Share offer of 375,000,000 ordinary shares at between HK$0.335 and HK$0.380 per share expected to raise net proceeds of approximately HK$44.7 million
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 375,000,000 shares, subject to re-allocation, comprising 187,500,000 Public Offer Shares and 187,500,000 Placing Shares (comprising 187,500,000 sale Shares), at an Offer Price range between HK$0.335 and HK$0.380 per Offer Share. The Public Offer opened at 9:00 a.m. on Saturday, 29 February 2020 and will close at 12:00 noon on Friday, 6 March 2020. The allotment results will be announced on Monday, 16 March 2020. Dealings in shares on HKEx are expected to commence on Tuesday, 17 March 2020, under the stock code 2381.
Red Sun Capital Limited is the Sole Sponsor. Joint Bookrunners are Futu Securities International (Hong Kong) Limited, CMBC Securities Company Limited, Essence International Securities (Hong Kong) Limited, First Shanghai Securities Limited, Guosen Securities (HK) Capital Company Limited, Guotai Junan International Limited, Red Sun Capital Limited and Shanxi Securities International 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$217.1 million, HK$251.0 million, HK$266.1 million and HK$228.7 million for FY2016, FY2017, FY2018 and 9M2019, respectively. The net profit of the Group was approximately HK$23.9 million, HK$31.2 million, HK$34.6 million and HK$42.1 million for FY2016, FY2017, FY2018 and 9M2019, respectively.
The net profit for the year increased by approximately HK$11.1 million or 35.6% from approximately HK$31.0 million for 9M2018 to approximately HK$42.1 million for 9M2019. The net profit margin increased from approximately 15.4% in 9M2018 to approximately 18.4% in 9M2019.
The profit of the Group for the year of 2019 profit estimate is not less than HK$44.5 million.
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 10 to 18 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: 375,000,000 Shares
Number of Public Offer Shares: 187,500,000 Shares (subject to re-allocation)
Number of Placing Shares: 187,500,000 Shares (comprising 187,500,000 Sale Shares) (subject to re-allocation)
Offer Price Range: Between HK$0.335 and HK$0.380 per Offer Share
Board Lot Size: 6,000 Shares
Nominal Value: HK$0.01 per Share
Public Offer Period: Saturday, 29 February 2020 – Friday, 6 March 2020
Announcement of Allotment Results: Monday, 16 March 2020
Expected Listing Date: Tuesday, 17 March 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$0.3575 per Offer Share, being the mid-point of the indicative Offer Price range of HK$0.335 to HK$0.380 per Share, will be approximately HK$44.7 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 14.1 %
Strategically expanding the Group’s manufacturing capabilities: approximately 62.9 %
Devoting resources on new products and applications: Approximately 23.0 %
Track Record:
HK’000 For the year ended/as at 31 December For the period ended/as at 30 September
FY2016 FY2017 FY2018 2019
Revenue 217,110 250,982 266,056 228,708
Gross profit 60,497 71,055 80,739 71,826
Gross profit margin 27.9% 28.3% 30.3% 31.4%
Profit before tax 29,627 38,876 44,778 52,210
Profit for the year 23,917 31,206 34,628 42,066
Net profit margin 11.0% 12.4% 13.0% 18.4%
Listing expenses – – 5,340 5,502
Profit before listing expenses 23,917 31,206 39,968 47,568