platform to enable more streamlined data collection, analysis and the integration of online and offline services. This will in turn allow the Group to leverage on longstanding experience in Zhongshan and customers’ past spending behaviors to better evaluate the performance of different business units, and conduct personalized marketing strategies to increase the success rate of cross-selling, and hence profit per customer.

Use of Proceeds

Assuming the over-allotment option is not exercised and the Offer Price is fixed at HK$1.12 per share (being the mid-point of the indicative range of the Offer Price), the net proceeds from the Offer are estimated at approximately HK$107.5 million, after deduction of underwriting fees and estimated expenses, and will be used as follows:

– Financing the expenditures required in connection with the organic growth of motor vehicle sales and service network via opening of new outlets in Zhongshan – 31.1%
– Network through selective acquisition of other automobile dealership outlets – 25.5%
– Expansion of other integrated auto services – 28.1%
– Optimising and upgrading information technology system to facilitate big data analysis and the integration of online and offline customer service – 10.2%
– General working capital – 5.1%

Financial Performance

            The Year Ended 31 December
(RMB '000)         2017          2018        Y/Y ch
Revenue       1,904,919     1,940,311         +1.9%
Gross Profit    145,422       174,378        +19.9%
Net Income       30,679        34,438        +12.1%

About Centenary United Holdings Ltd Established in 1999, Centenary United Holdings Ltd (Centenary United) was the largest 4S dealership group in Zhongshan with a focus on mid-to-high end sino-foreign and international brands, including Dongfeng Nissan, Beijing Hyundai, FAW Toyota, FAW Volkswagen, Dongfeng Venucia, Chevrolet, Buick, Jaguar and Land Rover, etc. The Group also offers a comprehensive array of integrated auto services, that is, repair services (including the repair and maintenance services, the sales of spare parts, car care services and used vehicle warranty services), the sales of accessories, insurance agency services and other value-added services, creating a unique one-stop automobile ecosystem in Zhongshan. http://www.car2000.com.cn.

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