KOK'S HOLDINGS LIMITED 郝氏控股有限公司 - :: HKEX ...

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility forthe contents of this Application Proof, make no representation as to its accuracy or completeness and expresslydisclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part ofthe contents of this Application Proof.

Application Proof of

KOK’S HOLDINGS LIMITED郝氏控股有限公司

(the ‘‘Company’’)(Incorporated in the Cayman Islands with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the ‘‘StockExchange’’) and the Securities and Futures Commission (the ‘‘SFC’’) solely for the purpose of providinginformation to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to changewhich can be material. By viewing this document, you acknowledge, accept and agree with the Company, itssponsor, advisers or members of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Company to the public in HongKong and not for any other purposes. No investment decision should be based on the information contained inthis document;

(b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’swebsite does not give rise to any obligation of the Company, its sponsor, advisers or members of theunderwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is noassurance that the Company will proceed with the offering;

(c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated infull or in part in the actual final listing document;

(d) this Application Proof is not the final listing document and may be updated or revised by the Company fromtime to time in accordance with the Rules Governing the Listing of Securities on the Stock Exchange;

(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisementoffering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to makeoffers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribefor or purchase any securities;

(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no suchinducement is intended;

(g) neither the Company nor any of its affiliates, sponsor, advisers or underwriters is offering, or is solicitingoffers to buy, any securities in any jurisdiction through the publication of this document;

(h) no application for the securities mentioned in this document should be made by any person nor would suchapplication be accepted;

(i) the Company has not and will not register the securities referred to in this document under the United StatesSecurities Act of 1933, as amended, or any state securities laws of the United States;

(j) as there may be legal restrictions on the distribution of this document or dissemination of any informationcontained in this document, you agree to inform yourself about and observe any such restrictions applicable toyou; and

(k) the application to which this document relates has not been approved for listing and the Stock Exchange andthe SFC may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded tomake their investment decisions solely based on the Company’s prospectus registered with the Registrar ofCompanies in Hong Kong, copies of which will be distributed to the public during the offer period.

If you are in doubt about any of the contents of this document, you should obtain independent professional advice.

KOK’S HOLDINGS LIMITED郝氏控股有限公司

(Incorporated in the Cayman Islands with limited liability)

[REDACTED]

Number of [REDACTED] : [REDACTED] Shares (subject to the[REDACTED])

Number of [REDACTED] : [REDACTED] Shares (subject to reallocation)Number of [REDACTED] : [REDACTED] Shares (subject to reallocation

and the [REDACTED])[REDACTED] : Not more than HK$[REDACTED] per

[REDACTED] and expected to be not lessthan HK$[REDACTED] per [REDACTED](payable in full upon application, plusbrokerage fee of 1%, SFC transaction levyof 0.0027% and Stock Exchange trading feeof 0.005%, subject to refund)

Nominal value : HK$0.01 per Share[REDACTED] : [REDACTED]

Sponsor

[REDACTED]

[REDACTED]

[REDACTED] and [REDACTED]

[REDACTED] [REDACTED]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for thecontents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or inreliance upon the whole or any part of the contents of this document.

A copy of this document, having attached thereto the documents specified in the section headed ‘‘Documents Delivered to the Registrar of Companies in Hong Kong andAvailable for Inspection’’ in Appendix V to this document, has been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Companies(Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar ofCompanies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above.

The [REDACTED] is expected to be determined by the [REDACTED] between [the [REDACTED]] (for itself and on behalf of the [REDACTED]) and our Company on orabout [REDACTED], [REDACTED] or such later date as may be agreed between the parties, but in any event not later than [REDACTED], [REDACTED]. If, for any reason,[the [REDACTED]] (for itself and on behalf of the [REDACTED]) and our Company are unable to reach an agreement on the [REDACTED] by that date or such later date asagreed by our Company and the [REDACTED] (for itself and on behalf of the [REDACTED]), the [REDACTED] will not become unconditional and will lapse immediately.The [REDACTED] will not be more than HK$[REDACTED] per [REDACTED] and is expected to be not less than HK$[REDACTED] per [REDACTED], unless otherwiseannounced.

The [REDACTED] (for itself and on behalf of the [REDACTED]) may, with the consent of our Company, reduce the above indicative [REDACTED] range at any time not laterthan the morning of the last day for lodging applications under the [REDACTED]. In such a case, notice of the reduction in the indicative [REDACTED] range will be availableon the website of the Stock Exchange at www.hkexnews.hk and the website of our Company at www.chishing.hk. Please refer to the sections headed ‘‘Structure of the[REDACTED]’’ and ‘‘How to Apply for the [REDACTED]’’ in this document for details.

Prospective investors of the [REDACTED] should note that [the [REDACTED]] (for itself and on behalf of the [REDACTED]) may in their absolute discretion, upon givingnotice in writing to our Company, terminate the [REDACTED] with immediate effect if any of the events set forth in the paragraph headed ‘‘[REDACTED]’’ in this documentoccurs at any time prior to 8:00 a.m. (Hong Kong time) on the [REDACTED]. Should the [the [REDACTED]] (for itself and on behalf of the [REDACTED]) terminate the[REDACTED] in accordance with the terms of the [REDACTED], the [REDACTED] will not proceed and will immediately lapse. It is important that prospective investors referto that paragraph for further details.

Prior to making an investment decision, prospective investors should carefully consider all the information set out in this document, including the risk factors set out inthe section headed ‘‘Risk Factors’’ in this document.

The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged ortransferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicablestate securities laws of the United States. There will be no [REDACTED] of securities in the United States.

ATTENTION

We have adopted a fully electronic application process for the [REDACTED]. We will not provide printed copies of this document or printed copies of any [REDACTED]to the public in relation to the [REDACTED]. This document is available at the websites of the Stock Exchange (www.hkexnews.hk) and our Company (www.chishing.hk).If you require a printed copy of this document, you may download and print from the website addresses above.

[REDACTED]

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THATTHE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED‘‘WARNING’’ ON THE COVER OF THIS DOCUMENT.

IMPORTANT

[REDACTED]


IMPORTANT

[REDACTED]


EXPECTED TIMETABLE(1)

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IMPORTANT NOTICE TO INVESTORS

This document is issued by our Company solely in connection with the [REDACTED]

and does not constitute an offer to sell or a solicitation of an offer to buy any security other

than the [REDACTED] offered by this document pursuant to the [REDACTED]. This

document may not be used for the purpose of, and does not constitute, an offer or invitation in

any other jurisdiction or in any other circumstances. No action has been taken to permit a

[REDACTED] of the [REDACTED] or the distribution of this document in any jurisdiction

other than Hong Kong.

You should rely only on the information contained in this document to make your

investment decision. Our Company, the Sponsor, the [REDACTED], the [REDACTED], the

[REDACTED] and the [REDACTED], have not authorised anyone to provide you with

information that is different from what is contained in this document. Any information or

representation not contained nor made in this document must not be relied on by you as having

been authorised by our Company, the Sponsor, the [REDACTED], the [REDACTED], the

[REDACTED] and the [REDACTED], any of their respective directors, officers, employees,

agents, representatives or advisors, or any other person or party involved in the

[REDACTED].

The contents on our Company’s website at www.chishing.hk do not form part of this

document.

Page

Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Information about this Document and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . 46

Directors and Parties Involved in the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54


CONTENTS

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Page

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

History, Reorganisation and Group Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Relationship with our Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

Future Plans and [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

How to Apply for the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280

Appendix I – Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix II – Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . II-1

Appendix III – Summary of the Constitution of Our Company and

Cayman Islands Company Law . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV – Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . IV-1

Appendix V – Documents Delivered to the Registrar of Companies

in Hong Kong and Available for Inspection . . . . . . . . . . . . . . . V-1


CONTENTS

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This summary aims to give you an overview of the information contained in thisdocument. As the following is only a summary, it does not contain all the information that maybe important to you. You should read the whole document in its entirety before you decide toinvest in the [REDACTED].

There are risks associated with any investment. Some of the particular risks in investingin the [REDACTED] are set out in the section headed ‘‘Risk Factors’’ in this document. Youshould read that section carefully before you decide to invest in the [REDACTED]. Variousexpressions used in this summary are defined in the section headed ‘‘Definitions’’ in thisdocument.

OVERVIEW

We are a well-established construction equipment provider principally offering constructionequipment rental services and sale of construction equipment in Hong Kong and the PRC.According to the CHFT Report, we ranked second in the power and energy equipment and highreach equipment rental market in Hong Kong in terms of revenue with a market share ofapproximately 6.2% in 2020. Our Group’s history can be traced back to 1983 when Mr. Kok, ourControlling Shareholder, formed his sole proprietorship, Chi Shing Electrical Machine Company*

（志成電機公司）. In 2015, we extended our footprint into the PRC market and established ourpresence at the Nansha district of the Guangdong Province with an aim to capture the growth ofthe PRC construction equipment rental and sales market, especially in the Greater Bay Area. Wemainly offer a wide range of (i) power and energy equipment; (ii) high reach equipment; and (iii)earthmoving equipment. Please refer to paragraph headed ‘‘Business – Our constructionequipment’’ in this document for details of our equipment.

As at 31 March 2021, we had 1,240 units of construction equipment in our rental fleet,comprising (i) 510 units of power and energy equipment; (ii) 705 units of high reach equipment;(iii) 19 units of earthmoving equipment; and (iv) six units of other equipment. For the three yearsended 31 March 2021, our revenue was approximately HK$53.8 million, HK$93.9 million andHK$128.8 million, respectively. The following table sets forth the breakdown of our revenue bybusiness segment during the Track Record Period:

Year ended 31 March2019 2020 2021

HK$’000 % HK$’000 % HK$’000 %

Rental services 50,320 93.5 71,423 76.1 95,845 74.4Sale of construction equipment 3,482 6.5 22,457 23.9 32,940 25.6

Total 53,802 100.0 93,880 100.0 128,785 100.0

The following table sets forth our revenue by geographical location during the Track RecordPeriod:

For the year ended 31 March2019 2020 2021

HK$’000 % HK$’000 % HK$’000 %

Hong Kong 42,547 79.1 82,361 87.7 118,635 92.1The PRC 11,255 20.9 11,519 12.3 10,150 7.9

Total 53,802 100.0 93,880 100.0 128,785 100.0


SUMMARY

– 1 –

Over the course of our operation, we have developed a large and diversified customer basewhich includes, among others, construction companies, manufacturing companies, educationinstitutions, government bodies and other construction equipment providers. Notably, we haveprovided construction equipment for prominent landmark construction projects including but notlimited to the Central Government Offices, Cathay Pacific air cargo terminal, Hong KongInternational Airport third runway, West Kowloon Station for the Guangzhou-Shenzhen-HongKong Express Rail Link, Hong Kong-Zhuhai-Macao Bridge – Hong Kong Boundary CrossingFacilities, Central-Wanchai Bypass, Kai Tak Sports Park, Kwu Tung North new development areaand Shenzhen World Exhibition and Convention Center.

Our ‘‘Chi Shing’’ brand is reputable within the Hong Kong construction industry. It wasestablished with the aspiration of providing reliable, high quality, environmentally friendly andinnovative construction equipment to customers. By leveraging our technical expertise andaccumulated industry experience in construction equipment, we successfully developed our own-branded KCG generator in 2012. We sold our first KCG generator in 2012 and first rented out ourKCG generator in 2013. Our KCG generators are designed and built to meet relevant emissionstandards in Hong Kong, and can be registered as approved NRMMs and are eligible to apply forQPME labels in Hong Kong. Our KCG generators have successfully penetrated into the HongKong construction equipment rental and sales market and have gained recognition from ourcustomers.

We place great emphasis on our services and construction equipment’s quality. Our

Directors believe that they represent our corporate image and our ‘‘Chi Shing’’ brand. We

continue to improve our service quality and competitiveness with our dedication to professional

management, accumulation of operational experience and enhancement of construction equipment

application knowledge. We endeavour to offer the best quality construction equipment by mainly

sourcing construction equipment manufactured by internationally renowned construction

equipment manufacturers. During the Track Record Period, we procured construction equipment

from various internationally renowned construction equipment manufacturers located in Japan,

Germany and the United States, of which we were the authorised dealer or distributor of two of

them in Hong Kong as at the Latest Practicable Date. We did not sublease any construction

equipment from third parties to our customers during the Track Record Period and we do not

intend to do so going forward, to ensure absolute control on our rental fleet’s quality and working

conditions. We believe such practice differentiates us from our competitors, and have provided us

with a competitive advantage to sustainably compete in the market over our long operating

history.

COMPETITIVE STRENGTHS

Our Directors believe that the following competitive strengths contribute to our success and

will enable us to further develop our business in the future: (i) we are one of the main players

with proven track record in the construction equipment rental and sales market in Hong Kong;

(ii) we offer a large, high quality and well-maintained rental fleet for our rental services

customers; (iii) we have an experienced and dedicated management team; (iv) we have built stable

relationship with our major customers and suppliers; (v) we act as an authorised dealer or

distributor of internationally renowned brands of construction equipment; and (vi) we offer KCG

generator under our ‘‘Chi Shing’’ brand.


SUMMARY

– 2 –

BUSINESS STRATEGIES

We aim to maintain our position as a key construction equipment provider and further

expand our market share in Hong Kong and the PRC. To achieve this, we intend to: (i) expand

and optimise our rental fleet in Hong Kong and the PRC; (ii) strengthen the development of our

own-branded products and enhance the marketing of our brand; (iii) install app-enabled

centralised rental fleet management system; (iv) hire additional workforce; and (v) lease

additional space for construction equipment storage and repair and maintenance services in Hong

Kong.

OUR BUSINESS MODEL

We are principally engaged in two business segments, namely (i) rental services of

construction equipment; and (ii) sale of construction equipment. The diagram below illustrates our

typical business model:

Construction equipment manufacturersOEM manufacturer

Construction equipment providers

Our suppliers

Rental servicesOur services Sale of construction

equipment

Spare parts

Used equipment

New equipment

Rental fleet

Our customers Our customers include, among others, construction companies, manufacturing companies, education institutions,

government bodies and other construction equipment providers.

(Note 1)(Note 2)

(Note 3)

(Note 4)

Notes:

1. Our Group is responsible for regular on-site repair and maintenance of our rental equipment. Our customers

are responsible for damage or loss of equipment caused by themselves, and our Group may charge separately

for the repair and maintenance services for such damage.

2. Depending on the circumstances, the construction equipment in our rental fleet may be phased out through

sale as used equipment.

3. Our Group is responsible for providing warranty against faulty material and poor workmanship for 12

months or 1,000 hours of operation from the date of delivery of new equipment, whichever occurs earlier.

For damage caused by incorrect operation or negligence of our customers, our Group charges separately for

repair services if required by our customers.

4. Some used equipment are sourced from third party construction equipment providers.


SUMMARY

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We maintained a rental fleet comprising 1,240 units of construction equipment as at 31March 2021. For details of the construction equipment we offer, please refer to the paragraphheaded ‘‘Business – Our construction equipment’’ in this document. As part of our rental services,we provide value-added services to our customers, which include, among others, advising onconstruction equipment selection, regular inspection and technical support services, transportationand logistics services, and repair and maintenance services. The minimum rental period we offerto our customers is seven days in Hong Kong and one day in the PRC.

Our sale of construction equipment business segment principally involved the sale of newand used equipment during the Track Record Period. Our construction equipment typicallyavailable for sale are mainly (i) power and energy equipment; (ii) high reach equipment; and (iii)earthmoving equipment. We source our new construction equipment mainly from internationallyrenowned construction equipment manufacturers and our OEM construction equipmentmanufacturer. For used equipment sold by us, some of them are used equipment phased out fromour rental fleet while others are sourced from third party construction equipment providers. Wesell our construction equipment by way of direct sales.

CUSTOMERS

During the Track Record Period, we provided services to more than 700 customers, amongwhich include construction companies, manufacturing companies, education institutions,government bodies and other construction equipment providers in Hong Kong and the PRC. Forthe three years ended 31 March 2021, our revenue from our five largest customers wasapproximately HK$20.0 million, HK$32.0 million and HK$32.1 million, accounting forapproximately 37.2%, 34.1% and 25.0% of our total revenue, respectively. During the sameyears, our revenue from our largest customer was approximately HK$7.3 million, HK$10.4million and HK$10.1 million, accounting for approximately 13.6%, 11.1% and 7.9% of our totalrevenue, respectively. For further information on our customers, please refer to the paragraphheaded ‘‘Business – Customers’’ in this document.

PRICING POLICIES

For the construction equipment rental services business segment, we set our price rental feeaccording to various factors which include, among others, (i) purchase and maintenance costs ofthe construction equipment; (ii) capacity and model of the construction equipment; (iii) marketdemand and market price; (iv) length of the rental period; (v) extent of foreseeable wear and tearon the construction equipment based on working condition of the site; (vi) condition of theconstruction equipment; (vii) price of our competitors in the market; and (viii) credibility of thecustomer.

For the sale of construction equipment business segment, the price of new constructionequipment sold is determined on a cost-plus basis taking into account various factors whichinclude, among others, (i) cost of purchase; (ii) prices offered by competitors in the market; (iii)supply and demand of similar construction equipment in the market; (iv) lead time of delivery ofthe construction equipment; and (v) specifications and production location of the constructionequipment. In respect of used equipment, in addition to the cost of procurement, we considerfactors such as rental and operation history of the construction equipment, prices quoted to itsequivalent in the market and the cost of refurbishment before sale.


SUMMARY

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SUPPLIERS

We believe that our sourcing and selection of suppliers of construction equipment play acrucial part in enhancing our reputation and product mix and ensuring our construction equipmentquality. Apart from the OEM construction equipment manufacturer in the PRC that we cooperatewith to produce our own-branded KCG generator, we source construction equipment mainly frominternationally renowned construction equipment manufacturers located in Japan, Germany andthe United States which our Directors consider are reputable for their construction equipmentreliability. We select our major suppliers based on their construction equipment quality, creditquality and transaction history with our Group. We had entered into dealership and distributorshipagreements with two of our suppliers which are internationally renowned construction equipmentmanufacturers as at the Latest Practicable Date. For the three years ended 31 March 2021, ourtransactions with our five largest suppliers amounted to approximately HK$32.2 million, HK$33.0million and HK$65.9 million, accounting for approximately 93.0%, 89.4% and 88.3% of our TotalPurchases, respectively. For the same years, our transactions with our largest supplier amountedto approximately HK$16.5 million, HK$14.4 million and HK$40.5 million, accounting forapproximately 47.7%, 39.1% and 54.4% of our Total Purchases, respectively. For furtherinformation of our suppliers, please refer to the paragraph headed ‘‘Business – Suppliers’’ in thisdocument.

Overlapping of our customers and suppliers

During the Track Record Period, to the best knowledge and belief of our Directors, (i) oneof our five largest suppliers (Supplier A) for the years ended 31 March 2019, 2020 and 2021 wasalso our customer for the year ended 31 March 2019 and 2020; and (ii) one of our five largestcustomers (Customer H) for the years ended 31 March 2020 and 2021 was also our supplier forthe year ended 31 March 2020. To the best knowledge and belief of our Directors, theoverlapping customers and suppliers and their ultimate beneficial owners are Independent ThirdParties. Please refer to the paragraph headed ‘‘Business – Overlapping of our customers andsuppliers’’ in this document for more information.

KEY FINANCIAL INFORMATION

Selected items of combined statements of profit or loss and other comprehensive income


HK$’000 HK$’000 HK$’000

Revenue 53,802 93,880 128,785Gross profit 17,130 48,418 75,830Profit before taxation 20,243 36,741 61,857Profit for the year 17,413 30,534 51,243

During the Track Record Period, our Group’s revenue increased from approximatelyHK$53.8 million for the year ended 31 March 2019 to approximately HK$93.9 million for theyear ended 31 March 2020, and further increased to approximately HK$128.8 million for the yearended 31 March 2021. The increases were mainly attributable to the increase in utilisation rates ofour power and energy equipment, high reach equipment and earthmoving equipment over thecorresponding years.

During the Track Record Period, our Group’s gross profit increased from approximatelyHK$17.1 million for the year ended 31 March 2019 to approximately HK$48.4 million for theyear ended 31 March 2020, and further increased to approximately HK$75.8 million for the yearended 31 March 2021. The increases were mainly attributable to the increase in revenue asdescribed above. For the same years, our gross profit margin was approximately 31.8%, 51.6%and 58.9%, respectively.


SUMMARY

– 5 –

During the Track Record Period, our Group’s profit for the year increased fromapproximately HK$17.4 million for the year ended 31 March 2019 to approximately HK$30.5million for the year ended 31 March 2020, and further increased to approximately HK$51.2million for the year ended 31 March 2021. Such increase was mainly attributable to the increasein revenue as described above.

For further details of our Group’s financial information, please refer to the section headed‘‘Financial Information’’ in this document.

Selected items of the combined statements of financial position

As at 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Non-current assets 124,756 116,576 151,780Current assets 80,647 60,276 82,349Current liabilities 54,330 46,915 76,131Non-current liabilities 15,490 15,019 31,562Net current assets 26,317 13,361 6,218Net assets 135,583 114,918 126,436

For an analysis of our selected items of combined statements of financial position, pleaserefer to the paragraphs headed ‘‘Financial Information – Net current assets’’ and ‘‘FinancialInformation – Description of selected items of combined statements of financial position’’ in thisdocument.

Selected items of the combined statements of cash flows


HK$’000 HK$’000 HK$’000

Operating cash flows before movements in working capital 32,479 61,337 83,921Movements in working capital (5,704) 3,433 3,646Purchase of plant and machinery (21,101) (24,016) (34,204)Net income tax and interest paid (2,749) (3,362) (11,179)

Net cash generated from operating activities 2,925 37,392 42,184Net cash generated from/(used in) investing activities 14,249 (34,850) (47,787)Net cash (used in)/generated from financing activities (15,661) (6,281) 8,652

Net increase/(decrease) in cash and cash equivalents 1,513 (3,739) 3,049Effect of foreign exchange rate changes, net (336) (195) 328Cash and cash equivalents at beginning of the year 18,045 19,222 15,288

Cash and cash equivalents at end of the year 19,222 15,288 18,665

For an analysis of our cash flows during the Track Record Period, please refer to theparagraph headed ‘‘Financial Information – Liquidity and capital resources’’ in this document.


SUMMARY

– 6 –

Key financial ratios

As at/year ended 31 March

2019 2020 2021

Gross profit margin 31.8% 51.6% 58.9%Net profit margin 32.4% 32.5% 39.8%Current ratio 1.5 1.3 1.1Gearing ratio 20.3% 18.7% 45.4%Interest coverage ratio 12.7 30.7 51.2Return on assets 8.5% 17.3% 21.9%Return on equity 12.8% 26.6% 40.5%

For further details, please refer to the paragraph headed ‘‘Financial Information – Keyfinancial ratios’’ in this document.

IMPACT OF [REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of theindicative [REDACTED] range of HK$[REDACTED] to HK$[REDACTED] per Share, the totalestimated [REDACTED] in connection with the [REDACTED] is approximatelyHK$[REDACTED], of which approximately HK$[REDACTED] will be accounted for as adeduction from our equity upon the [REDACTED] and the remaining amount of approximatelyHK$[REDACTED] is expected to be charged to our combined statements of profit or loss ando the r comprehens ive income (o f wh ich approx imate ly HK$ [REDACTED] andHK$[REDACTED] was charged for the two years ended 31 March 2021, respectively, and theremaining approximately HK$[REDACTED] is expected to be charged for the year ending 31March 2022).

FUTURE PLANS AND [REDACTED]

Based on an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-pointof the [REDACTED] range stated in this document), the net [REDACTED] from the issue ofShares under the [REDACTED] are expected to be approximately HK$[REDACTED] (afterdeducting estimated expenses payable by our Group in connection with the [REDACTED] andassuming that the [REDACTED] is not exercised). Our Directors currently intend to apply suchnet [REDACTED] in the following manner:

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for the expansion of power and energy equipment in ourrental fleet in Hong Kong;

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for the optimisation of our rental fleet in Hong Kong;

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for the upgrade of our rental fleet in the PRC with ChinaIV construction equipment;

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for strengthening the development of our own-brandedproducts and enhancing of the marketing of our brand;

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for the installation of app-enabled centralised rental fleetmanagement system;


SUMMARY

– 7 –

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for the hiring of additional workforce; and

• approximately HK$[REDACTED], representing approximately [REDACTED] of theestimated net [REDACTED], for general working capital of our Group.

For details, please refer to the section headed ‘‘Future Plans and [REDACTED]’’ in thisdocument.

DIVIDENDS AND DIVIDENDS POLICY

For the years ended 31 March 2019, 2020 and 2021, dividend of approximately HK$104.0million, HK$50.3 million and HK$41.0 million were declared, respectively. For further details,please refer to Note 13 in the Accountants’ Report in Appendix I to this document.

After completion of the [REDACTED], our Shareholders will be entitled to receivedividends that we declare. The declaration of dividends is subject to the discretion of our Board,our Articles of Association and applicable laws and regulations. Any declaration of final dividendshall also be subject to the approval of our Shareholders in a Shareholders’ meeting. In decidingwhether to propose a dividend and in determining the dividend amount, our Directors will takeinto account our operations and earnings, capital requirements and surplus, general financialcondition, capital expenditure and future development requirements, Shareholders’ interest andother factors which they may deem relevant at such time. Subject to those factors and our Articlesof Association, we intend to distribute dividend in cash each year up to 30.0% of the distributableprofit in our combined financial statements for that year. Our dividend distribution record in thepast may not be used as a reference or basis to determine the level of dividends that may bedeclared or paid by us in the future.

[REDACTED] STATISTICS

Based on theminimum

[REDACTED]of

HK$[REDACTED]per

[REDACTED]

Based on themaximum

[REDACTED]of

HK$[REDACTED]per

[REDACTED]

Market capitalisation at the [REDACTED] (Note 1) HK$[REDACTED] HK$[REDACTED]Unaudited pro forma adjusted combined net tangibleassets (Note 2)

HK$[REDACTED]per

[REDACTED]

HK$[REDACTED]per

[REDACTED][REDACTED] [REDACTED] [REDACTED]

Notes:

1. The calculation of the market capitalisation of our Shares is based on [REDACTED] Shares in issueimmediately after completion of the [REDACTED] but does not take into account any Shares which may beallotted and issued upon the exercise of the [REDACTED], any Shares which may be issued pursuant to thegrant of options under the Share Option Scheme or any Shares which may be allotted or repurchased by ourCompany pursuant to the general mandate and the repurchase mandate.

2. The unaudited pro forma adjusted combined net tangible assets per Share has been prepared with reference tocertain estimation and adjustment. Please see the section headed ‘‘Unaudited Pro Forma FinancialInformation’’ in Appendix II to this document for further details.


SUMMARY

– 8 –

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Immediately following completion of the Capitalisation Issue and the [REDACTED](without taking into account any Shares which may be issued upon the exercise of the[REDACTED] or any options which may be granted under the Share Option Scheme), CSInvestment will be beneficially interested in approximately [REDACTED] of the issued Shares.CS Investment is wholly-owned by Mr. Kok. As (i) CS Investment is entitled to exercise 30% ormore of the voting power at general meetings of our Company; and (ii) Mr. Kok is entitled to,through CS Investment, control the exercise of 30% or more of the voting power at generalmeeting of our Company; each of CS Investment and Mr. Kok is regarded as our ControllingShareholders for the purpose of the Listing Rules. For the background of CS Investment and Mr.Kok, please refer to the sections headed ‘‘History, Reorganisation and Group Structure’’,‘‘Directors and Senior Management’’ and ‘‘Relationship with our Controlling Shareholders’’ inthis document.

RECENT DEVELOPMENT AND MATERIAL ADVERSE CHANGE

Our business, revenue model and cost structure remain largely unchanged subsequent to theTrack Record Period. According to our Group’s unaudited financial information, our monthlyaverage revenue for the two months ended 31 May 2021 were generally in line with our monthlyaverage revenue for the month ended 31 March 2021.

Our Directors confirm that, save for the [REDACTED] to be incurred as stated in theparagraph headed ‘‘Financial Information – [REDACTED]’’ in this document, (i) there was nomaterial adverse change in the market conditions or the industry environment in which we operatethat materially and adversely affected our financial or operating position since 31 March 2021 andup to the date of this document; (ii) there was no material adverse change in the trading andfinancial position or prospects of our Group since 31 March 2021 and up to the date of thisdocument; and (iii) no event had occurred since 31 March 2021 and up to the Latest PracticableDate that would materially and adversely affect the information shown in the Accountants’ Reportset out in Appendix I to this document.

Impact of outbreak of COVID-19

According to the CHFT Report, the outbreak of COVID-19 (the ‘‘Outbreak’’) had causedtemporary delay of some construction projects in Hong Kong. Some of the constructioncontractors had encountered interruptions in the supply of construction materials and difficulty inlabour deployment in the first quarter of 2020. However, the Outbreak is expected to have limitedimpact on the demand for construction equipment in the long run due to the fact that the proposedschedules of the construction works in Hong Kong in the following years will unlikely beaffected. Attributable to the planned infrastructure development projects, the supportiveGovernment policies in increasing land and housing supply and the expected number of newprivate residential buildings to be completed, the construction equipment rental and sales industryin Hong Kong is expected to resume when COVID-19 becomes under control. Despite theOutbreak, we have recorded positive growth in our revenue, gross profit and net profit in the yearended 31 March 2021 as compared to the year ended 31 March 2020.

To the best of our Directors’ knowledge, since the Outbreak and up to the Latest PracticableDate, we had not experienced any material shortage nor delay in supply of constructionequipment from our suppliers. Our Directors are of the view that the Outbreak has not had anymaterial adverse impact on our business, results of operations and financial condition.


SUMMARY

– 9 –

LEGAL PROCEEDINGS AND COMPLIANCE

As at the Latest Practicable Date, there was one ongoing legal proceeding against our Groupfor personal injury claim initiated by a former employee of our Group who sustained injury in thecourse of his employment. The amount of the claim will be subject to assessment made by thecourt. For more details of the personal injury claim, please refer to the paragraph headed‘‘Business – Legal proceedings and compliance – Legal proceedings’’ in this document. Save asdisclosed, to the best knowledge and belief of our Directors, as at the Latest Practicable Date, nomember of our Group was engaged in litigation, claim or arbitration of material importance, andno litigation, claim or arbitration of material importance was known to our Directors to bepending or threatened against any member of our Group.

During the Track Record Period, we had been involved in non-compliance with certainregulatory requirements in the PRC. Please refer to the paragraph headed ‘‘Business – Legalproceedings and compliance’’ in this document for further details. Save as disclosed, ourDirectors confirm that we have complied with all applicable laws and regulations in all materialrespects in Hong Kong and the PRC during the Track Record Period and up to the LatestPracticable Date.

PRINCIPAL RISK FACTORS

You should read the section headed ‘‘Risk Factors’’ in this document carefully before youdecide to invest in our Shares. The material risks relating to our business include the following:

• our engagement with our customers are based on projects on hand of our customers,which are non-recurring in nature, and we do not enter into long-term agreements withour customers. There is no guarantee that our existing customers will be awarded newprojects on a continuous basis or engage us again in future construction projects;

• we had a high concentration of suppliers during the Track Record Period;

• the costs of new construction equipment may increase, which may cause us to spendsignificantly more for the procurement and replacement of construction equipment, andin some cases we may not be able to procure construction equipment at all due tosupplier constraints;

• there is no guarantee that our suppliers will extend the dealership and distributorshipagreement(s) with us upon expiry of such agreements and our future operations may beadversely affected; and

• our business performance is dependent on the trends and development of theconstruction industry in Hong Kong and the PRC.


SUMMARY

– 10 –

Unless the context otherwise requires, the following expressions have the following

meanings in this document. Certain other technical terms are explained in the section headed

‘‘Glossary of Technical Terms’’ in this document.

‘‘Accountants’ Report’’ the accountants’ report on our Group as set out in

Appendix I to this document

‘‘Ace Honour’’ Ace Honour Global Limited, a company incorporated in the

BVI with liability limited by shares on 23 July 2020,

which is a direct wholly-owned subsidiary of our Company

‘‘affiliate(s)’’ with respect to any specified person, any other person,

directly or indirectly, controlling or controlled by or under

direct or indirect common control with such specified

person

‘‘AQSIQ’’ the General Administration of Quality Supervision,

Inspection and Quarantine of the People’s Republic of

Ch ina（中華人民共和國國家質量監督檢驗檢疫總局）,

which was dissolved in March 2018 and the majority of its

administrative duty was assigned to SAMR

‘‘Articles of Association’’

or ‘‘Articles’’

the amended and restated articles of association of our

Company, conditionally adopted on [•] with effect from the

[REDACTED], a summary of which is contained in

Appendix III to this document, and as amended,

supplemented or otherwise modified from time to time

‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Audit Committee’’ the audit committee of our Board

‘‘Board of Directors’’ or ‘‘Board’’ our board of Directors

‘‘Budget’’ the annual budget of the Government

‘‘Business Day’’ or ‘‘business day’’ a day (other than a Saturday or a Sunday or a public

holiday in Hong Kong) on which licensed banks in Hong

Kong are generally open for normal banking business

‘‘BVI’’ the British Virgin Islands

‘‘CAGR’’ compound annual growth rate


DEFINITIONS

– 11 –

‘‘Capitalisation Issue’’ the allotment and issuance of [REDACTED] Shares to be

made upon the capitalisation of certain sum standing to the

credit of the share premium account of our Company

referred to in the paragraph headed ‘‘Statutory and General

Information – A. Further information about our Company –

3. Written resolutions of our then sole Shareholder passed

on [•]’’ in Appendix IV to this document

‘‘Cayman Companies Act’’

or ‘‘Companies Act’’

the Companies Act (as revised) of the Cayman Islands, as

amended or supplemented or otherwise modified from time

to time

‘‘CCASS’’ the Central Clearing and Settlement System established and

operated by HKSCC

‘‘CCASS Clearing Participant(s)’’ person(s) admitted to participate in CCASS as direct

clearing participant(s) or general clearing participant(s)

‘‘CCASS Custodian Participant(s)’’ person(s) admitted to participate in CCASS as custodian

participant(s)

‘‘[REDACTED]’’ [REDACTED]

‘‘CCASS Investor Participant(s)’’ person(s) admitted to participate in CCASS as investor

participant(s) who may be an individual or joint

individual(s) or corporation(s)


DEFINITIONS

– 12 –

‘‘CCASS Operational Procedures’’ the operational procedures of HKSCC in relation to

CCASS, containing the practices, procedures and

administrative requirements relating to the operations and

functions of CCASS, as from time to time in force

‘‘CCASS Participant(s)’’ CCASS Clearing Participant(s), CCASS Custodian

Participant(s) or CCASS Investor Participant(s)

‘‘CEDD’’ the Civil Engineering and Development Department of

Hong Kong

‘‘CHFT’’ CHFT Advisory and Appraisal Ltd., an independent market

research and consulting company, which prepared the

CHFT Report

‘‘CHFT Report’’ a market research report commissioned by us and

independently prepared by CHFT, the content of which is

quoted in this document

‘‘China’’ or ‘‘PRC’’ the People’s Republic of China, which for the purpose of

this document and for geographical reference only,

excludes Hong Kong, the Macau Special Administrative

Region of the People’s Republic of China and Taiwan

‘‘Chi Shing Equipment Trading’’ Chi Shing Equipment Trading Company Limited（志成設

備貿易有限公司）, a company incorporated in Hong Kong

with limited liability on 24 December 2002 and an indirect

wholly-owned subsidiary of our Company

‘‘Chi Shing Human Resources’’ Chi Shing Human Resources Company Limited（志成人力

資源有限公司）, a company incorporated in Hong Kong

with limited liability on 24 December 2002 and an indirect


‘‘Chi Shing Industries’’ Chi Shing Industries (Hong Kong) Company Limited（志成

工業（香港）有限公司）, a company incorporated in Hong

Kong with limited liability on 13 February 2012 and an

indirect wholly-owned subsidiary of our Company

‘‘Chi Shing Machinery’’ Chi Shing Machinery Company Limited（志成機械有限公

司）, a company incorporated in Hong Kong with limited

liability on 16 September 1998 and an indirect wholly-

owned subsidiary of our Company


DEFINITIONS

– 13 –

‘‘Chi Shing Machinery Rental’’ Chi Shing Machinery Rental Company Limited（志成機械

租賃有限公司）, a company incorporated in Hong Kong

with limited liability on 24 January 2003 and an indirect


‘‘Chi Shing Machinery (Macau)’’ Chi Shing Machinery Company Limited（志成機械有限公

司）, a company incorporated in Macau with limited

liability on 20 May 2016, which was duly dissolved on 7

May 2021

‘‘Chi Shing (Hong Kong) Group’’ Chi Shing (Hong Kong) Group Limited（志成（香港）集團

有限公司）, a company incorporated in Hong Kong with

limited liability on 6 July 2011 and an indirect wholly-

owned subsidiary of our Company

‘‘close associate(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Companies Ordinance’’ the Companies Ordinance (Chapter 622 of the Laws of

Hong Kong), as amended, supplemented or otherwise

modified from time to time

‘‘Companies (Winding Up and

Miscellaneous Provisions)

Ordinance’’

the Companies (Winding Up and Miscellaneous Provisions)

Ordinance (Chapter 32 of the Laws of Hong Kong), as

amended, supplemented or otherwise modified from time to

time

‘‘Company’’ or ‘‘our Company’’

or ‘‘the Company’’

Kok’s Holdings Limited（郝氏控股有限公司）, a company

incorporated as an exempted company with limited liability

in the Cayman Islands on 19 March 2021, and registered as

a non-Hong Kong company under Part 16 of the

Companies Ordinance on 25 May 2021

‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘connected transaction(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Construction Industry Council’’

or ‘‘CIC’’

the Construction Industry Council of Hong Kong

‘‘Controlling Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules and

in this context, refers to the controlling shareholders of our

Company, being CS Investment and Mr. Kok or any of

them


DEFINITIONS

– 14 –

‘‘core connected person(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Corporate Governance Code’’ the Corporate Governance Code as set out in Appendix 14

to the Listing Rules

‘‘COVID-19’’ novel coronavirus (COVID-19), a coronavirus identified as

the cause of an outbreak of respiratory illness

‘‘CS Investment’’ CS Investment Limited, a company incorporated in the BVI

with limited liability on 9 September 1998, being a

Controlling Shareholder and is wholly-owned by Mr. Kok

‘‘Deed of Indemnity’’ the deed of indemnity dated [•] and entered into by each of

our Controlling Shareholders in favour of our Company

pursuant to which our Controlling Shareholders agree to

provide us with certain indemnities, a summary of which is

set out in the paragraph headed ‘‘Statutory and General

Information – E. Other information – 1. Tax and other

indemnities’’ in Appendix IV to this document

‘‘Deed of Non-competition’’ the deed of non-competition dated [•] and entered into by

our Controlling Shareholders in favour of our Company, a

summary of which is set out in the paragraph headed

‘‘Relationship with our Controlling Shareholders – Non-

competition undertaking and corporate governance

measures to manage conflict of interests – Undertakings’’

in this document

‘‘Director(s)’’ the director(s) of our Company

‘‘EIT Law’’ the PRC Enterprise Income Tax Law（中華人民共和國企

業所得稅法）and the Implementation Regulations of the

PRC Enterprise Income Tax Law（中華人民共和國企業所

得稅法實施條例）

‘‘EPD’’ the Environmental Protect ion Department of the

Government

‘‘Euro’’ or ‘‘EUR’’ Euro, the lawful currency of the member states of

European Union



DEFINITIONS

– 15 –


‘‘Extreme Conditions’’ extreme conditions caused by a super typhoon as

announced by the Government

‘‘General Rules of CCASS’’ the terms and conditions regulating the use of CCASS, as

may be amended or modified from time to time and where

the context so permits, shall include the CCASS

Operational Procedures

‘‘Government’’ the Government of Hong Kong


‘‘Group’’, ‘‘our Group’’,

‘‘the Group’’, ‘‘we’’, ‘‘us’’

or ‘‘our’’

our Company and our subsidiaries at the relevant time or,

where the context otherwise requires, in respect of the

period prior to our Company became the holding company

of our present subsidiaries and the businesses operated by

such subsidiaries or their predecessors (as the case may be)

‘‘Guangdong Zhigui’’ Guangdong Zhigui Equipment Rental Company Limited*

（廣東志桂設備租賃有限公司）, a company incorporated in

the PRC with limited liability on 13 July 2015 and an

indirect wholly-owned subsidiary of our Company

‘‘Guangzhou Yonggui’’ Guangzhou Yonggui Investment Company Limited*（廣州

永桂投資有限公司）, a company incorporated in the PRC

with limited liability on 10 November 2014 and a direct

wholly-owned subsidiary of Hung Yun and a connected

person of our Company

‘‘HK Property 1’’ the premises situated at G/F and Portion of 1/F, Chi Shing

Centre, 2 Ping Fuk Lane, Tong Yan San Tsuen, Yuen

Long, New Territories, Hong Kong

‘‘HK Property 2’’ the premises situated at the Remaining Portion of Lot No.

391 in D.D. 106, Shek Wu Tong, Kam Tin, Yuen Long,

New Territories, Hong Kong


DEFINITIONS

– 16 –

‘‘HKFRS’’ Hong Kong Financial Reporting Standards, including the

Hong Kong Accounting Standards and Interpretation issued

by the HKICPA

‘‘HKICPA’’ Hong Kong Institute of Certified Public Accountants

‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited

‘‘HKSCC Nominees’’ HKSCC Nominees Limited, a wholly-owned subsidiary of

HKSCC

‘‘Hong Kong’’, ‘‘HKSAR’’

or ‘‘HK’’

the Hong Kong Special Administrative Region of the PRC

‘‘Hong Kong Branch Share

Registrar’’

[REDACTED]

‘‘Hong Kong dollars’’,

‘‘HK dollars,’’ ‘‘HKD’’

or ‘‘HK$’’

Hong Kong dollars, the lawful currency of Hong Kong

‘‘Hung Yun’’ Hung Yun (Hong Kong) Limited（鴻潤（香港）有限公司）, a

company incorporated in Hong Kong with limited liability

on 10 May 2002 and a direct wholly-owned subsidiary of

CS Investment and a connected person of our Company

‘‘IAS’’ International Accounting Standards

‘‘Independent Third Party(ies)’’ an individual(s) or a company(ies) who or which, as far as

our Directors are aware after having made all reasonable

enquiries, is or are not a connected person(s) of our

Company within the meaning of the Listing Rules

‘‘Japanese Yen’’ Japanese Yen, the lawful currency of Japan



‘‘Latest Practicable Date’’ 7 July 2021, being the latest practicable date prior to the

printing of this document for the purpose of ascertaining

certain information contained in this document



DEFINITIONS

– 17 –

‘‘Listing Committee’’ the Listing Committee of the Stock Exchange


‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The Stock

Exchange of Hong Kong Limi ted , as amended,

supplemented or modified from time to time

‘‘Macau’’ or ‘‘Macao’’ the Macau Special Administrative Region of the PRC

‘‘Main Board’’ the stock exchange (excluding the option market) operated

by the Stock Exchange, which is independent from and

operated in parallel with GEM of the Stock Exchange

‘‘MEE’’ the Ministry of Ecology and Environment of the PRC（中

華人民共和國生態環境部）

‘‘Memorandum’’ or ‘‘Memorandum

of Association’’

the amended and restated memorandum of association of

our Company conditionally adopted on [•] with effect from

the [REDACTED], a summary of which is contained in

Appendix III to this document, and as amended,

supplemented or otherwise modified from time to time

‘‘MEP’’ the Ministry of Environmental Protection of the PRC（中華

人民共和國環境保護部）, which was dissolved in March

2018 and its administrative duty was assigned to the MEE

‘‘MOF’’ the Ministry of Finance of the PRC（中華人民共和國財政

部）

‘‘MOFCOM’’ the Ministry of Commerce of the PRC（中華人民共和國商

務部）

‘‘Mr. Bobby Kok’’ Mr. Kok Kwai Man（郝桂民）, a permanent resident of

Hong Kong, a director of Guangdong Zhigui, son of Mr.

Kok and younger brother of Mr. Jason Kok

‘‘Mr. Carson Poon’’ Mr. Poon Ka Chun Carson（潘家俊）, a permanent resident

of Hong Kong and our executive Director


DEFINITIONS

– 18 –

‘‘Mr. Jason Kok’’ Mr. Kok Kwai Leung（郝桂良）, a permanent resident of

Hong Kong, our executive Director, our chief executive

officer, son of Mr. Kok and older brother of Mr. Bobby

Kok

‘‘Mr. Kok’’ Mr. Kok Yun Kuen（郝潤權）, a permanent resident of

Hong Kong, one of our Controlling Shareholders, chairman

of our Board, our executive Director and father of Mr.

Jason Kok and Mr. Bobby Kok

‘‘Ms. Kwan’’ Ms. Kwan Suet Man（關雪敏）, a permanent resident of

Hong Kong and our executive Director

‘‘NDRC’’ the National Development and Reform Commission of the

PRC（中華人民共和國國家發展和改革委員會）

‘‘Nomination Committee’’ the nomination committee of our Board

‘‘NPC’’ The National People’s Congress of the PRC（中華人民共和

國全國人民代表大會）





DEFINITIONS

– 19 –





‘‘PRC Company Law’’ the Company Law of the People’s Republic of China（中華

人民共和國公司法）

‘‘PRC Legal Advisers’’ GFE Law Office, the legal advisers to our Company as to

PRC laws

‘‘PRC Property 1’’ the premises situated at 26 Liye Road, Nansha District,

Guangzhou City, Guangdong Province, the PRC

‘‘Predecessor Companies

Ordinance’’

the Companies Ordinance (Chapter 32 of the Laws of Hong

Kong) as in force from time to time before 3 March 2014




DEFINITIONS

– 20 –





‘‘Regulation S’’ Regulation S under the U.S. Securities Act

‘‘Remuneration Committee’’ the remuneration committee of our Board

‘‘Reorganisation’’ the corporate reorganisation of our Group for the purpose

of the [REDACTED], particulars of which are set out in

the paragraph headed ‘‘History, Reorganisation and Group

Structure – Reorganisation’’ in this document

‘‘RMB’’ or ‘‘Renminbi’’ Renminbi, the lawful currency of the PRC

‘‘SAFE’’ the State Administration of Foreign Exchange of the PRC

（中華人民共和國國家外匯管理局）


DEFINITIONS

– 21 –

‘‘SAMR’’ the State Administration for Market Regulation of the PRC

（中華人民共和國國家市場監督管理總局）

‘‘SAT’’ or ‘‘State Administration

of Taxation’’

the State Taxation Administration of the PRC（中華人民共

和國國家稅務總局）

‘‘SCNPC’’ the Standing Committee of the NPC（中華人民共和國全國

人民代表大會常務委員會）

‘‘SFC’’ or ‘‘Securities and Futures

Commission’’

the Securities and Futures Commission of Hong Kong

‘‘SFO’’ or ‘‘Securities and Futures

Ordinance’’

the Securities and Futures Ordinance (Chapter 571 of the

Laws of Hong Kong), as amended, supplemented or

otherwise modified from time to time

‘‘Share(s)’’ ordinary share(s) with a par value of HK$0.01 each in the

share capital of our Company

‘‘Shareholder(s)’’ holder(s) of our Shares


‘‘Share Option Scheme’’ the share option scheme of our Company conditionally

adopted on [•], the principal terms of which are

summarised in the paragraph headed ‘‘Statutory and

General Information – D. Share Option Scheme’’ in

Appendix IV to this document


‘‘Sponsor’’ Ample Capital Limited, a licensed corporation under the

SFO to carry on type 1 (dealing in securities), type 4

(advising on securities), type 6 (advising on corporate

finance) and type 9 (asset management) regulated activities

as defined under the SFO, being the sponsor to the

[REDACTED]


‘‘State Council’’ the State Council of the PRC（中華人民共和國國務院）


DEFINITIONS

– 22 –


‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘subsidiary(ies)’’ has the meaning ascribed to it under the Listing Rules

‘‘Substantial Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Takeovers Code’’ the Codes on Takeovers and Mergers and Share Buy-backs

issued by the SFC, as amended, modi f ied and

supplemented from time to time

‘‘Total Purchases’’ means the sum of (i) our cost of services in related to our

rental services, less staff cost and depreciation of our plant

and machinery and depreciation of right-of-use assets; (ii)

rental expense between our Group and Hung Yun, Mr. Kok

and Guangzhou Yonggui relating to HK Property 1, HK

Property 2 and PRC Property 1, respectively; (iii)

purchases of our owned rental equipment; (iv) purchases of

equipment and spare parts for sale to our customers; and

(v) purchases of other supplies and consumables

‘‘Track Record Period’’ the period consisting of the three years ended 31 March

2021



‘‘U.S.’’ or ‘‘United States’’ the United States of America

‘‘U.S. dollars’’, ‘‘USD’’ or ‘‘US$’’ U.S. dollars, the lawful currency of the United States

‘‘U.S. Securities Act’’ the United States Securities Act of 1933, as amended from

time to time, and the rules and regulations promulgated

thereunder


DEFINITIONS

– 23 –

‘‘VAT’’ the PRC value added tax

‘‘%’’ per cent

Unless otherwise expressly stated or the context otherwise requires, all data in this

document is as at the date of this document.

The English names of the PRC entities, PRC laws or regulations, and the PRC governmental

authorities referred to in this document are translations from their Chinese names and are for

identification purposes. If there is any inconsistency, the Chinese names shall prevail.

Certain amounts and percentage figures included in this document have been subject to

rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an

arithmetic aggregation of the figures preceding them. Any discrepancies in any table or chart

between the total shown and the sum of the amounts listed are due to rounding.


DEFINITIONS

– 24 –

This glossary contains explanations of certain terms, definitions and abbreviations used in

this document in connection with our Group and our business. The terms and their meanings may

not correspond to standard industry meaning or usage of those terms.

‘‘13th Five-Year Plan’’ Outline of the 13th Five-Year Plan for National Economic

and Social Development of the People’s Republic of China

（《中華人民共和國國民經濟和社會發展第十三個五年規劃

綱要》）published by the PRC government in March 2016

‘‘14th Five-Year Plan’’ Outline of the 14th Five-Year Plan for National Economic

and Social Development of the People’s Republic of China

and the Long-Range Objectives Through the Year 2035

（《中華人民共和國國民經濟和社會發展第十四個五年規劃

和2035年遠景目標綱要》）pub l i s h ed by t h e PRC

government in March 2021

‘‘cfm’’ cubic feet per minute, a volumetric limit of measurement

used in industrial hygiene and ventilation engineering

which describes the volumetric rate of flow of a gas or air

into or out of a space

‘‘China IV’’ the phase IV standards of emission limits and measurement

methods for non-road mobile machinery diesel engine

exhaust pollutant and phase IV technical requirements for

pollutant emission control of non-road mobile machinery

pursuant to the Limits and Measurement Methods for

Exhaust Pollutants from Diesel Engines of Non-road

Mobile Machinery (China III, IV)（《非道路移動機械用柴

油機排氣污染物排放限值及測量方法（中國第三、四階

段）》）and the Emissions Control Technical Requirements

of Non-road Diesel Mobile Machinery（《非道路柴油移動

機械污染物排放控制技術要求》）

‘‘China IV construction equipment’’ construction equipment that complies with the China IV

standards

‘‘crawler crane’’ a non-road mobile machinery which has its boom mounted

on an undercarriage fitted with a set of crawler tracks


GLOSSARY OF TECHNICAL TERMS

– 25 –

‘‘GDP’’ gross domestic product

‘‘Greater Bay Area’’ the Guangdong-Hong Kong-Macau Greater Bay Area（粵港

澳大灣區）is a concept which was mentioned in the 13th

Five-Year Plan in 2016. The basic principles of the plan

include that the Greater Bay Area is to be driven by

innovation and led by reform, to coordinate regional

development, to create a platform for opening up and to

adhere to ‘‘one country, two systems’’. The Greater Bay

Area is positioned to leverage the advantages of Hong

Kong and Macau, as free and open economies, and

Guangdong, as a pioneer of reform and opening up, and to

continue deepening reform and further opening up. The

Greater Bay Area targets at setting an example for expedite

insti tutional innovation and pilot implementation,

developing a modern economic system, better integrating

into the global market system, building a global base of

emerging industries, advanced manufacturing and modern

service industries, and developing an internationally

competitive world-class city cluster

‘‘kVA’’ kilo-volt-ampere, a unit for the apparent power in an

electrical circuit

‘‘kW’’ kilowatt, a unit typically used to express the output power

of engines

‘‘main contractor’’ a contractor, appointed by the project employer, who is

generally responsible for the coordination and overall

supervision of all the construction works involved in the

construction project and delegation of specific work tasks

of the construction to different subcontractors

‘‘NRMM’’ non-road mobile machinery under control in line with

environmentally advanced countries, which includes a wide

range of mobile machines or vehicles powered by internal

combustion engines used primarily off-road, emissions of

which can cause environmental pollution and nuisance and

have adverse health effects

‘‘NRMM Regulation’’ the Air Pollution Control (Non-road Mobile Machinery)

(Emission) Regulation (Chapter 311Z of the Laws of Hong

Kong)



– 26 –

‘‘OEM’’ original equipment manufacturing or original equipment

manufacturer (as the case may be), a term used to refer to

arrangements under which products are manufactured in

whole or in part in accordance with the customer’s

specifications and are marketed under the customer’s own

brand names. A manufacturer that manufactures products

under such arrangements is an original equipment

manufacturer

‘‘QPME’’ Quality Powered Mechanical Equipment

‘‘QPME System’’ an administrative labeling system in Hong Kong for

benchmarking construction equipment

‘‘Registered Professional Engineer’’ a registered professional engineer whose name is currently

entered in the register established under the Engineers

Registration Ordinance (Chapter 409 of the Laws of Hong

Kong)

‘‘Regulated Machine(s)’’ any mobile machine(s) or transportable industrial

equipment(s) (other than a vehicle of a class specified in

Schedule 1 to the Road Traffic Ordinance (Chapter 374 of

the Laws of Hong Kong)) that is/are powered by an

internal combustion engine with a rated engine power

output that is greater than 19kW but not greater than

560kW

‘‘sq.ft.’’ square feet

‘‘sq.m.’’ square meter

‘‘Ten Major Infrastructure Projects’’ a series of infrastructure construction plans launched by the

Government in October 2007 which include South Island

Line, Sha Tin to Central Link, Tuen Mun-Chek Lap Kok

Link and Tuen Mun Western Bypass, Hong Kong section

of the Guangzhou-Shenzhen-Hong Kong Express Rail

Link, Hong Kong-Zhuhai-Macao Bridge, rail connection

between the Hong Kong and Shenzhen airports, Lok Ma

Chau Loop, West Kowloon Cultural District, Kai Tak

Development, and North East New Territories New

Development Areas and Hung Shui Kiu New Development

Area



– 27 –

This document contains certain forward-looking statements and information relating to our

Company and our subsidiaries that are based on the beliefs of our management as well as

assumptions made by and information currently available to our management. In some cases, our

Company uses the words ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘continue’’, ‘‘could’’, ‘‘estimate’’,

‘‘expect’’, ‘‘going forward’’, ‘‘intend’’, ‘‘may’’, ‘‘ought to’’, ‘‘might’’, ‘‘plan’’, ‘‘potential’’,

‘‘predict’’, ‘‘project’’, ‘‘propose’’, ‘‘seek’’, ‘‘should’’, ‘‘will’’, ‘‘would’’, ‘‘wish’’ and the negative

of these words and other similar expressions or statements to identify forward-looking statements.

These forward-looking statements reflect the current views of our management with respect

to future events, operations, liquidity and capital resources, some of which may not materialise or

may change. These statements are subject to certain risks, uncertainties and assumptions,

including other risk factors as described in this document. You are strongly cautioned that

reliance on any forward-looking statement involves known and unknown risks and uncertainties.

The risks and uncertainties facing our Company which could affect the accuracy of forward-

looking statements include, but are not limited to, the following:

• our Group’s operation and business prospects, including development plans for

existing and new businesses;

• future developments, trends and conditions in the industry and markets in which we

operate;

• our Group’s business objectives, business, strategies and plans to achieve these

strategies;

• general economic, political and business conditions in the markets in which our Group

operates;

• the regulatory environment and general outlook in the industry and markets in which

our Group operates;

• the effects of the global financial markets and economic crisis;

• our Group’s financial position;

• our Group’s ability to reduce costs;

• our Group’s dividend policy;

• the amount and nature of, and potential for, future development of our Group’s

business;

• various business opportunities that our Group may pursue;


FORWARD-LOOKING STATEMENTS

– 28 –

• fluctuation in the prices of the service’s cost and our Group’s ability to pass-through

any increase in price to customers;

• our Group’s ability to hire and retain talented employees;

• the actions and developments of our competitors and our Group’s ability to compete

under these actions and developments;

• change or volatility in interest rates, foreign exchange rates, equity prices, volumes,

operations, margins, risk management and overall market trends;

• the other factors that are described in the section headed ‘‘Risk Factors’’ in this

document; and

• other factors beyond our Group’s control.

By their nature, certain disclosures relating to these and other risks are only estimates and

should one or more of these uncertainties or risks materialise or should underlying assumptions

prove to be incorrect, our financial condition and actual results of operations may be materially

and adversely affected and may vary significantly from those estimated, anticipated or projected,

as well as from historical results.

We do not intend to update these forward-looking statements in addition to on-going

disclosure obligations pursuant to the Listing Rules or other requirements of the Stock Exchange.

As a result of these and other risks, uncertainties and assumptions, the forward-looking events and

circumstances discussed in this document might not occur in the way we expect, or at all.

Accordingly, the forward-looking statements are not a guarantee of future performance and you

should not place undue reliance on any forward-looking information. Moreover, the inclusion of

forward-looking statements should not be regarded as representations by us that our plans and

objectives will be achieved or realised. All forward-looking statements in this document are

qualified by reference to this cautionary statement set out in this section.

In this document, unless otherwise stated, statements of or references to our intentions or

those of our Directors are made as of the date of this document. Any such information may

change in light of future developments.


FORWARD-LOOKING STATEMENTS

– 29 –

RISKS RELATING TO OUR GROUP’S BUSINESS

Our engagement with our customers are based on projects on hand of our customers, which

are non-recurring in nature, and we do not enter into long-term agreements with our

customers. There is no guarantee that our existing customers will be awarded new projects

on a continuous basis or engage us again in future construction projects.

Our customers include construction companies, manufacturing companies, education

institutions, government bodies and other construction equipment providers. Our revenue may

depend materially on the number and size of projects our customers are awarded and the number

of our equipment engaged in such projects. When our customers complete the respective stages of

the construction projects we are involved in, our engagements with them will terminate. There is

no guarantee that our customers will continue to engage us for our services in future construction

projects to a similar extent, or at all.

In addition, during the Track Record Period, we did not enter into any long-term rental or

sales contract with our customers, and the minimum rental period is seven days in Hong Kong

and one day in the PRC. Our customers may choose instead to rent or purchase equipment from

our competitors for their future construction projects. If we cannot maintain our engagements with

our customers in the future, our business operation and future profits may be adversely affected.

In view of the above, the number and duration of contracts, and the amount of revenue we

are able to derive therefrom may vary significantly from period to period, and it is difficult to

estimate the volume of our future business. We recorded an overall utilisation rate of our rental

fleet in Hong Kong of approximately 35.9%, 52.4% and 69.5%, respectively, for the three years

ended 31 March 2021. In the PRC, we recorded an overall utilisation rate of our rental fleet of

approximately 19.0%, 19.6% and 17.9%, respectively, for the three years ended 31 March 2021.

There is no assurance that our Group could achieve the same or higher utilisation rate of our

rental fleet in the future as we did in the previous years. If the size or number of our customers’

projects reduce significantly in the future, our business operations, financial position and

prospects may be materially adversely affected.

We had a high concentration of suppliers during the Track Record Period

For the three years ended 31 March 2021, our transactions with our five largest suppliers

amounted to approximately HK$32.2 million, HK$33.0 million and HK$65.9 million, representing

approximately 93.0%, 89.4% and 88.3% of our Total Purchases for the three years ended 31

March 2021, respectively. There is no assurance that our Group would be able to establish

business relationships with new suppliers to reduce our reliance on our major suppliers; or our

existing suppliers will continue to supply suitable construction equipment to our Group in the

future. If any of our suppliers fails to supply the required construction equipment to us or if we

fail to identify alternative sources of construction equipment that meet the prescribed

requirements and/or standards in a timely manner and at favourable terms, our business, financial

conditions and results of operation may be materially adversely affected. Moreover, there is no


RISK FACTORS

– 30 –

assurance that we can obtain the required capital for procuring construction equipment and/or

spare parts through equity or debt financing on reasonable and acceptable terms or generate

sufficient cash flow from our operations to meet the capital requirements for procuring new

construction equipment, which may hinder our Group’s business growth or force us to forego

business opportunities.

The costs of new construction equipment may increase, which may cause us to spend

significantly more for the procurement and replacement of construction equipment, and in

some cases we may not be able to procure construction equipment at all due to supplier

constraints.

We meet our customers’ demand for construction equipment by providing new construction

equipment under our ‘‘Chi Shing’’ brand which are produced on an OEM basis as well as

sourcing construction equipment from our suppliers. We will take initiative to replace our

construction equipment when necessary. The cost of new construction equipment may increase,

which may cause us to spend significantly more for the procurement and replacement of our

construction equipment, and in some cases we may not be able to procure construction equipment

at all due to supplier constraints. The cost of maintaining our rental fleet could increase, due to

factors beyond our control, such as inflation, compliance with government regulations or

increased material costs. Price increases could materially adversely affect our business, financial

condition and results of operations.

In addition, we may not be able to procure all necessary replacement construction equipment

in a timely manner since our suppliers may not be able to meet our procurement schedules. If

demand for new construction equipment increases significantly, equipment manufacturers may not

be able to meet our customers’ orders on a timely basis. As a result, we may experience long lead

time for certain types of construction equipment and we cannot assure that we will be able to

acquire the types or sufficient numbers of construction equipment that we need to replace older

construction equipment according to our expected schedule. Consequently, we may have to age

our rental fleet longer than we would consider optimal or shrink our rental fleet, either of which

could restrict our ability to grow our business.

There is no guarantee that our suppliers will extend the dealership and distributorship

agreement(s) with us upon expiry of such agreements and our future operations may be

adversely affected.

As at the Latest Practicable Date, our Group had entered into dealership and distributorship

agreements with two construction equipment manufacturers in relation to their product dealership

and distributorship from which we sourced approximately 47.7%, 46.5% and 55.6% of our Total

Purchases for the three years ended 31 March 2021, respectively. We are dependent on the

continued supply of construction equipment from these suppliers to maintain our business

operation. Our existing distributorship agreement is subject to validity terms and needs to be

renewed in 2023. For the details of the dealership and distributorship agreements with our


RISK FACTORS

– 31 –

suppliers, please refer to the paragraph headed ‘‘Business – Suppliers – Dealership and

distributorship agreements’’ in this document. However, there is no assurance that we can

maintain our relationship with these suppliers and renew all the dealership and distributorship

agreements upon expiry. As a result, we may have to seek for other suppliers as substitutes, and

this could lead to a significant adverse effect on our operations if we are unable to find suitable

substitute suppliers in a timely manner, on favourable terms or at all.

Our business performance is dependent on the trends and development of the construction

industry in Hong Kong and the PRC.

During the Track Record Period, our revenue was mainly derived from the rental and sale of

construction equipment to customers for construction projects in Hong Kong and the PRC. The

future growth and level of profitability of the construction equipment rental and sales market

depend, to a large extent, on the continued availability of construction projects in general. The

availability of construction projects from the public and private sectors will be determined by a

variety of factors. These factors include investment plans and strategies of property developers,

and expenditure caps imposed by the Government and the PRC government on public projects.

Furthermore, public construction projects in Hong Kong rely on the timely funding approval by

the committees of the Legislative Council of Hong Kong. Therefore, any delays in the passing of

public works funding proposals by the committees of the Legislative Council of Hong Kong will

create uncertainty on the commencement date of construction projects in the public sector, which

may in turn adversely affect the overall demand for construction equipment in our industry. Any

significant delay in the commencement of private and public projects may adversely and

materially affect our financial position.

The prolonged pandemic of COVID-19 and any outbreak of other communicable diseases in

Hong Kong, the PRC and other places around the world could have a material and adverse

impact on our business.

Since December 2019, the outbreak of COVID-19 has led to many confirmed cases and

deaths in Hong Kong, the PRC and many other countries and regions. The World Health

Organisation declared COVID-19 a public health emergency of international concern in January

2020 and a global pandemic in March 2020. As COVID-19 is highly contagious, if our employees

are infected with COVID-19, quarantines and/or temporary closure of our office, open storage

and/or warehouses would be required. In addition, if the outbreak of COVID-19 is not contained

in the near future, the Government and the PRC government may have to impose restrictions on

movements and activities which may result in delay in delivery of construction equipment from

our suppliers and/or delivery of construction equipment to our customers. It may also lead to

rescheduling, delay or termination of construction projects of our customers, and our business and

our financial conditions may be adversely affected. It is highly uncertain as to when COVID-19

will be contained and whether its impact will be short-lived or long-lasting. In the event of a

prolonged outbreak, the overall economy of Hong Kong and the PRC may be adversely affected.

As a result, our business and prospect may be materially adversely affected.


RISK FACTORS

– 32 –

Our liquidity and financial position may be adversely affected if our customers default in, or

delay, their payments.

Our customers are mainly construction companies, manufacturing companies, education

institutions, government bodies and other construction equipment providers. We recorded

balances of trade receivables (before provision for loss allowance) of approximately HK$16.8

million, HK$34.5 million and HK$30.3 million as at 31 March 2019, 2020 and 2021,

respectively. The trade receivable turnover days were approximately 107.1 days, 97.7 days and

90.0 days for the three years ended 31 March 2021, respectively. We are subject to the credit risk

of our customers. We may not be able to collect payments from those customers who are having

financial difficulties or delayed projects. We cannot assure that our customers will not

subsequently default in, or delay, their payments in the future. In the event our customers default

in all or a substantial portion of their payments to us, our financial performance may be materially

adversely affected.

Our past revenue and profit margin may not be indicative of our future revenue and profit

margin.

For the three years ended 31 March 2021, our revenue was approximately HK$53.8 million,

HK$93.9 million and HK$128.8 million, respectively. For the same years, our gross profit was

approximately HK$17.1 million, HK$48.4 million and HK$75.8 million, respectively, whereas

our gross profit margin for the same years was approximately 31.8%, 51.6% and 58.9%,

respectively. For discussion of our financial performance, please refer to the paragraph headed

‘‘Financial Information – Combined statements of profit or loss and other comprehensive income’’

in this document.

There is inherent risk in using our historical financial information to project or estimate our

financial performance in the future, as it only reflects our past performance under particular

conditions. We may not be able to sustain our historical growth rate, revenue and profit margin

for various reasons, including, intensification of competition among construction equipment

providers, aggravation in labour shortage, and other unforeseen factors such as adverse weather,

outbreak of contagious diseases and geological conditions, any of which may delay the delivery

of construction equipment from our suppliers as well as the delivery of construction equipment to

our customers, reduce the number of projects awarded to our customers, and/or reduce our profit

margin.

Changes in existing laws, regulations and government policies, including the introduction of

more stringent laws and regulations on environmental protection and labour safety may

cause us to incur substantial additional expenditure.

Many aspects of our business operations are governed by various laws and regulations, and

government policies. The requirements in respect of the granting and/or renewal of various

licenses and qualifications in the construction equipment rental and sales industry may change

from time to time, and we may not be able to respond to such changes in a timely manner. Such


RISK FACTORS

– 33 –

changes may also increase our costs and burden for compliance, which may materially adversely

affect our business, financial condition and results of operations. For example, if there are any

change to and/or imposition of requirements for qualification in the construction equipment rental

and sales industry in relation to environmental protection and labour safety (such as, the China IV

standard which will be implemented in the PRC from 1 December 2022), and we fail to meet the

new requirements in a timely manner or at all, our business operations will be materially

adversely affected. For more details, please refer to the paragraph headed ‘‘Regulatory Overview

– PRC laws and regulations – H. Regulations related to non-road mobile machinery’’ in this

document.

We need to maintain necessary registrations or exemptions for the construction equipment

used in our business operation in Hong Kong.

We are required to maintain certain registrations, such as, QPME and NRMM, or

exemptions from NRMM for the construction equipment used in our business operation in Hong

Kong. Please refer to the paragraph headed ‘‘Business – Health, work safety, social and

environmental matters’’ in this document for further details. To maintain such registrations or

exemptions, we must comply with the restrictions and conditions imposed by the relevant

authorities and regulations. Please refer to the section headed ‘‘Regulatory Overview’’ in this

document for further details.

The standards of restrictions and conditions imposed by the relevant authorities on

registrations and exemptions may vary from time to time without advance notice and we cannot

assure you that we will be able to duly comply with such changes in a timely manner. If we fail

to comply with any of these restrictions or conditions, our registrations and/or exemptions could

be temporarily suspended or even revoked, or the renewal of our registrations upon expiry of the

terms may be delayed or refused. Furthermore, these registrations and exemptions are valid for a

limited period of time and may be subject to periodic review and renewal by the relevant

authorities. In case we fail to apply for their renewal in a timely manner when they fall due or the

relevant authorities take disciplinary actions against us for any non-compliance in the future, the

renewal of our registrations and exemptions upon expiry of their terms may be delayed or even

refused. Losing any of these registrations or exemptions may have a direct material impact on our

business operations and financial conditions.

We are dependent on our key management personnel.

Our Directors consider that the success of our Group is largely attributable to the

contribution, experience and expertise of our Directors and senior management. Our core

management team is led by Mr. Kok, who has over 35 years of experience in the construction

equipment rental and sales industry. Our key management team plays a critical role not only in

obtaining favourable dealership and distributorship agreements with our suppliers, but also in

maintaining stable relationship with and providing satisfactory products and after-sales services to

our customers. If any of these members of our core management team cease to be


RISK FACTORS

– 34 –

involved in the management of our Group in the future and our Group is unable to find suitable

replacements in a timely manner, there could be an adverse impact on the business, results of

operation and profitability of our Group. Please refer to the section headed ‘‘Directors and Senior

Management’’ in this document for details of the biography of our core management personnel.

We are exposed to the risk of shortage of skilled labour and experienced technicians.

As at the Latest Practicable Date, our technical team consisted of 13 members, a certain

number of them had worked for our Group for over 15 years. Our technical team provides repair

and maintenance and other supporting services to our customers, and the number of such qualified

personnel in our industry is limited. In the event of a shortage of skilled labour in the market, we

may have to increase their compensation in order to retain their services, which will result in an

increase in our operating expenses and we may not be able to pass it on to our customers.

Therefore, our profitability could be adversely affected. Even if we increase the salaries of our

staff, there is still no guarantee that we will be able to maintain an adequate number of skilled

employees and experienced technicians. There may be an adverse impact on our business

operations should a large portion of these skilled labour and experienced technicians cease their

employment with our Group and appropriate replacements could not be found in a timely manner.

We are exposed to foreign exchange risks.

Payments made by us for the settlement of our purchases are generally made in Japanese

Yen, Euro, US dollar, Hong Kong dollar and RMB. Payments received by us from our customers

are, on the other hand, mainly in Hong Kong dollar and RMB. We are therefore exposed to

foreign exchange risks as the exchange rates between Hong Kong dollar/RMB and foreign

currencies at the time we place orders under such agreements may be substantially different from

those at the time that we are required to make payments to our suppliers. If exchange rate

fluctuations cause increases in our cost of sales, we may not be able to adjust our selling price

promptly to pass such increment on to our customers, which would negatively affect our

profitability.

We engage third parties to carry out some of the tasks in our operation cycle. The sub-

standard or delayed performance of these third parties may adversely affect our reputation.

We have engaged third party service providers for (i) the production of our ‘‘Chi Shing’’

brand equipment; and (ii) the delivery of construction equipment to our customers’ designated

locations. We may not be able to review and monitor the performance of these service providers

as directly and as efficiently as managing our own staff. Our inability to ensure the service

quality of these third party service providers could also hinder our ability to deliver services to

customers in a timely and satisfactory manner. By engaging them for different tasks, we are

exposed to risks associated with sub-standard or delayed performance by these third party service

providers. If such risks materialise, our services may deteriorate and could therefore impact our

profitability, financial performance and reputation, and result in litigation or damages claims.


RISK FACTORS

– 35 –

We are exposed to risks related to litigious claims that may affect our operations and

financial position.

During the Track Record Period and up to the Latest Practicable Date, there had been one

accident causing bodily injuries to one of our former employees and an amount of approximately

HK$473,000, which was covered by our insurance, had been compensated to him as at the Latest

Practicable Date. Such former employee filed a personal injury claim against our Group on 5 May

2021. Please refer to the paragraph headed ‘‘Business – Legal proceedings and compliance –

Legal proceedings’’ in this document for further details. We have implemented a series of safety

measures and procedures, but there is no assurance that all the safety measures or other related

rules and regulations of our Group or of our customers are strictly followed. Any violation may

lead to higher probability of occurrences and/or increased seriousness, of personal injuries,

property damages and/or fatal accidents at work sites, which may materially and adversely affect

our business operations and financial position to the extent not covered by insurance policies.

Our business plans and strategies may not be successful or achieved within the expected

timeframe or the estimated budget.

We intend to achieve sustainable growth in our current business and to create long-term

Shareholder’s value by implementing certain corporate strategies, which include: (i) expand and

optimise our rental fleet in Hong Kong and the PRC; (ii) strengthen the development of our own-

branded products and enhance the marketing of our brand; (iii) installation of app-enabled

centralised rental fleet management system; (iv) hiring of additional workforce; and (v) lease

additional space for construction equipment storage and repair and maintenance services in Hong

Kong. For more details of our business plans and strategies, please refer to the paragraph headed

‘‘Business – Business strategies’’ and the section headed ‘‘Future Plans and [REDACTED]’’ in

this document. However, our plans and strategies may be hindered by an array of risks including

those mentioned in this section. There is no assurance that we will be able to successfully

maintain our market share or grow our business successfully after deploying our management and

financial resources. Any failure in maintaining our current market position or implementing our

plans will materially and adversely affect our business, financial condition and results of

operations.

Acquisition of new construction equipment could increase our depreciation expenses and

there is no guarantee that the new purchases will be utilised for our business as expected.

As discussed in the section headed ‘‘Future Plans and [REDACTED]’’ in this document,

we intend to apply approximately HK$[REDACTED], representing approximately [REDACTED]

of the net [REDACTED] from the [REDACTED] (assuming an [REDACTED] of approximately

HK$[REDACTED] per Share, being the mid-point of the proposed [REDACTED] range of

HK$[REDACTED] to HK$[REDACTED] per Share), for expanding and optimising

our rental fleet in Hong Kong and the PRC. Upon purchase of the aforesaid construction

equipment, we will incur additional annual depreciation expenses which will also

increase our cost of sales and services. As a result, our future financial condition


RISK FACTORS

– 36 –

may be adversely affected by the increase in depreciation expenses. There is no assurance that the

intended new purchases can be employed at a utilisation rate comparable to or higher than that

during the Track Record Period. In the event that the new construction equipment cannot be

rented out and/or sold to customers as expected, our profitability and financial performance may

be adversely affected.

Our operations are exposed to risks customary to the construction industry and our existing

insurance coverage may not provide us with adequate protection against these risks.

We may face the risk of loss or damage to our properties and construction equipment due to

fire, flood, theft or other kinds of accidents in our day-to-day operations. Such events may lead to

disruptions and may therefore adversely affect our profitability. We have maintained property all

risks insurance for construction equipment stored at HK Property 1 in Hong Kong. We have also

maintained equipment insurance for part of the construction equipment in our rental fleet in the

PRC. In the event that we face losses or damages to our construction equipment, rental fleet or

inventories due to theft or any other accidents at our storage facilities, these losses or damages

may not be covered by our insurance and we may not be able to receive any compensation. It

may then have an adverse impact on our business operations and financial position.

Notwithstanding our commitment to insure for our employees, our liabilities may not be

fully covered by insurance in the event that there are claims made against us as a result of

accidents. In such case, our profitability and financial performance may be adversely affected.

There is also no guarantee that the insurance premium will not increase or we will not be

required by law or our customers to obtain additional insurance coverage. We also cannot control

that there will not be any reduction in or limitation of insurance coverage by insurers upon expiry

of our current insurance policies. Any significant increase in insurance premium or reduction in

coverage in the future may adversely affect our operations and financial performance.

We may not be able to secure suitable premises for storage of our construction equipment

and for our office and we may have to relocate for alternatives.

We have entered into the tenancy agreements for two properties located in Yuen Long, New

Territories in Hong Kong and one property in Nansha district, Guangdong Province in the PRC,

for the storage of our construction equipment and/or for our office. There is no assurance that we

can continue to lease the properties in the event of early termination by the landlords or when the

relevant agreements expire. If we are unable to renew our existing leases, secure suitable new

premises, or if there is sudden change in demand for our rental fleet, we may need to secure

alternative premises. As storage facilities have to be located on premises which meet zoning and

permitted land use requirements, such premises may not be immediately available when needed. If

we cannot extend our current leases and/or cannot find alternative or additional premises when

required, this may result in disruptions to our operations which will in turn adversely affect our

operations.


RISK FACTORS

– 37 –

Our reputation may be adversely affected if there are major disruptions to our business

operations.

The reputation that we have built up over the years plays a significant role in attracting

customers and maintaining customer relationships. If there are any major disruptions to our

business operations caused by events such as major or frequent breakdowns of construction

equipment in our rental fleet, recall of construction equipment from our suppliers due to quality

problems, inability of our technical support team or our third party service providers to provide

quality and timely services to our customers, and/or other circumstances beyond our control, we

may face adverse publicity and our reputation and goodwill in the market may be adversely

affected.

RISKS RELATING TO OUR MARKET AND INDUSTRY

The construction equipment rental and sales industry is competitive, and competitive

pressure could lead to a decrease in our market share and our ability to sell or rent

equipment at favourable prices.

The concentration of the construction equipment rental and sales industry in Hong Kong is

low. As mentioned in the CHFT Report, as of February 2021, there were about 100 competitors in

the construction equipment rental and sales industry in Hong Kong while there were

approximately 12,000 construction equipment rental and sales service providers in the PRC.

Despite of the entry barriers for new entrants to enter the construction equipment rental and sales

industry in Hong Kong and the PRC, such as, capital intensiveness, requirement for reputation,

experience and repair and maintenance capability, and established relationship with upstream

suppliers, we believe there may be increased competition in our industry from existing

competitors or from new market entrants.

We believe that quality of products and services is a prominent competitive factor in the

construction equipment rental and sales industry. Our Directors consider that, from time to time,

our competitors may compete by introducing similar or lower-priced substitutes. Competitive

pressure may materially adversely affect our revenue and operating results by reducing our market

share or depressing construction equipment rental rates or prices. If we lower the prices in order

to retain or increase market share, our operating margin and financial performance may be

adversely impacted.

Changes in market conditions and trends in the construction industry and in the overall

economy may affect our operations and growth.

Our operations are mainly located in Hong Kong and the PRC. According to CHFT, the

demand for our construction equipment rental services and our construction equipment is closely

associated with the construction industry as a whole. According to the CHFT Report, the

construction industry in Hong Kong and the PRC may be threatened by various factors, including

but not limited to (i) shortage of skilled labour; (ii) rise in operating costs such as cost for


RISK FACTORS

– 38 –

construction equipment storage; and (iii) delay in procurement of materials, plant and equipment.

Should there be an occurrence of any of the above conditions or the threat materialises, there may

be a significant deterioration in the demand for construction equipment, and our operating results

and financial conditions may be adversely affected.

RISKS RELATING TO HONG KONG

The state of economy in Hong Kong may adversely affect our performance and financial

condition.

Most of our revenue generated during the Track Record Period was derived from provision

of construction equipment rental services and sale of construction equipment in Hong Kong. If

Hong Kong experiences any adverse economic conditions due to events beyond our control, such

as a local economic downturn, natural disasters, contagious disease outbreaks, terrorist attacks, or

if the local authorities adopt regulations that place additional restrictions or burdens on us or on

our industry in general, our overall business and results of operations may be materially adversely

affected.

RISKS RELATING TO THE PRC

We may be adversely affected by changes in social and economic policies, as well as

governmental policies, in the PRC.

During the Track Record Period, a part of our revenue was derived from our provision of

construction equipment rental service and sale of construction equipment to customers in the

PRC. A part of our assets and operations is located in the PRC. Therefore, our business, financial

condition and results of operations are subject to economic and legal developments in the PRC.

The PRC’s economy differs from the economies of most developed countries in some aspects,

including growth rate, control of foreign exchange, allocation of resources and capital investment.

Any significant changes in the PRC’s economic and governmental policies and measures could

have a material adverse effect on the PRC economy and we cannot assure you that such changes

will not occur. Where such changes have a material adverse effect on the PRC economy and

economic growth, it may impact the industry in which we operate, and may reduce the demand

for our products and services.

We may be deemed a PRC resident enterprise under the EIT Law and be subject to PRC

taxation on our worldwide income.

Our Company is a holding company incorporated under the laws of the Cayman Islands.

Under the EIT Law, if an enterprise incorporated outside the PRC has its ‘‘de facto management

bodies’’ located within the PRC, such enterprise may be recognised as a PRC tax

resident enterprise and be subject to the unified income tax at a rate of 25% on its

worldwide income. The EIT Law defines the term ‘‘de facto management body’’ as a body

that has a material and overall management control over the business, personnel, accounts and


RISK FACTORS

– 39 –

properties of the enterprise. In April 2009, SAT issued the Notice regarding the Determination of

Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the

basis of ‘‘de facto management bodies’’, which was partially revised by SAT in December 2017,

setting out certain criteria for specifying what constitutes a ‘‘de facto management body’’ in

respect of enterprises that are established offshore by PRC enterprises. However, no such criteria

are provided in these or other regulations of SAT in respect of enterprises established offshore by

private individuals or foreign enterprises like us, therefore, it is unclear whether we will be

deemed to be a ‘‘PRC tax resident enterprise’’ for the purposes of the EIT Law even though a part

of our operations and management are currently based in the PRC. We are currently not treated as

a PRC tax resident enterprise by the relevant tax authorities, nevertheless, there can be no

assurance that we will not be treated as a PRC tax resident enterprise under the EIT Law in the

future and be subject to the unified income tax. In the event that we are subject to the unified

income tax, our income tax expenses may increase significantly and have a material adverse effect

on our net profit and financial performance.

Dividends payable by us to our foreign investors and gains on the sale of our Shares may be

subject to withholding taxes under the PRC tax laws.

Under the EIT Law, enterprise income tax at the rate of 10.0% is applicable to dividends

payable to investors that are ‘‘non-resident enterprises’’ (being investors which have not set up

institutions or premises in the PRC, or where the institutions or premises are set up but its

subsidiary’s after tax income has no actual relationship with such institutions or premises) to the

extent such dividends are sourced within the PRC. Similarly, any gain realised on the transfer of

the shares of a PRC enterprise by such investors is also subject to 10.0% PRC enterprise income

tax if such gain is regarded as income derived from sources within the PRC. If we are considered

as a PRC ‘‘resident enterprise’’, it is unclear whether the dividends we pay with respect to our

Shares, or the gain you may realise from the transfer of our Shares, would be treated as income

derived from sources within the PRC and be subject to PRC tax. If we are required under the EIT

Law to withhold PRC enterprise income tax on our dividends payable to our foreign

Shareholders, or if you are required to pay PRC enterprise income tax on the transfer of our

Shares, the value of your investment or return on your investment in our Shares may be

materially adversely affected.

We have been involved in non-compliance with certain regulatory requirements in the PRC

and may be subject to liabilities.

We are required to make contribution to social insurance funds and the housing provident

fund for our eligible employees according to various laws, regulations and requirements in the

PRC, the details of which are summarised in the section headed ‘‘Regulatory Overview’’ in this

document. Should we fail to comply with or meet these laws, regulations and requirements, we

may be subject to fines or other remedial measures. Besides, our Group may incur additional

costs to ensure compliance in case of changes in the relevant requirements in the future. During

the Track Record Period, we had failed to make adequate contribution to social insurance fund


RISK FACTORS

– 40 –

and housing provident fund for all of our eligible employees. For details of the non-compliances

of our Group, please refer to the paragraph headed ‘‘Business – Legal proceedings and

compliance – Legal compliance’’ in this document.

The PRC government has certain measures in relation to currency conversion which mayaffect the value of our Shares and limit our ability to utilise our cash effectively.

Some of our revenue is denominated in RMB. The PRC government has imposed certain

measures on the conversion between RMB and foreign currencies and, in certain cases, the

remittance of foreign currencies into and out of the PRC. Pursuant to the existing PRC foreign

exchange regulations, payments of current account items, such as dividend distributions and

interest payments, can be made in foreign currencies without prior approval from SAFE, but

subject to certain procedural requirements. However, approval from or registration with SAFE or

its designated banks is required where RMB is to be converted into other foreign currencies and

remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in

foreign currencies.

We cannot assure you that the PRC regulatory authorities will not impose restrictions on

foreign exchange transactions for current account items in the future. Any shortage in the

availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient

foreign currency to pay dividend or make other payments to our Group, or otherwise satisfy their

obligations that are required to be settled in foreign currency.

If the foreign exchange control system prevents us from obtaining sufficient foreign

currency to satisfy our currency demands, we may not be able to pay dividend in foreign

currencies to our Shareholders. In addition, since some of our future cash flow derived from our

operation will be denominated in RMB, any existing and future restriction on currency exchange

may limit our ability to purchase or obtain goods and services in countries outside of the PRC, or

otherwise limit or impair our business activities that are conducted in foreign currencies.

The PRC regulations may limit our ability to finance our PRC subsidiary effectively with thenet [REDACTED] from the [REDACTED], which may adversely affect the value of yourinvestment.

We, as an offshore holding company, may make additional capital contributions or loans to

our PRC subsidiary, including from the net [REDACTED] of the [REDACTED]. Any loan to

our PRC subsidiary is subject to PRC laws and regulations. For example, loans from us to our

PRC subsidiary, which is a foreign-invested enterprise, to finance its activities cannot exceed

statutory limits and must be registered with SAFE or its local branches. We may also decide to

finance our PRC subsidiary by means of capital contributions. These capital contributions must be

registered with the SAMR or its local branches.

We cannot assure you that we will be able to complete the necessary government registrations

on a timely basis, or at all, with respect to making future borrowings or capital contributions to our

PRC subsidiary with the net [REDACTED] from the [REDACTED]. Should we fail to


RISK FACTORS

– 41 –

complete such registrations, our ability to contribute additional capital to fund our PRC operation

may be negatively affected, which could materially adversely affect our liquidity as well as our

ability to fund and expand our business.

You may experience difficulties in effecting service of legal process and enforcing judgments

against us and our officers.

Our Company was incorporated under the laws of the Cayman Islands and a part of our

businesses, assets and operations is located in the PRC. It may not be possible to effect service of

legal process upon us or officers in the PRC. Moreover, a judgment of a court of another

jurisdiction may be reciprocally recognised or enforced if the jurisdiction has a treaty with the

PRC or if judgements of the PRC courts have been recognised before in that jurisdiction (subject

to the satisfaction of other requirements). The PRC does not have treaties providing for the

reciprocal recognition and enforcement of civil judgments of courts of the United States, the

United Kingdom, Japan and most other western countries. Therefore, it may be difficult for you to

enforce against us and our officers in the PRC any judgments obtained from non-PRC courts.

There are certain uncertainties regarding the interpretation and enforcement of PRC laws

and regulations.

Some of our operations are based in the PRC and are subject to the laws and regulations of

the PRC. The PRC legal system is based on statutory laws. Under this system, prior court

decisions may be cited for reference but do not have binding precedential effect. Since 1979, the

PRC government has been developing a comprehensive legal system and considerable progress

has been made in the promulgation of laws and regulations dealing with economic matters, such

as corporate organisation and governance, property title, foreign investment, commerce, taxation

and trade. As these laws and regulations are relatively new and evolving, and because of the

limited volume of published cases and judicial interpretations and the non-binding nature of prior

court decisions, the interpretation and enforcement of these laws and regulations involve certain

uncertainties. Such uncertainties may lead to difficulties in enforcing our rights and in resolving

disputes with any persons, and could result in unanticipated costs and liabilities.

RISKS RELATING TO THE [REDACTED]

There has been no prior public market for our Shares and an active trading market for our

Shares may not develop or be sustained.

Prior to the [REDACTED], no public market for our Shares existed. Following the completion

of the [REDACTED], the Stock Exchange will be the only market on which our Shares will be

publicly traded. We cannot assure our investors that an active trading market for our Shares will be

developed or be sustained after the [REDACTED]. In addition, we cannot assure our investors that

our Shares will be traded in the public market subsequent to the [REDACTED] at or above the

[REDACTED]. The [REDACTED] for our Shares is expected to be fixed by the [REDACTED],

and may not be indicative of the market price of our Shares following the completion


RISK FACTORS

– 42 –

of the [REDACTED]. If an active trading market for our Shares does not develop or is not

sustained after the [REDACTED], the market price and liquidity of our Shares could be

materially adversely affected.

Investors may experience dilution if we issue additional Shares in the future.

We may issue additional Shares upon exercise of options to be granted under the

[REDACTED] and/or the Share Option Scheme in the future. The increase in the number of

Shares outstanding after such issue would result in reduction in the percentage ownership of our

Shareholders and may result in a dilution in their earnings and net asset value per Share. In

addition, we may need to raise additional funds in the future to finance our business expansion,

new development and acquisitions. If additional funds are raised through the issuance of new

equity or equity-linked securities of our Company other than on a pro-rata basis to our then

existing Shareholders, the shareholding of such Shareholders may be reduced or such new

securities may confer rights and privileges that take priority over those conferred by the

[REDACTED].

Any disposal by our Controlling Shareholders of a substantial number of Shares in thepublic market could materially adversely affect the market price of our Shares.

There is no guarantee that our Controlling Shareholders will not dispose of their Shares

following the expiration of their respective lock-up periods after the [REDACTED]. Our Group

cannot predict the effect of any future sales of our Shares by any of our Controlling Shareholders

on the market price of our Shares. Sales of a substantial number of Shares by any of our

Controlling Shareholders or the market perception that such sales may occur could materially

adversely affect the prevailing market price of our Shares.

Investors may experience difficulties in enforcing their Shareholders’ rights because ourCompany was incorporated in the Cayman Islands, and the protection to minorityShareholders under Cayman Islands laws may be different from that under the laws ofHong Kong or other jurisdictions.

Our Company was incorporated in the Cayman Islands and our affairs are governed by the

Articles, the Companies Act and common law applicable in the Cayman Islands. The laws of the

Cayman Islands may differ from those of Hong Kong or other jurisdictions where our investors

may be located. As a result, minority Shareholders may not enjoy the same rights as pursuant to

the laws of Hong Kong. A summary of the Cayman Islands company laws on protection of

minority Shareholders is set out in Appendix III to this document.

There is no assurance that we will pay dividends in the future.

We declared dividend of approximately HK$104.0 million, HK$50.3 million and

HK$41.0 million for the three years ended 31 March 2021, respectively. The declaration,

payment and amount of any future dividends are subject to the discretion of our

Board depending on, among other things, our operations and earnings, general

financial condition, capital expenditure and future development requirements and


RISK FACTORS

– 43 –

our Articles of Association, applicable laws and other relevant factors. For further details, please

refer to the paragraph headed ‘‘Financial Information – Dividends and dividends policy’’ in this

document. We cannot assure investors when or whether we will pay dividends in the future.

Investors should read this entire document carefully and we strongly caution you not to

place any reliance on any information (if any) contained in press articles or other media

regarding us and the [REDACTED] including, in particular, any financial projections,

valuations or other forward looking statements.

Prior to the publication of this document, there may be press or other media, which contains

certain information referring to us and the [REDACTED] that is not set out in this document. We

wish to emphasise to potential investors that neither we nor any of the Sponsor, the

[REDACTED], the [REDACTED], the [REDACTED], the [REDACTED], our Directors,

officers, employees, advisers, agents or representatives of any of them, or any other professional

parties involved in the [REDACTED] has authorised the disclosure of such information in any

press or media, and neither the press reports, any future press reports nor any repetition,

elaboration or derivative work were prepared by, sourced from, or authorised by us or any of the

professional parties. Neither we nor any of the professional parties accept any responsibility for

any such press or media coverage or the accuracy or completeness of any such information. We

make no representation as to the appropriateness, accuracy, completeness or reliability of any

such information or publication. To the extent that any such information is not contained in this

document or is inconsistent or conflicts with the information contained in this document, we

disclaim any responsibility or liability whatsoever in connection therewith or resulting therefrom.

Accordingly, prospective investors should not rely on any such information in making your

decision as to whether to subscribe for the [REDACTED]. You should rely only on the

information contained in this document.

There are uncertainties and risks associated with forward-looking statements.

This document contains certain statements and information that are ‘‘forward-looking’’ and

uses forward-looking terminology such as ‘‘of the view’’, ‘‘consider’’, ‘‘aim’’, ‘‘expect’’,

‘‘believe’’, ‘‘intend’’, ‘‘can’’, ‘‘going forward’’, ‘‘could’’, ‘‘anticipate’’, ‘‘estimate’’, ‘‘should’’,

‘‘plan’’, ‘‘potential’’, ‘‘project’’, ‘‘seek’’, ‘‘would’’ and ‘‘will’’. Those statements include, among

other things, the discussion of our growth strategy and expectations concerning our future

business, operations, liquidity and capital resources. Purchasers of our Shares are cautioned that

any forward-looking statements are subject to uncertainties and that, although we believe the

assumptions on which the forward-looking statements are based are reasonable, any or all of these

assumptions could be incorrect. The uncertainties in this regard include, but are not limited to,

those identified in this section, many of which are not within our control. In light of these and

other uncertainties, the inclusion of forward-looking statements in this document should not be

regarded as representations by us that our plans or objectives will be achieved, and investors


RISK FACTORS

– 44 –

should not place undue reliance on such forward-looking statements. We do not undertake any

obligation to update publicly or release any revisions of any forward-looking statements in this

document, whether as a result of new information, future events or otherwise.


RISK FACTORS

– 45 –

[REDACTED]


INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

– 46 –

[REDACTED]



– 47 –

[REDACTED]



– 48 –

[REDACTED]



– 49 –

[REDACTED]



– 50 –

DIRECTORS

Name Residential Address Nationality

Executive Directors

Mr. Kok Yun Kuen（郝潤權） Flat G, 4/F, Albion Gardens

17–21 La Salle Road

Kowloon City, Kowloon

Hong Kong

Chinese

Mr. Kok Kwai Leung（郝桂良） Flat B, 16/F, Tower 6

23 Fat Kwong Street

Ultima, Ho Man Tin

Kowloon

Hong Kong

Chinese

Ms. Kwan Suet Man（關雪敏） Room 2526

Ming Shun Lau, Jat Min Chuen

Shatin, New Territories

Hong Kong

Chinese

Mr. Poon Ka Chun Carson（潘家俊） 25 H, Block 19

City One Shatin

Shatin, New Territories

Hong Kong

Chinese

Independent non-executive Directors

Mr. Chung Kau Cheong（鍾球昌） Flat 14, 22/F, Block J

Kam Lan House, Phase 5

Kam Fung Court

Ma On Shan, New Territories

Hong Kong

Chinese

Mr. Tsui Pui Hung（徐沛雄） Flat E, 40/F, Tower 3

The Avenue, Phase 2

No. 200 Queen’s Road East

Hong Kong

Chinese

Ms. Chu Moune Tsi Stella（崔滿枝） Avenida Da Praia Grande No. 763

Edificio Lun Pong, 8-Andar-D

Macau

Chinese

Further information on the profile and background of our Directors has been disclosed in the

section headed ‘‘Directors and Senior Management’’ in this document.


DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

– 51 –

Party Name and address

Sponsor Ample Capital Limited

(A licensed corporation carrying on type 1 (dealing in

securities), type 4 (advising on securities), type 6

(advising on corporate finance) and type 9 (asset

management) regulated activities as defined under the

SFO)

Unit A, 14/F

Two Chinachem Plaza

135 Des Voeux Road Central

Central

Hong Kong




Legal advisers to our Company As to Hong Kong law:

David Fong & Co.

Solicitors, Hong Kong

Unit A, 12/F

China Overseas Building

139 Hennessy Road, Wan Chai

Hong Kong

As to Cayman Islands law:

Appleby

Suites 4201-03 & 12

42/F, One Island East

Taikoo Place

18 Westlands Road

Quarry Bay

Hong Kong

As to PRC law:

GFE Law Office

Units 3409-3412

Guangzhou CTF Finance Center

No.6 Zhujiang Road East

Zhujiang New Town

Guangzhou

PRC



– 52 –

Party Name and address

Legal advisers to the Sponsor

and the [REDACTED]

As to Hong Kong law:

Addleshaw Goddard (Hong Kong) LLP

802-804 Champion Tower

3 Garden Road

Central

Hong Kong

Auditors and reporting accountants Wellink CPA Limited

Certified Public Accountants

Rooms 802-4, Kin Wing Commercial Building

24-30 Kin Wing Street

Tuen Mun, New Territories

Hong Kong

Industry consultant CHFT Advisory and Appraisal Ltd.

1601, 16/F, Sun House

90 Connaught Road Central

Hong Kong




– 53 –

Registered office in the Cayman

Islands

71 Fort Street

PO Box 500, George Town

Grand Cayman KY1-1106

Cayman Islands

Head office and principal place of

business in Hong Kong under Part

16 of the Companies Ordinance

G/F and Portion of 1/F, Chi Shing Centre

2 Ping Fuk Lane, Tong Yan San Tsuen, Yuen Long

New Territories

Hong Kong

Website of the Company www.chishing.hk

(the contents of this website does not form part of

this document)

Company secretary Mr. Ng Lok Ki（伍樂淇）HKICPA, HKICS

Flat F, 26/F, Block 1

Metro City Phase I

1 Wan Hang Road

Tseung Kwan O, New Territories

Hong Kong

Authorised representatives Mr. Kok Kwai Leung（郝桂良）Flat B, 16/F, Tower 6

23 Fat Kwong Street

Ultima, Ho Man Tin

Kowloon

Hong Kong

Mr. Ng Lok Ki（伍樂淇）HKICPA, HKICS

Flat F, 26/F, Block 1

Metro City Phase I

1 Wan Hang Road

Tseung Kwan O, New Territories

Hong Kong


CORPORATE INFORMATION

– 54 –

Compliance adviser [Ample Capital Limited

(A licensed corporation carrying on type 1 (dealing in

securities), type 4 (advising on securities), type 6

(advising on corporate finance) and type 9 (asset

management) regulated activities as defined under the

SFO)

Unit A, 14/F

Two Chinachem Plaza


Central

Hong Kong]

Audit Committee Ms. Chu Moune Tsi Stella（崔滿枝）(Chairperson)

Mr. Tsui Pui Hung（徐沛雄）

Mr. Chung Kau Cheong（鍾球昌）

Remuneration Committee Mr. Tsui Pui Hung（徐沛雄）(Chairperson)

Ms. Chu Moune Tsi Stella（崔滿枝）

Mr. Kok Yun Kuen（郝潤權）

Nomination Committee Mr. Chung Kau Cheong（鍾球昌）(Chairperson)

Mr. Kok Yun Kuen（郝潤權）

Mr. Tsui Pui Hung（徐沛雄）

Cayman Islands principal share

registrar and transfer office

[REDACTED]

Hong Kong branch share registrar and

transfer office

[REDACTED]



– 55 –

Principal bankers Nanyang Commercial Bank Limited


Hong Kong

China Construction Bank Corporation

25 Finance Street, Beijing

China



– 56 –

The information contained in this section and elsewhere in this document have been derivedfrom a commissioned report, the CHFT Report, prepared by CHFT which is an independent thirdparty. We believe that the sources of the information are appropriate sources for such informationand have taken reasonable care in extracting and reproducing such information. We have no reasonto believe that such information is false or misleading or that any fact has been omitted that wouldrender such information false or misleading. However, the information has not been independentlyverified by us, or any of our affiliates or advisors, nor by any other party involved in the[REDACTED] other than CHFT with respect to the information contained in the CHFT Report. Norepresentation is given as to the accuracy of the CHFT Report. For the above reasons, informationcontained in this section should not be unduly replied upon. After taking reasonable care, ourDirectors confirm that there has been no adverse change in the market information since the date ofthe CHFT Report which may qualify, contradict or adversely impact the quality of the informationin this section.

SOURCE AND RELIABILITY OF INFORMATION

We have commissioned CHFT, an independent market research company, to conduct an analysisof and to produce a report on the construction equipment rental and sales industry in Hong Kong andthe PRC for use in this document. Founded in 2017, CHFT provides industry research and advisoryservices on a variety of industries. The information from CHFT disclosed in this document is extractedfrom the CHFT Report and is disclosed with the consent of CHFT. We agreed to pay a fee ofHK$500,000, which we believe reflects market rates for reports of this type.

The CHFT Report was prepared based on a top-down approach with the use of both primary andsecondary researches and has attempted to cross check each significant findings with multiple sources.The primary research included site visits, management interviews and consultations with industryexperts, while the secondary research included internet research and articles, publications andknowledge base search. Any projections in the CHFT Report were done utilising a mix of bothqualitative and quantitative analysis. Whenever applicable, a set of historical data is used as a basis forits projections, and if necessary, adjustments are subsequently made for projection purposes and toensure data relevancy and accuracy.

The following assumptions are used in the CHFT Report: (a) there will not be material incidentssuch as social, political or administrative developments causing the economic condition to differsignificantly from the forecasts, or adversely affect the business activities of the constructionequipment rental and sales industry in Hong Kong and the PRC; and (b) the COVID-19 pandemic islikely under effective control with governmental quarantine and preventive measures and does notaffect the long term economic development of Hong Kong and the PRC.

OVERVIEW OF THE CONSTRUCTION INDUSTRY IN HONG KONG

Market size and forecast for the construction industry in Hong Kong

The gross value of construction works performed by main contractors has increased fromapproximately HK$223.9 billion in 2015 to approximately HK$236.4 billion in 2019, representing aCAGR of 1.4%. The growth was primarily driven by the increase in construction activities for keylarge-scale public infrastructure and property development projects. The gross value of constructionworks performed by main contractors had grown steadily from 2015 to 2018 with a decrease in 2019.The drop in 2019 was mainly due to decrease in the gross value of private sector projects resulted fromthe developments of the US-China trade relations and the local social incident, and slight decrease inpublic spending on construction works as a result of social unrest and delay in the LegislativeCouncil’s approval of funding proposals of new public construction projects in Hong Kong.

In the first half of 2020, the gross value of construction works performed by main contractorsdecreased mainly due to the outbreak of COVID-19, causing temporary delays in project schedule inthe first quarter of 2020 and uncertainty to the macro-economy in Hong Kong in the short run.However, it is expected that the construction industry in Hong Kong would not be affected materiallyby the outbreak of COVID-19 in the long run given COVID-19 did not cause significant material delayor suspension of construction works in Hong Kong and the pipeline of major construction projects inHong Kong are ongoing as planned. Going forward, as the Government is determined to increasehousing supply and community facilities and infrastructure investment, the gross value of constructionworks performed by main contractors is expected to increase from approximately HK$226.4 billion in2020 to approximately HK$292.1 billion in 2024 at a CAGR of 6.6%.


INDUSTRY OVERVIEW

– 57 –

Gross Value of Construction Works Performed by Main Constractors(in nominal terms), Hong Kong, 2015-2024E

67,781 77,666 74,945 75,552 73,286 58,664 67,464 72,861 76,795 82,017

77,24281,367 87,854 75,856

62,69770,428

73,94979,126 84,269

90,842

78,92477,458

87,119 100,768100,455

97,342101,430

106,096112,250

119,209223,947236,491

249,918 252,176236,438

226,434242,843

258,083273,314

292,068

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

HKD_Million

Private sector Public sector Construction works in locations other than sites

CAGR: 1.4% CAGR: 6.6%

Source: Census and Statistics Department, HKSAR, CHFT

DEFINITION AND CLASSIFICATION OF CONSTRUCTION EQUIPMENT

Construction equipment can be classified into different categories based on their application andfunctionality, which include earthmoving equipment, foundation equipment, high reach equipment,lifting equipment, material handling equipment, metal recycling equipment, and power and energyequipment.

Category Definition Examples

Earthmovingequipment

Equipment primarily used for grading andexcavating soil and rock, levelling,mixing, compacting, digging foundationsfor landscaping, material handling,construction and demolition

Excavator, bulldozer, roller, vibrating platecompactor, rammer, motor graders,trencher, scraper and dump truck,crawler loader, wheel loader and skidloader

Foundationequipment

Equipment primarily used in early stages ofconstruction projects such as siteformations and piling

Casing rotator, hydraulic drilling rig, casingoscillator and telescopic clamshell

High reachequipment

Mechanical equipment primarily used toefficiently provide temporary access forpeople or equipment in high areas thatmay be inaccessible

Aerial platform, scissor lift and diesel/electric boom lift

Lifting equipment Equipment primarily used in constructionsites to lift heavy objects or loweringloads

Crawler crane, tower crane, telescopiccrane, mobile crane and terrain crane

Material handlingequipment

Mechanical equipment primarily used forthe storage, movement, protection andcontrol of materials within a constructionsite

Telehandlers and diesel/electric forklift

Metal recyclingequipment

Equipment primarily used to handle metalmaterial for recycling purpose

Lifting magnet, scrap metal hopper, palletjack with scale and fork grapple

Power and energyequipment

Equipment primarily used to provide powerand energy for illumination or operationin the construction site

Silent diesel generator, diesel welder,diesel/electric air compressor and diesellight tower


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OVERVIEW OF THE CONSTRUCTION EQUIPMENT RENTAL AND SALES INDUSTRY INHONG KONG

Market size of the construction equipment rental industry in Hong Kong

The market size of the construction equipment rental industry in Hong Kong grew fromapproximately HK$3,969 million in 2015 to approximately HK$4,487 million in 2019, representing aCAGR of 3.1%. It is estimated that there was a slight decrease in the revenue of the constructionequipment rental industry in Hong Kong in 2020 as compared to 2019 as the construction industry inHong Kong was negatively affected by the outbreak of COVID-19 which caused delay of someconstruction projects. Some of the construction contractors had encountered interruptions in the supplyof construction materials and difficulty in labour deployment in the first quarter of 2020. However, theoutbreak of COVID-19 is expected to have limited impact on the demand for construction equipment inthe long run due to the fact that the proposed schedules of the construction works in Hong Kong in thefollowing years will unlikely be affected. Attributable to the planned infrastructure developmentprojects, the supportive Government policies in increasing land and housing supply and the expectednumber of new private residential buildings to be completed, the market size of the constructionequipment rental industry in Hong Kong is expected to grow from approximately HK$4,271 million in2020 to approximately HK$5,485 million in 2024 at a CAGR of 6.5%.

Construction Equipment Rental Market Size, Hong Kong, 2015 - 2024E

1,741 1,646 1,650 1,864 1,976 1,8882,137 2,290 2,359 2,417

494 478 504574 585 538

589627 668 696

677646 648

660769

752

824875

920 9751,057

962 1,004

1,0831,157

1,092

1,2481,281

1,3471,398

3,9693,732 3,806

4,181

4,4874,271

4,7995,073

5,2955,485

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

HKD million

othershigh reach equipment power and energy equipmentearthmoving equipment

CAGR: 3.1%

CAGR: 6.5%

Source: CHFT

Market size of the construction equipment sales industry in Hong Kong

The market size of the construction equipment sales industry in Hong Kong decreased fromapproximately HK$3,583 million in 2015 to approximately HK$3,046 million in 2016. The decreasewas mainly due to the intermittent filibustering in the Legislative Council in Hong Kong in 2016,which caused slowdown in progress of some construction projects as major construction companiesreduced their budget. In order to save costs, contractors chose to lease equipment rather than purchaseequipment for contract works. Hence, the Hong Kong construction equipment sales market recorded amoderate increase from 2016 to 2019. It is estimated that there was a decrease in the revenue of theconstruction equipment sales industry in Hong Kong in 2020 as compared to 2019 due to outbreak ofCOVID-19 causing delay and interruptions in the schedules of construction projects. As COVID-19gradually comes under control, considering the major construction projects in the pipeline will becarried out as planned and the Government’s support towards the construction industry, the market sizeof the construction equipment sales industry in Hong Kong is expected to increase from approximatelyHK$3,507 million in 2020 to approximately HK$4,110 million in 2024 at a CAGR of 4.0%.


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Construction Equipment Sales Market Size, Hong Kong, 2015-2024E

1,592 1,361 1,467 1,569 1,657 1,570 1,663 1,722 1,756 1,839

406356 384 414 420 403 440 448 455 480

618

534576

625 645 625651 667 695 725

966

795893

911970

908967 1,000 1,055

1,0663,583

3,0463,320

3,5193,691

3,5073,721 3,837

3,9614,110

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

HKD_ Million

CAGR: 0.7%CAGR: 4.0%


Source: CHFT

Drivers, trends and opportunities

The development of construction equipment rental and sales industry in Hong Kong is closelyrelated to the construction industry as a whole.

Government’s large-scale infrastructure development

According to the 2020-21 Budget, the annual capital works expenditure will be approximatelyHK$100 billion on average in coming years, with the annual total construction output reachingHK$300 billion. In particular, some highlighted large-scale infrastructure projects include Lok MaChau Loop Development, and infrastructure works for public housing development at Wang Chau, PokFu Lam South and Yau Tong. Several major projects are under planning by the CEDD, including butnot limited to, Kai Tak development – remaining infrastructure works for developments at the formerrunway and south apron, Kai Tak development – Kai Tak approach channel and Kwun Tong typhoonshelter improvement works (Phase 2), Development at Anderson Road, Tseung Kwan O furtherdevelopment – infrastructure works for Tseung Kwan O Stage I Landfill site, Tseung Kwan O, andCycle Tracks Connecting North West New Territories with North East New Territories. All of theaforesaid infrastructure construction works are expected to increase the demand for constructionequipment, benefiting the construction equipment rental and sales industry in Hong Kong.

Redevelopment planning

The rising number of aged buildings has been one of the key issues in Hong Kong. According tothe Urban Renewal Authority (‘‘URA’’), there would be more than 326,000 residential flats aged atleast 70 years or above by 2046. Therefore, the URA has been executing various redeveloping schemesin old districts and some of the planned major redevelopment projects include Kau Pui Lung Road/ChiKiang Street Development Scheme, Kwun Tong Town Centre Project and Nga Tsin Wai VillageProject. These redevelopment projects require construction works for demolition and buildingsconstruction, which generate business opportunities for players in the construction equipment rental andsales industry in Hong Kong.

Rising supply of residential buildings

In late 2020, the Government announced the Long-Term Housing Strategy 2020 Annual ProgressReport. With the expectation that the residential demand will increase progressively, the Governmenthas set the total housing supply target of 430,000 units for the next 10 years. Accordingly, increasingresidential housing supply is one of the key factors driving construction activities and hence thedemand for construction equipment in Hong Kong for the coming years.

Rising land supply

Given the shortage of land supply in Hong Kong, the Government has announced policies inraising land supply for the upcoming years in the 2019 Policy Address. Such policies includecommencement of new development area projects such as Hung Shui Kiu/Ha Tsuen, Kwu Tung North/Fanling North new development areas and Yuen Long South development. In order to shorten the townplanning process, the Government has simplified and accelerated the process of lease modification andchange of land use. It is expected that more than 1,200 hectares of land could be released to the market


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within the next decade. Accordingly, the increase in land supply in Hong Kong in the coming years isexpected to positively drive the number of construction work for public facilities in these newdevelopment areas, including playgrounds, hospitals, sports centres, school, and other recreationalfacilities, which in turn create the demand for rental and sales of construction equipment in the nearfuture.

Government promotion of adoption of new construction technology

The Government, along with the CIC, have been promoting new construction methods andtechnologies, such as Modular Integrated Construction (‘‘MiC’’). MiC is carried out by assemblingprefabricated components on site. In particular, in order to encourage greater adoption of MiC in newbuildings, approximately 6% of the floor area constructed through MiC may be disregarded from thecalculation of gross floor area. Such assembly work has a greater demand for lifting and high reachequipment. Therefore, the adoption of MiC is expected to drive more demand for rental and sales ofcranes and high reach equipment.

Increasing environmental awareness of the construction industry

The Government has implemented environmental regulations and schemes, such as, NRMM andQPME, which relate to the construction equipment rental and sales industry in Hong Kong. With theincreasing environmental awareness and increasing stringent requirement on construction equipment airand noise pollution emission, the construction industry has seen increasing use of constructionequipment which are approved NRMMs with valid QPME labels. This trend has driven contractors andconstruction equipment providers to lease and purchase construction equipment with higher emissionstandards.

Adoption of new technology

Technology such as 5G, Internet of Things (‘‘IoT’’) and artificial intelligence (‘‘AI’’) have seenincreasing use and application in the construction equipment rental and sales industry to improveservices, operational efficiency and fleet management. The emergence of 5G, IoT and AI have allowedthe intelligent networking of construction equipment which digitalise the operating data of constructionequipment for data collection, storage, computing, cloud services and data analysis. With thedigitalised data, construction equipment providers can provide value-added services, such as, remotecontrol and smart equipment management, enhance services quality, improve operation efficiency andachieve cost savings.

Threats and challenges

Shortage of labour

Labour shortage is a major challenge of the construction equipment rental and sales industry inHong Kong. Aging population has resulted in decline in the size of the labour force in recent years.The construction equipment rental and sales industry in Hong Kong often faces shortage of skilledworkers due to retirement of experienced workers and the reluctance of young workers to enter theindustry. According to the Hong Kong Construction Association, approximately 40% of theconstruction workers in Hong Kong were aged above 50 in 2020. Due to the subsidies provided by theGovernment, although the number of young people joining the construction industry has beenincreasing, most trainees under 35 years old do not choose to stay in the industry upon completingtheir training. As such, shortage of labour remains an issue for the construction equipment rental andsales industry in Hong Kong.

Delay in approval for funding for public projects

The delay in the approval for funding applications for some development plans and public workscould affect the commencement of the relevant public projects as well as the continuity of theGovernment’s expenditure on those projects. Public projects are a major contributor to the revenue ofthe overall construction industry, thus delays to public projects may have a knock on impact on thedemand for the services of the construction equipment rental and sales industry in Hong Kong.

COMPETITIVE LANDSCAPE OF CONSTRUCTION EQUIPMENT RENTAL AND SALESINDUSTRY IN HONG KONG

The concentration of the construction equipment rental and sales industry in Hong Kong is low.There were approximately 100 competitors in the construction equipment rental and sales industry inHong Kong, with top five players accounting for approximately 15.0% of the total market size in termsof revenue in 2020.


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Factors of competition in the construction equipment rental and sales industry include but notlimited to reputation and track record, scale of operation, scale of rental fleet, ability to provide qualityand reliable construction equipment, relationship with customers and suppliers, and capability toprovide timely repair and maintenance services.

Top five largest market players in the power and energy equipment and high reach equipmentrental market

The Group’s revenue generated from the rental of power and energy equipment and high reachequipment in Hong Kong was approximately HK$79.6 million for the year ended 31 March 2021,representing over 80% of the Group’s total revenue generated from rental services. Given the revenueof the power and energy equipment and high reach equipment rental market in Hong Kong is expectedto be approximately HK$1,290 million for the year ended 31 December 2020, the Company rankedsecond in the power and energy equipment and high reach equipment rental market with a market shareof approximately 6.2%.

Top Five Largest Market Players in the Power and Energy Equipment and High Reach EquipmentRental Market in Hong Kong in 2020

Rank Company Description Approximaterevenue1

(HK$ million)

ApproximateMarketShare

1 Competitor A Competitor A is a company listed onthe Stock Exchange, principallyengaging in the trading of machineryand spare parts, leasing of machineryand provision of related services,provision of transportation servicesin Hong Kong, and provision ofproperty management services,leasing of machinery and propertyleasing and subletting in the PRC.

88.1 6.8%

2 The Group 79.6 6.2%3 Competitor B Competitor B is a company listed on

the Stock Exchange, principallyengaging in the provision ofequipment rental-related solutionsand value-added services tocustomers in Hong Kong.

65.7 5.1%

4 Competitor C Competitor C is a private companyprincipally engaging in the leasingand trading of high reach equipmentin Hong Kong.

29.8 2.3%

5 Competitor D Competitor D is a private companyprincipally engaging in leasing andtrading of power and energy, highreach and earthmoving equipment inHong Kong.

26.4 2.0%

Note 1: It represents the estimated revenue generated by the companies listed above for the year ended 31 March 2021.

COMPETITIVE STRENGTHS OF THE GROUP

Please refer to the paragraph headed ‘‘Business – Competitive strengths’’ in this document fordetails.

MAJOR COSTS OF CONSTRUCTION EQUIPMENT RENTAL AND SALES INDUSTRY INHONG KONG

Hong Kong’s labour cost increased steadily along with the consumer price index and inflationrate. Due to the shortage of skilled labor, mechanics had a higher average pay rise from 2015 to 2019at a CAGR of 5.1% as compared to that of office staff at CAGR of 3.2% and that of sales staff atCAGR of 4.5%.


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Median Monthly Labour Wage, Hong Kong, 2015 - 2024E

18,20019,500

20,500 21,00022,200 22,555

23,30024,364

25,53426,913

13,200 13,700 14,399 14,800 15,000 15,345 15,950 16,500 16,900 17,400

12,600 13,000 13,60014,400 15,000 15,050 15,650

16,300 16,750 17,300

0

5000

10000

15000

20000

25000

30000

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

HKD

Mechanics Office Sales

CAGR

(15-19)

CAGR

(20-24)

5.1% 4.5%

3.2% 3.2%

4.5% 3.5%

Mechanics

Office Staff

Sales Staff

Source: Census and Statistics Department, HKSAR, CHFT

Industrial warehouse and open storage in the New Territories are common storage locations forconstruction equipment providers in Hong Kong. The average monthly rental rate per square foot ofindustrial warehouses and open storage is expected to be approximately HKD9.4 and HKD3.0 in 2020,respectively.

Unit Rent, Hong Kong, 2015 - 2024E

2.8 2.9 2.9 2.9 3.0 3.0 3.1 3.1 3.1 3.1

7.6 7.9 8.2 8.59.0 9.4 9.8 10.1 10.4 10.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

HKD/sq�/month

Open storageIndustrial warehouseSource: CHFT

HISTORICAL PRICE TRENDS OF THE CONSTRUCTION EQUIPMENT RENTAL ANDSALES INDUSTRY IN HONG KONG

The rental prices for all power and energy, high reach and earthmoving equipment rosecontinuously from 2015 to 2019. Despite of the outbreak of COVID-19, the rental prices of equipmentare projected to rise steadily from 2019 to 2021 due to limited equipment supply. The rental prices ofall three equipment categories are expected to increase from 2021 to 2024, as construction activities areexpected to resume and flourish when COVID-19 becomes under control.

Average Construction Equipment Rental Price Index, Hong Kong, 2015-2024E (Note 1)

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

2015-2019

CAGR

2020E-2024ECAGR

(Note 2)

Power and energyequipment 100.0 103.6 104.5 107.9 109.7 112.2 114.6 116.8 118.3 120.6 2.3% 1.8%

High reach equipment 100.0 103.8 106.5 107.5 109.7 111.1 113.1 113.8 115.8 118.1 2.3% 1.6%Earthmoving equipment 100.0 103.9 105.1 106.8 109.3 109.8 112.2 114.5 116.5 119.1 2.2% 2.1%

Source: CHFT

Note 1: The rental price indices exclude transportation costs.

Note 2: 2015 = 100.


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The trading prices of power and energy, high reach and earthmoving equipment categories rosecontinuously from 2015 to 2019. The trading prices for power and energy equipment, high reachequipment and earthmoving equipment are projected to remain stable between 2019 to 2021 due toCOVID-19. The trading prices of all three categories of equipment are expected to increase from 2021to 2024 as the overall progress of construction projects is expected to resume to normal.

Average Construction Equipment Trading Price Index, Hong Kong, 2015-2024E (Note 1)

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

2015-2019

CAGR

2020E-2024ECAGR

(Note 2)

Power and energyequipment 100.0 103.3 101.3 105.6 107.6 108.3 109.3 112.2 114.1 114.9 1.8% 1.5%

High reach equipment 100.0 105.6 106.8 110.1 110.4 111.3 111.6 112.0 112.6 113.3 2.5% 0.4%Earthmoving equipment 100.0 105.1 108.1 107.9 110.0 113.8 114.3 115.5 116.5 117.1 2.4% 0.7%

Source: CHFT

Note 1: The trading price indices exclude transportation costs.

Note 2: 2015 = 100.

OVERVIEW OF THE CONSTRUCTION EQUIPMENT RENTAL AND SALES INDUSTRY INTHE PRC

Market size of the construction equipment rental and sales industry in the PRC

Driven by the ever-increasing investment in infrastructure and real estate construction and theincreasing urbanisation rate in the PRC, the market size of the construction equipment rental industryin the PRC grew significantly from RMB185 billion in 2015 to RMB330 billion in 2019 at a CAGR of15.6%, while the market size of the construction equipment sales industry in the PRC grew fromRMB247 billion in 2015 to RMB303 billion in 2019 at a CAGR of 5.2%. Looking forward, with thecontinuing stable growth of the construction industry, continuing urbanisation process and hugedemand from urban-rural development, industry upgrade and the renovation of old communities, themarket size of the construction equipment rental industry in the PRC will grow from RMB359 billionin 2020 to RMB513 billion in 2024 at a CAGR of 9.3%, while the market size of the constructionequipment sales industry in the PRC will grow from RMB315 billion in 2020 to RMB365 billion in2024 at a CAGR of 3.8%.

Construction Equipment Rental Market Size, the PRC, 2015-2024E

95 120154 166 169 193 214 226 240 256

2123

2335 37

3540 47 49

59

9

1213

15 1616

1821 20

27

60

7889

101 107116

132138

153

171

185

233278

317 330359

403433

461

513

50

150

250

350

450

550

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

RMB_Billion

CAGR: 15.6%

CAGR: 9.3%


Source: CHFT


INDUSTRY OVERVIEW

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Construction Equipment Sales Market Size, the PRC, 2015-2024E

127 133156 160 155 169 178 179 180 18227 26

2434 34

3033 37 37 42

12 1413

14 1514

15 17 1519

8086

9197 99

102110 109 115

121

247259

283306 303

315336 342 346

365

100

150

200

250

300

350

400

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Billion RMB

CAGR: 5.2%

CAGR: 3.8%


Source: CHFT

Drivers, trends and opportunities

Continuous urbanisation progress

The overall gross value of construction works in the PRC is expected to grow further due to thecontinuous urbanisation progress in the PRC. Along with the steady growth of the PRC’s economy, theurbanisation rate is expected to increase from approximately 60.6% in 2019 to approximately 68.1% in2024, and the overall gross value of construction works in the PRC is expected to increase fromRMB26,480 billion in 2020 to RMB33,541 billion in 2024, which will increase the demand for rentaland sales of construction equipment in the PRC.

Regional development and investment initiatives

There are a series of government-driven development initiatives as part of the nationaldevelopment strategies in recent years. Some initiatives are at national and regional level, includingthe Belt and Road Initiative（一帶一路合作倡議）, the Regional Integration of Beijing-Tianjin-Hebei

（京津冀一體化）, the Regional Integration of the Yangtze River Delta（長三角一體化）and the GreaterBay Area（粵港澳大灣區）. These development initiatives are expected to further drive theinfrastructure investment and construction demand in the relevant regions in the PRC, and hencestimulate the growth of the construction equipment rental and sales market in the PRC.

National promotion of prefabricated building

Prefabricated building has been widely promoted by the PRC government in recent years, whichis a type of building that consist of factory-built components or units to be assembled on-site. It isexpected that the proportion of prefabricated buildings in newly constructed buildings would increasefrom 15% in 2020 to 30% by 2026, according to the Guiding Opinions of the General Office of theState Council Vigourously Developing Prefabricated Buildings（國務院辦公廳關於大力發展裝配式建築的指導意見）. The assembly of prefabricated buildings involves handling of large and structural partsof buildings, the demand for high reach equipment would therefore highly increase following suchtrend.

Increasingly stringent regulatory requirements on environment protection and work safety

The Central Committee of the Communist Party of China and the State Council have issued aseries of policies to facilitate the transformation to an environmentally friendly and low-carbonemission economic system. In particular, the 14th Five-Year Plan published in 2021 sets out that thePRC government’s plans to facilitate the environmentally friendly transformation in key industries andareas, as well as low-carbon, safe and efficient use of energy, and emphasizes the importance of worksafety. With the 14th Five-Year Plan in place, there are following trends and opportunities in theconstruction equipment rental and sales industry in the PRC.

Introduction of China IV emissions standards

The China IV emission standards of diesel mobile non-road engine was confirmed in December2020. The MEE has required all production, sales and import of regulated diesel mobile non-roadengine under 560kW in the PRC market to fulfill the China IV standard starting from 1 December2022, which is a step to further regulate the pollutant emission of construction equipment by the PRCgovernment. With the introduction of the the China IV standard, construction equipment not meetingthe China IV standard will be gradually phased out from the market and be replaced by newer models


INDUSTRY OVERVIEW

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that satisfy the standard. Hence, this will lead to demand for China IV equipment to replace oldconstruction equipment due to tightened regulation and customers’ preferences for environmentalprotection following the PRC government’s promotion.

Increasing use of high reach equipment in aerial work

The construction industry in the PRC has seen an increasing use of high reach equipment.Compared with traditional aerial work tool, such as hanging baskets, high reach equipment is moreflexible in operation and deployment, which can significantly improve construction efficiency, simplifyconstruction process in harsh conditions, reduce labor intensity and labor costs, and ensure the safetyof construction workers. Moreover, application of high reach equipment is expanding from traditionalareas such as manufacturing and construction to more diversified areas. As a result of the advantages ofhigh reach equipment and increasing market demands, the number of high reach equipment in the PRCincreased significantly from approximately 95,000 units in 2018 to approximately 190,000 units in2020 at a CAGR of 41.4%.

Threats and challenges

Shortage of talent and labour

The PRC’s population has been growing at a slower speed and is facing aging problem. Inaddition, along with the urbanisation progress, more people attend college and move to larger cities,and fewer people choose to enter the construction industry as labourers. As such, there is insufficientlabour supply in the construction industry and it is increasingly more difficult to hire talents to carryout repair and maintenance for construction equipment, which is key component of the operations ofconstruction equipment providers.

Rise in operating cost

The major operating cost of the construction equipment rental and sales industry consists ofstorage cost and labour cost. The continuing increase of land and labour costs will impact the cost ofconstruction equipment providers in the PRC.

ENTRY BARRIERS OF THE CONSTRUCTION EQUIPMENT RENTAL AND SALESINDUSTRY IN HONG KONG AND THE PRC

Capital intensive

Significant upfront investment is required in the construction equipment rental and sales industryas the rental fleet and inventory of construction equipment are purchased at the beginning of businessoperation. It is important for construction equipment providers to possess a sufficient startup capital forconstruction equipment procurement.

Reputation, experience and repair and maintenance capability

Reputation and experience are important factors considered by customers when they selectconstruction equipment providers. As malfunctioning of construction equipment may result in progressdelay of construction projects, customers prefer reputable construction equipment providers for reliableequipment supply. It is also important for construction equipment providers to demonstrate capabilityand experience in repairing and maintaining construction equipment, which customers can rely on forrental services and after-sales services. It is the industry norm that construction contractors value thereputation, experience and the repair and maintenance capability of construction equipment providersand tend to establish long-term business relationship with them. It is therefore difficult for new entrantsto compete with established players due to lack of track record and market experience.

Established relationship with upstream suppliers

In the construction equipment rental and sales industry, customers in general have preference forconstruction equipment of well-established brands to ensure equipment performance and reliability.Construction equipment providers with long term business relationship with upstream suppliers aremore likely to obtain dealership from renowned construction equipment manufacturers, which enablethem to enjoy the market recognition and goodwill of the renowned construction equipmentmanufacturers.


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HONG KONG LAWS AND REGULATIONS

This section summarises the principal laws and regulations of Hong Kong which arerelevant to our business. As this is a summary, it does not contain detailed analysis of the HongKong laws which are relevant to our business.

Other than the Companies Ordinance and requirement of business registration applicable tocompanies in Hong Kong, there is no legal regulation requiring construction equipment rentalservices providers and construction equipment suppliers in Hong Kong to obtain specificoperating licence from the Government in order to carry out provision of construction equipmentrental and sales activities. Nevertheless, in carrying out our operation during the Track RecordPeriod and up to the Latest Practicable Date, we are required to abide by relevant laws andregulations summarised as follows:

A. Laws and regulation relating to labour, health and safety

Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of HongKong) (‘‘FIU Ordinance’’)

The FIU Ordinance provides for the safety and health protection to workers in anindustrial undertaking. Under the FIU Ordinance, it is the duty of a proprietor (includingperson for the time being having the management or control of the business carried on insuch industrial undertaking and also the occupier of any industrial undertaking) of anindustrial undertaking to take care of, so far as is reasonably practicable, the health andsafety at work of all persons employed by the proprietor at the industrial undertaking. Theduties of a proprietor extend to include:

(a) providing and maintaining plant and work systems that do not endanger safety orhealth;

(b) making arrangement for ensuring safety and health in connection with the use,handling, storage and transport of articles and substances;

(c) providing all necessary information, instruction, training and supervision forensuring safety and health;

(d) providing and maintaining safe access to and egress from the workplaces; and

(e) providing and maintaining a safe and healthy work environment.

A proprietor of an industrial undertaking who contravenes these duties commits anoffence and is liable to a fine of HK$500,000. A proprietor who contravenes these dutieswilfully and without reasonable excuse commits an offence and is liable to a fine ofHK$500,000 and to imprisonment for six months.

Pursuant to section 6BA of the FIU Ordinance, persons employed at industrialundertakings engaging in construction work must attend a relevant safety training courserecognised under the FIU Ordinance and be issued a construction industry safety trainingcertificate (also known as ‘‘green card’’) for attendance of such safety training course, andevery proprietor of industrial undertakings shall not employ any person without a green card


REGULATORY OVERVIEW

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or where such a green card has expired. Any proprietor who contravenes section 6BA of theFIU Ordinance wilfully or without reasonable excuses commits an offence and is liable to afine of HK$50,000.

Matters regulated under the subsidiary regulations of the FIU Ordinance, including theConstruction Sites (Safety) Regulations (Chapter 59I of the Laws of Hong Kong), include (i)the prohibition of employment of persons under 18 years of age (save for certainexceptions); (ii) the maintenance and operation of hoists; (iii) the duty to ensure safety ofplaces of work; (iv) prevention of falls; (v) safety of excavations; (vi) the duty to complywith miscellaneous safety requirements; and (vii) provision of first aid facilities. Non-compliance with any of these rules commits an offence and different levels of penalty willbe imposed. A contractor guilty of the relevant offence could be liable to a fine up toHK$200,000 and imprisonment of up to 12 months.

Code of Practice for Safe Use of Mobile Cranes (‘‘Code of Practice’’)

The Code of Practice is prepared by the Occupational Safety and Health Branch of theHong Kong Labour Department (the ‘‘Labour Department’’). It is approved and issued bythe Commissioner for Labour under section 7A of the FIU Ordinance to complement thelegislative framework at an operational level. It provides practical guidance to the industryas to how to use mobile cranes safely and properly with a view to assist the duty holderswith preventing accidents.

The Code of Practice provides guidance on the safe use and operation of mobile cranesto ensure safety of personnel working at or nearby those cranes. It covers management andplanning of lifting operation of mobile cranes, requirements for operators, slingers andsignallers, siting, erection, dismantling, maintenance and testing of mobile cranes. It alsocontains guidance pertaining to the selection, safe use and specific precautions when mobilecranes are operating within a workplace.

Under the Code of Practice, an owner of mobile cranes is responsible for puttingtogether the safe system of work, educating all related personnel in safe practices and theassignment of definite, individual safety responsibilities. The owner must plan all phases ofthe operation involving the mobile crane and it is the responsibility of the owner to ensurethat the persons who prepare the mobile crane, erect it, operate it and work with it are welltrained in both safety and operating procedures. The owner must ensure that all mobilecranes are operated by trained, experienced, competent and qualified crane operators and thepersons who direct, rig and handle the loads have received proper training in the principlesof the operation, are able to establish weights and judge distances, heights and clearances,are capable of selecting tackle and lifting gear as well as rigging method suitable for theloads to be lifted, and are capable of directing the movement of the crane and load to ensurethe safety of all personnel.

In Hong Kong, mobile crane operators are required to attend training courses offeredby the Construction Industry Council or by any other person specified by the Commissionerfor Labour in order to qualify for the safety certificates issued by the Commissioner forLabour.


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Failure by any person to observe the Code of Practice shall not of itself cause him toincur any criminal liability but the compliance or contravention of the Code of Practice maybe relied by any party in criminal proceedings where the compliance with a provision of theCode of Practice is found by the court to be relevant to any question in the proceedings.

Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear)Regulations (Chapter 59J of the Laws of Hong Kong) (‘‘FIU (LALG) Regulations’’)

Safety of lifting appliances and lifting gear used at industrial undertaking is mainlyregulated by the FIU (LALG) Regulations administered by the Labour Department.

The FIU (LALG) Regulations lay down the requirements with respect to theconstruction, inspection, testing, thorough examination, operation, erection, dismantling andalteration of lifting appliances, including overhead runway and lorry crane. For instance, theFIU (LALG) Regulations specifically require the owner, among other matters, to ensure that(i) all lifting appliances shall be of good mechanical construction, made of strong and soundmaterials, free from patent defect and properly maintained; (ii) the arrangements for fixingand anchoring the appliance are adequate to secure its safety; and (iii) lifting appliance isadequately and securely supported and every structure supporting it is of good constructionand adequate strength, of sound materials and free from patent defect.

According to the FIU (LALG) Regulations, the owner of a lifting appliance shallensure that it is not used unless it has been thoroughly examined by a competent examinerat least once in the preceding 12 months.

According to the FIU (LALG) Regulations, the owner of a lifting appliance (other thana crane, crab or winch) shall ensure that it is not used unless it has been tested andthoroughly examined by a competent examiner in such manner prescribed in the saidregulation and the owner of any crane, crab or winch shall ensure that it is not used unlessduring the preceding 4 years it has been tested and thoroughly examined by a competentexaminer in such manner prescribed in the said regulation.

According to the FIU (LALG) Regulations, the owner of any chain, rope or lifting gearshall ensure that no chain, rope or lifting gear (except a fibre rope or fibre-rope sling) shallbe used unless it has been tested and thoroughly examined by a competent examiner in suchmanner prescribed in the said regulation and shall ensure that each chain, rope and liftinggear in use shall be thoroughly examined by a competent examiner in the preceding 6months before it is used.

Where a test or a thorough examination shows that a lifting appliance is in a safeworking order, the competent examiner shall deliver the test or examination certificate to theowner of the lifting appliance within 28 days after the test or the thorough examination.Where a test or a thorough examination shows that a lifting appliance cannot be used safelyunless certain repairs are carried out, the competent examiner shall immediately inform theowner of the lifting appliance of that fact and shall, within 14 days after the test or thethorough examination, deliver a report to the owner of the lifting appliance and a copy of itto the Commissioner for Labour. A competent examiner or competent person shall notdeliver to an owner a certificate or make a report which is to his knowledge false as to amaterial particular. A copy of the test certificates and related documents shall be displayed


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in the driving cabin or other prominent place on the equipment to which it relates or in aprominent place nearby. The owner of the lifting appliance shall ensure that the liftingappliance is not used until the repairs have been effected.

In addition to that, pursuant to the FIU (LALG) Regulations, the owner of a crane(except for a crane with a maximum safe working load of one tonne or less or a crane thatoperates with a grab or any electromagnetic means) shall ensure that it is not used unless itis fitted with an automatic safe load indicator that (i) functions properly; (ii) has been testedby a competent examiner on each occasion that a test and thorough examination of the craneis required under regulation 5 of the FIU (LALG) Regulations and the competent examinerhas given the owner a certificate in the approved form in which he has made a statement tothe effect that the automatic safe load indicator is in good working order; and (iii) has beeninspected by a competent person and determined to be in safe working order during eachinspection of the crane required under regulation 7A of the FIU (LALG) Regulations and thecompetent person has given the owner a certificate in the approved form in which he hasmade a statement to the effect that the automatic safe load indicator is in good workingorder.

Under the FIU (LALG) Regulations, before a lifting appliance is used at or moved inan industrial undertaking, the owner of the appliance shall take appropriate precautions toensure its stability. The owner of a crane shall, for the purpose of securing the stability ofthe crane, ensure that before use (i) the crane is securely anchored, or adequately weightedby suitable ballast which is properly placed on the structure of the crane and secured in amanner sufficient to prevent the ballast from being accidentally displaced; and (ii) no part ofany rail on which the crane is mounted, or any sleeper supporting such rail, is used as ananchorage.

Under the FIU (LALG) Regulations, the owner of a crane shall ensure that it is onlyoperated by a person (i) who has attained the age of 18 years; (ii) holds a valid certificateissued by the specified body or by any other person specified by the Commissioner forLabour; (iii) and in the opinion of the owner, is competent to operate the crane by virtue ofhis experience.

For the purposes of the FIU (LALG) Regulations, ‘‘owner’’, in relation to any liftingappliance or lifting gear, includes the lessee or hirer thereof, and any overseer, foreman,agent or person in charge or having the control or management of the lifting appliance orlifting gear, and the contractor who has control over the way any construction work whichinvolves the use of the lifting appliance or lifting gear is carried out and, in the case of alifting appliance or lifting gear situated on or used in connection with work on aconstruction site, also includes the contractor responsible for the construction site.

Any contraventions by the owners of any crane or lifting appliance of the FIU (LALG)Regulations will attract penalties from a fine of HK$50,000 to a fine of HK$200,000 and upto 12 months imprisonment.


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Factories and Industrial Undertakings (Gas Welding and Flame Cutting) Regulation(Chapter 59AI of the Laws of Hong Kong) (‘‘FIU (GWFC) Regulation’’)

The FIU (GWFC) Regulation regulates the carrying out of gas welding and flamecutting work in industrial undertakings by persons who are trained and certified competentfor carrying out such work. Regulation 3 of the FIU (GWFC) Regulation requires aproprietor to ensure that gas welding and flame cutting work is only performed by (i) aperson who has attained the age of 18 years and holds a valid certificate; or (ii) a personwho is undergoing training in performing gas welding and flame cutting work and theperformance of such work is under the supervision of a person who has attained the age of18 years and holds a valid certificate. A proprietor who without reasonable excusecontravenes such obligation commits an offence and is liable on conviction to a maximumfine of HK$50,000.

Boilers and Pressure Vessels Ordinance (Chapter 56 of the Laws of Hong Kong)(‘‘Boilers and Pressure Vessels Ordinance’’)

The Boilers and Pressure Vessels Ordinance regulates the control, use, and operationof boilers and pressure vessels, provides for conduct of inquiries into accidents relating toboilers and pressure vessels and regulates registration, maintenance and examination ofboilers, pressure vessels and steam containers, and their use and operations.

Section 24 of the Boilers and Pressure Vessels Ordinance prescribes that every new airreceiver, other than a pressurised fuel container, and its fittings and attachments shall beexamined by an appointed examiner before it is put into use. Under section 27 of the Boilersand Pressure Vessels Ordinance, any air receiver, other than a pressurised fuel container,shall be examined by an appointed examiner within 26 months after the date of anycertificate of fitness issued in respect thereof.

The owner of the boiler or pressure vessels who, without reasonable excuse, fails toregister the relevant boiler or pressure vessels with the Labour Department is liable onsummary conviction to a fine of HK$10,000 under section 50(1) of the Boilers and PressureVessels Ordinance, or one who fails to obtain the certificate of fitness is liable on summaryconviction to a fine of HK$30,000 under section 49(8) of the Boilers and Pressure VesselsOrdinance.

Construction Workers Registration Ordinance (Chapter 583 of the Laws of HongKong) (‘‘Construction Workers Registration Ordinance’’)

The Construction Workers Registration Ordinance provides, among others, for theregistration and regulation of construction workers and related matters. The principal objectof the Construction Workers Registration Ordinance is to establish a system for registrationof construction workers and to regulate construction workers who personally carry outconstruction work on construction site.

According to section 3 of the Construction Workers Registration Ordinance, a personshall not personally carry out on a construction site construction work unless the person is aregistered construction worker. A person who contravenes section 3 of the ConstructionWorkers Registration Ordinance commits an offence and is liable on conviction to a fine at


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HK$10,000. The establishment of the Construction Industry Council under the ConstructionIndustry Council Ordinance (Chapter 587 of the Laws of Hong Kong) is responsible for theregistration of construction workers.

Further, section 5 of the Construction Workers Registration Ordinance provides that noperson shall employ unregistered construction workers to carry out on construction sitesconstruction work. A person who contravenes section 5 of the Construction WorkersRegistration Ordinance commits an offence and is liable on conviction to a fine atHK$50,000.

Under section 58 of the Construction Workers Registration Ordinance, a controller fora construction site is required to:

(a) establish and maintain a daily record in specified form that contains informationof the registered construction workers employed by the controller orsubcontractor of the controller and personally carry out on the site constructionwork; and

(b) furnish the Registrar of Construction Workers (as defined under the ConstructionWorkers Registration Ordinance) in manner as directed by the Registrar ofConstruction Workers with a copy of the record:

(i) for the period of seven days after any construction work begins on the site;and

(ii) for each successive periods of seven days,

within two business days after the last day of the period concerned.

Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)(‘‘OSH Ordinance’’)

The OSH Ordinance provides for the protection of safety and health to employees inworkplaces, both industrial and non-industrial.

Employers must as far as reasonably practicable, ensure the safety and health at workof all their employees by (including but without limitation):

(a) providing and maintaining plant and systems of work that are safe and withoutrisks to health;

(b) making arrangements for ensuring safety and absence of risks to health inconnection with the use, handling, storage or transport of plant or substances;

(c) providing all necessary information, instructions, training and supervision forensuring safety and health;

(d) as regards any workplace under the employer’s control:


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(i) maintenance of the workplace in a condition that is safe and without risksto health; and

(ii) provision and maintenance of means of access to and egress from theworkplace that are safe and without any such risks; and

(e) providing and maintaining a working environment for their employees that is safeand without risks to health.

Failure to comply with any of the above provisions constitutes an offence and theemployer is liable on conviction to a fine of HK$200,000. An employer who fails to do sointentionally, knowingly or recklessly commits an offence and is liable on conviction to afine of HK$200,000 and to imprisonment for 6 months.

The Commissioner for Labour may also issue (i) an improvement notice against anynon-compliance of the OSH Ordinance or the FIU Ordinance; or (ii) a suspension noticeagainst an employer if in general an activity is undertaken at the workplace which maycreate an imminent hazard to the employees. Failure to comply with such notices withoutreasonable excuse constitutes an offence punishable by a fine of HK$200,000 andHK$500,000, respectively, and imprisonment of up to 12 months. Contravening suspensionnotice carries a further fine of HK$50,000 for each day or part of a day.

Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)(‘‘Employees’ Compensation Ordinance’’)

The Employees’ Compensation Ordinance establishes a no-fault and non-contributoryemployee compensation system for work injuries and lays down the rights and obligations ofemployers and employees in respect of injuries or death caused by accidents arising out ofand in the course of employment, or by prescribed occupational diseases.

Under the Employees’ Compensation Ordinance, if an employee sustains an injury ordies as a result of an accident arising out of and in the course of his employment, hisemployer is in general liable to pay compensation even if the employee might havecommitted acts of faults or negligence when the accident occurred. Similarly, an employeewho suffers incapacity or dies due to an occupational disease is entitled to receive the samecompensation as that payable to employees injured in occupational accidents.

According to section 15 of the Employees’ Compensation Ordinance, an employermust notify the Commissioner for Labour of any work accident (within 14 days for generalwork accidents and within seven days for fatal accidents), irrespective of whether theaccident gives rise to any liability to pay compensation. If the happening of such accidentwas not brought to the notice of the employer or did not otherwise come to his knowledgewithin such periods of seven and 14 days, respectively, then such notice shall be given notlater than seven days or, as may be appropriate, 14 days after the happening of the accidentwas first brought to the notice of the employer or otherwise came to his knowledge.

According to section 40 of the Employees’ Compensation Ordinance, all employers arerequired to take out insurance policies to cover their liabilities both under the Employees’Compensation Ordinance and at common law for injuries at work in respect of all theiremployees (including full-time and part-time employees). The minimum insurance cover


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should be for an amount not less than HK$100 million per event where the number ofemployees is not more than 200 and for an amount not less than HK$200 million per eventwhere the number of employees is more than 200.

An employer who fails to comply with the Employees’ Compensation Ordinance tosecure an insurance cover commits an offence and is liable on conviction upon indictment toa fine of HK$100,000 and to imprisonment for two years and on a summary conviction to afine of HK$100,000 and to imprisonment for one year.

Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) (‘‘Minimum WageOrdinance’’)

The Minimum Wage Ordinance provides for a prescribed minimum hourly wage rate(currently set at HK$37.5 per hour) during the wage period for every employee engagedunder a contract of employment under the Employment Ordinance (Chapter 57 of the Lawsof Hong Kong). Any provision of the employment contract which purports to extinguish orreduce the right, benefit or protection conferred on the employee by the Minimum WageOrdinance is void.

Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of HongKong) (‘‘Mandatory Provident Fund Schemes Ordinance’’)

Under the Mandatory Provident Fund Schemes Ordinance, employers are required toenroll their regular employees (except for certain exempt persons) aged between at least 18but under 65 years of age and employed for 60 days or more in a Mandatory Provident Fund(‘‘MPF’’) scheme within the first 60 days of employment.

For both employees and employers, it is mandatory to make regular contributions to aMPF scheme. For an employee, subject to the maximum and minimum levels of income(currently being HK$30,000 and HK$7,100 per month, respectively), an employer willdeduct 5% of the relevant income on behalf of an employee as mandatory contributions to aregistered MPF scheme with the current ceiling of HK$1,500. Employer will also berequired to contribute an amount equivalent to 5% of an employee’s relevant income to theMPF scheme, subject only to the maximum level of income (currently being HK$30,000).

Industry schemes (‘‘Industry Schemes’’) were established under the MPF system foremployers and employees in the construction and catering industries in view of the highlabour mobility in these two industries, and the fact that most employees in these industriesare ‘‘casual employees’’ whose employment is on a day-to-day basis or for a fixed period ofless than 60 days.

For the purpose of the Industry Schemes, eight major categories of the constructionindustry are covered. Nevertheless, the Mandatory Provident Fund Schemes Ordinance doesnot stipulate that employers in these industries must join the Industry Schemes, despite thatthey provide convenience to the employers and employees in the construction and cateringindustries that causal employees do not have to switch schemes when they change jobswithin the same industry, so long as their previous and new employers are registered withthe same Industry Scheme.


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B. Laws and regulations in relation to environmental protection

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (Chapter311Z of the Laws of Hong Kong) (‘‘NRMM Regulation’’)

The NRMM Regulation (as amended by the Air Pollution Control (Non-road MobileMachinery) (Emission) (Amendment) Regulation 2018) came into effect on 1 June 2015 tointroduce regulatory control on the emissions of non-road mobile machinery, including non-road vehicles and regulated machines such as mobile generators, air compressors and liftingplatforms.

Unless exempted, NRMM which is regulated under the NRMM Regulation is requiredto comply with the emission standards prescribed under this regulation. From 1 September2015, all regulated machines sold or leased for use in Hong Kong must be approved orexempted with a proper label in a prescribed format issued by the EPD pursuant to section 4of the NRMM Regulation. Starting from 1 December 2015, pursuant to section 5 of theNRMM Regulation, only approved or exempted NRMM with a proper label can be used inspecified activities and locations, including construction sites. Nevertheless, existing NRMMwhich is already in Hong Kong on or before 30 November 2015 may, on application to thecompetent authority, be exempted from complying with the emission requirements pursuantto section 11 of the NRMM Regulation.

Any person who sells or leases a regulated machine for use in Hong Kong, or uses aregulated machine in specified activities or locations without (i) exemption or the approvalof the competent authority is liable to a fine of up to HK$200,000 and imprisonment for upto six months; and (ii) a proper label is liable to a fine of up to HK$50,000 andimprisonment for up to three months.

Pursuant to the Technical Circular (Works) No. 1/2015 issued by the Works Branch ofthe Development Bureau of the Government on 8 February 2015 (the ‘‘TechnicalCircular’’), there is an implementation plan to phase out the use of four types of exemptedNRMM (namely generators, air compressors, excavators and crawler cranes) (the‘‘Implementation Plan’’) under which all new capital works contracts of public worksincluding design and build contracts with an estimated contract value exceeding HK$200million and tenders invited on or after 1 June 2015 shall require the contractor to allow noexempted generator and air compressor to be used after 1 June 2015 and the number ofexempted excavators and crawler cranes not to exceed 50%, 20% and 0% of the total unitsof exempted NRMMs from 1 June 2015, 1 June 2017 and 1 June 2019, respectively.Notwithstanding the Implementation Plan, exempted NRMM may still be permitted at thediscretion of the respective architect/engineer designated by the Government if there is nofeasible alternative.


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Noise Control (Air Compressors) Regulations (Chapter 400C of the Laws of HongKong) (‘‘Noise Control (Air Compressors) Regulations’’)

The Noise Control (Air Compressors) Regulations limits noise emission of aircompressor capable of supplying compressed air at 500 kPa or above for carrying outconstruction work. Air compressors must comply with the prescribed noise emissionsstandards and be issued with a noise emission label (‘‘Noise Emission Label’’) from theEPD.

Application for a Noise Emission Label should be made in the specific form prescribedunder the Noise Control (Air Compressors) Regulations and accompanied by the requisitedocuments.

Contravention to any of the aforesaid provisions shall be liable to a fine ofHK$100,000 on the first conviction and to a fine of HK$200,000 on a second or subsequentconviction and in any case to a fine of HK$20,000 for each day during which the offencehas continued.

C. Other relevant laws and regulations

The Competition Ordinance (Chapter 619 of the Laws of Hong Kong) (‘‘CompetitionOrdinance’’)

The Competition Ordinance, which came into force on 14 December 2015 (i) prohibitsconduct that prevents, restricts or distorts competition in Hong Kong; (ii) prohibits mergersthat substantially lessen competition in Hong Kong; and (iii) provides for incidental andconnected matters.

The Competition Ordinance includes (i) the First Conduct Rule which provides that anundertaking shall not make or give effect to an agreement, engage in a concerted practice,or, as a member of an association of undertakings, make or give effect to a decision of theassociation, if the object or effect of the agreement, concerted practice or decision is toprevent, restrict or distort competition in Hong Kong; and (ii) the Second Conduct Rule,which prohibits anti-competitive conduct by a party with substantial market power andprovides that an undertaking that has a substantial degree of market power in a market mustnot abuse that power by engaging in conduct that has as its object or effect the prevention,restriction or distortion of competition in Hong Kong.

The Competition Tribunal may impose pecuniary penalty, director disqualifications,and prohibition, damages and other orders. Pursuant to section 93 of the CompetitionOrdinance, the Competition Tribunal may impose a maximum penalty in relation to a‘‘single contravention’’ of up to 10% of the turnover of the undertakings concerned for eachyear the contravention occurred (if the occurred in more than three years, 10% of theturnover of the undertaking for the three years that saw the highest, second highest and thirdhighest turnover).


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Road Traffic Ordinance (Chapter 374 of the Laws of Hong Kong) (‘‘Road TrafficOrdinance’’)

The usage, licensing and maintenance of crane trucks, container trucks, lorries andother vehicles are mainly regulated by the Road Traffic Ordinance and its subsidiarylegislations. The Road Traffic Ordinance also provides for regulation of road traffic and theuse of vehicles and roads (including private roads).

According to section 42(1) of the Road Traffic Ordinance, no person shall drive amotor vehicle on a road unless he has a driving license in respect of the class of vehiclewhich he is driving, except as otherwise provided by the Road Traffic Ordinance. Anyperson who contravenes this subsection commits an offence and is liable, in the case of afirst conviction to a fine of HK$5,000 and to imprisonment for three months, and in the caseof a second or subsequent conviction, to a fine of HK$10,000 and to imprisonment for sixmonths.

Under the Road Traffic Ordinance, there are 21 subsidiary legislations currently inforce which include, among others:

(a) Road Traffic (Construction and Maintenance of Vehicles) Regulations (Chapter374A of the Laws of Hong Kong) (‘‘Road Traffic (Construction andMaintenance of Vehicles) Regulations’’); and

(b) Road Traffic (Registration and Licensing of Vehicles) Regulations (Chapter 374Bof the Laws of Hong Kong) (‘‘Road Traffic (Registration and Licensing ofVehicles) Regulations’’).

The Road Traffic (Construction and Maintenance of Vehicles) Regulations

Pursuant to regulation 79 of the Road Traffic (Construction and Maintenance ofVehicles) Regulations, the owner of every goods vehicle and special purpose vehicle shallcause the permitted gross vehicle weight as shown in the registration document in respect ofsuch vehicle and the maximum permitted axle weight to be painted or otherwise plainlymarked upon some conspicuous place on both sides of the vehicle unless a valid vehiclelicence, issued in respect of the vehicle, containing such information, is displayed on suchvehicle. Such markings shall be in English and in Chinese characters and shall be inscribedin white on a black surface in letters, characters and figures not less than 25 millimeters inheight and shall at all times be kept clean and unobscured by the owner.

Under regulation 80 of the Road Traffic (Construction and Maintenance of Vehicles)Regulations, on every goods vehicle and special purpose vehicle, the exhaust pipe shall beso fitted or shielded, and maintained that:

(a) no inflammable material can be thrown upon it from any other part of thevehicle;

(b) it is not likely to cause a fire through proximity to any inflammable material inthe vehicle or being carried on the vehicle; and

(c) the exhaust outlet is not directed to the near side of the vehicle.


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Under regulation 35 of the Road Traffic (Construction and Maintenance of Vehicles)Regulations, subject to paragraph (3) thereof, every goods vehicle or special purpose vehicleshall be equipped with mudguards at all wheels and mudflaps behind the rearmost wheels,which shall be of specifications approved by the Commissioner for Transport of Hong Kong(the ‘‘Commissioner for Transport’’).

Under regulation 121 of the Road Traffic (Construction and Maintenance of Vehicles)Regulations, any person who uses or causes or permits to be used on any road any vehiclewhich does not comply in all respects with the provisions of these regulations commits anoffence and is liable to a fine of HK$10,000 and to imprisonment for six months.

The Road Traffic (Registration and Licensing of Vehicles) Regulations

According to regulation 5 of the Road Traffic (Registration and Licensing of Vehicles)Regulations, any person who wishes to register his motor vehicle within any class specifiedin schedule 1 to the Road Traffic Ordinance, shall deliver to the Commissioner for Transportan application for registration in a form specified by the Commissioner for Transporttogether with such documents as may be specified in the application form relating to theowner and the vehicle required for the purposes of regulation 4 of the Road Traffic(Registration and Licensing of Vehicles) Regulations and the Motor Vehicles (FirstRegistration Tax) Ordinance (Chapter 330 of the Laws of Hong Kong), and shall pay to theCommissioner for Transport the prescribed registration fee.

Under regulation 21 of the Road Traffic (Registration and Licensing of Vehicles)Regulations, any person who wishes to have licensed a motor vehicle which is registeredwithin any class specified in schedule 1 to the Road Traffic Ordinance and of which he isthe registered owner shall deliver to the Commissioner for Transport an application for suchlicence in a form specified by the Commissioner for Transport which shall be accompaniedby the requisite documents, and subject to sub-regulations (3), (7) and (9) and regulation 23of the Road Traffic (Registration and Licensing of Vehicles) Regulations, pay to theCommissioner for Transport the prescribed licence fee.

The Trade Descriptions Ordinance (Chapter 362 of the Laws of Hong Kong) (‘‘TradeDescriptions Ordinance’’)

The Trade Descriptions Ordinance prohibits false trade descriptions, false, misleadingor incomplete information, false marks and misstatements in respect of goods provided inthe course of trade or suppliers of such goods.

Section 2 of the Trade Descriptions Ordinance provides, among others, that ‘‘tradedescription’’ in relation to goods means an indication, direct or indirect, and by whatevermeans given, of certain matters (including among other things, quantity, method ofmanufacture, composition, fitness for purpose, availability, compliance with a standardspecified or recognised by any person, their being of the same kind as goods supplied to aperson, price, place or date of manufacture, production, processing or reconditioning, andperson by whom manufactured, produced, processed or reconditioned), with respect to anygoods or parts of the goods; and in relation to services means an indication, direct orindirect, and by whatever means given, of certain matters (including among other things,nature, scope, quantity, fitness for purpose, method and procedures, availability, the personby whom the service is supplied, after-sale service assistance, and price).


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Section 7 of the Trade Descriptions Ordinance provides that no person shall in the

course of trade or business apply a false trade description to any goods or supply or offer to

supply any goods with false trade descriptions applied thereto. A person who commits an

offence under section 7 of the Trade Descriptions Ordinance shall be liable, on conviction

on indictment, to a fine of HK$500,000 and to imprisonment for five years, and on summary

conviction, to a fine at HK$100,000 and to imprisonment for two years.

PRC LAWS AND REGULATIONS

A. Laws and regulations related to foreign investment

Foreign-invested enterprises in the PRC must follow all the applicable PRC laws and

regulations and must not engage in activities detrimental to China’s public interest.

The Foreign Investment Negative List

Foreign investment in the PRC is principally governed by the Catalogue of Industries

for Encouraging Foreign Investment (2020 Version)（鼓勵外商投資產業目錄（2020年

版））(the ‘‘2020 Encouraged Catalogue’’), which was promulgated by the NDRC and the

MOFCOM on 27 December 2020 and became effective on 27 January 2021, and the Special

Administrative Measures (Negative List) for the Access of Foreign Investment (2020

Version) （外商投資准入特別管理措施（負面清單）（2020年版）） (the ‘‘2020 NegativeList’’), which was jointly promulgated by NDRC and MOFCOM on 23 June 2020 and

became effective on 23 July 2020. Industries listed therein shall be classified into three

categories: encouraged, restricted and prohibited. Foreign investment can be made directly

in an encouraged industry by setting up a wholly foreign-owned enterprise. For restricted

industry, foreign investment may be allowed, but subject to the relevant governmental

departments’ approvals, and in some cases, limited to equity or contractual joint ventures to

which Chinese parties are required to hold the majority interests in such joint ventures.

Foreign investors shall not be allowed to invest in industries in the prohibited category. Any

industry not listed in the 2020 Negative List or the 2020 Encouraged Catalogue is generally

deemed to be permitted and open to foreign investment, unless otherwise restricted or

prohibited by laws and regulations. According to the 2020 Negative List and the 2020

Encouraged Catalogue, foreign investment in the construction equipment rental and sales

industry does not fall within the encouraged, restricted or prohibited industry list, therefore

is permitted.

Laws Related to The Foreign-Invested Enterprise

On 15 March 2019, the NPC promulgated the Foreign Investment Law of the PRC（中

華人民共和國外商投資法）, and on 26 December 2019, the State Council promulgated the

Implementation Regulations of the Foreign Investment Law（中華人民共和國外商投資法實

施條例）(collectively, the ‘‘Foreign Investment Law’’), which both came into force on 1

January 2020. The Foreign Investment Law sets out the definitions of foreign investments

and the framework for promotion, protection and administration of foreign investment

activities.


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Subject to the Foreign Investment Law, the organisational forms, organisation

structures and activities guidelines of foreign invested enterprises shall be governed by the

provisions of the Company Law of the PRC（中華人民共和國公司法）and the Law of the

Partnership Enterprise of the PRC（中華人民共和國合夥企業法）. The foreign invested

enterprises, established in accordance with the Sino-foreign Equity Joint Ventures Law of

the PRC（中華人民共和國中外合資經營企業法）, the Wholly Foreign-owned Enterprise

Law of the PRC（中華人民共和國外資企業法）and the Sino-foreign Cooperative Joint

Ventures Law of the PRC（中華人民共和國中外合作經營企業法）before the effective date

of Foreign Investment Law, may retain their original organisational forms within five years

after the Foreign Investment Law took effect. Furthermore, the Foreign Investment Law also

stipulates that foreign investors or foreign invested enterprises shall submit investment

information to the competent commerce departments through the enterprise registration

system and the enterprise credit information publicity system.

B. Regulations related to production safety

Pursuant to the Administrative Regulations on the Safety Production of Construction

Projects（建設工程安全生產管理條例）which was promulgated by the State Council on 24

November 2003 and came into effect on 1 February 2004, the rental of mechanical equipment,

construction equipment or fitting shall be accompanied with a production (manufacture) license

and a quality certificate. The lessor shall conduct testing on the safety performance of such

mechanical equipment, construction equipment or fitting, and issue a test certificate to the lessee

while signing a lease agreement. Any mechanical equipment, construction equipment or fitting

determined as unqualified upon testing shall be prohibited from lease, or the lessor would be

ordered to suspend operation for rectification and be imposed a fine ranging from RMB50,000 to

RMB100,000, and may be liable for compensation if any damage is caused. Where a company

provides mechanical equipment and fitting for a construction project, it shall be equipped with

effective and adequate insurance, and safety facilities and devices, such as stop block, in

accordance with the requirements for safety construction.

C. Regulations related to importation and exportation

Pursuant to the Customs Law of the PRC（中華人民共和國海關法）promulgated by the

SCNPC on 22 January 1987 and last amended on 29 April 2021, and other relevant laws, the

consignors and consignees of imported and exported goods, and the customs declaration

enterprise shall file a record with the PRC customs authorities for handling the customs clearance

procedures. The customs authorities may impose a fine on those who do not fill in a record for

customs declaration. Consignees of imported goods and consignors of exported goods shall report

to the PRC customs authorities about the facts and provide the import and export licenses,

certificates and other relevant documents for inspection. Duties shall be levied accordingly, unless

otherwise exempted or reduced according to the laws or regulations. The consignee of import

goods, the consignor of export goods and the owner of inward and outward articles shall be the

obligatory customs duty payer.


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According to the Measures for the Record-Filing and Registration of Foreign Trade Business

Operators（對外貿易經營者備案登記辦法）which was promulgated on 25 June 2004, last

amended on 10 May 2021 and became effective as from the same day, any foreign trade business

operator engages in the import or export of goods or technology shall go through the filing

procedure to the MOFCOM or its entrusted institutions, save as otherwise provided by laws,

administrative regulations and provisions of the MOFCOM. The customs shall not handle the

formalities for declaration of release for import and export in case the foreign trade business

operator fails to complete the aforesaid filing procedure.

According to the Measures for the Administration of Entry-Exit Inspection and Quarantine

Enterprises（出入境檢驗檢疫報檢企業管理辦法）which was promulgated by the AQSIQ (which

was dissolved in March 2018, and the administrative duty of entry and exit inspection and

quarantine was assigned to the General Administration of Customs) on 15 February 2015, last

amended on 29 May 2018 and effective as from 1 July 2018, the consignors and consignees of

imported and exported goods handling the entry and exit inspection and quarantine declaration

business shall report to the competent customs authorities for the record.

D. Laws and regulations related to product liabilities

In accordance with the Product Quality Law of the PRC（中華人民共和國產品質量法）(the

‘‘Product Quality Law’’) promulgated on 22 February 1993 and subsequently amended on 8 July

2000, 27 August 2009 and 29 December 2018, both the manufacturer and the seller shall be

responsible for the quality of products. The seller shall be responsible for product repair,

replacement or refund in any of the following circumstances, and if the product has caused any

damage to the consumer who purchased the product, the seller shall compensate for the relevant

loss: (i) the product fails to play its function and the seller has not explained this in advance; (ii)

the product does not meet the quality standard of the product itself or as indicated by its

packaging label; (iii) the quality of the product does not match with that of the product

description or its sample and so on. After repair, replacement, refund or compensation by the

seller according to the Product Quality Law, if the liability is on the part of the manufacturer or

other supplier supplying such products, the seller is entitled to claim from such manufacturer or

supplier for its loss. If the defective product causes damage to another person and/or property, the

injured party may seek compensation from either the manufacturer or the seller. Where the

product defect is caused by the manufacturer, the seller may, after paying compensation, claim

against the manufacturer for the same. Where the product defect is caused by the seller, the

manufacturer may, after paying compensation, claim against the seller for the same. Also, the

seller shall be liable for compensation if it fails to identify the manufacturer or the supplier of

such defective products.


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E. Regulations related to foreign exchange controls

The PRC government imposes controls on the convertibility of Renminbi into foreign

currencies and, in certain cases, the remittance of foreign currency out of the PRC. SAFE is

responsible for administering all matters relating to foreign exchange, including the enforcement

of the PRC foreign exchange control regulations.

The principal regulations governing foreign currency exchanges in the PRC are the Foreign

Exchange Administration Regulations of the PRC（中華人民共和國外匯管理條例）which was

promulgated by the State Council on 29 January 1996, and which became effective on 1 April

1996 and was subsequently amended on 14 January 1997 and 5 August 2008, and the Regulation

on the Administration of Foreign Exchange Settlement, Sale and Payment（結匯、售匯及付匯管

理規定）which was promulgated on 20 June 1996 and became effective on 1 July 1996.

Under these existing PRC foreign exchange control regulations, all international payments

and transfers are classified into current account items and capital account items. Foreign currency

payments under current account items by domestic institutions, including payments for imports

and exports of goods and services and payments of income and current transfers into and outside

the PRC must be either paid with their own foreign currency with valid documentation or with the

foreign currency purchased from financial institutions. Foreign currency income under current

account items may be retained or sold to financial institutions. Foreign currency payments under

capital account items include cross-border transfers of capital, direct investments, securities

investments, derivative products and loans, and must be made out of a domestic institution’s own

foreign currency with valid documentation or be made with foreign currency purchased from any

financial institution. The payments of current account items can be made in foreign currencies

without the prior approval from the SAFE, by complying with certain procedural requirements.

However, payments under the capital account items are subject to significant foreign exchange

controls and require the prior approval from SAFE or registration with the SAFE or its designated

banks.

Pursuant to the Circular of the SAFE on Further Simplifying and Improving the Direct

Investment-related Foreign Exchange Administration Policies（國家外匯管理局關於進一步簡化

和改進直接投資外匯管理政策的通知）(the ‘‘SAFE Circular No. 13’’), which was promulgated

on 13 February 2015 and came into effect on 1 June 2015, foreign exchange registration under

domestic direct investment and foreign exchange registration under overseas direct investment are

directly reviewed and handled by banks in accordance with the SAFE Circular No.13, and SAFE

and its branches shall perform indirect regulation over the foreign exchange registration via

banks.

On 23 October 2019, SAFE promulgated the Notice on Further Promoting the Facilitation of

Cross-border Trade and Investment（國家外匯管理局關於進一步促進跨境貿易投資便利化的通

知）(the ‘‘SAFE Circular No. 28’’), which came into force on the same day. SAFE Circular

No.28 cancels the restriction on domestic equity investment made with capital funds by non-

investment foreign-invested enterprises, expands the pilot program for facilitation of domestic

payment under capital account, and relaxes the restriction on settlement and use of foreign

exchange funds under capital account, etc.


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F. Laws and regulations related to tax

Enterprise Income Tax

According to the Enterprise Income Tax Law of the PRC（中華人民共和國企業所得稅

法）, promulgated by the NPC on 16 March 2007, amended by the SCNPC on 24 February2017 and 29 December 2018, and the latest amendment came into effect on 29 December2018, and its Implementation Regulations（中華人民共和國企業所得稅法實施條例）promulgated by the State Council on 6 December 2007, amended on 23 April 2019 andwhich became effective on the same day (collectively, the ‘‘EIT Law’’), enterprises areclassified into resident enterprises and non-resident enterprises. Enterprises, which areincorporated in the PRC or which are incorporated pursuant to the foreign laws with their‘‘de facto management bodies’’ located in the PRC are deemed ‘‘resident enterprise’’ andsubject to an enterprise income tax rate of 25% on their global income. Non-residententerprises with establishments or place of business in the PRC are subject to (i) anenterprise income tax rate of 25% on their income generated by their establishments orplaces of business in the PRC and their income derived outside the PRC which areeffectively connected with their establishments or places of business in the PRC; and (ii) anenterprise income tax rate of 10% on their income derived from the PRC but not connectedwith their establishments or places of business located in the PRC. Non-resident enterpriseswithout an establishment or place of business in the PRC are subject to an enterprise incometax of 10% on their income derived from the PRC.

Withholding Income Tax

Pursuant to the EIT Law, dividends generated after 1 January 2008 and payable by aforeign invested enterprise in the PRC to its foreign investors are subject to a 10%withholding income tax, unless otherwise provided in the tax treaty concluded between thePRC and such foreign investor’s jurisdiction of incorporation.

Pursuant to the Arrangement between the Mainland of China and the Hong KongSpecial Administrative Region for the Avoidance of Double Taxation and the Prevention ofFiscal Evasion with respect to Taxes on Income（內地和香港特別行政區關於對所得避免雙

重徵稅和防止偷漏稅的安排）(the ‘‘Tax Treaty’’) concluded on 21 August 2006, theapplicable withholding income tax payable by a PRC resident company which pays thedividends to a Hong Kong resident enterprise shall be not more than 5% of the total amountof dividends where a beneficial owner is an enterprise directly holding at least 25% capitalof such PRC company, and in other cases, such applicable withholding income tax shall benot more than 10% of the total amount of dividends.

On 14 October 2019, the SAT promulgated the Announcement of the AdministrativeMeasures on Entitlement of Non-resident Taxpayers to Tax Treaty Benefits（國家稅務總局

關於發佈〈非居民納稅人享受協定待遇管理辦法〉的公告）(the ‘‘SAT AnnouncementNo. 35’’), which came into force on 1 January 2020. According to the SAT AnnouncementNo. 35, non-resident taxpayers enjoying their tax treaty benefits shall adopt the method of‘‘self-assessment, claim by declaration and retention of the relevant materials for review’’.Where a non-resident taxpayer deems that it is eligible for tax treaty benefits through self-assessment, it may, at the time of filing tax return or making withholding declaration by awithholding agent, enjoy tax treaty benefits, and simultaneously compile and retain therelevant materials for review, and be subject to follow-up administration by the taxauthorities.


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Value-added Tax

As our PRC subsidiary is taxpayer of value-added tax, we are hence subject to thevalue-added tax laws and regulations. Pursuant to the Interim Regulations of the PRC onValue Added Tax（中華人民共和國增值稅暫行條例）which was last amended on 19November 2017 and its implementation regulations, all entities or individuals in the PRCengaged in the sale of goods, the supply of processing services, repairs and replacementservices, and the import of goods are required to pay value-added tax (‘‘VAT’’). VATpayable is calculated as ‘‘output VAT’’ minus ‘‘input VAT’’. The VAT rate for the sale ofgoods, the lease of tangible movable property and the import of goods is 17%.

Pursuant to the Notice of the MOF and the SAT on Adjusting Value-added Tax Rates（財政部、稅務總局關於調整增值稅稅率的通知）, which was jointly issued by the MOFand SAT on 4 April 2018 and became effective from 1 May 2018, VAT taxpayer whoengages in taxable sales or import of goods and is originally subject the tax rate of 17% and11%, is subject to a VAT tax rate of 16% and 10%, respectively. According to the Notice ofthe MOF, the SAT and the General Administration of Customs on Deepening the PoliciesRelated to Value-Added Tax Reform（財政部、稅務總局、海關總署關於深化增值稅改革

有關政策的公告）issued on 20 March 2019 and implemented on 1 April 2019, the tax rateof 16% and 10% applicable to the VAT taxpayers who engage in taxable sales or import ofgoods have been adjusted to 13% and 9%, respectively.

G. Laws and regulations related to employment and social security

Labour Law

The Labour Law of the PRC（中華人民共和國勞動法）, which was passed by theSCNPC on 5 July 1994, came into effect on 1 January 1995, and amended on 27 August2009 and 29 December 2018, provides that employees are entitled to have equalopportunities in employment, choose occupations, receive labour remuneration, have restdays and holidays, acquire protection of occupational safety and healthcare, enjoy socialinsurance and welfare, etc. Employers must establish and improve the system foroccupational safety and healthcare, provide training on occupational safety and healthcareto employees, comply with national and/or local regulations on occupational safety andhealthcare, and provide necessary labour protective supplies to employees.

Labour Contract Law

The Labour Contract Law of the PRC（中華人民共和國勞動合同法）(the ‘‘LabourContract Law’’) which was passed by the SCNPC on 29 June 2007, came into effect on 1January 2008, and amended on 28 December 2012, and the Implementation Regulations onthe Labour Contract Law of the PRC（中華人民共和國勞動合同法實施條例）, which waspromulgated by the State Council on 18 September 2008 and came into effect on the sameday, provide that labour contracts must be executed in order to establish the labourrelationship between employers and employees. The Labour Contract Law stipulates that anemployer shall inform the employees truthfully the scope of work, working conditions,workplace, occupational hazards, production safety conditions, labour remuneration andother information requested by the employees. The Labour Contract Law also stipulates that


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employer and employee shall fully perform their respective obligations in accordance withthe terms set forth in the labour contract. In addition, employer shall pay employeesremuneration in a timely manner and in full amount in accordance with terms in the labourcontract. The Labour Contract Law also provides for the scenario of rescission andtermination of a labour contract, except for the situations explicitly stipulated in the LabourContract Law and its implementation regulations which will not entitle the employee toeconomic compensation, the economic compensation shall be paid to the employee whoselabour contract has been revoked or terminated by the employer.

Social Insurance

Pursuant to the Social Insurance Law of the PRC（中華人民共和國社會保險法）whichwas promulgated by the SCNPC on 28 October 2010 and became effective on 1 July 2011and was amended on 29 December 2018, and other relevant regulations, employers arerequired to contribute, on behalf of their employees, to a number of social insurance funds,including funds for basic pension insurance, unemployment insurance, basic medicalinsurance, work-related injury insurance and maternity insurance. If an employer fails to doso, the relevant social insurance authorities shall order the employer to make the outstandingsocial insurance contributions within a prescribed time limit, and may impose additional latepayment fees and a fine on the employer.

Housing Provident Fund

Pursuant to the Regulations on the Administration of Housing Provident Fund（住房公

積金管理條例）which was promulgated by the SCNPC on 3 April 1999 and becameeffective on 3 April 1999, and amended on 24 March 2002 and on 24 March 2019,employers shall go through housing provident funds registration with the local housing fundadministration center and open housing fund accounts for its employees. In the event offailure to comply with the above-mentioned registration and accounts opening procedures,an employer may be ordered to handle the same within a time limit. If an employer fails tohandle the same within prescribed time limit, it shall be imposed a penalty ranging fromRMB10,000 to RMB50,000. Also, the employers are required to make contribution tohousing provident funds for their employees. Where an employer fails to pay up housingprovident funds within a time limit, the housing fund administration center shall order it tomake full payment in certain period of time, and if the employer still fails to do so, thehousing fund administration center may apply to the court for enforcement of the unpaidamount.

H. Regulations related to non-road mobile machinery

The Notice on the Three-Year Action Plan for Winning the Blue Sky Defense War（《國務院

關於印發打贏藍天保衛戰三年行動計劃的通知》）was promulgated by the State Council on 27June 2018 and came into effect on the same day. It demands for strengthening the prevention andcontrol of pollutant emitted from non-road mobile machinery, carrying out thorough investigationof non-road mobile machinery, delimiting low-emission control areas for non-road mobilemachinery, and strictly controlling high-emission non-road mobile machinery.


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The atmospheric pollutant emission for non-road diesel mobile machinery shall be subject tothe Limits and Measurement Methods for Exhaust Pollutants from Diesel Engines of Non-roadMobile Machinery (CHINA III、IV)（《非道路移動機械用柴油機排氣污染物排放限值及測量方法

（中國第三、四階段）》）(promulgated by the MEP and AQSIQ on 16 May 2014, amended on 28December 2020, and came into effect on the same day) and the Emissions Control TechnicalRequirements of Non-road Diesel Mobile Machinery（《非道路柴油移動機械污染物排放控制技術要求》）(promulgated by the MEE on 28 December 2020 and came into effect on the same day),which specifies the phase III and phase IV standards of emission limits and measurement methodsfor non-road mobile machinery diesel engine exhaust pollutant, and the technical requirements forpollutant emission control of non-road mobile machinery for phase IV. Since 1 October 2014, alldiesel engines for non-road mobile machinery that have undergone type approval for exhaustpollutant emission must comply with the phase III standard, while the phase IV standard shall beexecuted by all non-road mobile machinery below 560kw (including 560kw) produced, importedor sold and the diesel engines installed thereon from 1 December 2022. For more details on theimpact of the phase IV standard on our PRC operation, please refer to the paragraphs headed‘‘Business – Business strategies – Need of upgrading our rental fleet at the Nansha OperationCentre to China IV construction equipment’’ and ‘‘Risk Factors – Risks relating to our Group’sbusiness – Changes in existing laws, regulations and government policies, including theintroduction of more stringent laws and regulations on environment protection and labour safetymay cause us to incur substantial additional expenditure’’ in this document.

Pursuant to the Atmospheric Pollution Prevention and Control Law of the PRC（《中華人民共和國大氣污染防治法》）promulgated by the SCNPC on 5 September 1987, last amended on 26October 2018 and became effective on the same day, non-road mobile machinery, which meansmobile machines and transportable industrial equipment with engines, shall not dischargeatmospheric pollutants in excess of the standards formulated by the competent ecologicalenvironment department under the State Council or the people’s governments of provinces,autonomous regions and municipality. The manufacturing, import or sale of non-road mobilemachinery with air pollutant emissions exceeding the standard shall be prohibited. The urbangovernment may delimit and announce the areas where the use of high-emission non-road mobilemachinery is prohibited based on the quality of the atmospheric environment.

Pursuant to the Regulations of Guangdong Province on Prevention and Control ofAtmospheric Pollution（《廣東省大氣污染防治條例》）promulgated on 29 November 2018 andcame into force on 1 March 2019, non-road mobile machinery sold in Guangdong province shallmeet the emission limits of the corresponding phase in the currently implemented national non-road mobile machinery atmospheric pollutant emission standards, and the non-road mobilemachinery used in Guangdong province shall not emit air pollutants in excess of the standards,and shall not emit visible pollutants such as black smoke. Any individual or entity which useshigh-emission non-road mobile machinery in the prohibited areas shall be ordered to rectify, beimposed a fine of RMB20,000, or even ordered to suspend operation for rectification in severalcases.

The environmental authorities in many regions of the PRC have delimited the prohibitedutilisation areas of high-emission non-road mobile machinery in their jurisdictions.

DIRECTORS’ CONFIRMATION IN RELATION TO THE LEGAL COMPLIANCE

Our Directors confirm that save as disclosed under the paragraph headed ‘‘Business – Legalproceedings and compliance’’ in this document, so far as the Hong Kong and the PRC laws areconcerned, our Group had obtained all the relevant permits, registrations and licences for itsexisting operations in Hong Kong and the PRC as at the Latest Practicable Date and had compliedwith all applicable laws and regulations in all material respects in Hong Kong and the PRC duringthe Track Record Period and up to the Latest Practicable Date.


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OVERVIEW

Our Group’s history can be traced back to 1983 when Mr. Kok formed his sole

proprietorship, Chi Shing Electrical Machine Company*（志成電機公司）, which primarily

engaged in the provision of construction equipment rental services. In 1998, Mr. Kok, decided to

continue to develop his business by incorporating Chi Shing Machinery (through CS Investment),

a private company with limited liability in Hong Kong primarily engaging in the provision of

construction equipment rental services.

Our Group had gradually expanded our business into sale of construction equipment. Over

time, our Group has established more subsidiaries to facilitate the human resource management,

operation and business of our Group in Hong Kong and the PRC.

With a view to further strengthen our position in the construction equipment rental and sales

industry, we have entered into various dealership and distributorship agreements with

internationally renowned construction equipment manufacturers. From 2003 to 2014, our Group

was appointed as a distributor of JLG for certain high reach equipment and components firstly in

Hong Kong, and later also in Macau. Since 2005, our Group has been appointed as a distributor

of Airman for certain power and energy equipment and earthmoving equipment in Hong Kong

and Macau. Since 2019, our Group has been appointed as a dealer of BOMAG for certain

earthmoving equipment in Hong Kong and Macau.

Leveraging our technical expertise and industry experience, and with an aim to offer a wider

range of high quality and environmentally friendly equipment to our customers, our Group

cooperated with a PRC OEM equipment manufacturer to produce our own-branded KCG

generators on an OEM basis according to our design and specifications in 2012. Our Group

secured our first sales order and first rental order of our own-branded KCG generators in 2012

and 2013, respectively.

After establishing a foothold in Hong Kong, our Group expanded our business into the PRC

market through the incorporation of our PRC subsidiary, Guangdong Zhigui, in 2015. With an

aim to capture the growth of the PRC construction equipment rental and sales market, our Group

established our first market presence in the PRC at the Nansha district of the Guangdong Province

of the PRC. Our Group secured our first rental order and first sales order in the PRC in 2016 and

in 2017, respectively.

We strive to be a reputable and reliable construction equipment provider in Hong Kong and

the PRC. As at 31 March 2021, our Group had 1,022 and 218 units of construction equipment in

our rental fleet in Hong Kong and the PRC, respectively.


HISTORY, REORGANISATION AND GROUP STRUCTURE

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Our Group operates our business through Chi Shing Equipment Trading, Chi Shing

Machinery Rental, Chi Shing Machinery, Chi Shing Human Resources, Chi Shing (Hong Kong)

Group, Chi Shing Industries and Guangdong Zhigui, which are all subsidiaries of our Company.

BUSINESS MILESTONES

The following table outlines the key milestones and achievements in the history of our

Group:

Year Event

1998 CS Investment was incorporated as a holding company and Chi Shing

Machinery was incorporated primarily engaging in the provision of

construction equipment rental services

2002 Chi Shing Equipment Trading was incorporated to engage in trading of

aerial work platforms in the construction industry

Chi Shing Human Resources was incorporated to engage in the provision of

human resources to our Group’s companies

2003 Chi Shing Machinery Rental was incorporated to engage in rental of

construction equipment

Our Group was first appointed as a distributor of JLG for certain high reach

equipment and components in Hong Kong

2005 Our Group was first appointed as a distributor of Airman for certain power

and energy equipment and earthmoving equipment in Hong Kong and

Macau

2010 Our Group provided construction equipment for the construction of the

Cathay Pacific air cargo terminal in Hong Kong

2011 Chi Shing (Hong Kong) Group was incorporated

Our Group provided construction equipment for the construction of the

Central Government Offices and the construction of the Central-Wanchai

Bypass in Hong Kong

2012 Chi Shing Industries was incorporated

Our Group provided construction equipment for the construction of the

Hong Kong West Kowloon Station of the Guangzhou-Shenzhen-Hong Kong

Express Rail Link



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Year Event

Our Group cooperated with a PRC OEM equipment manufacturer to

produce our own-branded KCG generator on an OEM basis

Certain models of our own-branded KCG generator satisfied the noise

emission standard under the directive 2000/14/EC amended by 2005/88/EC

of the European Union and were eligible for QPME labels

Our Group secured our first sales order of our own-branded KCG generator

2013 Our Group secured our first rental order of our own-branded KCG generator

2015 Guangdong Zhigui was incorporated in the PRC, and our Group established

our market presence in the PRC market at the Nansha district of the

Guangdong Province of the PRC for provision of construction equipment

rental and sales services

2018 Our Group provided construction equipment for the construction project of

the Hong Kong-Zhuhai-Macao Bridge – Hong Kong Boundary Crossing

Facilities

2019 Our Group was first appointed as a dealer of BOMAG for certain

earthmoving equipment in Hong Kong and Macau

2020 Our Group provided construction equipment for the construction of the

Hong Kong International Airport third runway

Our Group has successfully applied for the inclusion of certain single drum

rollers and soil compactors and asphalt rollers of the brand of BOMAG in

the pre-approved list-technologies of the Construction Innovation and

Technology Fund

Our Group was the second largest company in the power and energy

equipment and high reach equipment rental industry in Hong Kong in terms

of market share by revenue in 2020



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CORPORATE AND BUSINESS DEVELOPMENT HISTORY

Please refer to the paragraph headed ‘‘Our Group Structure’’ in this section below for the

diagram setting forth the corporate structure of our Group as at 1 April 2018, being the

commencement date of the Track Record Period. The following sets forth the shareholding and

corporate structure, place of incorporation and principal business activities of each member of our

Group as at the Latest Practicable Date.

Our Company

Our Company was incorporated in the Cayman Islands under the Companies Act as an

exempted company with limited liability on 19 March 2021, with an initial authorised share

capital of HK$380,000 divided into 38,000,000 ordinary shares of a par value of HK$0.01 each,

of which, one Share was allotted and issued, credited as fully paid, at par to its initial subscriber,

an Independent Third Party, who, on the same date, transferred to CS Investment the said one

issued Share, which represented the entire issued share capital of our Company.

On 17 June 2021, as part of the Reorganisation, our Company further allotted and issued

one Share credited as fully paid to CS Investment, details of which are set out in the paragraph

headed ‘‘Reorganisation – Stage (5) – Acquisition of Ace Honour by our Company’’ in this

section.

As a result of the Reorganisation, our Company has become the holding company of our

Group, details of which are set out in the paragraph headed ‘‘Reorganisation’’ in this section.

On [•], our Company increased its authorised share capital from HK$380,000 divided into

38,000,000 Shares of a par value of HK$0.01 each to [HK$100,000,000] divided into

[10,000,000,000] Shares of a par value of HK$0.01 each by the creation of an additional of

[9,962,000,000] Shares of a par value of HK$0.01 each, each ranking pari passu in all respects

with our Shares then in issue.

Our intermediate holding subsidiary

Ace Honour (BVI)

Ace Honour was incorporated in the BVI with liability limited by shares on 23 July 2020

and is authorised to issue a maximum of 50,000 shares of a single class each with a par value of

US$1.00 each. As at the Latest Practicable Date, Ace Honour had six shares in issue. Ace Honour

is an investment holding company.

On 19 August 2020, Ace Honour allotted and issued one ordinary share to Mr. Kok,

credited as fully paid, at par. Immediately after the aforesaid allotment and issuance of share, Ace

Honour was wholly-owned by Mr. Kok.



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On 15 June 2021, as part of the Reorganisation, CS Investment acquired one ordinary share

of Ace Honour (representing the only issued share of Ace Honour) from Mr. Kok. Immediately

after the aforesaid transfer of share, Ace Honour became a direct wholly-owned subsidiary of CS

Investment.

On 16 June 2021, as part of the Reorganisation, Ace Honour further allotted and issued five

shares, credited as fully paid, to CS Investment.

On 17 June 2021, as part of the Reorganisation, our Company acquired six shares of Ace

Honour (representing all the issued shares of Ace Honour) from CS Investment. Immediately after

the aforesaid transfer of shares, Ace Honour became a direct wholly-owned subsidiary of our

Company.

For further details of the abovementioned transfer of shares and allotment and issuance of

shares, please refer to the paragraphs headed ‘‘Reorganisation – Stage (3) – Acquisition of Ace

Honour by CS Investment’’, ‘‘Reorganisation – Stage (4) – Acquisition of Chi Shing Equipment

Trading, Chi Shing Machinery Rental, Chi Shing Machinery, Chi Shing Human Resources and

Chi Shing (Hong Kong) Group by Ace Honour’’ and ‘‘Reorganisation – Stage (5) – Acquisition of

Ace Honour by our Company’’ in this section.

Our operating subsidiaries

Chi Shing Equipment Trading (Hong Kong)

Chi Shing Equipment Trading is a private company incorporated in Hong Kong with limited

liability on 24 December 2002. Chi Shing Equipment Trading is principally engaged in sale of

construction equipment and the provision of repairing services and other ancillary services.

As at 1 April 2018, being the commencement date of the Track Record Period, Chi Shing

Equipment Trading had 1,000,000 shares in issue, and was owned as to 999,999 shares by CS

Investment and as to one share by Ms. Kwan (who held such one share on trust for CS

Investment), respectively.

On 25 September 2020, Ms. Kwan transferred one share of Chi Shing Equipment Trading to

CS Investment at nil consideration. Immediately after the aforesaid transfer of share, Chi Shing

Equipment Trading was directly wholly-owned by CS Investment.

As a result of the Reorganisation, Chi Shing Equipment Trading became an indirect wholly-

owned subsidiary of our Company, details of which are set out in the paragraph headed

‘‘Reorganisation’’ in this section.



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Chi Shing Machinery Rental (Hong Kong)

Chi Shing Machinery Rental is a private company incorporated in Hong Kong with limited

liability on 24 January 2003. Chi Shing Machinery Rental is principally engaged in investment

holding and the provision of construction equipment rental services.


Machinery Rental had 100,000 shares in issue, and was owned as to 99,999 shares by CS



On 24 September 2020, Ms. Kwan transferred one share of Chi Shing Machinery Rental to


Machinery Rental was directly wholly-owned by CS Investment.

As a result of the Reorganisation, Chi Shing Machinery Rental became an indirect wholly-



Chi Shing Machinery (Hong Kong)

Chi Shing Machinery is a private company incorporated in Hong Kong with limited liability

on 16 September 1998. Chi Shing Machinery is principally engaged in the provision of

construction equipment rental services and sale of construction equipment.


Machinery had 1,000,000 shares in issue, and was owned as to 999,999 shares by CS Investment

and as to one share by Ms. Kwan (who held such one share on trust for CS Investment),

respectively.

On 24 September 2020, Ms. Kwan transferred one share of Chi Shing Machinery to CS

Investment at nil consideration. Immediately after the aforesaid transfer of share, Chi Shing

Machinery was directly wholly-owned by CS Investment.

As a result of the Reorganisation, Chi Shing Machinery became an indirect wholly-owned

subsidiary of our Company, details of which are set out in the paragraph headed


Chi Shing Human Resources (Hong Kong)

Chi Shing Human Resources is a private company incorporated in Hong Kong with limited

liability on 24 December 2002. Chi Shing Human Resources is principally engaged in the

provision of human resources for our Group.



– 92 –


Human Resources had 10,000 shares in issue, and was owned as to 9,999 shares by CS



On 24 September 2020, Ms. Kwan transferred one share of Chi Shing Human Resources to


Human Resources was wholly-owned by CS Investment.

As a result of the Reorganisation, Chi Shing Human Resources became an indirect wholly-



Chi Shing (Hong Kong) Group (Hong Kong)

Chi Shing (Hong Kong) Group is a private company incorporated in Hong Kong with

limited liability on 6 July 2011. Chi Shing (Hong Kong) Group is an investment holding

company.


(Hong Kong) Group had 10,000 shares in issue and was wholly-owned by Mr. Kok. There had

been no change in the shareholding of Chi Shing (Hong Kong) Group since 1 April 2018 until

immediately before the Reorganisation.

As a result of the Reorganisation, Chi Shing (Hong Kong) Group became an indirect

wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed


Chi Shing Industries (Hong Kong)

Chi Shing Industries is a private company incorporated in Hong Kong with limited liability

on 13 February 2012. Chi Shing Industries holds the trademarks of our Group.


Industries had 10,000 shares in issue and was wholly-owned by Chi Shing (Hong Kong) Group.

There had been no change in the shareholding in Chi Shing Industries during the Track Record

Period and up to the Latest Practicable Date.

As a result of the Reorganisation, Chi Shing Industries became an indirect wholly-owned





– 93 –

Guangdong Zhigui (PRC)

Guangdong Zhigui was established in the PRC as a limited liability company on 13 July

2015 and had a registered capital of RMB20,000,000. Guangdong Zhigui is principally engaged

in the provision of construction equipment rental services and sale of construction equipment.

During the Track Record Period and up to the Latest Practicable Date, the registered capital

of Guangdong Zhigui was RMB20,000,000 and Guangdong Zhigui was directly wholly-owned by

Chi Shing Machinery Rental.

As a result of the Reorganisation, Guangdong Zhigui became an indirect wholly-owned



Our dissolved company

Since we decided to streamline our core businesses, being the provision of construction

equipment rental services and sale of construction equipment in Hong Kong and the PRC, we

have dissolved Chi Shing Machinery (Macau) pursuant to the Reorganisation because Chi Shing

Machinery (Macau) had no business operation prior to its dissolution.

Our Directors confirm that to the best of their knowledge, Chi Shing Machinery (Macau)

was not involved in any material non-compliances, litigations or claims, or exposed to any

material actual or contingent liabilities since 1 April 2018 till its dissolution on 7 May 2021.

Chi Shing Machinery (Macau) (Macau)

Chi Sing Machinery (Macau) was incorporated in Macau with limited liability with a share

capital of MOP 25,000 on 20 May 2016.


Machinery (Macau) was owned as to 96% and as to 4% by Chi Shing Machinery Rental and Mr.

Bobby Kok, respectively. There had been no change in the shareholding of Chi Shing Machinery

(Macau) since 1 April 2018 till its dissolution on 7 May 2021.

As Chi Shing Machinery (Macau) had no business operation prior to its dissolution, our

Group has applied to the relevant authority in Macau for the dissolution of Chi Shing Machinery

(Macau) in May 2021, and it was dissolved on 7 May 2021 and thus ceased to be a member of

our Group.



– 94 –

REORGANISATION

For the purpose of the [REDACTED], we underwent the Reorganisation as a result of

which our Company became the holding company of our Group.

The Reorganisation involved the following steps:

Stage (1) – Incorporation of our Company

For details of the incorporation of our Company, please refer to the paragraph headed

‘‘Corporate and Business Development History – Our Company’’ in this section.

Stage (2) – Dissolution of Chi Shing Machinery (Macau)

As Chi Shing Machinery (Macau) had no business operation prior to its dissolution,

our Group has applied to the relevant authority in Macau for the dissolution of Chi Shing

Machinery (Macau) in May 2021, and it was dissolved on 7 May 2021 and thus ceased to be

a member of our Group.

Stage (3) – Acquisition of Ace Honour by CS Investment

As part of the Reorganisation and pursuant to a sale and purchase agreement entered

into between Mr. Kok, as vendor, and CS Investment, as purchaser, dated 15 June 2021, CS

Investment acquired one ordinary share of Ace Honour (representing the only issued share

of Ace Honour) from Mr. Kok, in consideration thereof, CS Investment allotted and issued

one ordinary share, credited as fully paid, to Mr. Kok. After the aforesaid share transfer,

Ace Honour became a direct wholly-owned subsidiary of CS Investment.



– 95 –

Stage (4) – Acquisition of Chi Shing Equipment Trading, Chi Shing Machinery Rental,

Chi Shing Machinery, Chi Shing Human Resources and Chi Shing (Hong Kong) Group

by Ace Honour

Acquisition of Chi Shing Equipment Trading, Chi Shing Machinery Rental, Chi Shing

Machinery and Chi Shing Human Resources by Ace Honour


into between CS Investment, as vendor, and Ace Honour, as purchaser, dated 16 June 2021,

CS Investment transferred:

(i) its legal and beneficial interest of 1,000,000 shares in Chi Shing Equipment

Trading (representing the entire issued share capital of Chi Shing Equipment

Trading);

(ii) its legal and beneficial interest of 100,000 shares in Chi Shing Machinery Rental

(representing the entire issued share capital of Chi Shing Machinery Rental);

(iii) its legal and beneficial interest of 1,000,000 shares in Chi Shing Machinery

(representing the entire issued share capital of Chi Shing Machinery); and

(iv) its legal and beneficial interest of 10,000 shares in Chi Shing Human Resources

(representing the entire issued share capital of Chi Shing Human Resources),

to Ace Honour, and as consideration thereof, Ace Honour allotted and issued four ordinary

shares, credited as fully paid, to CS Investment.

Immediately after the aforesaid transfers of shares, Chi Shing Equipment Trading, Chi

Shing Machinery Rental, Chi Shing Machinery and Chi Shing Human Resources became

direct wholly-owned subsidiaries of Ace Honour, and Guangdong Zhigui became an indirect

wholly-owned subsidiary of Ace Honour.

Acquisition of Chi Shing (Hong Kong) Group by Ace Honour


into between Mr. Kok, as vendor, and Ace Honour, as purchaser, dated 16 June 2021, Mr.

Kok transferred his legal and beneficial interest of 10,000 shares in Chi Shing (Hong Kong)

Group (representing the entire issued share capital of Chi Shing (Hong Kong) Group) to Ace

Honour, and as consideration thereof, Ace Honour allotted and issued one ordinary share,

credited as fully paid, to CS Investment as directed by Mr. Kok.

Immediately after the aforesaid transfer of shares, Chi Shing (Hong Kong) Group

became a direct wholly-owned subsidiary of Ace Honour and Chi Shing Industries became

an indirect wholly-owned subsidiary of Ace Honour.



– 96 –

Stage (5) – Acquisition of Ace Honour by our Company


into between CS Investment, as vendor, and our Company, as purchaser, dated 17 June

2021, CS Investment transferred its legal and beneficial interest of six ordinary shares in

Ace Honour (representing all the issued shares of Ace Honour) to our Company, and as

consideration thereof, our Company allotted and issued one Share, credited as fully paid, to

CS Investment.

Immediately after the aforesaid transfer of shares, Chi Shing Equipment Trading, Chi

Shing Machinery Rental, Chi Shing Machinery, Chi Shing Human Resources, Chi Shing

(Hong Kong) Group, Guangdong Zhigui and Chi Shing Industries became indirect wholly-

owned subsidiaries of our Company.

As confirmed by our Directors, each of the share transfers made in the Reorganisation

was properly and legally completed and settled. No approval is required from the relevant

regulatory authorities.

THE CAPITALISATION ISSUE AND THE [REDACTED]

We will [REDACTED] the [REDACTED] for [REDACTED] at the [REDACTED]. Such

[REDACTED] shall represent not less than 25% of the total issued share capital of our Company

upon the [REDACTED]. Conditional on our Company’s share premium account having sufficient

balance, or otherwise being credited as a result of the allotment and issuance of the

[REDACTED] pursuant to the [REDACTED], our Directors are authorised to capitalise a sum

of HK$[REDACTED] standing to the credit of the share premium account of our Company by

applying such sum towards the paying up in full at par of [REDACTED] Shares for allotment

and issuance to CS Investment, being the entity which name appeared on the register of members

or principal share register of our Company at the close of business on the date which the

resolution of our Company was passed.



– 97 –

OUR GROUP STRUCTURE

The following diagram sets forth the corporate structure of our Group as at 1 April 2018,

being the commencement date of the Track Record Period:

100% 100%

100%100%100%100%

100%

100%

96%

Mr. Kok

CS Investment(BVI)

Chi ShingEquipment Trading

(Hong Kong)

Chi ShingMachinery Rental

(Hong Kong)

Chi ShingMachinery (Macau)

(Macau)

Guangdong Zhigui(PRC)

Chi ShingMachinery

(Hong Kong)

Chi Shing HumanResources

(Hong Kong)

Chi ShingIndustries

(Hong Kong)

Chi Shing(Hong Kong)

Group(Hong Kong)

(Note 5)

(Note 1) (Note 2) (Note 3) (Note 4)

Notes:

1. As at 1 April 2018, one share of Chi Shing Equipment Trading was held by Ms. Kwan on trust for CS

Investment. Ms. Kwan transferred such one share back to CS Investment at nil consideration on 25

September 2020.

2. As at 1 April 2018, one share of Chi Shing Machinery Rental was held by Ms. Kwan on trust for CS


September 2020.

3. As at 1 April 2018, one share of Chi Shing Machinery was held by Ms. Kwan on trust for CS Investment.

Ms. Kwan transferred such one share back to CS Investment at nil consideration on 24 September 2020.

4. As at 1 April 2018, one share of Chi Shing Human Resources was held by Ms. Kwan on trust for CS


September 2020.

5. As at 1 April 2018, the remaining 4% shareholding of Chi Shing Machinery (Macau) was owned by Mr.

Bobby Kok, who is the son of Mr. Kok and younger brother of Mr. Jason Kok.



– 98 –

The following diagram sets forth the corporate structure of our Group immediately before

the implementation of the Reorganisation:

100% 100%100%

100%100%100%100%

100%

100%

96%

Mr. Kok

CS Investment(BVI)


(Hong Kong)


(Hong Kong)

Chi ShingMachinery (Macau)

(Macau)


Chi ShingMachinery

(Hong Kong)


(Hong Kong)

Chi ShingIndustries

(Hong Kong)


Group(Hong Kong)

Ace Honour(BVI)

(Note)

Note: Immediately before the implementation of the Reorganisation, the remaining 4% shareholding of Chi Shing

Machinery (Macau) was owned by Mr. Bobby Kok, who is the son of Mr. Kok and younger brother of Mr.

Jason Kok.



– 99 –

The following diagram sets forth the corporate structure of our Group immediately after the

completion of the Reorganisation:

100%

100%

100%

100%

100%

100%100%100%

100%

100%

Mr. Kok

CS Investment(BVI)

Our Company(Cayman Islands)


(Hong Kong)


(Hong Kong)


Chi ShingMachinery

(Hong Kong)


(Hong Kong)

Chi ShingIndustries

(Hong Kong)


Group(Hong Kong)

Ace Honour(BVI)



– 100 –

The following diagram sets forth the corporate structure of our Group immediately after the

completion of the Capitalisation Issue and the [REDACTED] (without taking into account any

Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any

options which may be granted under the Share Option Scheme):

100%

[Redacted][Redacted]

100%

100%

100%

100%100%100%

100%

100%

Mr. Kok

CS Investment(BVI)

Public

Our Company(Cayman Islands)


(Hong Kong)


(Hong Kong)


Chi ShingMachinery

(Hong Kong)


(Hong Kong)

Chi ShingIndustries

(Hong Kong)


Group(Hong Kong)

Ace Honour(BVI)



– 101 –

OVERVIEW

We are a well-established construction equipment provider principally offering construction

equipment rental services and sale of construction equipment in Hong Kong and the PRC.

According to the CHFT Report, we ranked second in the power and energy equipment and high

reach equipment rental market in Hong Kong in terms of revenue with a market share of

approximately 6.2% in 2020. Our Group’s history can be traced back to 1983 when Mr. Kok, our

Controlling Shareholder, formed his sole proprietorship, Chi Shing Electrical Machine Company*

（志成電機公司）. In 2015, we extended our footprint into the PRC market and established our

presence at the Nansha district of the Guangdong Province with an aim to capture the growth of

the PRC construction equipment rental and sales market, especially in the Greater Bay Area. We

mainly offer a wide range of (i) power and energy equipment; (ii) high reach equipment; and (iii)

earthmoving equipment. Please refer to paragraph headed ‘‘Our construction equipment’’ in this

section for details of our construction equipment.

As at 31 March 2021, we had 1,240 units of construction equipment in our rental fleet,

comprising (i) 510 units of power and energy equipment; (ii) 705 units of high reach equipment;

(iii) 19 units of earthmoving equipment; and (iv) six units of other equipment. For the three years

ended 31 March 2021, our revenue was approximately HK$53.8 million, HK$93.9 million and

HK$128.8 million, respectively. The following table sets forth the breakdown of our revenue by

business segment during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %


Total 53,802 100.0 93,880 100.0 128,785 100.0

The following table sets forth our revenue by geographical location during the Track Record

Period:


HK$’000 % HK$’000 % HK$’000 %

Hong Kong 42,547 79.1 82,361 87.7 118,635 92.1The PRC 11,255 20.9 11,519 12.3 10,150 7.9

Total 53,802 100.0 93,880 100.0 128,785 100.0


BUSINESS

– 102 –

Over the course of our operation, we have developed a large and diversified customer base

which includes, among others, construction companies, manufacturing companies, education

institutions, government bodies and other construction equipment providers. Notably, we have

provided construction equipment for prominent landmark construction projects including but not

limited to the Central Government Offices, Cathay Pacific air cargo terminal, Hong Kong

International Airport third runway, West Kowloon Station for the Guangzhou-Shenzhen-Hong

Kong Express Rail Link, Hong Kong-Zhuhai-Macao Bridge – Hong Kong Boundary Crossing

Facilities, Central-Wanchai Bypass, Kai Tak Sports Park, Kwu Tung North new development area

and Shenzhen World Exhibition and Convention Center.

Our ‘‘Chi Shing’’ brand is reputable within the Hong Kong construction industry. It was

established with the aspiration of providing reliable, high quality, environmentally friendly and

innovative construction equipment to customers. By leveraging our technical expertise and

accumulated industry experience in construction equipment, we successfully developed our own-

branded KCG generator in 2012. We sold our first KCG generator in 2012 and first rented out our

KCG generator in 2013. Our KCG generators are designed and built to meet relevant emission

standards in Hong Kong, and can be registered as approved NRMMs and are eligible to apply for

QPME labels in Hong Kong. Our KCG generators have successfully penetrated into the Hong

Kong construction equipment rental and sales market and have gained recognition from our

customers.

We place great emphasis on our services and construction equipment’s quality. Our

Directors believe that they represent our corporate image and our ‘‘Chi Shing’’ brand. We

continue to improve our service quality and competitiveness with our dedication to professional

management, accumulation of operational experience and enhancement of construction equipment

application knowledge. We endeavour to offer the best quality construction equipment by mainly

sourcing construction equipment manufactured by internationally renowned construction

equipment manufacturers. During the Track Record Period, we procured construction equipment

from various internationally renowned equipment manufacturers located in Japan, Germany and

the United States, of which we were the authorised dealer or distributor of two of them in Hong

Kong as at the Latest Practicable Date. As confirmed by our Directors, we did not sublease any

construction equipment from third parties to our customers during the Track Record Period and

we do not intend to do so going forward, to ensure absolute control on our rental fleet’s quality

and working conditions. We believe such practice differentiates us from our competitors, and

have provided us with a competitive advantage to sustainably compete in the market over our

long operating history.

COMPETITIVE STRENGTHS

Our Directors believe that the following competitive strengths contribute to our success and

will enable us to further develop our business in the future.


BUSINESS

– 103 –

We are one of the main players with proven track record in the construction equipment

rental and sales market in Hong Kong

We endeavour to develop our Group as a diversified construction equipment provider and

our proven track record demonstrates that we are one of the main players in the construction

equipment rental and sales market in Hong Kong. According to the CHFT Report, we ranked

second in the power and energy equipment and high reach equipment rental market in Hong Kong

in terms of revenue with a market share of 6.2% in 2020. Over the years, we have developed a

large and diversified customer base which includes, among others, construction companies,

manufacturing companies, education institutions, government bodies and other construction

equipment providers. During our long operating history, we have provided construction equipment

for prominent landmark construction projects including but not limited to the Central Government

Offices, Cathay Pacific air cargo terminal, Hong Kong International Airport third runway, West

Kowloon Station for the Guangzhou-Shenzhen-Hong Kong Express Rail Link, Hong Kong-

Zhuhai-Macao Bridge – Hong Kong Boundary Crossing Facilities, Central-Wanchai Bypass, Kai

Tak Sports Park, Kwu Tung North new development area and Shenzhen World Exhibition and

Convention Center.

We consider we have accumulated industry experience and technical knowledge in power

and energy equipment, high reach equipment and earthmoving equipment throughout our long

operating history, and such experience and knowledge have become one of our key strengths. We

further believe our leading market position in Hong Kong, industry reputation and strong

relationship with major suppliers and customers position us favourably to capture the upcoming

growth of the construction equipment rental and sales markets in Hong Kong and the PRC. For

the growth rate of the construction equipment rental and sales markets in Hong Kong and the

PRC, please refer to the section headed ‘‘Industry Overview’’ in this document.

With the wealth of industry insight and experience of our management team, we believe we

have sailed through different business cycles of the construction industry in Hong Kong over our

long operating history by consistently being able to devise strategic business plans, manage risks

and secure emerging opportunities, and our Group has achieved continuous growth in the

construction equipment rental and sales market.

We offer a large, high quality and well-maintained rental fleet for our rental services

customers

We strive to promptly respond to customers’ needs to maintain and enhance our market

position and competitiveness in the construction equipment rental market in Hong Kong and the

PRC by providing quality construction equipment with high emission standard. We had 1,240

units of construction equipment in our rental fleet as at 31 March 2021, comprising (i) 510 units

of power and energy equipment; (ii) 705 units of high reach equipment; (iii) 19 units of

earthmoving equipment; and (iv) six units of other equipment. After the implementation of the

NRMM Regulation and the QPME System, we consider that construction companies are


BUSINESS

– 104 –

increasingly paying attention to environmental protection in their construction work in recent

years and there is a surging demand for more environmentally friendly construction equipment.

Our rental fleet as at 31 March 2021 complied with the NRMM Regulation. They were either

approved or exempted NRMMs. Among all construction equipment in our rental fleet subject to

NRMM Regulation, approximately 82.5% of which were approved NRMMs as at 31 March 2021.

Furthermore, approximately 74.2% of our QPME System-applicable rental equipment had

obtained the QPME label as at 31 March 2021.

In addition to the emission quality of construction equipment, our Directors are aware that

our customers generally place emphasis on construction equipment reliability and safety to

minimise the risk of malfunctioning which would cause construction equipment downtime and

safety issue. Our Group has a robust rental fleet management programme where our technical

team regularly inspects and maintains our rental fleet to ensure the safety and reliability of our

construction equipment and that they are in optimal condition for our customers’ use. As at the

Latest Practicable Date, our technical team consisted of 13 members, among then a certain

number of them had worked for our Group for over 15 years. To ensure that our technical team is

competent in keeping our construction equipment well-maintained, we require our technicians to

attend training, from time to time, delivered by our in-house staff and construction equipment

manufacturers. We believe our technical staff have sufficient knowledge and experience to deal

with different technical problems, and to provide timely on-site support and repair and

maintenance services. We believe that our ability to provide a high quality and well-maintained

rental fleet has contributed to building long-term business relationships with our customers.

We have an experienced and dedicated management team

Mr. Kok, our founder, chairman of our Board and executive Director, has more than 35

years of experience in the construction equipment rental and sales market and has played a key

leadership and management role in spearheading the growth and development of our Group.

Under Mr. Kok’s leadership, we have built an experienced and dedicated management team,

comprising Mr. Jason Kok, Ms. Kwan and Mr. Carson Poon, who are our executive Directors and

possess extensive industry knowledge of more than 20 years of experience on average in the

construction equipment rental and sales market. Please refer to the section headed ‘‘Directors and

Senior Management’’ in this document for further information on our Directors and senior

management.

We believe that our management’s long-term presence and extensive experience in the

construction equipment rental and sales market, and in-depth knowledge of the construction

equipment are our key capabilities and our competitive advantages which enable us to (i) stay

abreast of the industry development; (ii) be aware of our competitive and market landscape; (iii)

recognise the needs of our customers more readily to foster a strong customer-oriented culture;

(iv) manage our operations more efficiently; (v) formulate sound business strategies; and (vi)

further foster the relationship we have built with our customers and suppliers. We consider our


BUSINESS

– 105 –

experienced and dedicated management team responds and adapts to various challenges posed by

the ever-changing market conditions, and has earned our customers’ trust in our services, which is

essential to our long-term development in the construction equipment rental and sales market.

We have built stable relationship with our major customers and suppliers

Capitalising on our ‘‘Chi Shing’’ brand and our long history in the construction equipment

rental and sales market, our Group has established and maintained stable business relationship

with our major customers and suppliers. As at the Latest Practicable Date, we had maintained

business relationship with our five largest customers during the Track Record Period and with our

five largest suppliers during the Track Record Period for an average of approximately eight and

seven years, respectively. We believe that our stable business relationships with customers and

suppliers represent their trust and acknowledgement of our ability.

Through our sales and rental team’s regular communication with our customers, our

Directors believe that we are able to better understand our customers’ needs and the market trend.

Leveraging our close working relationship with construction equipment manufacturers, they

provide us with construction equipment application knowledge, technical expertise and training on

the function, operation, maintenance and safety of their construction equipment. We believe our

established relationship with suppliers enable us to fulfill our customers’ needs in a timely

manner and ensure stable supply of construction equipment and technical support, which in turn

gives us a competitive edge over our competitors in the market.

We act as an authorised dealer or distributor of internationally renowned brands of


Our Directors consider that internationally renowned construction equipment manufacturers

generally have stringent requirements in selecting their authorised dealers and distributors. During

the Track Record Period and up to the Latest Practicable Date, we were the authorised dealer or

distributor of two internationally renowned brands of construction equipment (namely, Airman

and BOMAG). Through interaction with manufacturers producing construction equipment under

such brand names, including visiting them and their overseas production facilities, our Directors

believe that we have fortified our relationships with them. Furthermore, being the authorised

dealer or distributor of these brands, our Directors consider that we have benefited from existing

market recognition and goodwill carried by such brands. According to the CHFT Report, the

Airman brand ranked second in terms of number of generators with valid QPME labels in Hong

Kong in June 2021 and ranked first in terms of number of air compressors with valid QPME

labels in Hong Kong in June 2021. According to the CHFT Report, BOMAG is one of the major

brands of vibratory rollers in terms of number of vibratory rollers in Hong Kong with valid

QPME labels in Hong Kong in June 2021. We believe our healthy and long-term relationship with

these internationally renowned construction equipment manufacturers, on the one hand, has


BUSINESS

– 106 –

enabled our Group to benefit from stable sources of market-leading construction equipment and

favourable terms, and on the other hand, demonstrates that they have identified our Group as a

suitable and desirable business partner.

We offer KCG generator under our ‘‘Chi Shing’’ brand

In addition to offering construction equipment manufactured by internationally renowned

manufacturers, we offer our ‘‘Chi Shing’’ brand KCG generator to our customers. Throughout our

long history in the construction equipment rental and sales industry, we believe we have

accumulated sufficient knowledge which enables us to enhance our construction equipment. Since

2012, we have cooperated with a PRC construction equipment manufacturer to produce our own-

branded KCG generator designed by us on an OEM basis, with an aim to provide high quality

and environmentally friendly construction equipment to our customers. Our own-branded KCG

generators are designed to comply with high emission standard such that they can be registered as

approved NRMMs and are eligible to apply for QPME labels in Hong Kong. According to CHFT

Report, our ‘‘Chi Shing’’ brand KCG generator is one of the major brands of generators in terms

of number of generators with valid QPME labels in Hong Kong.

We sold our first KCG generator in 2012 and rented out our first KCG generator in 2013.

For the three years ended 31 March 2021, we sold four, 11 and 20 units of KCG generators,

respectively. Rental services revenue from our KCG generators was approximately HK$1.0

million, HK$3.9 million and HK$11.7 million, representing approximately 1.9%, 5.4% and 12.2%

of our total rental services revenue for the three years ended 31 March 2021, respectively. Our

Directors consider our ability to offer our own-branded KCG generator has given us a unique

competitive advantage in the market and allows us to demonstrate a brand image of expertise in

construction equipment, which gives confidence to our customers. Moreover, we believe it lowers

the risk of relying on construction equipment manufacturers to supply generators to us. We

believe our own-branded KCG generator has successfully established its presence in the

construction equipment rental and sales market and gained recognition from our customers. We

will continue to develop our own-branded equipment and we expect the revenue generated from

our own-branded construction equipment to continue to grow in the future.


BUSINESS

– 107 –

BUSINESS STRATEGIES

We aim to maintain our position as a key construction equipment provider and further

expand our market share in Hong Kong and the PRC. To achieve this, we intend to implement the

following strategies which will be financed by a combination of our internal resources and net

[REDACTED] from the [REDACTED]. For our funding needs, please refer to the paragraph

headed ‘‘Future Plans and [REDACTED] – Reasons for [REDACTED]’’ in this document.

Expand and optimise our rental fleet in Hong Kong and the PRC

Hong Kong

In our usual course of business, our management regularly reviews and monitors the status

of the construction equipment in our rental fleet. In particular, we routinely replace construction

equipment in our rental fleet in Hong Kong to maintain the quality, competitiveness and

attractiveness of our rental fleet, and ensure that it meets the latest emission standards in order to

consistently capture demand from our customers. We mainly make replacement decisions based

on considerations such as (i) the age of construction equipment; (ii) whether the construction

equipment are exempted NRMMs; (iii) the ratio of the number of construction equipment with

valid QPME label in our rental fleet to the number of construction equipment with valid QPME

label in the market; and (iv) when new models of construction equipment with improved safety,

reliability or functionality are introduced. For our fleet management strategy, please refer to the

paragraph headed ‘‘Our fleet management – Fleet management strategy’’ in this section.

As part of our regular rental fleet management strategy, we had been replacing our rental

fleet regularly during the Track Record Period. As at 1 April 2018, 31 March 2019, 31 March

2020 and 31 March 2021, our rental fleet in Hong Kong consisted of 1,216, 1,135, 964 and 1,022

units of construction equipment, respectively. During the Track Record Period, we had phased out

628 units of construction equipment in our rental fleet in Hong Kong in total, the majority of

which were replaced due to the aforementioned factors. During the Track Record Period, we

acquired in total 445 units of construction equipment for replacing a majority of the phased out

construction equipment in our rental fleet in Hong Kong. According to our fleet management

strategy, we strive to maintain a stable quantity of construction equipment in our rental fleet in

order to maintain the size of our operation and our servicing capacity. For details of our fleet

management, please refer to the paragraph headed ‘‘Our fleet management – Movement of our

rental fleet’’ in this section. Our management will continue to assess our rental fleet and make

replacement regularly.

Our Directors consider we incur considerable internal financial resources in managing our

rental fleet every year. The size of our rental fleet in Hong Kong reduced from 1,216 units of

construction equipment as at 1 April 2018 to 1,022 units of construction equipment as at 31

March 2021. We have devised a construction equipment replacement and expansion plan to

maintain and expand our market share, but our Directors are of the view that, due to limitation of

our current available financial resources, we will not be able to implement our plan to a full


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extent to further grow our business and expand our market share and to address the increasing

demand from our customers without the net [REDACTED] from the [REDACTED]. In this

connection, we intend that our construction equipment replacement and expansion plan will be

financed by a combination of our internal resources and net [REDACTED] from the

[REDACTED]. The following sets out our plan of expanding and optimising our rental fleet in

Hong Kong:

1. Expansion of power and energy equipment in our rental fleet in Hong Kong

We intend to spend approximately HK$[REDACTED] to purchase [156] new

generators and [66] new air compressors to expand our rental fleet to capture market growth

and expand our market share in the power and energy equipment rental market in Hong

Kong. We intend to allocate approximately HK$[REDACTED] of the net [REDACTED]

from the [REDACTED] to finance part of the expenditure for the expansion of our rental

fleet in Hong Kong and to finance the remaining balance by our internal resources.

During the Track Record Period, our rental services in Hong Kong had experienced a

significant growth. Our rental services revenue in Hong Kong increased by approximately

49.7% from approximately HK$40.6 million for the year ended 31 March 2019 to

approximately HK$60.8 million for the year ended 31 March 2020, and further increased by

approximately 43.3% to approximately HK$87.2 million for the year ended 31 March 2021.

Our Directors are of the view that the growth of our rental services segment in Hong Kong

was mainly due to the combined effects of (i) the growth of the construction equipment

rental market in general; (ii) our increased effort on marketing activities and our Directors’

devotion on building customer relationships for soliciting rental orders; and (iii) the

purchase of new construction equipment which had made our rental fleet younger and more

appealing to our customers.

With an interplay of the abovementioned factors, the number of rental services

customers we served in Hong Kong increased from 214 for the year ended 31 March 2019

to 296 for the year ended 31 March 2020, and further increased to 334 for the year ended 31

March 2021. The overall utilisation rate of our rental fleet in Hong Kong increased from

35.9% for the year ended 31 March 2019 to 69.5% for the year ended 31 March 2021.

According to the CHFT Report, the market size of the construction equipment rental market

in Hong Kong is expected to grow at a CAGR of approximately 6.5% from 2020 to 2024.

Considering (i) the growth of the construction equipment rental industry in general; (ii) the

growth of our rental services segment during the Track Record Period, (iii) the surge in

utilisation rate of our rental fleet in Hong Kong during the Track Record Period; and (iv)

the presence of occasions that we were only able to partially offer the requested quantity of

construction equipment to our customers, we are of the view that we have to expand our

rental fleet in terms of both quantity and quality to drive our future growth and market

share, and to continue capture the business opportunities presented by the flourishing

construction equipment rental industry effectively.


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We target to purchase construction equipment that have high utilisation rate and great

demand from the market. The following table sets forth the breakdown of construction

equipment we intend to purchase to expand our rental fleet in Hong Kong (the ‘‘HK

Expansion Equipment’’):

Relevantutilisation

rate for theyear ended 31

March 2021

Number ofunit(s) to be

purchasedPurchaseamount

To befinanced by

net[REDACTED]

from the[REDACTED]

To befinanced by

internalresources

(HK$ million) (HK$ million) (HK$ million)

Power and energy equipmentAir compressor

185-390 cfm 90.9% [21] [REDACTED] [REDACTED] [REDACTED]750-1,100 cfm 90.3% [45] [REDACTED] [REDACTED] [REDACTED]

Generator25-100 kVA 89.0% [50] [REDACTED] [REDACTED] [REDACTED]125-250 kVA 93.8% [72] [REDACTED] [REDACTED] [REDACTED]300-800 kVA 81.8% [34] [REDACTED] [REDACTED] [REDACTED]

Total [222] [REDACTED] [REDACTED] [REDACTED]

The rental services revenue attributable to our air compressors in Hong Kong increased

significantly by approximately 324.8% from approximately HK$5.1 million for the year

ended 31 March 2019 to approximately HK$21.7 million for the year ended 31 March 2021.

The rental services revenue attributable to our generators in Hong Kong increased by

approximately 197.4% from approximately HK$9.7 million for the year ended 31 March

2019 to approximately HK$29.0 million for the year ended 31 March 2021. The overall

utilisation rate of our air compressors and generators in Hong Kong increased from

approximately 29.6% and 26.2% for the year ended 31 March 2019, respectively, to

approximately 90.4% and 89.5% for the year ended 31 March 2021, respectively. According

to the CHFT Report, our market share of the power and energy equipment rental industry in

Hong Kong in terms of revenue increased from 2.3% in 2018 to 6.9% in 2020. Moreover,

the power and energy equipment rental industry in Hong Kong is expected to grow at a

CAGR of approximately 6.7% from 2020 to 2024. Given the sharp increase and high

utilisation rate of our air compressors and generators, our Directors believe that the purchase

of the HK Expansion Equipment is necessary for us to maintain business growth and boost

our market share in the power and energy equipment rental industry in Hong Kong, thereby

further strengthening our rental services in Hong Kong. We plan to acquire the HK

Expansion Equipment that comply with higher emission standards so that they would be

approved NRMMs with QPME labels. We believe new construction equipment with higher

emission standards will allow us to further capture the growing market demand for

construction equipment of the construction industry and will generate higher return of equity

to our Shareholders.


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2. Optimising our rental fleet in Hong Kong

We intend to spend approximately HK$[REDACTED] to upgrade and replace

exempted NRMMs and construction equipment aged over 10 years in our rental fleet in

Hong Kong. We intend to allocate approximately HK$[REDACTED] of the net

[REDACTED] from the [REDACTED] to finance part of the expenditure for the

optimisation of our rental fleet in Hong Kong and to finance the remaining balance by our

internal resources. Our Directors are of the view that it is important for construction

equipment rental service providers like our Group to replace construction equipment in our

rental fleet on a regular basis to remain competitive in the market because (i) more stringent

emission and noise control standards (such as the NRMM Regulation which became

effective from 1 June 2015) have been issued by the Government requiring the employment

of newer and more environmentally friendly construction equipment at construction sites;

and (ii) customers’ preference to rent younger construction equipment to ensure safety and

efficient construction equipment performance.

i Replacing exempted NRMMs in our rental fleet in Hong Kong with approved

NRMMs

We intend to spend approximately HK$[REDACTED] on replacing all exempted

NRMMs in our rental fleet with approved NRMMs. Our Directors observe that the

Hong Kong construction market has increasing demand for construction equipment

with high emission standards following the implementation of the NRMM Regulation.

The NRMM Regulation came into effect on 1 June 2015 to bring NRMMs, including

non-road vehicles and Regulated Machines, in line with emission standards of

environmentally friendly countries. Unless exempted, NRMMs which are regulated are

required to comply with the emission standards prescribed under the NRMM

Regulation. From 1 September 2015, all Regulated Machines sold or leased for use in

Hong Kong must be approved or exempted with a proper label in a prescribed format

issued by the EPD. Starting from 1 December 2015, only approved or exempted

NRMMs with a proper label are allowed to be used for specified activities and at

certain locations including construction sites. However, existing NRMMs which were

already in Hong Kong on or before 30 November 2015 are exempted from complying

with the emission requirements. A period of six months (from 1 June 2015 to 30

November 2015, both dates inclusive) was allowed for the then existing NRMMs to

apply for exemption. As at 31 March 2021, our Group had obtained approval or

exemption for all of our Regulated Machines.


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The Technical Circular, sets out an implementation plan to phase out the use of

four types of exempted NRMMs (namely generators, air compressors, excavators and

crawler cranes) in all new capital works contracts of public works (including design

and build contracts) with an estimated contract value exceeding HK$200 million

(‘‘NCW Contracts’’) within the following time frame:

Phase I

Tenders of NCW

Contracts to be

invited from

1 June 2015 to

31 May 2017

Phase II

Tenders of NCW

Contracts to be

invited from

1 June 2017 to

31 May 2019

Phase III

Tenders of NCW

Contracts to be

invited from

1 June 2019

onwards

Generators No exempted NRMM is allowed

Air compressors No exempted NRMM is allowed

Excavators Exempted NRMM

shall not exceed

50% of all units

on site

Exempted NRMM

shall not exceed

20% of all units

on site

No exempted

NRMM is allowed

Crawler cranes Exempted NRMM

shall not exceed

50% of all units

on site

Exempted NRMM

shall not exceed

20% of all units

on site

No exempted

NRMM is allowed

Following the complete phasing out of the four types of exempted NRMMs in

public projects described above, and as confirmed by CHFT, the construction industry

as a whole has gradually phased out the use of exempted NRMMs. To the best

knowledge of our Directors, an increasing number of contractors have specified in

their tenders that only approved NRMMs shall be used for their contracted works. As

such, construction equipment providers need to replace their existing exempted

NRMMs with approved NRMMs to maintain competitiveness in the market. As at 31

March 2021, our rental fleet consisted of 97 units of exempted NRMMs, of which 63

units were generators, 11 units were air compressors, 10 units were high reach

equipment, eight units were diesel welders and five units were forklifts. Given the

expected growth of the construction equipment rental industry in Hong Kong and the

fact that public projects will continue to be the key contributor to the revenue of the

overall construction industry in Hong Kong according to the CHFT Report, our

Directors believe that by replacing all exempted NRMMs with approved NRMMs, our

rental fleet will be optimised to cater for our customers’ preference for construction

equipment with higher emission standards and approved NRMMs.


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ii. Replacing construction equipment aged over 10 years in our rental fleet in Hong

Kong

To optimise our rental fleet utilisation and to foster customer loyalty, we intend

to spend approximately HK$[REDACTED] to replace our construction equipment

aged over 10 years in our rental fleet. As at 31 March 2021, our rental fleet in Hong

Kong consisted of 77 units of construction equipment aged over 10 years. In

particular, it consisted of 17 units of construction equipment aged over 10 years which

will be replaced as part of the replacement of exempted NRMMs, 52 units of high

reach equipment, two generators, five light towers and one forklift. We plan to

gradually phase out our construction equipment aged over 10 years through second-

hand sale.

Based on our experience and as confirmed by CHFT, rental services customers

generally prefer relatively younger construction equipment as they are perceived to be

safer and have less chance of malfunction and downtime. Our Directors consider that

the schedule of construction projects are usually tight, therefore, any safety issue or

downtime of construction equipment would delay the progress of the projects. Our

customers may specify their requirement of not renting construction equipment aged

over 10 years when requesting for our quotation. Also, some of our major customers

during the Track Record Period were of the opinion that we would be more

competitive if our Group purchases new equipment to replace construction equipment

aged over 10 years. To ensure the safety and performance of our construction

equipment aged over 10 years, our Directors consider that such construction equipment

generally incur more time and cost for repair and maintenance. Therefore, we believe

the replacement of our construction equipment aged over 10 years will further enhance

our rental fleet’s competitiveness and market position.

PRC

Upgrade our rental fleet at Nansha district, Guangdong Province, the PRC with China IV standard


We intend to spend approximately HK$[REDACTED] to upgrade and replace the

construction equipment aged over 10 years that will be subject to China IV standard in our rental

fleet at our operation center at Nansha district, Guangdong Province, the PRC (the ‘‘Nansha

Operation Center’’) with new construction equipment that fulfill the China IV standard. We

intend to allocate approximately HK$[REDACTED] of the net [REDACTED] from the

[REDACTED] to finance part of the expenditure for upgrading our rental fleet in the PRC and

to fund the remaining balance with our internal resources.


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The Greater Bay Area and its development

In 2015, we established our market presence at Nansha district, Guangdong Province, the

PRC, with an aim to strategically capture the growth of the PRC construction equipment rental

and sales market. In 2016, the concept of the Greater Bay Area was mentioned in the 13th Five-

Year Plan. The Greater Bay Area consists of, amongst others, Hong Kong, as well as the

municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan,

Jiangmen and Zhaoqing in the Guangdong Province of the PRC. The total area of the Greater

Bay Area is around 56,000 square kilometres and the total population in the Greater Bay Area

was over 72 million at the end of 2019. The development of the Greater Bay Area accorded the

status of key strategic planning in the PRC’s development blueprint, having great significance in

the country’s implementation of innovation-driven development and commitment to reform and

open-up. The objectives of the Greater Bay Area concept are to further deepen the cooperation

amongst Guangdong, Hong Kong and Macau, so as to fully leverage the composite advantages of

the three places, facilitate in-depth integration within the region and promote coordinated regional

economic development. It also has a view to develop an international first-class bay area ideal for

living, working and travelling. According to the CHFT Report, the market size of the construction

equipment rental market in the PRC is expected to grow at a CAGR of approximately 9.3% from

2020 to 2024. There will be major upcoming infrastructure projects in the Greater Bay Area,

including but not limited to, the Shenzhen-Zhongshan Bridge, Terminal 3 of the Guangzhou

Baiyun International Airport, Nansha International Port, Zengcheng-Dongguan-Panyu Expressway,

Guangzhan High Speed Rail, Shenzhen-Huizhou intercity railway and Guangzhou-Foshan-

Jiangmen-Zhuhai Intercity Railway. Our Directors consider the Greater Bay Area and the

upcoming infrastructure projects present potential for growth of our business.

Need of upgrading our rental fleet at the Nansha Operation Center to China IV construction

equipment

In recent years, the PRC government has strengthened its supervision of environmental

pollution problems in the PRC, and has made environmental protection as one of the key national

missions. The goal of preserving the environment is included as one of the major focuses in the

13th Five-Year Plan and the 14th Five-Year Plan. Following the macro-environment and the

national policies with an emphasis on environmental protection, the PRC construction market has

increasing demand for construction equipment with high emission standards. On 16 May 2014,

the MEP and the AQSIQ jointly published the Limits and Measurement Methods for Exhaust

Pollutants from Diesel Engines of Non-Road Mobile Machinery (CHINA III, IV)（《非道路移動機

械用柴油機排氣污染物排放限值及測量方法（中國第三、四階段）》(‘‘GB 20891-2014’’) which

set out the predictive requirements of the China IV standard, with an aim to control

environmental pollution and improve ambient air quality. GB 20891-2014 was amended in

December 2020, which further clarify the pollutant emission requirements of China IV standard.

According to the amendment, starting in December 2022, all production, sales and import of non-

road machineries not exceeding 560kW and diesel engines installed thereon must comply with the

China IV standard. The amendment is an accelerated effort to improve environmental quality and


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control environmental pollution, demonstrating the determination of the PRC government in

environmental preservation. Please refer to the paragraph headed ‘‘Regulatory Overview – PRC

laws and regulations – H. Regulations related to non-road mobile machinery’’ in this document

for further details. On 1 April 2021, the Beijing Municipal Ecology and Environment Bureau has

taken a step further and announced an early adoption of the China IV standard in Beijing,

requesting all production and sale of non-road mobile machineries not exceeding 560kW in

Beijing must comply with the China IV standard starting from 1 December 2021.

As at 31 March 2021, our rental fleet in the PRC consisted of 218 units of construction

equipment of which 137 units will be subject to the China IV standard when it is implemented.

According to the CHFT Report, following the amendment to GB20891-2104 and early adoption

of the China IV standard in Beijing, it is expected that when the China IV standard applies

nationally, China IV construction equipment will prevailingly be used in construction projects in

the PRC and the use of construction equipment of lower emission standards will be phased out

gradually. As a result, our Directors believe the upgrade of construction equipment in our rental

fleet in the PRC to China IV construction equipment is necessary for maintaining our

competitiveness in the PRC market and will provide our PRC operation with a first mover

advantage to compete for upcoming construction projects in the PRC.

Our plan to upgrade our rental fleet in the PRC to China IV construction equipment

As at 31 March 2021, our rental fleet in the PRC consisted of 218 units of construction

equipment of which 116 units were second-hand construction equipment. Our rental fleet in the

PRC had an average age of approximately 7.9, 8.8 and 9.7 years as at 31 March 2019, 2020 and

2021, respectively. In comparison, our rental fleet in Hong Kong had an average age of

approximately 4.8, 4.7 and 4.6 years for the same years, respectively. During the Track Record

Period, the utilisation rate of our rental fleet in the PRC was approximately 19.0%, 19.6% and

17.9% for the years ended 31 March 2019, 2020 and 2021, respectively. Our Directors consider

that the low utilisation rate of our rental fleet in the PRC was mainly due to aging of our

construction equipment in the PRC and that a majority of the construction equipment were

second-hand equipment. Our Directors consider and CHFT confirmed that rental services

customers in the PRC generally prefer younger construction equipment as they are perceived to be

safer and have lower malfunction rate and chance of downtime.

Given the above, as part of our plan to upgrade our rental fleet in the PRC to China IV

construction equipment, we intend to first replace our construction equipment aged over 10 years

that will be subject to the China IV standard with China IV construction equipment, which is

crucial to further consolidate and develop our operation in the PRC market. As at 31 March 2021,

our rental fleet in the PRC consisted of 69 units of construction equipment aged over 10 years

and will be subject to the China IV standard, of which 52 units were high reach equipment and 17

units were air compressor. Our Directors consider the upgrade plan to be essential for our Group


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to continue to operate in the PRC market and potentially give us a first mover advantage with the

China IV standard to be implemented in 2022, as we will be able to retain our existing customers

by providing them with new China IV construction equipment.

Given the high growth potential of the construction equipment rental industry in the PRC,

which according to CHFT, its market size will grow at a CAGR of 9.3% from 2020 to 2024, our

Directors consider the upgrade and replacement of our rental fleet in the PRC will lower the

average age of our rental fleet in the PRC and ensure its compliance with the higher emission

standards promoted by the PRC government, which in turn can increase our rental fleet’s

competitiveness, allowing us to fully take advantage of the Nansha Operation Center which is

located in the heart of the Greater Bay Area.

Strengthen the development of our own-branded products and enhance the marketing of our

brand

We intend to allocate approximately HK$[REDACTED] of the net [REDACTED] from the

[REDACTED] to strengthen the development of our own-branded products and enhance the

marketing of our brand.

Development of our own-branded products

We intend to spend approximately HK$[REDACTED] to further improve our ‘‘Chi Shing’’

brand KCG generators and to expand our own-branded product offerings by developing our ‘‘Chi

Shing’’ brand high reach equipment. Our Directors consider the development and launch of our

own-branded KCG generators is an important achievement of our Group as it conveys a brand

image of expertise in construction equipment and high repair and maintenance capability. It also

lowers our reliance on other generator manufacturers. As our KCG generators have gained

recognition in the market and we recorded an increasing revenue derived from KCG generators

during the Track Record Period, we plan to continue to develop our own-branded products. In

particular, we intend to spend approximately HK$[REDACTED] to enhance the reliability,

performance and functionality of the current six models of KCG generators. Furthermore, to

expand our own-branded product offerings, we intend to spend approximately HK$[REDACTED]

to develop [seven] models of our own-branded 4-12 metre high reach equipment. The product

improvement and development cost will be mainly the cost of production of prototypes of

generators and high reach equipment by OEM manufacturers. With our established position,

diversified customer base and the proven track record of our existing KCG generators, we believe

that we can swiftly introduce our new own-branded products to construction equipment users in

Hong Kong and the PRC.


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Enhance the marketing of our brand

We intend to spend approximately HK$[REDACTED] to promote our ‘‘Chi Shing’’ brand

and services in the Hong Kong and PRC markets. To further expand our market share in Hong

Kong and enhance our market penetration in the PRC, we plan to increase our marketing

expenditure to promote our ‘‘Chi Shing’’ brand, our services and our own-branded KCG

generators in Hong Kong and the PRC. In particular, we plan to increase the frequency of

advertisements of our ‘‘Chi Shing’’ brand, services and products in construction industry

magazines and journals as well as online platforms and social media in Hong Kong, and

participate in the China Import and Export Fair (also known as Canton Fair) in the PRC. We

believe participation in exhibitions is an effective means for our management to meet with

national potential customers in the PRC to promote our ‘‘Chi Shing’’ brand and services and to

showcase our own-branded product offerings.

Installation of app-enabled centralised rental fleet management system


[REDACTED] to install an app-enabled centralised rental fleet management system on our

construction equipment in Hong Kong and the PRC. The app-enabled system will collect and

transmit live data, including location, status, usage and malfunctioning (if any) of our

construction equipment, to our headquarters in Hong Kong and the PRC. We believe the app-

enabled system will improve the quality of our overall construction equipment rental services. On

the customer end, the app-enabled system will facilitate the construction equipment selection and

inspection process by allowing our customers to know the past usage and current condition of the

construction equipment. On the rental fleet management end, the app-enabled system can allow

our operation team to (i) proactively track and monitor the usage and location of the construction

equipment; (ii) manage our rental fleet with constant update of availability; (iii) process

customers’ orders and monitor transportation and delivery of construction equipment efficiently;

and (iv) promptly respond to customers’ service request, thereby reducing construction equipment

downtime and improving the quality of construction equipment servicing and maintenance.

When our construction equipment malfunctions at a customer’s construction site, the app-

enabled system will allow our technicians to locate the construction equipment efficiently and

understand its conditions to make a quick judgement of whether the construction equipment can

be repaired immediately at the customer’s site or a replacement of construction equipment is

needed. When the construction equipment is returned by customers to our warehouse, our

technicians can refer to the app-enabled system to understand usage of the construction equipment

and apply appropriate maintenance measures for better and more efficient maintenance. By

gaining an understanding of the condition of each construction equipment, it will help us to

decide more accurately whether the equipment is still fit to be included in our rental fleet or

whether we shall make the decision of phasing out the construction equipment by selling it. In

addition, the app-enabled system will allow our management team flexibility of reading live data

on mobile devices through software application to efficiently oversee the day-to-day operation

activities of our rental fleet and assess the performance of our technical team and sales and rental

team regularly.


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Hiring of additional workforce


[REDACTED] to hire additional workforce in Hong Kong and the PRC, including sales and

rental staff, technicians and operation and back office personnel to support our growing scale of

operation. With the expansion and optimisation of our rental fleet in Hong Kong and the PRC, we

would require additional sales and rental staff to further foster customer relationship and to

promote our brand and services. Furthermore, we provide maintenance services as part of our

rental services and after-sales services. We believe our customers expect us to be able to keep the

construction equipment in our rental fleet in a good condition and provide repair and maintenance

services for our construction equipment in a timely manner, especially in case of emergency,

which a larger team of skilled technicians would allow us to meet our customers’ expectation.

The following table sets forth the particulars of staff that we intend to recruit upon the

[REDACTED] by different functions:

Position and headcount

Geographical

location Experience and qualification

Approximate net

[REDACTED] from

the [REDACTED]

(HK$’000)

(Note)

Six technicians Hong Kong Minimum five years of relevant

work experience

[REDACTED]

One sales and rental representative and

one sales and rental assistant

Hong Kong Minimum five and three years of

relevant work experience,

respectively

[REDACTED]

Two operation assistants Hong Kong Minimum three years of relevant

work experience

[REDACTED]

Three technicians PRC Minimum five years of relevant

work experience

[REDACTED]

Two sales and rental representatives PRC Minimum five years of relevant

work experience

[REDACTED]

One operation assistant PRC Minimum three years of relevant

work experience

[REDACTED]

One accounting supervisor PRC Minimum eight years of relevant

work experience

[REDACTED]

Total [REDACTED]

Note: The amount is calculated based on the estimated remuneration of the additional workforce for two years.


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Lease additional space for construction equipment storage and repair and maintenance

services in Hong Kong

We intend to lease additional space for construction equipment storage and repair and

maintenance services in Hong Kong and to finance the relevant expenses by internal resources.

As at 31 March 2021, the total area of our leased premises in Hong Kong was approximately 70.4

thousand sq.ft., and the total area required to store our whole rental fleet in Hong Kong was

approximately 58.0 thousand sq.ft. As certain area of our leased premises in Hong Kong is

occupied for driveway, walkway, repair and maintenance services and offices purposes, our

Directors consider our existing leased premises in Hong Kong can only accommodate our current

operation scale and existing rental fleet. In view of our rental fleet expansion plan in Hong Kong

as disclosed in the paragraph headed ‘‘Business strategies – Expand and optimise our rental fleet

in Hong Kong and the PRC – Hong Kong’’ in this section,we expect that we need additional area

for construction equipment storage and repair and maintenance. Our Directors will look for sites

in the New Territories in Hong Kong that fit our size requirement and are suitable for

construction equipment storage and repair and maintenance work.

OUR CONSTRUCTION EQUIPMENT

During the Track Record Period, we mainly provided three types of construction equipment:

(i) power and energy equipment; (ii) high reach equipment; and (iii) earthmoving equipment. We

also provided other equipment such as forklifts, drainage pumps and electric hammers. Details of

major construction equipment in our rental fleet and sold by us are set forth in the following

tables.

Type Description Construction equipment photo

Power and energy equipmentGenerator Construction equipment which generates

electrical power and is a power source atconstruction sites and various outdoorevents.

Air compressor Construction equipment that consists of anengine which converts power intopotential energy stored in compressedair, which is particularly used atconstruction sites for foundation worksusing down-the-hole or large-diameterboring techniques.


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Diesel welder Construction equipment that incorporates adiesel fueled engine coupled to anelectrical generator to produce power forwelding at construction sites.

Light tower Construction equipment that consists of anarray of electric lamps affixed to the topof a mast which is used to shine light ona designated area in dark surrounding atconstruction sites.

High reach equipmentCrawler boom lift Construction equipment that consists of an

aerial working platform with anextendable arm that is attached to agrounded base which provides a secureworkspace at high heights. In addition,the equipment has a pair of large tracksproviding ultimate terrain ability atconstruction sites.

Wheel boom lift Construction equipment that consists of anaerial working platform with anextendable arm that is attached to agrounded base which provides a secureworkspace at high heights. In addition,the equipment has wheels that is idealfor working on improved surfaces suchas finished concrete or asphalt and canmove comparatively faster to and fromdifferent destinations at constructionsites.

Crawler scissor lift Construction equipment that consists of awide aerial working platform supportedby cross-brace supports which can onlymove straight up and down atcomparatively lower heights and must beplaced directly beneath the working area.In addition, the equipment has a pair oflarge tracks providing ultimate terrainability at construction sites.


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Wheel scissor lift Construction equipment that consists of awide aerial working platform supportedby cross-brace supports which can onlymove straight up and down atcomparatively lower heights and must beplaced directly beneath the working area.In addition, the equipment has wheelsthat is ideal for working on improvedsurfaces such as finished concrete orasphalt and can move comparativelyfaster to and from different destinationsat construction sites.

Personal lift Construction equipment that principallyoffers workers a secure aerial workingplatform that is easy to maneuver andthe ability to work 360 degrees withboth hands.

Earthmoving equipmentSingle drum roller Construction equipment that consists of one

steel drum at the front of the machineand features two pneumatic tiresinstalled on the rear which is used forroad construction, leveling ground forsidewalks and driveways, preparing sitesfor building foundations and compactingsoil, gravel and asphalt in smaller areas.

Tandem roller Construction equipment that consists of onesteel drum at the front and one at theback of the machine which is ideal forflat or gradual surfaces such as footpath,asphalt, car parks and access road.

Plates roller Construction equipment that consists of avibratory plate which is used forearthworks, compacting asphalt andpaving applications.


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Excavator Construction equipment which is used for avariety of works including but notlimited to digging trenches, breakingholes and material handling and are usedin conjunction with other attachmentsuch as bucket, arm, rotating cab andmovable tracks.

Our ‘‘Chi Shing’’ brand KCG generators

Since 2012, we have cooperated with a PRC construction equipment manufacturer to

produce our own-branded KCG generator designed by us on an OEM basis with an aim to

provide high quality and environmentally friendly construction equipment to our customers. Our

own-branded KCG generators are designed to comply with high emission standards such that they

can be registered as approved NRMMs and are eligible to apply for QPME labels in Hong Kong.

Our KCG generators are available both for rental and sales. Their details are set forth in the

following table.

Model No. Description Construction equipment photo

KCG100S Generator that generates energyup to 100 kVA and is used primarilyat construction sites.





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Model No. Description Construction equipment photo



OUR BUSINESS MODEL

We are principally engaged in two business segments, namely (i) rental services of

construction equipment; and (ii) sale of construction equipment. We have a long history in the

construction equipment rental and sales industry in Hong Kong and have accumulated technical

expertise to cope with our customers’ needs. We have built long-term business relationships with

our suppliers and we have entered into dealership and distributorship arrangements with two

internationally renowned construction equipment manufacturers. We endeavour to offer our

customers a comprehensive mix of quality construction equipment and value-added services. The

following diagram illustrates our typical business model:

Construction equipment manufacturersOEM manufacturer

Construction equipment providers

Our suppliers

Rental servicesOur services Sale of construction

equipment

Spare parts

Used equipment

New equipment

Rental fleet

Our customers Our customers include, among others, construction companies, manufacturing companies, education institutions,

government bodies and other construction equipment providers.

(Note 1)(Note 2)

(Note 3)

(Note 4)


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Notes:

1. Our Group is responsible for regular on-site repair and maintenance of our rental equipment. Our customers

are responsible for damage or loss of equipment caused by themselves, and our Group may charge separately

for the repair and maintenance services for such damage.

2. Depending on the circumstances, the construction equipment in our rental fleet may be phased out through

sale as used equipment.

3. Our Group is responsible for providing warranty against faulty material and poor workmanship for 12

months or 1,000 hours of operation from the date of delivery of new equipment, whichever occurs earlier.

For damage caused by incorrect operation or negligence of our customers, our Group charges separately for

repair services if required by our customers.

4. Some used equipment are sourced from third party construction equipment providers.

The following table sets forth our revenue by business segments during the Track Record

Period:


HK$’000 % HK$’000 % HK$’000 %

Rental servicesPower and energy equipment 15,707 29.2 33,200 35.4 52,829 41.0High reach equipment 31,071 57.7 34,331 36.5 35,234 27.4Earthmoving equipment 680 1.3 553 0.6 2,212 1.7Other equipment (Note 1) 34 0.1 70 0.1 128 0.1Rental related services (Note 2) 2,828 5.2 3,269 3.5 5,442 4.2

50,320 93.5 71,423 76.1 95,845 74.4Sale of construction equipmentNew equipment 1,689 3.1 1,236 1.3 15,750 12.2Used equipment (Note 3) 1,558 3.0 20,741 22.1 16,133 12.5Spare parts 235 0.4 480 0.5 1,057 0.9

3,482 6.5 22,457 23.9 32,940 25.6

Total 53,802 100.0 93,880 100.0 128,785 100.0

Notes:

1. Other equipment mainly consisted of forklifts, drainage pumps and electric hammers.

2. Rental related services included transportation services, repair and maintenance services and other labour

services.

3. Used equipment includes second-hand equipment which were sourced externally from third party

construction equipment providers and internally from our rental fleet.


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Rental services

We maintained a rental fleet comprising 1,240 units of construction equipment as at 31

March 2021 with a wide range of models and standards. Our rental fleet comprised: (i) 510 units

of power and energy equipment; (ii) 705 units of high reach equipment; (iii) 19 units of

earthmoving equipment; and (iv) six units other equipment as at 31 March 2021. For details of

the construction equipment we offer, please refer to the paragraph headed ‘‘Our construction

equipment’’ in this section. We source our construction equipment in our rental fleet mainly from

internationally renowned construction equipment manufacturers located in Japan, Germany and

the United States (which we believe are reputable for their product reliability within the industry).

We also source construction equipment from our OEM equipment manufacturer in the PRC. The

minimum rental period we offer to our customers is seven days in Hong Kong and one day in the

PRC. According to the CHFT Report, we ranked second in the power and energy equipment and

high reach equipment rental market in Hong Kong in terms of revenue in 2020.

As part of our rental services, we provide value-added services to our customers, which

include, among others, advising on construction equipment selection, regular inspection and

technical support services, transportation and logistics services, and repair and maintenance

services. In addition, we arrange construction equipment operation and safety training for our

customers as part of our customer service and our measures to reduce the risk of accidents and

damage to our construction equipment.

We carry out repair and maintenance works on our rental equipment to ensure that our

customers are provided with high quality and well-maintained equipment. In the event of

malfunctioning of our construction equipment, we provide timely support to our customers in

order to minimise their losses caused by the breakdown and downtime. As at the Latest

Practicable Date, we had a technical team with 13 members, among whom a certain number of

them had worked for our Group for over 15 years.

Our management regularly reviews and monitors the status and condition of the construction

equipment in our rental fleet. In particular, we routinely replace construction equipment in our

rental fleet to maintain its quality, competitiveness and attractiveness, and ensure that it meets the

latest emission standards in order to continuously capture the demand from our customers. For

details of our rental fleet management strategy, please refer to the paragraph headed ‘‘Our fleet

management – Fleet management strategy’’ in this section.


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Power and energy equipment

We had 343 generators, 129 air compressors, 25 diesel welders and 13 light towers as at 31

March 2021. Our generators had output rates between 25 kVA and 800 kVA, and our air

compressors had output rates ranging from 185 cfm to 1,100 cfm as at 31 March 2021. For the

three years ended 31 March 2021, rental of power and energy equipment contributed

approximately HK$15.7 million, HK$33.2 million and HK$52.8 million to our rental services

revenue respectively, representing approximately 31.2%, 46.5% and 55.1% of our rental services

revenue for the same years, respectively. The general monthly rental rate of power and energy

equipment in Hong Kong and the PRC ranged from approximately (i) HK$3,300 to HK$48,000,

HK$3,200 to HK$58,000, and HK$3,000 to HK$140,000 per equipment; and (ii) RMB3,500 to

RMB48,000, RMB3,500 to RMB90,000 and RMB12,000 to RMB90,000 per equipment,

respectively, during the Track Record Period.

High reach equipment

We had 19 crawler boom lifts, 239 wheel boom lifts, 312 crawler scissor lifts, 130 wheel

scissor lifts and five personal lifts as at 31 March 2021. The height of our high reach equipment

ranged from 4 meters to 42 meters as at 31 March 2021. For the three years ended 31 March

2021, rental of high reach equipment contributed approximately HK$31.1 million, HK$34.3

million and HK$35.2 million to our rental services revenue respectively, representing

approximately 61.7%, 48.1% and 36.8% of our rental services revenue for the same years,

respectively. The general monthly rental rate of high reach equipment in Hong Kong and the PRC

ranged from approximately (i) HK$2,800 to HK$12,000, HK$2,100 to HK$120,000 and

HK$1,750 to HK$69,000 per equipment; and (ii) RMB3,800 to RMB112,500, RMB2,500 to

RMB60,000 and RMB1,450 to RMB60,000 per equipment, respectively, during the Track Record

Period.

Earthmoving equipment

We had one single drum roller, 12 tandem rollers, two plates rollers and four excavators as

at 31 March 2021. For the three years ended 31 March 2021, rental of earthmoving equipment

contributed approximately HK$680,000, HK$553,000 and HK$2.2 million to our rental services

revenue respectively, representing approximately 1.4%, 0.8% and 2.3% of our rental services

revenue for the same years, respectively. For the three years ended 31 March 2021, the general

monthly rental rate of earthmoving equipment in Hong Kong ranged from approximately

HK$4,500 to HK$25,000, HK$4,500 to HK$30,000 and HK$3,500 to HK$36,000 per equipment,

respectively.


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Value-added services

By leveraging our accumulated experience in the market, we provide value-added services to

our customers which include, among others, advising on equipment selection, regular inspection

and technical support services, transportation and logistics services, and repair and maintenance

services. In addition, we arrange construction equipment operation and safety training for our

customers as part of our customer service and our measures to reduce the risk of accidents and

damage to our construction equipment.

For rental services, our technical team regularly inspects our rental equipment to prevent

construction equipment breakdown and minimise the consequential loss of our customers. We

maintain service quality by providing our management and technicians with training from time to

time, which is delivered by our in-house staff and some construction equipment manufacturers

which are our suppliers, to ensure that our technicians are competent in keeping our construction

equipment well-maintained, and are well-informed about the functions, operation and maintenance

of our construction equipment.

Under our rental arrangement, except for any damage caused by our customers, we offer on-

site repair and maintenance services and technical support in the event of malfunctioning of our

construction equipment without extra charge. In the case where the malfunctioning equipment

cannot be repaired on-site, we will replace the malfunctioning construction equipment with

another construction equipment from our rental fleet if available. We reserve common spare parts

and construction equipment and we believe this practice is important for provision of timely

service and support. We may provide logistics services to deliver our rental equipment to

locations designated by our customers in Hong Kong and the PRC. In Hong Kong, our rental

equipment is generally delivered by our vehicles or by third party logistics service providers. In

the PRC, our rental equipment is delivered by third party logistics service providers.


BUSINESS

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Rental services operation

The following chart illustrates the typical operational process of our rental services.

1. Enquiry from customers

2. Provision of quotation

3. Confirmation on price and estimation of delivery date

6. Return of construction equipment to us and post-rental check

7. Invoicing and payment collection

one day

subject to rental period

4. Pre-rental inspection and delivery of construction equipment

5. Use of construction equipment by customers and provision of on-site repair and maintenance services and technical support

Pre-

rent

alR

enta

lPo

st-r

enta

l

Approximately

Time

one day

withinone month

1. Enquiry from customers

Our rental process typically starts with enquiry from potential or existing customers.

As a main player in the construction equipment rental market in Hong Kong, we are

approached by our customers seeking for quotations for rental of our construction

equipment. We may then communicate with the potential customers to understand their

needs and provide our advice on construction equipment planning and selection.

2. Provision of quotation

We determine our rental fees taking into account various factors which include, among

others, (i) purchase and maintenance cost of the construction equipment; (ii) capacity and

model of the construction equipment; (iii) market demand and price; (iv) length of the rental

period; (v) foreseeable wear and tear based on working condition of the construction site;

(vi) credibility of the potential customer; and (vii) competition from other construction

equipment rental service providers. We generally prepare a formal quotation for our

customer’s consideration which specifies the details of the rental arrangement, terms and

conditions of the rental arrangement, and cost of transporting the construction equipment if

such service is required.

For our rental services, we may provide our customers with quotations of our rental

equipment with one-year validity, specifying the monthly rental fee of our rental equipment.

In general, we require a minimum rental period of seven days in our Hong Kong quotation

and one day in our PRC quotation.


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3. Confirmation on price and estimation of delivery date

Our customer may either (i) confirm our quotation; or (ii) formally request for our

rental services by issuing a purchase order specifying the type, quantity and details of the

construction equipment required, the rental fee and expected delivery date. Such orders are

generally subject to our standard terms and conditions, details of which are set out in the

paragraph headed ‘‘Our business model – Rental services – Principal terms of our rental

services operation’’ in this section.

4. Pre-rental inspection and delivery of construction equipment

We generally conduct pre-rental inspection to ensure our construction equipment is in

good condition before delivery. Upon our customer’s confirmation on the rental services

arrangement, the rental equipment would be delivered to our customer by (i) our vehicles; or

(ii) third party logistics service providers arranged by us or our customer. Upon receiving

the rental equipment by our customer, we would require our customer to confirm receipt.

5. Use of construction equipment by customers and provision of on-site repair and

maintenance services and technical support

To ensure that our rental equipment is in satisfactory condition and fully functional,

our technicians conduct on-site checking of our rental equipment to ensure our customers

are provided with high quality and well-maintained equipment. Upon request, we also

provide technical support to our customers. In the event of malfunctioning of our

construction equipment, we will deploy our technician to conduct on-site repair and

maintenance services. In the case our technician cannot repair the malfunctioning

construction equipment on-site, we will replace the malfunctioning construction equipment

with another construction equipment from our rental fleet, if available.

6. Return of construction equipment to us and post-rental check

At the end of the rental period, the construction equipment will be returned to our

designated location and be inspected by our technicians. It is agreed between us and our

customers that the rental equipment should be returned in good condition. We may charge

our customer for the cost of repair for damage or loss of construction equipment caused by

customers.


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For rental period of over one month, our usual arrangement is to issue monthly

invoices to our customer for interim rental payment. After the construction equipment is

returned to our designated location, a final invoice will be issued to our customer. For rental

period of less than one month, invoice is typically issued after the return of construction

equipment. During the Track Record Period, the credit period granted to our rental services

customers was up to 60 days.

Principal terms of our rental services operation

The rental services terms we offer to our customers vary, depending on construction

equipment type and are subject to case-by-case negotiation. During the Track Record Period, as

confirmed by our Directors, we did not enter into any long-term rental contracts with our

customers. We normally provide a written quotation to our customers with standard terms and

conditions. If our customers are satisfied with the quotation, they would confirm our quotation or

send us a purchase order. The major terms of our typical rental services operation are generalised

as below:

Major terms Description

Rental period We will agree on a rental period with our customers based on their

demands. We generally have a minimum rental period of seven

days in Hong Kong and one day in the PRC, which may be subject

to extension by our customers, thereafter rental of the remaining

rental period will be pro-rated. Our customers are still charged for

the whole rental period in the event of early termination.

Payment terms We require deposit of up to 50% of the total rental fee from some

of our customers to secure the value of the construction equipment

in the event of loss of or material damage to our construction

equipment. Invoice will be issued to our customers at the end of

each month for construction equipment which is rented for over one

month. For construction equipment which is rented for less than a

month, invoice will be issued after the construction equipment is

returned to us. Our customers are generally required to pay within

the credit period granted by us, which is up to 60 days, following

our issue of invoice.


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Termination We may accept termination of rental services arrangement by

advance notification from our customers on a case-by-case basis,

and a rental services arrangement is considered to be terminated

when the construction equipment is returned to our designated

location.

Normal working

hours

The daily working hours of our construction equipment range from

eight to 12 hours a day, depending on construction equipment type.

Operating hours exceeding this will be charged at overtime rate.

Repair and

maintenance

Our Group is responsible for on-site repair and maintenance of our

rental equipment. For the damage or loss of construction equipment

caused by our customers, our Group charges separately for such

repair and maintenance services. On the other hand, our customers

are responsible for daily checks of batteries, oil and water level,

belts and tires condition, and generally maintaining the equipment

in good condition.

Consumables Either our Group or our customer is responsible for the cost of

consumables, as agreed on a case-by-case basis.

Transportation Subject to case-by-case negotiation, transportation of the

construction equipment may be arranged by us or our customers.

Transportation charge will be specified in our quotation at the

request of our customers.

Sale of construction equipment

Our sale of construction equipment business segment principally involved the sale of new

and used equipment during the Track Record Period. Our construction equipment typically

available for sale are mainly (i) power and energy equipment; (ii) high reach equipment; and (iii)

earthmoving equipment. Apart from the OEM construction equipment manufacturer in the PRC

which we cooperate with, we source our new construction equipment mainly from internationally

renowned construction equipment manufacturers located in Japan, Germany and the United States

which we consider are reputable for their reliability within the industry. For used equipment sold

by us, some of them are used equipment phased out from our rental fleet while others are sourced

from third party construction equipment providers. We sell our construction equipment by way of

direct sales and our customers may be required to pay a deposit in advance and settle the payment

before delivery of construction equipment.


BUSINESS

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The following table sets forth the details of our revenue generated from the sale of

equipment by type during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

New equipment 1,689 48.5 1,236 5.5 15,750 47.8Used equipment (Note) 1,558 44.7 20,741 92.4 16,133 49.0

Spare parts 235 6.8 480 2.1 1,057 3.2

Total 3,482 100.0 22,457 100.0 32,940 100.0

Note:

Used equipment includes second-hand equipment which were sourced externally from third party construction

equipment providers and internally from our rental fleet.

New equipment

New equipment that we sell primarily include (i) power and energy equipment; (ii) high

reach equipment; and (iii) earthmoving equipment. For the three years ended 31 March 2021, sale

of new equipment amounted to approximately HK$1.7 million, HK$1.2 million and HK$15.8

million, respectively.

Power and energy equipment that we sell primarily includes generators and air compressors.

For the three years ended 31 March 2021, sale of new power and energy equipment amounted to

approximately HK$847,000, HK$958,800 and HK$14.6 million, representing approximately

50.1%, 77.6% and 92.5% of our sale of new equipment revenue, respectively. During the Track

Record Period, the selling price of our power and energy equipment ranged from HK$85,333 to

HK$695,000.

High reach equipment that we sell primarily include boom lifts and scissor lifts. For the

three years ended 31 March 2021, sale of new high reach equipment amounted to approximately

HK$842,000, nil and HK$955,000, respectively, representing approximately 49.9%, nil and 6.1%

of our sale of new equipment revenue, respectively. During the Track Record Period, the selling

price of our high reach equipment ranged from HK$53,820 to HK$418,000.

Earthmoving equipment that we sell primarily include single drum rollers and tandem

rollers. For the three years ended 31 March 2021, sale of new earthmoving equipment amounted

to approximately nil, HK$277,500 and HK$220,000, respectively, representing approximately nil,

22.4% and 1.4% of our sale of new equipment revenue, respectively. During the Track Record

Period, the selling price of our earthmoving equipment ranged from HK$220,000 to HK$277,500.


BUSINESS

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Used equipment

Apart from offering new equipment, our sale of construction equipment business segment

also involves selling used equipment to our customers to maximise our ability to capture business

opportunities. As part of our fleet management strategy to ensure our rental fleet’s

competitiveness and attractiveness, we may gradually phase out construction equipment in our

rental fleet by selling used rental equipment to customers. We also purchase second-hand

equipment from third party construction equipment providers if we believe we can sell at a

profitable margin. During the Track Record Period, the selling price of our used equipment

ranged from HK$3,000 to HK$600,600.

Sale of construction equipment business operation

The following chart illustrates the typical operational process of our sale of construction

equipment business.

1. Enquiry from customers and communication with our suppliersfor the availability of the required construction equipment

2. Provision of a written quotation

3. Confirmation on price, purchase lead time and estimated delivery date

4. Collection of down payment (if any)

5. Pre-sale inspection of construction equipment


7. Delivery of construction equipment

8. Provision of after-sales services

Pre-

orde

rO

rder

and

del

iver

yA

fter

-sal

es

Approximately

Time

one to 10 days

For construction equipment

out of stock:three to six months

For construction equipmentin stock:

one day to seven days

12 months or 1,000 operating hours from date of delivery

(whichever occurs first) for new equipment


BUSINESS

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1. Enquiry from customers and communication with our suppliers for the availability of

the required construction equipment

When our customers look for construction equipment, they would approach us and

request for our quotation. We provide pre-sale consultation services to our potential

customers and give recommendations on the types and number of equipment needed to

achieve their goals. Our customers may also specify a particular construction equipment of a

particular brand. For new equipment, if the required construction equipment is out of stock,

we would communicate with our suppliers for the availability and the estimated delivery

date of the required construction equipment. Our used equipment for sale generally are

readily in stock, therefore, our customers may inspect them on-site before placing an order.

2. Provision of a written quotation

For construction equipment with available stock, we provide a written quotation to our

customers directly. For new equipment without available stock, our suppliers would notify

us the price, transportation cost and estimated delivery date. We would then provide a

written quotation to our customers.

3. Confirmation on price, purchase lead time and estimated delivery date

We then follow up with our customers on the price and delivery date and seek their

confirmation on our quotation. Purchases of new equipment may have long lead time of

three to six months for production and delivery to our designated location. Our Directors

believe that our customers usually have a tight construction schedule, therefore their consent

on delivery date is crucial. We conduct quality inspection when new equipment arrives at

our designated location.

On the other hand, as confirmed by our Directors, used equipment normally does not

involve purchase lead time as they are generally readily in stock.

4. Collection of down payment (if any)

For the sale of new equipment, we typically request a down payment of 10% to 50%

of the total purchase price of the construction equipment from our customers on a case-by-

case basis. For sale of used equipment, we typically do not require a down payment in

advance, instead, we may require the full payment before delivery or grant a credit period of

up to 60 days to our customers, following our issue of invoice.


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5. Pre-sale inspection of construction equipment

We generally conduct pre-sale inspection to ensure our construction equipment is in

good condition before delivery.


Around the time of delivery of construction equipment, we will issue invoice to our

customers, who shall pay the remaining balance of the purchase price. During the Track

Record Period, the credit period granted to our customers is up to 60 days, following our

issue of invoice. Our Directors grant credit period to our customers based on their

credibility, length of business relationship with our Group, financial strength and repayment

history. In some cases, we may require certain customers to settle in full the payment before

delivery.

7. Delivery of construction equipment

Upon receipt of payment, the construction equipment would be delivered by our

vehicle or third party logistics service providers to our customers’ designated locations or

picked up by our customers at our warehouse. Once the construction equipment is delivered

or picked up, we would require our customers to confirm receipt of construction equipment.

8. Provision of after-sales services

As part of our sale of new equipment business, our technical team would provide on-

site technical support and equipment operation training during the start-up process of new

equipment to our customers. In addition, we offer warranty against faulty material and poor

workmanship for 12 months or 1,000 hours of operation from date of delivery of new

equipment, whichever occurs earlier. During the warranty period, if the new equipment

operates longer than the warranted operating hours, or suffers from damage caused by

incorrect operation or negligence of our customers, our Group charges separately for repair

services if required by our customers. No warranty is provided for used equipment sold by

us.

We also provide our customers the manufacturer’s operation manual which includes

general operation, maintenance and storage instructions to facilitate our customers’ own

maintenance after the warranty period. Moreover, we have established a set of procedures

for handling customer complaints.


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Principal terms of our sale of construction equipment business operation

During the Track Record Period, as confirmed by our Directors, we did not enter into any

long-term sales contracts with our customers. Our customers typically issue a purchase order to us

or confirm our quotation for their purchase of construction equipment. The major terms of our

sale of construction equipment business operation during the Track Record Period are generalised

as below:


Construction

equipment

description

A general description of the construction equipment purchased by

the customer, including but not limited to construction equipment

type, brand name, model number, serial number, construction

equipment specifications, quantity, unit price and total purchase

amount.

Delivery arrangement The construction equipment will be delivered by us or third party

logistics service providers to locations designated by our customers,

or picked up by our customers at our warehouse.

Payment terms For sale of new equipment, we typically require a down payment

ranging from 10% to 50% of the total purchase price of the

construction equipment from our customers and the remaining

balance is to be paid before pick-up or delivery, or within a credit

period of up to 60 days, following our issue of invoice. For sale of

used equipment, the customers are generally required to settle the

payment before delivery or within a credit period of up to 60 days,

following our issue of invoice.

The PRC business model

In 2015, we established our strategic market presence in the PRC at the Nansha district of

the Guangdong Province with an aim to capture the growth of the PRC construction equipment

rental and sales market, particularly in the Greater Bay Area. We offer construction equipment

rental services and sale of construction equipment in the PRC. Our PRC construction equipment

rental and sale business model is generally the same as the Hong Kong construction equipment

rental and sale business model as set out in the paragraphs headed ‘‘Our business model – Rental

services’’ and ‘‘Our business model – Sale of construction equipment’’ in this section. Mr. Jason

Kok, our executive Director, is mainly responsible for our PRC business. We had a total of 13

employees in the PRC as at the Latest Practicable Date. Our rental fleet in the PRC had 218 units

of construction equipment as at 31 March 2021, mainly comprising 189 units of high reach

equipment, 26 air compressors and three generators.


BUSINESS

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Revenue attributable to the construction equipment rental services in the PRC was

approximately HK$9.7 million, HK$10.6 million and HK$8.7 million, representing approximately

86.2%, 92.1% and 85.6% of the revenue generated from our PRC operation for the three years

ended 31 March 2021, respectively. Revenue attributable to the sale of construction equipment in

the PRC was approximately HK$1.6 million, HK$0.9 million and HK$1.5 million, representing

approximately 13.8%, 7.9% and 14.4% of the revenue generated from our PRC operation for the

three years ended 31 March 2021, respectively.

OUR FLEET MANAGEMENT

Fleet management strategy

We have adopted a fleet management strategy that aims at optimising the size and

composition of our rental fleet to adapt to changing market conditions and trends to maintain

competitiveness. Fleet management refers to the process of purchasing, maintaining and selling

rental equipment and is one of the most critical considerations for construction equipment rental

services providers.

We aim to identify the right timing for expanding our rental fleet by purchasing new rental

equipment, and replacing and upgrading existing rental equipment in our rental fleet based on our

industry experience and business acumen of our management. When considering the expansion of

our rental fleet, we will take into account the market growth, market demand, our expected

market share, type of construction equipment that may be strongly demanded by reference to our

forecasts and the utilisation rate of the construction equipment in our rental fleet.

We replace or upgrade existing construction equipment in our rental fleet with an aim to (i)

maintain the quality, competitiveness and attractiveness of our rental fleet; (ii) boost our

construction equipment’s utilisation rate; (iii) meet the latest emission standards to consistently

capture demand from our customers; and (iv) manage repair and maintenance costs. We mainly

consider and make replacement decisions based on, including but not limited to, the following

factors:

(i) the age of construction equipment

Construction equipment are durable goods which wear and tear naturally and

inevitably as a result of aging and prolonged usage. As such, we believe and some of our

major customers during the Track Record Period indicated that they generally prefer

younger construction equipment as they are generally in better condition and are less

susceptible to malfunctioning and safety issues. With our long operating history in Hong

Kong and experience in the construction equipment rental market, and given some of our

customers’ specific requirement of not using construction equipment aged over 10 years, we

strive to replace construction equipment aged over 10 years in our rental fleet whenever

feasible.


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(ii) whether the construction equipment are exempted NRMMs

Following implementation of the NRMM Regulation in 2015, some of our major

customers during the Track Record Period prefer construction equipment with higher

emission standards, we have therefore begun to gradually phase out the use of exempted

NRMMs. For details of the NRMM Regulation, please refer to the paragraph headed

‘‘Regulatory Overview – Hong Kong laws and regulations – B. Laws and regulations in

relation to environmental protection’’ in this document.

(iii) the ratio of the number of construction equipment with valid QPME label in our

rental fleet to the number of construction equipment with valid QPME label in the

market

QPME System is a voluntary environmental protection program. According to the

EPD, the QPME label scheme primarily targets newly manufactured powered mechanical

equipment. It is further stated by the EPD that after servicing for a long period in harsh

operation conditions and rugged construction sites, powered mechanical equipment may lose

its ‘‘excellence’’ elements and its sound emission and environmental performance would

have deteriorated. As such, according to the EPD, the validity of QPME labels of new

construction equipment (i.e. age less than one year) is up to six years from the date of

issuance, and applications for QPME labels for equipment aged six years and above are

normally not accepted. With the foregoing, our Directors believe that our customers have

increasing preference for construction equipment with QPME label as it represents the

young age and relatively higher quality of the construction equipment with lower risk of

breakdown and malfunctioning. Accordingly, our Directors consider the ratio of construction

equipment with valid QPME label in our rental fleet to construction equipment with valid

QPME label in the market indicates our rental fleet’s competitiveness, which we monitor

regularly and consider when making replacement decisions.

(iv) when new models of construction equipment with improved safety, reliability or

functionality are launched

We replace and upgrade construction equipment in our rental fleet when construction

equipment manufacturers launch new models of construction equipment which our Directors

consider are safer, more reliable or more functional compared to the current models in our

rental fleet. By upgrading to the new models, we believe our rental fleet will be more

appealing to our customers.


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Equipment utilisation

The following table sets forth information on the number, utilisation rate, average rental

period and average rental price of our rental fleet by type of construction equipment as at the

dates and for the periods indicated.


Numberin fleet

Utilisationrate %(Note 1)

Averagerentalperiod(days)

Averagerental

price perday

(HK$)Numberin fleet



Averagerental

price perday

(HK$)Numberin fleet



Averagerental

price perday

(HK$)

Hong KongPower and energy equipment 463 26.5 88.6 362.4 420 60.4 202.8 387.5 481 89.3 299.2 393.1

Generator 341 26.2 87.8 314.5 288 52.1 174.9 338.5 340 89.5 299.8 312.4Air compressor 99 29.6 99.1 543.0 104 85.5 287.2 512.2 103 90.4 302.8 699.9Light tower 8 2.7 8.9 293.4 13 39.8 133.7 180.8 13 74.8 250.5 150.4Diesel welder 15 23.4 78.5 182.8 15 68.5 230.1 167.0 25 90.7 303.8 161.2

High reach equipment 636 43.6 146.2 217.5 516 47.4 159.4 298.5 516 53.1 177.9 308.0Earthmoving equipment 10 32.0 107.3 529.9 22 31.4 105.7 428.7 19 58.5 196.1 530.8Other equipment (Note 2) 26 0.1 0.3 1,628.6 6 17.3 58.3 139.6 6 16.3 54.5 392.1

1,135 35.9 120.4 261.5 964 52.4 176.0 341.8 1,022 69.5 232.7 361.9

The PRCPower and energy equipment 32 6.3 21.1 950.2 32 16.2 54.5 951.3 29 9.0 30.2 908.1

Generator 3 14.7 49.3 242.0 3 6.7 22.7 269.2 3 – – –

Air compressor 29 5.4 18.2 1,151.0 29 17.2 57.8 979.0 26 9.9 33.0 908.1High reach equipment 182 21.3 71.5 703.5 186 20.2 67.8 684.2 189 19.4 65.0 628.2

214 19.0 63.6 716.3 218 19.6 65.9 716.7 218 17.9 60.0 648.7

Notes:

1. Utilisation rate is calculated based on the number of days the construction equipment were rented out during

the respective year divided by the estimated number of days the construction equipment was available for

rental service in the year (excluding a total of 30 days regarding the estimated time mainly for repair,

maintenance and transportation).

2. Other equipment included forklifts, drainage pumps and electric hammers.

Utilisation of our rental fleet in Hong Kong

The utilisation rate of our rental fleet in Hong Kong was approximately 35.9%, 52.4% and

69.5% for the three years ended 31 March 2021, respectively.


BUSINESS

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Utilisation rate of power and energy equipment in Hong Kong

During the Track Record Period, the utilisation rate of our power and energy equipment in

Hong Kong was approximately 26.5%, 60.4% and 89.3%, respectively. The increase in utilisation

rate between the year ended 31 March 2019 and the year ended 31 March 2020 was mainly due to

the increase in demand from customers in Hong Kong for the rental of power and energy

equipment with an increase in average rental period of (i) generators from 87.8 days to 174.9

days; (ii) air compressors from 99.1 days to 287.2 days; (iii) light towers from 8.9 days to 133.7

days; and (iv) diesel welders from 78.5 days to 230.1 days. The utilisation rate of our power and

energy equipment further increased to approximately 89.3% mainly due to the increase in average

rental period of (i) generators from 174.9 days to 299.8 days; (ii) air compressors from 287.2

days to 302.8 days; (iii) light towers from 133.7 days to 250.5 days; and (iv) diesel welders from

230.1 days to 303.8 days for the year ended 31 March 2021.

Utilisation rate of high reach equipment in Hong Kong

During the Track Record Period, the utilisation rate of our high reach equipment in Hong

Kong was approximately 43.6%, 47.4% and 53.1%, respectively. The increase in utilisation rate

between the year ended 31 March 2019 and the year ended 31 March 2020 was mainly due to the

increase in demand from customers in Hong Kong for the rental of high reach equipment with an

increase in average rental period from approximately 146.2 days to 159.4 days. The utilisation

rate of our high reach equipment further increased to approximately 53.1% for the year ended 31

March 2021 which was mainly due to the increase in average rental period of high reach

equipment from 159.4 days to 177.9 days, respectively.

Utilisation rate of earthmoving equipment in Hong Kong

During the Track Record Period, the utilisation rate of our earthmoving equipment in Hong

Kong was approximately 32.0%, 31.4% and 58.5%, respectively. The utilisation rate was

relatively stable between the years ended 31 March 2019 and 2020, and increased to 58.5% for

the year ended 31 March 2021 mainly due to the increase in demand from customers in Hong

Kong for the rental of excavator and tandem roller with an increase in average rental period from

105.7 days to 196.1 days.

Utilisation rate of other equipment in Hong Kong

During the Track Record Period, the utilisation rate of our other equipment in Hong Kong

was approximately 0.1%, 17.3% and 16.3%, respectively. The increase in utilisation rate between

the year ended 31 March 2019 and the year ended 31 March 2020 was mainly due to the increase

in demand from customers in Hong Kong for the rental of drainage pump with an increase in

average rental period from 0.3 day to 58.3 days. Our utilisation rate remained relatively stable at

approximately 17.3% and 16.3% for the years ended 31 March 2020 and 2021 respectively.


BUSINESS

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Utilisation rate of our rental fleet in the PRC

During the Track Record Period, the utilisation rate of our rental fleet in the PRC remained

relatively stable at approximately 19.0%, 19.6% and 17.9%, respectively.

Movement of our rental fleet

As at 1 April 2018, 31 March 2019, 31 March 2020 and 31 March 2021, our rental fleet

consisted of 1,408, 1,349, 1,182 and 1,240 units of construction equipment, respectively. The

following table sets forth the movement of our rental fleet by type of construction equipment

during the Track Record Period.

Balanceas at

1 April2018

Forthe year

ended31 March

2019

Forthe year

ended31 March

2019

Balanceas at

31 March2019

Forthe year

ended31 March

2020

Forthe year

ended31 March

2020

Balanceas at

31 March2020

Forthe year

ended31 March

2021

Forthe year

ended31 March

2021

Balanceas at

31 March2021

Additionand transfer

frominventory

Disposaland

reallocationfrom our

rental fleet


frominventory

Disposaland


rental fleet


frominventory

Disposaland


rental fleet

Hong KongPower and energy equipment 510 13 60 463 75 118 420 139 78 481High reach equipment 655 169 188 636 5 125 516 31 31 516Earthmoving equipment 19 – 9 10 12 – 22 1 4 19Other equipment (Note) 32 – 6 26 – 20 6 – – 6

The PRCPower and energy equipment 29 3 – 32 – – 32 – 3 29High reach equipment 163 19 – 182 4 – 186 4 1 189

Total 1,408 204 263 1,349 96 263 1,182 175 117 1,240

Note: Other equipment included forklifts, drainage pumps and electric hammers.

Average age and remaining useful life of our rental fleet

The following table sets forth the average age and remaining useful life of our rental fleet

by type of construction equipment as at the dates indicated:

As at 31 March

2019 2020 2021

Average

age (years)(Note 1)

Average

remaining

useful

life (years)(Note 2)

Average

age (years)(Note 1)

Average

remaining

useful


Average

age (years)(Note 1)

Average

remaining

useful


Rental fleet in Hong Kong 4.8 5.8 4.7 5.7 4.6 5.8

Rental fleet in the PRC 7.9 3.3 8.8 2.7 9.7 2.1


BUSINESS

– 141 –

Notes:

1. Average age is calculated based on the average of the number of years between the date of manufacturing of

each construction equipment and year end date of each accounting year.

2. We adopt a straight-line depreciation method on our rental fleet and we allocate the construction equipment’s

costs over its estimated useful life after taking into account its estimated residual value. The remaining useful

life of individual construction equipment is calculated by deducting the age of such construction equipment

from its useful life (i.e. 10 years). For this purpose, construction equipment with age (i.e. the time from the

date of manufacturing to the year end date of each accounting year) exceeding its useful life shall have zero

year of remaining useful life. Therefore, the total of average age and average remaining useful life could be

over 10 years for construction equipment aged over 10 years. Please refer to note 4 to the Accountant’s

Report in Appendix I to this document for details of the depreciation method adopted.

SUPPLIERS

We believe that our sourcing and selection of suppliers of construction equipment play a

crucial part in enhancing our reputation and product mix and ensuring our construction equipment

quality. Occasionally, potential suppliers may approach us for business cooperation. Apart from

the OEM construction equipment manufacturer in the PRC that we cooperate with to produce our

own-branded KCG generator, we source construction equipment mainly from internationally

renowned construction equipment manufacturers located in Japan, Germany and the United States

which our Directors consider are reputable for their construction equipment reliability. In

addition, our suppliers also include suppliers of spare parts, third party logistics service providers,

landlords of our office, warehouse and open storage and other third party service providers which

support our operation. We select our major suppliers based on their construction equipment

quality, credit quality and transaction history with our Group. We had entered into dealership or

distributorship arrangements with two of our suppliers which are internationally renowned

construction equipment manufacturers as at the Latest Practicable Date. For more details of the

dealership and distributorship arrangements, please refer to the paragraph headed ‘‘Suppliers –

Dealership and distributorship agreements’’ in this section.

Our five largest suppliers during the Track Record Period

For the three years ended 31 March 2021, our transactions with our five largest suppliers

amounted to approximately HK$32.2 million, HK$33.0 million and HK$65.9 million,

respectively, accounting for approximately 93.0%, 89.4% and 88.3% of our Total Purchases,

respectively. For the same years, our transactions with our largest supplier amounted to

approximately HK$16.5 million, HK$14.4 million and HK$40.5 million, accounting for

approximately 47.7%, 39.1% and 54.4% of our Total Purchases, respectively. Despite such

concentration of suppliers, our Directors consider that we are not overly reliant on any single

supplier for the following reasons:


BUSINESS

– 142 –

• Supplier A, our largest supplier for the three years ended 31 March 2021, is an

internationally renowned construction equipment manufacturer. During the Track

Record Period, we mainly purchased power and energy equipment and high reach

equipment (the ‘‘Relevant Construction Equipment’’) from Supplier A. Supplier A

distributed their products in Hong Kong through distributorship arrangement and we

have been the distributor of Supplier A in Hong Kong since 2005. While we are not

Supplier A’s exclusive distributor in Hong Kong, Supplier A considers that we are its

key distributor in Hong Kong. Our Directors confirm, and as supported by the CHFT

Report, it is common for construction equipment manufacturers to enter into

distributorship agreements with a limited number of selected distributors with proven

capability and track record. Given (i) our track record of renting and selling power and

energy equipment and high reach equipment to a relatively large customer base in

Hong Kong throughout the years; (ii) our long term and well-established relationship

with Supplier A for over 15 years; and (iii) as confirmed by our Directors, our ability

to renew our distributorship agreement with Supplier A without difficulty since 2005

and their belief that the distributorship agreement with Supplier A will remain stable in

the future, Supplier A and our Group have been and are expected to be in mutual

reliance with each other in Hong Kong in future. In the event that our Group faces

difficulties in renewing the distributorship agreement or purchase of the Relevant

Construction Equipment from Supplier A, our Group will seek to engage other

suppliers for purchasing the Relevant Construction Equipment from our internal list of

approved suppliers. In particular, our Group had purchased high reach equipment from

a number of suppliers apart from Supplier A during the Track Record Period. In

addition, our Group developed our KCG generators in 2012 which has penetrated into

the construction equipment rental and sales market in Hong Kong. As such, our own-

branded products are also available for rental and sale. This illustrates our ability to

source from alternative suppliers other than Supplier A;

• Hung Yun, Guangzhou Yonggui and Mr. Kok, leased three properties in Hong Kong

and the PRC to our Group during the Track Record Period. Hung Yun and its

subsidiary, Guangzhou Yonggui, are wholly owned by our Controlling Shareholder,

Mr. Kok. For more details, please refer to the paragraph headed ‘‘Suppliers –

Relationship with Hung Yun together with Guangzhou Yonggui and Mr. Kok’’ in this

section. Given that the rental cost is one of our key direct costs, Hung Yun became our

second largest supplier for the three years ended 31 March 2021. Our Directors

consider that there is a supply of similar premises for rental on comparable terms in

the market, hence, our Directors believe that our Group would be able to rent similar

premises with terms no less favourable than those in the existing tenancy agreements

entered into with Hung Yun, Guangzhou Yonggui and Mr. Kok if any of them is

terminated;


BUSINESS

– 143 –

• some of our major suppliers, including but not limited to Supplier A and Hung Yun,

have established and stable business relationships with us for over 15 years; and

• our Directors are of the view that in case of any shortage of construction equipment

from certain suppliers, we are able to source from alternative suppliers which offer

similar construction equipment with similar quality and prices.

Our Group has dealt directly with our five largest suppliers during the Track Record Period

without any third party agent, which we believe has allowed us to offer our customers more

competitive prices through avoiding mark-ups by agents.

Our Directors believe that we have cultivated a close and stable working relationship with

our major suppliers. As at the Latest Practicable Date, we had maintained business relationship

with our five largest suppliers during the Track Record Period for an average of approximately

seven years. We make payments to our major suppliers generally by electronic transfer, letter of

credit or cheque, and we are generally given a credit period of up to 90 days by our suppliers.

Save for our dealership/distributorship agreement(s) entered into with our suppliers as

disclosed in the paragraph headed ‘‘Suppliers – Dealership and distributorship agreements’’ in this

section, we generally do not enter into long-term purchase agreement with our suppliers and

instead place purchase orders with them on an order-by-order basis. We believe that long-term

purchase agreement is not needed due to our well-established relationships with our major

suppliers and that, as confirmed by our Directors, we had not experienced any major disputes,

material shortage nor delay of supply during the Track Record Period and up to the Latest

Practicable Date. We had not been subject to material price increases by our suppliers during the

Track Record Period and up to the Latest Practicable Date, and we believe that in the event of

price increment, we have the ability to pass on a portion of the price increment to our customers

by raising our rental or selling prices. Please refer to the paragraph headed ‘‘Financial Information

– Sensitivity analysis’’ in this document for a sensitivity analysis illustrating the impact of

hypothetical fluctuations in cost of construction equipment on our profit before taxation during

the Track Record Period.


BUSINESS

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The following tables set forth a breakdown of the cost of services from and/or purchase

from our five largest suppliers during the Track Record Period and their respective background

information.

For the year ended 31 March 2019

Supplier Principal business nature/backgroundNature of products/servicesprovided to us

Settlementmethod

Businessrelationshipsince Credit term

Transactionamount

Approximate% of our

TotalPurchases

(HK$’000)

Supplier A A company principally engagingin the manufacturing and sale ofconstruction and industrial equipmentwhich is listed on the Tokyo StockExchange.

Provision of power and energyequipment, high reach equipmentand earthmoving equipment

By letter ofcredit

2005 90 days 16,518 47.7

Hung Yun, GuangzhouYonggui and Mr. Kok(Note)

A Hong Kong based private companyprincipally engaging in property andinvestment holding, a PRC based privatecompany principally engaging in propertyholding and an individual who is ourexecutive Director and ControllingShareholder. Such individual holds theHong Kong private company which inturn holds the PRC private company.

Rental of properties By cheque 2003 Zero day 7,554 21.8

Supplier B A Swiss subsidiary and a PRC subsidiary ofa company which is listed on the NewYork Stock Exchange. Such subsidiariesprincipally engage in manufacturing andsale of lifting and material processingequipment.

Provision of power and energyequipment and high reachequipment

By electronictransfer

2017 Prepayment 7,448 21.5

Supplier C A Hong Kong based private companyprincipally engaging in the provision ofsurvey services.

Provision of examination andtesting certificates

By cheque 2003 30 days 380 1.1

Supplier D A PRC based private company principallyengaging in the provision of logisticsservices.

Provision of logistics services By electronictransfer

2018 Payment uponarrival ofequipment

321 0.9

Total 32,221 93.0


BUSINESS

– 145 –


Supplier Principal business natureNature of products/servicesprovided to us

Settlementmethod


Transactionamount

Approximate% of our

TotalPurchases

(HK$’000)

Supplier A A company principally engaging in themanufacturing and sale of construction andindustrial equipment which is listed on theTokyo Stock Exchange.

Provision of power andenergy equipment, highreach equipment andearthmoving equipment

By letter ofcredit

2005 90 days 14,443 39.1


A Hong Kong based private company principallyengaging in property and investment holding, aPRC based private company principallyengaging in property holding and an individualwho is our executive Director and ControllingShareholder. Such individual holds the HongKong private company which in turn holds thePRC private company.


Supplier B A Swiss subsidiary and a PRC subsidiary of acompany which is listed on the New YorkStock Exchange. Such subsidiaries principallyengage in manufacturing and sale of lifting andmaterial processing equipment

Provision of power andenergy equipment and highreach equipment


2017 Prepayment 4,301 11.7

Supplier E A PRC based private company principallyengaging in the manufacturing and sale ofpower generation equipment.

Provision of power andenergy equipment


2012 10% downpayment inadvance, 90%balance to bepaid beforedelivery

3,647 9.9

Supplier F A Germany based private company principallyengaging in the manufacturing and sale ofcompaction equipment.

Provision of earthmovingequipment

By letter ofcredit

2019 Payment at sight 2,739 7.4

Total 32,986 89.4


Supplier Principal business natureNature of products/servicesprovided to us

Settlementmethod


Transactionamount

Approximate% of our

TotalPurchases

(HK$’000)

Supplier A A company principally engaging in themanufacturing and sale of construction andindustrial equipment which is listed on theTokyo Stock Exchange.

Provision of power andenergy equipment, highreach equipment andearthmoving equipment

By letter ofcredit

2005 90 days 40,531 54.4

Supplier E A PRC based private company principallyengaging in the manufacturing and sale ofpower generation equipment.



2012 10% downpayment inadvance, 90%balance to bepaid beforedelivery

10,324 13.8


A Hong Kong based private company principallyengaging in property and investment holding, aPRC based private company principallyengaging in property holding and an individualwho is our executive Director and ControllingShareholder. Such individual holds the HongKong private company which in turn holds thePRC private company.


Supplier G A Japanese subsidiary of a company which islisted on the Tokyo Stock Exchange. Suchsubsidiary principally engages in themanufacturing and sale of high reachequipment.

Provision of high reachequipment


2020 Payment beforeshipment

5,522 7.4

Supplier H A Hong Kong based private company principallyengaging in the sale of power and energyequipment.


By cheque 2020 30 days 1,885 2.5

Total 65,903 88.3


BUSINESS

– 146 –

Note:

Hung Yun, Guangzhou Yonggui and Mr. Kok, leased three properties in Hong Kong and the PRC to our Group

during the Track Record Period. The transaction amount consisted of a combination of rental cost and depreciation

of right-of-use asset. Please refer to the paragraphs headed ‘‘Financial Information – Description of selected items

from combined statements of profit or loss and other comprehensive income – Cost of sales and services – Rental

cost’’ and ‘‘Financial Information – Description of selected items from combined statements of profit or loss and

other comprehensive income – Cost of sales and services – Depreciation’’ in this document for more details. Please

also refer to the paragraph headed ‘‘Suppliers – Relationship with Hung Yun together with Guangzhou Yonggui and

Mr. Kok’’ in this section for details.

Relationship with Hung Yun together with Guangzhou Yonggui and Mr. Kok

Hung Yun engages in property and investment holding and its subsidiary Guangzhou

Yonggui engages in property holding, and they are wholly-owned by Mr. Kok. As Mr. Kok is one

of our Controlling Shareholders, the chairman of our Board and an executive Director, Hung Yun,

Guangzhou Yonggui and Mr. Kok are therefore our connected persons under Chapter 14A of the

Listing Rules.

During the Track Record Period, we leased HK Property 1, HK Property 2 and PRC

Property 1 from Hung Yun, Mr. Kok and Guangzhou Yonggui, respectively, of which the total

rental as stated in the relevant lease agreements amounted to approximately HK$7.6 million,

HK$7.9 million and HK$7.6 million, representing approximately 21.8%, 21.3% and 10.2% of our

Total Purchases for the three years ended 31 March 2021, respectively. For more details of the

transactions between the above three parties and our Group, please refer to the paragraph headed

‘‘Relationship With Our Controlling Shareholders – Transactions entered into before

[REDACTED] which would otherwise constitute connected transactions’’ in this document.

Save as disclosed in this document, none of our Directors, their respective close associates

and our Shareholders (who and which, to the best knowledge and belief of our Directors, owns

more than 5% of our issued share capital) had any interest in any of our five largest suppliers

during the Track Record Period and up to the Latest Practicable Date. Our Directors confirm that

each of our five largest suppliers for the three years ended 31 March 2021, except for Hung Yun

together with Guangzhou Yonggui and Mr. Kok, is an Independent Third Party.

During the Track Record Period and up to the Latest Practicable Date, as confirmed by our

Directors, our Group had no dispute with or claims from our suppliers which would have had a

material impact on our business, financial condition or results of operations.


BUSINESS

– 147 –

Dealership and distributorship agreements

Since our Group has been engaging in provision of construction equipment rental services

and sale of construction equipment for years, we have cultivated a close and stable working

relationship with our major suppliers. As at the Latest Practicable Date, we were the authorised

dealer or distributor of two of our suppliers which produce internationally renowned brands of

construction equipment. Our Directors confirm that as at the Latest Practicable Date, the

dealership and distributorship agreements were valid and in force, and we were not in dispute

with the relevant suppliers regarding the dealership and distributorship agreements. We do not

expect any material impediment in renewing any of the dealership and distributorship agreements

under normal circumstances. Details of our dealership and distributorship agreements are set forth

in the table below:

SupplierLocation ofsupplier

Rightgranted

Products ofdealership/distributorship

Geographicalcoverage

Term of thelatest dealership/distributorshipagreement Purchase requirement

Month and yearof enteringinto the firstdealership/distributorshipagreement Warranty period

Supplier A Japan Distributorship Diesel generator, aircompressor andscissors lift.

Hong Kong andMacau (Note 1)

From 1 April 2021 to31 March 2023

Minimum purchase requirement: November 2005 Within one year or 1,000hours from the date ofcommissioning,whichever occurs first

From 1 January 2018 to31 December 2018: 150,000,000 yen

Purchase target:

From 1 January 2019 to31 December 2019: 250,000,000 yen;and from 1 January 2020 to31 December 2020: 300,000,000 yen

From 1 January 2021 to31 December 2021: 350,000,000 yen;and from 1 January 2022 to 31December 2022: 400,000,000 yen

Supplier A shall have the right toterminate the distributorship agreementif the purchase target is not met.(Note 2)

Supplier F Germany Dealership Among others, singledrum roller, lightarticulated tandemroller, paver, feederand soil compactor.

Hong Kong andMacau (Note 1)

Dealership agreemententered into on 17June 2019 for anunlimited period oftime

No purchase requirement which wouldentitle Supplier F to terminate itsdealership agreement.

June 2019 Within 12 months or2,000 hours/1,000hours from the date ofcommissioning,whichever occurs first;or within 12 monthsfrom the date ofcommissioning as thecase may be

Notes:

1. Our Group did not generate any revenue from Macau during the Track Record Period.

2. During each of the abovementioned years, we had met the minimum purchase requirement and purchase

target (as applicable). As confirmed by our Directors, we expect that we will meet the purchase target for

2021 and 2022.

During the Track Record Period, our transactions with these two suppliers under the

dealership and distributorship agreements amounted to approximately 47.7%, 46.5% and 55.6% of

our Total Purchases for the three years ended 31 March 2021, respectively.


BUSINESS

– 148 –

CUSTOMERS

During the Track Record Period, we provided services to more than 700 customers, amongwhich include construction companies, manufacturing companies, education institutions,government bodies and other construction equipment providers in Hong Kong and the PRC. Wehave established long-term business relationship of over 15 years with some of our customers. Asat the Latest Practicable Date, we had maintained business relationship with our five largestcustomers during the Track Record Period for an average of approximately eight years.

Our five largest customers during the Track Record Period

We have a diversified customer base and we believe we are not reliant on any singlecustomer or group of customers. We believe this is evidenced by the fact that revenue from ourfive largest customers was approximately HK$20.0 million, HK$32.0 million and HK$32.1million, respectively, accounting for approximately 37.2%, 34.1% and 25.0% of our total revenuefor the three years ended 31 March 2021, respectively. For the same years, our revenue from ourlargest customer was approximately HK$7.3 million, HK$10.4 million and HK$10.1 million,respectively, accounting for approximately 13.6%, 11.1% and 7.9% of our total revenue,respectively.

The following tables set forth a breakdown of our revenue from our five largest customers

during the Track Record Period and their respective background information.


Customer Principal business natureProducts/Services providedby our Group

Settlementmethod

Businessrelationshipsince Credit term Revenue

Approximate% of our

total revenue(HK$’000)

Customer A Hong Kong subsidiaries and a joint venture heldby a company which is listed on the LondonStock Exchange, Singapore Exchange Limitedand Bermuda Stock Exchange, and a companywhich is listed on the London Stock Exchange.The principal activities of such subsidiaries andjoint venture are building construction works.

Rental of constructionequipment


2002 60 days 7,291 13.6

Customer B A Hong Kong based private company principallyacting as a construction contractor.

Rental and sale ofconstruction equipment

By cheque 2004 30 days 4,412 8.2

Customer C Hong Kong subsidiaries of two companies bothlisted on the Stock Exchange and bothultimately held by a company listed on theShanghai Stock Exchange; and PRC subsidiariesof the said company which is listed on theShanghai Stock Exchange. The principalactivities of such subsidiaries are provision ofengineering services and acting as constructioncontractor.


By electronictransfer and bycheque

2003 30 days 3,807 7.1

Customer D A joint venture construction contractor in HongKong formed among three companies which areheld by companies listed on the Shanghai StockExchange and the Stock Exchange, the TaiwanStock Exchange and the Stock Exchange,respectively.


By cheque 2015 30 days 2,235 4.2

Customer E Hong Kong subsidiaries of a BVI company. Theprincipal activities of such subsidiaries areprovision of heavy construction and civilengineering services.


By cheque 2009 Payment againstinvoice

2,226 4.1

Total 19,971 37.2


BUSINESS

– 149 –


Customer Principal business natureProducts/Services providedby our Group

Settlementmethod

Businessrelationshipsince Credit term Revenue

Approximate% of our

total revenue(HK$’000)

Customer B A Hong Kong based private companyprincipally acting as a constructioncontractor.

Rental and sale of constructionequipment

By cheque 2004 30 days 10,427 11.1

Customer F A Hong Kong based private companyprincipally engaging in investmentholding.

Rental of construction equipment By cheque 2019 Payment againstinvoice

6,278 6.7

Customer G A Singapore based private company and aHong Kong based private company heldby a common individual shareholder.They principally engage in the provisionof construction equipment rental servicesand sale of construction equipment.

Sale of construction equipment By electronictransfer

2019 Payment beforepick-up

6,186 6.6

Customer H A Hong Kong based private companyprincipally engaging in the provision ofconstruction equipment trading, rental andrepair and maintenance services.

Rental of construction equipment By cheque 2009 60 days 6,160 6.6

Customer I A Hong Kong based private companyprincipally engaging in the provision ofconstruction equipment trading services.

Rental of construction equipment By cheque 2018 30 days 2,904 3.1

Total 31,955 34.1


Customer Principal business nature

Products/Servicesprovided byour Group

Settlementmethod

Businessrelationship since Credit term Revenue

Approximate % ofour total revenue

(HK$’000)

Customer H A Hong Kong based private companyprincipally engaging in the provisionof construction equipment trading,rental and repair and maintenanceservices.

Rental and saleof constructionequipment

By cheque 2009 60 days 10,134 7.9

Customer J A Hong Kong based private companyprincipally engaging in constructionequipment trading.

Sale ofconstructionequipment

Deposit of cash 2020 Paymentagainstinvoice

6,565 5.1

Customer F A Hong Kong based private companyprincipally engaging in investmentholding.

Rental ofconstructionequipment

By cheque 2019 Paymentagainstinvoice

6,026 4.7

Customer K A Hong Kong based private companyprincipally engaging in constructionequipment trading.


10% deposit bycheque, 90%balance byelectronictransfer

2020 10% deposit,90% balanceto be paidupon pick-up

5,005 3.9

Customer C Hong Kong subsidiaries of twocompanies both listed on the StockExchange and both ultimately held bya company listed on the ShanghaiStock Exchange; and PRC subsidiariesof the said company which is listedon the Shanghai Stock Exchange. Theprincipal activities of such subsidiariesare provision of engineering servicesand acting as construction contractor.

Rental ofconstructionequipment

By electronictransfer and bycheque

2003 30 days 4,409 3.4

Total 32,139 25.0


BUSINESS

– 150 –

None of our Directors, their close associates or any Shareholder (who or which, to the best

knowledge and belief of our Directors, owns more than 5% of our issued share capital) had any

interest in any of our five largest customers during the Track Record Period. All these five largest

customers are Independent Third Parties. Our Directors confirm that during the Track Record

Period and up to the Latest Practicable Date, our Group did not experience any major disruption

of business due to material delay or default of payment by our customers. Our Directors further

confirm that they are not aware of any of our major customers has experienced material financial

difficulties that may materially affect our Group’s business.

OVERLAPPING OF OUR CUSTOMERS AND SUPPLIERS

During the Track Record Period, to the best knowledge and belief of our Directors, (i) one

of our five largest suppliers (Supplier A) for the years ended 31 March 2019, 2020 and 2021 was

also our customer for the years ended 31 March 2019 and 2020; and (ii) one of our five largest

customers (Customer H) for the years ended 31 March 2020 and 2021 was also our supplier for

the year ended 31 March 2020. Our Directors confirm that the sales and purchases from such

overlapping customers and suppliers are not inter-related and/or inter-conditional. To the best

knowledge and belief of our Directors, the overlapping customers and suppliers and their ultimate

beneficial owners are Independent Third Parties.

One of our five largest suppliers for the years ended 31 March 2019, 2020 and 2021 was also

our customer for the years ended 31 March 2019 and 2020


Supplier

Nature of products/services provided tous

Transactionamount

Approximate %of our Total

PurchasesNature of products

provided by usRevenue fromthe supplier

Approximate% of our

revenue(HK$’000) (HK$’000)

Supplier A (Note) Provision of power andenergy equipment,high reach equipmentand earthmovingequipment

16,518 47.7 Sale of a high reachequipment

54 0.1


Supplier

Nature of products/services provided tous

Transactionamount

Approximate %of our Total

PurchasesNature of products

provided by usRevenue fromthe supplier

Approximate% of our

revenue(HK$’000) (HK$’000)

Supplier A (Note) Provision of power andenergy equipment,high reach equipmentand earthmovingequipment

14,443 39.1 Sale of seven units ofpower and energyequipment

812 0.9


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Note:

Our Group purchased air compressors and high reach equipment from Supplier A for the year ended 31 March

2019, and we sold a unit of high reach equipment to Supplier A for the same year. Our Group purchased generators

and air compressors from Supplier A for the year ended 31 March 2020, and we sold seven used generators to a

joint venture formed by Supplier A for the same year. Supplier A’s gross profit for the years ended 31 March 2019

and 2020 was approximately HK$16.5 million and HK$13.6 million, respectively, calculated by deducting our

revenue from Supplier A of approximately HK$54,000 from Supplier A’s transaction amount with our Group of

approximately HK$16.5 million for the year ended 31 March 2019 and by deducting our revenue from the joint

venture formed by Supplier A of approximately HK$812,000 from Supplier A’s transaction amount with our Group

of approximately HK$14.4 million for the year ended 31 March 2020.

One of our five largest customers for the years ended 31 March 2020 and 2021 was also our

supplier for the year ended 31 March 2020


CustomerNature of servicesprovided by us

Revenue fromthe customer

Approximate %of our total

revenue

Nature ofproducts/servicesprovided to us

Transactionamount

Approximate% of our

TotalPurchases

(HK$’000) (HK$’000)

Customer H (Note) Rental and sale ofconstructionequipment

6,160 6.6 Provision of second-hand equipment

371 1.0

Note:

Our Group purchased second-hand equipment from Customer H for re-sale for the year ended 31 March 2020, while

Customer H rented construction equipment from our Group for the year ended 31 March 2020. For Customer H,

gross profit for the year ended 31 March 2020 was approximately HK$5.8 million calculated by deducting Customer

H’s transaction amount with our Group of approximately HK$371,000 from our revenue from Customer H of

approximately HK$6.2 million.

Save as disclosed above, as confirmed by our Directors, there was no other major customer

during the Track Record Period which was also our supplier during the same period, and vice

versa.

SALES AND MARKETING

We strive to maintain a strong sales and marketing orientation which we believe will help us

broaden our customer base, and better understand and serve our customers.


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Credit policy

Our Group generally offers a credit period of up to 60 days to our major customers. For

some of our new rental customers, our Group may require such customers to pay deposit when

they place orders. For sale of new construction equipment, our Group generally require our

customers to pay a down payment when they place orders. Our Group reviews our trade

receivables on a regular basis and assessments are made by our senior management on the

collectability of overdue balances to consider whether a provision for impairment of trade

receivables should be made in accordance with internal guidelines.

Pricing policies

For the construction equipment rental services business segment, we set our price rental fee

according to various factors which include, among others, (i) purchase and maintenance costs of

the construction equipment; (ii) capacity and model of the construction equipment; (iii) market

demand and market price; (iv) length of the rental period; (v) extent of foreseeable wear and tear

on the construction equipment based on working condition of the site; (vi) condition of the

construction equipment; (vii) price of our competitors in the market; and (viii) credibility of the

customer. We maintain a standard price list for our construction equipment, and review the price

list from time to time.

For the sale of construction equipment business segment, the price of new equipment sold is

determined on a cost-plus basis taking into account various factors which include, among others,

(i) cost of purchase; (ii) prices offered by competitors in the market, (iii) supply and demand of

similar construction equipment in the market; (iv) lead time of delivery of the construction

equipment; and (v) specifications and production location of the construction equipment. In

respect of used equipment, in addition to the cost of procurement, we consider factors such as

rental and operation history of the construction equipment, prices quoted to its equivalent in the

market and the cost of refurbishment before sale to determine the price of each piece of used

construction equipment. During the Track Record Period and up to the Latest Practicable Date, as

confirmed by our Directors, we did not provide any rebate to our customers.

We generally do not offer discounts to our customers. However, discounts may be offered in

certain circumstances on a case-by-case basis.

Marketing policies

We had three sales and rental staff as at the Latest Practicable Date and our executive

Director, Mr. Carson Poon, oversees our marketing activities. Our Directors and sales and rental

staff regularly communicate with our customers to understand their needs. We invite our

customers to our warehouse where we showcase our construction equipment and attract business.

In addition, we market our products and services through printing our ‘‘Chi Shing’’ brand name

and logo on the construction equipment in our rental fleet, promotional pamphlets and our

Group’s websites. We also advertise our ‘‘Chi Shing’’ brand, services and offerings in

construction magazines from time to time.


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Customer feedback and complaint handling

We consider customer feedback is valuable for improving our services. We have established

a set of procedures for handling customer complaints. During the Track Record Period and up to

the Latest Practicable Date, we did not receive any complaint which had a material impact on our

business and operation. We have established telephone hotlines for handling customer complaints

and enquiries during office hours. The enquiries and complaints received should be reported

immediately to an internal communication group and be handled within seven working days by

the relevant department.

Product returns and warranty

For new equipment that we source from suppliers and subsequently on-sell to customers,

some suppliers will give us a warranty for such new equipment and we will provide a similar

warranty to the relevant customer. For new equipment sold by us to customers in Hong Kong and

the PRC, depending on the type and condition of the construction equipment and the relevant

contract terms, we provide warranty against faulty material and poor workmanship for 12 months

or 1,000 operating hours from date of delivery of new equipment, whichever occurs first. We

generally do not allow product return or refund for our construction equipment. During the Track

Record Period and up to the Latest Practicable Date, as confirmed by our Directors, we had not

experienced any product return which had a material impact on our business and operation, and

we had not recalled any construction equipment due to defects or other issues. For used

equipment sold by us to customers in Hong Kong and the PRC, as confirmed by our Directors,

we do not provide any warranty.

SEASONALITY

Our Directors confirm that our business operations are not subject to seasonality and we did

not experience any material seasonal fluctuation of demand for our construction equipment or

services during the Track Record Period.

INVENTORY

Our inventory primarily consists of new and used equipment held for sale, and spare parts

for our repair and maintenance services.

Based on market trends and expected lead time for obtaining new equipment from suppliers,

we may purchase and maintain new equipment as stock before securing any orders from our

customers in order to reduce delivery lead time. As at 31 March 2019, 2020 and 2021, our

inventories amounted to approximately HK$2.0 million, HK$2.4 million and HK$15.6 million,

respectively.


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Our Directors confirm that our Group had not encountered any shortage of supply that

would have a material impact on our business operations during the Track Record Period and up

to the Latest Practicable Date.

Price fluctuations of our inventory

As confirmed by our Directors, we currently do not have any hedging policy against any

risk of fluctuations in prices of construction equipment and spare parts. Nevertheless, we strive to

closely monitor the market prices of construction equipment and spare parts and we intend to

manage any price fluctuation by passing on the increased costs to our customers. Given that (i)

the selling prices of construction equipment and spare parts are generally negotiated by our Group

with our customers for each transaction, taking into account the prevailing market prices and cost

of purchase of the construction equipment and spare parts; and (ii) we do not maintain a high

level of inventory of construction equipment and spare parts, our Directors consider that price

fluctuations of construction equipment and spare parts did not and will not have a material impact

on our financial performance.

QUALITY CONTROL

We emphasise quality control in all aspects of our business as we believe that our

construction equipment quality is one of our core strengths and is vital to our success. In order to

monitor construction equipment quality and ensure that our rental fleet is well-maintained, we

have implemented various quality control measures in our operation process.

Quality control on rental services operation

With an aim to reduce construction equipment downtime at our customers’ work sites, we

conduct inspections on our construction equipment before delivery to our customers to ensure that

our construction equipment are of high quality and well-maintained. Our technical team plays an

important role in quality control. As at the Latest Practicable Date, our technical team consisted

of 13 members, among whom a certain number of them had worked for our Group for over 15

years. We deploy our technicians to inspect our rental equipment on a regular basis to ensure our

customers are provided with high quality and well-maintained construction equipment. Our

technicians would also conduct post-rental inspections before we accept return of our construction

equipment from our customers and perform maintenance on the returned construction equipment

before renting them out again.

We intend to strengthen our technical team’s capacity and enhance quality control on our

rental services operation by hiring additional technicians. For more details, please refer to the

paragraph headed ‘‘Future Plans and [REDACTED] – [REDACTED]’’ in this document.


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Quality control on sale of construction equipment operation

We purchase construction equipment and spare parts from selected suppliers which we

consider are reputable manufacturers in the industry. We maintain a list of approved suppliers

selected based on stringent selection criteria including construction equipment quality, credit

quality and transaction history with our Group.

We conduct inspections and testings on incoming construction equipment to ensure that they

are in satisfactory condition and up to standard before we accept the construction equipment from

our suppliers.

PRODUCT DEVELOPMENT

Throughout our long operating history in the construction equipment rental and sales

market, we believe we have accumulated sufficient knowledge which enables us to enhance our

construction equipment. Since 2012, we have cooperated with a PRC construction equipment

manufacturer to produce our ‘‘Chi Shing’’ brand KCG generators designed by us according to our

requirements on an OEM basis. Our KCG generator is designed with an aim to provide high

quality and environmentally friendly construction equipment to our customers. Our KCG

generators are designed to comply with high emission standards such that they can be registered

as approved NRMM and are eligible to apply for QPME labels in Hong Kong. In June 2021, our

‘‘Chi Shing’’ brand KCG generator was one of the major brands of generators in terms of number

of generators with valid QPME labels in Hong Kong.

We first sold our KCG generator in 2012 and we first rented our KCG generator in 2013.

For the three years ended 31 March 2021, we sold four, 11 and 20 KCG generators, respectively.

Rental services revenue from our KCG generators amounted to approximately HK$1.0 million,

HK$3.9 million and HK$11.7 million, representing approximately 1.9%, 5.4% and 12.2% of our

total rental services revenue for the three years ended 31 March 2021, respectively.

Our Directors consider our ability to offer our own-branded KCG generators has given us a

unique competitive advantage in the market and allows us to demonstrate a brand image with

expertise in construction equipment, which gives confidence to our customers. Moreover, we

believe it lowers the risk of our reliance on other suppliers to supply power generators. We

believe our KCG generators have successfully established its presence in the construction

equipment rental and sales market and gained recognition from our customers in Hong Kong. We

intend to continue to develop our own-branded construction equipment and we are confident that

the revenue generated from our own-branded construction equipment will continue to grow in the

future.


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MARKET AND COMPETITION

According to the CHFT Report, we ranked second in the power and energy equipment and

high reach equipment rental market in Hong Kong in terms of revenue with a market share of

approximately 6.2% in 2020. The concentration of the construction equipment rental and sales

market in Hong Kong is low with approximately 100 players. The five largest players in the

construction equipment rental and sales market in Hong Kong, including our Group, accounted

for approximately 15.0% of the total market share in terms of revenue in 2020.

According to the CHFT Report, from 2020 to 2024, the market size of the construction

equipment rental market in Hong Kong is expected to increase at a CAGR of approximately 6.5%

and the market size of the construction equipment sales market in Hong Kong is expected to

increase at a CAGR of approximately 4.0%. For more details, please refer to the paragraph

headed ‘‘Industry Overview – Overview of the construction equipment rental and sales industry in

Hong Kong’’ in this document. Moreover, according to the CHFT Report, from 2020 to 2024, the

market size of the construction equipment rental market in the PRC is expected to increase at a

CAGR of approximately 9.3% and the market size of the construction equipment sales industry in

the PRC is expected to increase at a CAGR of approximately 3.8%. For more details, please refer

to the paragraph headed ‘‘Industry Overview – Overview of the construction equipment rental and

sales industry in the PRC’’ in this document.

Our Directors consider that there are entry barriers to the construction equipment rental and

sales market in Hong Kong and the PRC. Such entry barriers include but not limited to (i) capital

intensiveness; (ii) reputation, experience and repair and maintenance capability; and (iii)

established relationship with upstream suppliers. For more details, please refer to the paragraph

headed ‘‘Industry Overview – Entry barriers of construction equipment rental and sales industry in

Hong Kong and the PRC’’ in this document.

EMPLOYEES

We had a total of 35 employees as at the Latest Practicable Date, of whom 22 were

employed in Hong Kong and 13 in the PRC. Sets forth below is a breakdown of the number of

our employees by functions as at the Latest Practicable Date:

Functional role

Number of

employees

Management (including our executive Directors) 5

Sales and rental 3

Procurement 1

Finance 3

Technical 13

Operation 10

Total 35


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We generally recruit our employees from the open market through placing recruitment

advertisements. We endeavour to attract and retain suitable personnel. Our Group assesses the

available human resources as per the request of department heads and determines whether

additional personnel are required to cope with the business development of our Group.

We enter into separate labour contracts with each of our employees in Hong Kong and the

PRC in accordance with the applicable labour laws of Hong Kong and the PRC, respectively. The

remuneration offered to our employees generally includes salaries and bonuses. In general, we

determine salaries of our employees based on their qualifications, positions and seniority.

Our Directors consider that we have maintained good relationship with our employees.


Directors, we did not experience any labour disputes save as that disclosed in the paragraph

headed ‘‘Legal proceedings and compliance – Legal proceedings’’ in this section, nor did we

experience any difficulties in the recruitment and retaining of experienced or skilled employees

which would have a material impact on our business, financial condition or results of operations.

Our Group has not set up any trade union for our employees.

Employee training

We believe our employees are our most valuable resources. We provide training to our

employees, from time to time, on topics including but not limited to construction equipment

operation and safety issues. Our employees also join training provided by our suppliers for

enhancing their knowledge about the construction equipment we procure from them. Such training

primarily focuses on procedures of operation and safety. Our Directors consider that the training

received by our employees can facilitate us to retain quality employees and increase our overall

servicing capabilities and competitiveness.

Qualifications of our employees

Our employees may be required to enter the construction sites from time to time, for which

they are required to obtain the relevant permits and qualifications, such as the construction

industry safety training certificate and the construction workers registration card.

PROPERTIES

We do not own any property. We had no single property interest of which the carrying

amount accounted for 15% or above of our total assets as at the Latest Practicable Date. Our

leased properties are used for non-property activities as defined under Rule 5.01(2) of the Listing

Rules. According to section 6(2) of the Companies (Exemption of Companies and Prospectuses

from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this

document is exempted from compliance with the requirements of section 342(1)(b) of the

Companies Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies

Ordinance, which requires a valuation report with respect to all of our interests in land or

buildings.


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As at the Latest Practicable Date, we leased HK Property 1, HK Property 2 and PRC

Property 1 from Hung Yun, Mr. Kok and Guangzhou Yonggui, respectively. These leased

properties are primarily used for the storage of our construction equipment and/or for our office.

As confirmed by our Directors, all the tenancy agreements relating to HK Property 1, HK

Property 2 and PRC Property 1 do not contain any covenants, easements, exceptions or

reservations of an unusual or unduly onerous nature for an agreement of this nature. The terms of

these lease agreements are three years.

The following table sets out a summary of the leased properties of our Group:

Hong Kong

Property Address LandlordApproximate aggregate areaof the leased portion

Use of theproperty

Term of thetenancy

Monthlyrental

HK Property 1 G/F and portion of 1/F, ChiShing Center, 2 Ping FukLane, Tong Yan San Tsuen,Yuen Long, New Territories,Hong Kong

Hung Yun Gross floor area of 44,323sq.ft.

Office andstorage ofconstructionequipment

1 March 2021 to29 February 2024

HK$469,000

In addition, exclusive use of apart of driveway area of1,771 sq.ft.

HK Property 2 The remaining portion of LotNo. 391 in D.D. 106, ShekWu Tong, Kam Tin, YuenLong, New Territories, HongKong

Mr. Kok Land area of 24,275.8 sq.ft. Storage ofconstructionequipment

1 March 2021 to29 February 2024

HK$76,000

In addition, three one to two-storey temporary structuresare erected on the subjectland with a total gross floorarea of approximately 5,565sq.ft.

The PRC

Property Address Landlord

Approximate aggregatearea ofthe leased portion

Use of theproperty

Term of thetenancy

Monthlyrental

PRC Property 1 The leased portion of anindustrial complex located at26 Liye Road, Dongchongtown, Nansha District,Guangzhou City, GuangdongProvince, the PRC

Guangzhou Yonggui Leased area of 5,035 sq.m. Office andstorage ofconstructionequipment

1 March 2021 to 29February 2024

RMB88,189(Note)

Note: The monthly rental of RMB88,189 includes value-added tax.

We have entered into the tenancy agreements with parties who will, upon the

[REDACTED], become our connected persons. These transactions were entered into before the

[REDACTED] and are accounted as one-off in nature under HKFRS 16. If these transactions

were entered into af ter the [REDACTED] , such t ransact ions would const i tu te

connected transactions. In order to facilitate potential investors to understand that we

have, before the [REDACTED], entered into transactions which would otherwise be

considered as connected transactions should our Group be [REDACTED] on the Stock


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Exchange at the time of the relevant transactions, details of such transactions are set out in the

paragraph headed ‘‘Relationship with Our Controlling Shareholders – Transactions entered into

before [REDACTED] which would otherwise constitute connected transactions’’ in this

document.

HEALTH, WORK SAFETY, SOCIAL AND ENVIRONMENTAL MATTERS

Our business is subject to certain health, work safety, social and environmental laws and

regulations in Hong Kong and the PRC. Our Group has been committed to observing relevant

laws and regulations in our business activities to ensure our operations are in compliance with the

applicable health, work safety, social and environmental laws and regulations in Hong Kong and

the PRC. Please refer to the section headed ‘‘Regulatory Overview’’ in this document for further

details of these laws and regulations.

Governance measures in place to oversee Environmental, Social and Governance (‘‘ESG’’)

matters

In order to ensure compliance with the relevant health, work safety, social and

environmental laws and regulations in Hong Kong and the PRC, our Group has various

governance measures in place to oversee the implementation of the ESG-related policies, which

are set forth in our standard operation procedure.

Our Directors consider that establishing and implementing sound ESG principles and

practices will increase the investment value of our Company and provide long-term return to our

stakeholders. Our Group has governance measures in place to monitor and collect ESG-related

data for preparing disclosure in compliance with requirements of the Environmental, Social and

Governance Reporting Guide (‘‘ESG Reporting Guide’’) in Appendix 27 to the Listing Rules,

upon the [REDACTED] and when appropriate. To ensure the effectiveness of our ESG risk

management measures and respective internal control systems, our Board is and will be

responsible for overseeing the formulation and reporting of our ESG strategies and determining

the ESG-related risks. In addition, we intend to, among others, identify the material ESG areas,

discuss with our key stakeholders on the material ESG areas identified and discuss among our

management to ensure all material ESG areas which are important to our business development

are reported and comply with the recommendation of the ESG Reporting Guide.

Our Board has overall and collective responsibility for ensuring an effective risk

management and internal control mechanism and for reviewing its effectiveness to safeguard our

Group’s assets and our Shareholders’ interests. Upon the [REDACTED] and when appropriate,

enterprise risk assessment will be conducted at least once annually to cover the current and

potential risks in our business, including but not limited to the risks arising from ESG and

climate-related matters. Our Board will continuously assess or engage qualified independent third

parties to evaluate the risks and review our Group’s existing strategy, metrics and targets as well

as internal controls, and necessary improvement measures will be implemented to mitigate such

risks.


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In order to better implement our ESG policies and measures, we have established an ESG

taskforce (the ‘‘ESG Taskforce’’) which comprises our executive Directors and our chief

financial officer, and is chaired by Mr. Kok, chairman of our Board and one of our executive

Directors. The ESG Taskforce shall support our Board in establishing and implementing ESG-

related policies and procedures, as well as monitoring and collecting ESG information. The ESG

Taskforce shall report to our Board regularly with regard to implementation of the ESG-related

risk management and internal control mechanism.

Health and work safety matters

Our Group recognises that a safe work environment is essential to our business operations.

We are committed to operate our business in compliance with applicable laws and regulations in

relation to labour and safety. We have formulated internal policies relating to occupational safety

and employees’ health management, and implemented safety measures in our business operations

to minimise the risk of injury to our employees.

Our operational safety manual enables our employees to become familiar with proper

handling procedures of construction equipment and requires them to comply with the procedures

and steps stipulated therein. Safety education and training programmes, in respect of operational

features, operators’ safety and construction equipment repair and maintenance, are also provided

to our employees. Furthermore, our employees are required to use personal protective gear where

necessary at the workplace.

To ensure our construction equipment are in satisfactory and safe condition, our technicians

conduct inspection prior to rental of construction equipment, post-rental inspection after return of

construction equipment, and construction equipment repair and maintenance procedures. Ms.

Kwan, our executive Director who oversees our Group’s administration, human resources and

financial management is responsible for overseeing the safety matters in relation to our

operations. Our employees are required to report to their supervisors and Ms. Kwan in accordance

with our policy if any accident occurs.

During the Track Record Period and up to the Latest Practicable Date, there was one

accident which resulted in bodily injuries of a former employee of our Group and an amount of

approximately HK$473,000, which was covered by our insurance, had been compensated to him

as at the Latest Practicable Date. Such former employee further filed a personal injury claim

against our Group on 5 May 2021, please refer to the paragraph headed ‘‘Legal proceedings and

compliance – Legal proceedings’’ in this section for further details. As confirmed by our

Directors, such accident had not resulted in penalty, enforcement action or prosecution against us

by the Government as at the Latest Practicable Date.


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Save as disclosed in this document, our Group did not experience any significant incidents

or accidents in relation to workplace safety that had materially and adversely affected our

operations during the Track Record Period and up to the Latest Practicable Date. Our Group has

adopted comprehensive work safety measures to prevent workplace accidents.

Social matters

Our Group has policies regarding compensation, dismissal, equal opportunities, diversity and

anti-discrimination in place. Our Group respects the gender, age and ethnicity of each person.

Accordingly, our Group ensures equal job opportunity for each job applicant and we have an

internal policy in place to ensure that there is no discrimination as to gender, age and ethnicity. In

addition, we have stipulated in our internal policies that decisions in relation to human resource

management, which include but are not limited to, promotion, salary increment and dismissal

within our Group would be based solely on the employee’s performance, experience and

competency.

In addition, we have adopted the board diversity policy which sets out the objectives and

approach to achieve and maintain diversity of our Board to enhance its effectiveness and to

maintain a high standard of corporate governance. For further details of the board diversity

policy, please refer to the paragraph headed ‘‘Directors and Senior Management – Board diversity

policy’’ in this document.

Environmental matters

Our environmental policies to assess and manage the relevant risks

We are subject to certain environmental laws and regulations in Hong Kong and the PRC.

Please refer to the section headed ‘‘Regulatory Overview’’ in this document for further details.

Our Group endeavours to minimise any adverse impact on the environment resulting from

our business activities. The major emissions produced in our business activities mainly include

greenhouse gas (‘‘GHG’’). In order to comply with the relevant environmental laws and

regulations, our Group has formulated an environmental management policy to manage our

emissions.

During the Track Record Period, the annual cost of compliance with the applicable

environmental rules and regulations was immaterial. We expect the future cost of compliance with

the applicable rules and regulations will remain immaterial. During the Track Record Period and

up to the Latest Practicable Date, as confirmed by our Directors, there had been no material

violation of any environmental laws and regulations applicable to our operations and there had

been no material claim or penalty imposed on our Group as a result of violation of environmental

laws and regulations. Our Directors also confirmed that during the Track Record Period and up to

the Latest Practicable Date, our Group’s business, strategy and financial performance had not been

materially adversely affected by any actual or potential impacts of environmental-related risks.


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Set forth below are our major environmental management measures to control our

operation’s environmental impact:

Emissions

During our business and operation processes, which include testing, transportation and

repair and maintenance, GHG and air pollutants are emitted. GHG emissions can be categorised

into three scope levels. Scope 1 refers to direct emissions from operations that are owned or

controlled by a company; scope 2 refers to energy indirect emissions resulting from the generation

of purchased or acquired electricity within a company; and scope 3 refers to all other indirect

emissions that occur outside a company. Due to our business nature as a construction equipment

rental services and construction equipment provider, the majority of emissions are generated by

our rental customers who rent our construction equipment for use and therefore they are scope 3

emissions. We are of the view that such indirect GHG emissions and air pollutants emission, on

the whole, are not controllable by our Group.

Our scope 1 direct GHG emissions result principally from fuel consumption by vehicles and

construction equipment testing, repair and maintenance, while our scope 2 indirect GHG

emissions is from the use of electricity to support our business operations and activities.

Use of energy

As a construction equipment rental services and construction equipment provider, our energy

consumption principally comprises electricity consumed to support our business operations,

including office facilities, and fuel consumption in vehicles and construction equipment testing,

repair and maintenance.

Our Group has established an environmental management policy to govern our emissions

and efficient use of energy. Our policy includes (i) monitoring and reviewing of electricity and

fuel consumption level by the relevant departments; (ii) encouraging employees to limit the use of

unnecessary lighting and turn off electrical appliances which are not in use to save energy and

costs; and (iii) a equipment management programme which comprises regular inspections and

repair and maintenance on our construction equipment to ensure their satisfactory condition and

reliability.

Due to our business nature as construction equipment rental services and construction

equipment provider, we are of the view that the fuel consumed by our rental customers which rent

our construction equipment would not be controllable by our Group. Nevertheless, our Group is

committed to provide more environmentally friendly construction equipment to our customers by

providing and selling our own-branded KCG generators which are approved NRMMs with QPME

labels and purchasing new construction equipment which are more environmentally friendly to

expand, replace and upgrade our rental fleet from time to time.


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Climate change

The potential climate-related risks and opportunities regarding construction equipment the

recommendations of the Task Force on Climate-related Financial Disclosures (‘‘TCFD’’) have

been considered and analysed. Our Group has established a comprehensive set of policies and

procedures to identify, monitor and manage potential ESG-related risks.

Climate-related risks and opportunities

Identified climate-related risks can be classified into two major categories: physical risks

and transitional risks.

Physical risks refer to risks that are event-driven, which can arise from extreme weather

events such as typhoons, rainstorm and floods caused by heavy rainfall. Such events may lead to

business disruptions and may therefore adversely affect our profitability. As such, we have a

business continuity plan and disaster recovery plan in place for possible emergency incidents to

provide guidance to our employees for facilitating the recovery of our key business processes. In

the event of such emergency incident, our Group will closely follow the latest weather news and

advice released by the government. Such policies and measures would minimise the potential

impact of extreme weather events on our Group’s business.

Transitional risks may be resulted from the transition to a lower-carbon economy which

entails change in environmental and climate-related regulations. Many aspects of our business

operations are governed by various environmental and climate-related laws, regulations and

government policies. The requirements in respect of the granting and/or renewal of various

licenses and qualifications in the construction equipment rental and sales industry may change

from time to time, and we may not be able to respond to such changes in a timely manner. Such

changes may also increase our costs and burden for compliance, which may materially and

adversely affect our business, financial condition and results of operations. Our Group is or will

be required to maintain certain registrations and fulfill certain standards, such as, the NRMM

Regulation which became effective in 2015 in Hong Kong and the China IV standard which will

be implemented in December 2022 in the PRC. If we fail to meet the environmental-related

requirements in a timely manner or at all, our business operations may be adversely affected.


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On the other hand, despite potential transitional risks and, given the increasing attention of

governments on environmental protection in Hong Kong and the PRC, and consumers’ increasing

preference for greener products and services, the introduction of environmentally friendly

products, services and measures may generate business opportunities. As such, as stated in the

paragraph headed ‘‘Business strategies’’ in this section, our Group intends to apply our

[REDACTED] from the [REDACTED] to replace our construction equipment aged over 10 years

that will be subject to the China IV standard with China IV construction equipment in the PRC,

which our Directors consider is crucial to further consolidate and develop our operations in the

PRC. We believe replacement of construction equipment will allow us to mitigate the potential

impact of transitional risks on our Group’s business, and the results of operation and financial

condition of our Group would not be materially adversely affected by climate change. Our Group

will continue to monitor the regulatory environment and the market to ensure that our

construction equipment meet the standards imposed by and expectations of our customers and

regulators.

QPME

The EPD has developed and implemented the QPME System to encourage the use of

construction equipment that are newer, notably quieter, more environmentally friendly and

efficient. As at 31 March 2021, we had obtained QPME labels for 312 units of our construction

equipment, and approximately 74.2% of our QPME system-applicable rental equipment had

obtained the QPME label as at 31 March 2021. We believe that our effort in obtaining the QPME

labels for our construction equipment and our ability to obtain QPME labels for majority of our

applicable construction equipment illustrates our emphasis on the quality and environmental

friendliness of our rental fleet. We believe, and as confirmed by CHFT, that our customers would

take this factor into consideration when they decide on which construction equipment provider to

cooperate with.

NRMM

The NRMM Regulation came into effect on 1 June 2015 to introduce regulatory control on

the emission of NRMMs, including non-road vehicles and Regulated Machines. Unless exempted,

NRMMs which are regulated are required to comply with the emission standards prescribed under

the NRMM Regulation. From 1 September 2015, all Regulated Machines sold or rented for use in

Hong Kong must be approved or exempted with a proper label in a prescribed format issued by

the EPD. For more details, please refer to the paragraph headed ‘‘Regulatory Overview – Hong

Kong laws and regulations – B. Laws and regulations in relation to environmental protection –

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (Chapter 311Z of the

Laws of Hong Kong) (‘‘NRMM Regulation’’)’’ in this document.

As at 31 March 2021, 554 units of construction equipment in our rental fleet were subject to

the NRMM Regulation and we had obtained approval or exemption for all of our Regulated

Machines. As at 31 March 2021, 457 of the Regulated Machines were granted approval and the

remaining 97 of them were granted exemption by the EPD under the NRMM Regulation.


BUSINESS

– 165 –

INTELLECTUAL PROPERTY

As at the Latest Practicable Date, we had registered nine trademarks in Hong Kong. We

were also the registrant of three domain names. For more details of our intellectual property

rights, please refer to the paragraph headed ‘‘Statutory and General Information – B. Further

information about the business – 2. Intellectual property rights’’ in Appendix IV to this document.

To the best of our Directors’ knowledge and belief, during the Track Record Period and up

to the Latest Practicable Date, there was no material infringement of intellectual property rights or

disputes between our Group, our customers and other third parties in respect of intellectual

property rights.

INSURANCE

In relation to our operation in Hong Kong, we have maintained (i) employees’ compensation

insurance for our employees covering insured workplaces such as our office and warehouse and

construction sites of our customers in Hong Kong; (ii) property all risks insurance to cover the

construction equipment in our leased HK Property 1 in Hong Kong; and (iii) public liability

insurance covering accidental bodily injury or accidental damage to property caused by the fault

or negligence of our Group in Hong Kong. In respect of our rental operation, we generally

request our customers to provide third party liability insurance and insure our construction

equipment at their own expense during the rental period. In relation to our operation in the PRC,

we have maintained equipment insurance for our construction equipment for our rental fleet.

For the three years ended 31 March 2021, our insurance expenses in Hong Kong and the

PRC amounted to approximately HK$359,000, HK$293,000 and HK$226,000, respectively.

Certain risks are disclosed in the section headed ‘‘Risk Factors’’ in this document and such risks

are not covered by insurance since they are either uninsurable or it is not cost justifiable to insure

against such risks. Nonetheless, our Directors believe that our Group’s insurance policies are

adequate and consistent with the common industry practice in Hong Kong and the PRC. Save as

disclosed in the paragraph headed ‘‘Legal proceedings and compliance – Legal proceedings’’ in

this section, our Directors confirm that we were not subject to any material insurance claims or

liabilities arising from our operations during the Track Record Period and up to the Latest

Practicable Date.

HEDGING


Directors, we did not engage in any hedging activity nor enter into any futures contract.


BUSINESS

– 166 –

LEGAL PROCEEDINGS AND COMPLIANCE

Our Controlling Shareholders [have] entered into the Deed of Indemnity whereby they have

agreed to indemnify our Group, subject to the terms and conditions of the Deed of Indemnity, in

respect of any liabilities and penalties which may arise as a result of any work injuries (if any),

outstanding litigations (including criminal litigations) (if any), claims, and non-compliances of

our Group on or before the date on which the [REDACTED] becomes unconditional. Further

details of the Deed of Indemnity are set out in the paragraph headed ‘‘Statutory and General

Information – E. Other information – 1. Tax and other indemnities’’ in Appendix IV to this

document.

Legal proceedings

Save as disclosed below, to the best knowledge and belief of our Directors, as at the Latest

Practicable Date, no member of our Group was engaged in any litigation, claim or arbitration of

material importance, and no litigation, claim or arbitration of material importance was known to

our Directors to be pending or threatened against any member of our Group.

As at the Latest Practicable Date, there was one ongoing legal proceeding against our

Group, the details of which are set out in the table below:

Nature of the claim

Date of

incident Plaintiff

Amount/estimated

quantum of damages

claimed

Status as at the

Latest Practicable

Date

Personal injury claim

initiated by a

former employee of

our Group who

sustained injury in

the course of his

employment.

14 May 2018 Former employee

of our Group

The amount of the

claim will be

subject to the

assessment made

by the court. Our

Directors consider

that the exposure

of and the financial

impact to our

Group are

insignificant.

Ongoing.

For further details of the accident, please refer to the paragraph headed ‘‘Health, work

safety, social and environmental matters – Health and work safety matters’’ in this section.


BUSINESS

– 167 –

Legal compliance

Our Directors confirm that save as disclosed below under this paragraph, we had complied

with all applicable laws and regulations in all material respects in Hong Kong and the PRC during

the Track Record Period and up to the Latest Practicable Date.

Non-compliance with the Social Insurance Law of the PRC

Background

Reason(s) for the non-

compliance Legal consequence Follow-up actions

Measure(s) adopted to prevent

future recurrence

According to the Social Insurance

Law of the PRC（中華人民共和國社會

保險法）, we are required to make

contribution to social insurance for

our eligible employees.

During the Track Record Period,

Guangdong Zhigui did not make

adequate cont r ibu t ion to socia l

insurance funds for all of its eligible

employees in accordance with the

relevant PRC laws and regulations.

We estimate that the aggregate

outstanding amount involved and the

corresponding late payment fee as at

31 March 2021 was approximately

RMB534,000.

Su ch no n - c omp l i a n c e wa s

p r i m a r i l y d u e t o t h e

a dm i n i s t r a t i v e p e r s o n n e l ’s

i n a d v e r t e n t ov e r s i g h t a nd

m i s u n d e r s t a n d i n g o f

requirements of the relevant

PRC laws and regulat ions .

Additionally, as confirmed by

our Directors, some of our

employees preferred not to

make their respective social

insurance contributions due to

personal reasons.

Pursuant to the Social Insurance

Law of the PRC（中華人民共和

國社會保險法）and other relevant

P R C l a w s , t h e r e l e v a n t

governmenta l au thor i ty may

require the concerned company

t o m a k e t h e o u t s t a n d i n g

contribution with an additional

late payment fee at a daily rate

of 0.05% of the outstanding

contribution calculated from the

date such contributions become

overdue within a given period

and, if the concerned company

fails to do so, it may impose a

fine on the concerned company

ranging from one to three times

of the total amount of the

outstanding contribution.

Our PRC Legal Advisers are of

the view that Guangdong Zhigui

may be required to pay the

outstanding social insurance

contribution and late payment

fee within the given period.

Guangdong Zhigui intends to

i m m e d i a t e l y s e t t l e t h e

outstanding contribution together

with such additional late payment

fee upon receipt of notice or

o r d e r f r o m t h e r e l e v a n t

gov e r nmen t a u t ho r i t y . Th e

ma x imum l i a b i l i t y a g a i n s t

Guangdong Zhigui for its non-

compliance under the Social

Insurance Law of the PRC will

comprise (i) the additional late

payment fee in the maximum

am o u n t o f a p p r o x i m a t e l y

RMB227,000; (ii) the outstanding

amount of social insurance

contribution of RMB307,000 as

at 31 March 2021 under the PRC

laws; and (iii) a fine of no more

than three times of the total

amount o f the ou t s t and ing

contribution.

We obtained a certificate dated

13 May 2021 issued by the

Human Resources and Social

Secur i ty Service Cen te r o f

Guangzhou City（廣州市人力資源

和社會保障事務服務中心）con f i rming tha t Guangdong

Zhigui had not been penalised

for violating the social insurance

laws and regulations from 1

April 2018 to 31 March 2021.

As advised by our PRC Legal

Advisers, the Human Resources

and Social Security Service

Center of Guangzhou City has

the authority and is competent to

issue the aforesaid certificate.

We obtained a certificate dated

30 April 2021 issued by the

Guangzhou Healthcare Security

Administrat ion（廣州市醫療保障

局）confirming Guangdong Zhigui

had not been penalised for

violating the medical insurance

and the maternity insurance laws

and regulations from January

2018 to March 2021. As advised

by our PRC Legal Advisers, the

Guangzhou Healthcare Security

Administration has the authority

and is competent to issue the

aforesaid certificate.

As at the Latest Practicable Date,

we had no t r ec e i ved any

notification from the relevant

PRC authorities alleging that we

had not fully contributed to

social insurance and demanding

payment of the same before a

stipulated deadline.

Guangdong Zhigui has made

adequate contribution to social

insurance funds for all i ts

eligible employees since March

2021.

We have clearly set out in a

manual all internal procedures

for timely payment of adequate

contributions to social insurance

in accordance with the relevant

PRC laws and regulations. In

part icular , our f inancia l - in-

charge in the PRC will (i)

ensure the correctness of the

amount of contributions to

soc i a l in su rance fo r ea ch

employee before the payment

due date; (ii) on or before the

due date, notify our financial

department in the PRC to

arrange for payment; and (iii)

prepare and update a register of

contribution to social insurance.

Our Company has also assigned

our chief financial officer and

company secretary, Mr. Ng Lok

Ki, to carry out review and

double-check on a monthly

basis to ensure that the register

of payment record is updated

p r o p e r l y a n d t h a t a l l

contributions to social insurance

for each employee are made on

a timely basis.

Our Directors are of the view

that the adopted internal control

measures are adequate and

effective to address the non-

compliance incident.


BUSINESS

– 168 –

Background

Reason(s) for the non-

compliance Legal consequence Follow-up actions

Measure(s) adopted to prevent

future recurrence

We had already made provisions

in the aggregate amount of

RMB534,000 for the outstanding

contribution of social insurance

and late payment fee as at 31

March 2021. Our Direc tors

believe that such provisions are

sufficient to cover our liabilities

in respect of the outstanding

social insurance contribution and

late payment fee.

Our PRC Legal Advisers are of

the view that if Guangdong

Zhigui adequate ly pays the

outs tanding socia l insurance

contribution and late payment

fee by the stipulated deadline

after being notified and required

by the relevant social insurance

adminis t ra t ive authori ty , the

likelihood of Guangdong Zhigui

being fined is remote. Our

Directors consider that it is not

necessary for our Group to make

any provision for the relevant

fine.

In addition, our Controlling

Shareholders have undertaken to

fully indemnify us against all

liabilities arising from the social

insurance non-compliance in this

regard.


BUSINESS

– 169 –

Non-compliance with the Regulations on the Administration of Housing Provident Fund in

the PRC

Background Reason(s) for the non-

compliance

Legal consequences Follow-up actions Measure(s) adopted to prevent

future recurrence

According to the Regulations on the

Administration of Housing Provident

Fund（住房公積金管理條例）and other

relevant regulations, we are required

to make contribution to the housing

provident fund for our eligible

employees.

During the Track Record Period,

Guangdong Zhigui did not make

adequate contribution to housing

provident fund for all of its eligible

PRC employees in accordance with

t h e r e l e v a n t PRC l aw s a n d

regulations. We estimate that the

aggregate outstanding amount incurred

and accrued as at 31 March 2021 was

approximately RMB99,000.

Su ch no n - c omp l i a n c e wa s

p r i m a r i l y d u e t o t h e

a dm i n i s t r a t i v e p e r s o n n e l ’s

i n a d v e r t e n t ov e r s i g h t a nd

m i s u n d e r s t a n d i n g o f

requirements of the relevant

PRC laws and regulat ions .

Additionally, as confirmed by

our Directors, some of our

employees preferred not to

make their respective housing

provident fund contributions due

to personal reasons.

Th e r e l ev an t gov e rnmen t a l

au t ho r i t y may r equ i r e t h e

concerned company, which fails

to make full contribution to

housing provident fund, to make

the outs tanding contr ibut ion

within a prescribed time limit,

and if the concerned company

fails to do so, it may apply to a

PRC court for an order to

enforce payment.


no penalty or fine was involved

in Guangdong Zhigui’s failure to

make adequate contribution to

housing provident fund for its

eligible PRC employees, hence,

the maximum liability against

Guangdong Zhigui will be the

aggregate outstanding amount of

hous ing p rov iden t fund o f

RMB99,000 as at 31 March

2021 under the PRC laws.

We obtained a certificate dated 8

Jun e 2021 i s sued by t he

Guangzhou Housing Provident

F u n d M a n a g em e n t C e n t e r

con f i rming tha t Guangdong

Zhigui had not been penalised

by such center from January

2018 to March 2021. As advised

by our PRC Legal Advisers, the

Guangzhou Housing Provident

Fund Management Center has the

authority and is competent to

issue the aforesaid certificate.

Guangdong Zhigui has made

adequate contribution to housing

provident funds for al l i ts

eligible employees since March

2021.


we had no t r ec e i ved any

notification from the relevant

PRC authorities alleging that we

had not fully contributed to the

housing provident fund and

demanding payment of the same

before a stipulated deadline.

We had already made provisions

in the aggregate amount of

RMB99,000 for the outstanding

contribution of housing provident

fund as at 31 March 2021. Our

Directors be l ieve that such

provisions are sufficient to cover

our liabilities in respect of the

outstanding housing provident

fund contribution.

In addition, our Controlling

Shareholders have undertaken to

fully indemnify us against all

l i abi l i t i e s ar i s ing f rom the

housing provident fund non-

compliance in this regard.

We have clearly set out in a

manual all internal procedures

for timely payment of adequate

c o n t r i b u t i o n s t o h o u s i n g

provident fund in accordance

with the relevant PRC laws and

regulations. In particular, our

financial-in-charge in the PRC

will (i) ensure the correctness of

the amount of contributions to

housing provident fund for each

employee before the payment

due date; (ii) on or before the

due date, notify our financial

department in the PRC to

arrange for payment; and (iii)

prepare and update a register of

c o n t r i b u t i o n t o h o u s i n g

provident fund.

Our Company has also assigned

our chief financial officer and

company secretary, Mr. Ng Lok

Ki, to carry out review and

double-check on a monthly

basis to ensure that the register

of payment record is updated

p r o p e r l y a n d t h a t a l l

c o n t r i b u t i o n s t o h o u s i n g

p r o v i d e n t f u n d f o r e a c h

employee are made on a timely

basis.

Our Directors are of the view

that the adopted internal control

measures are adequate and

effective to address the non-

compliance incident.


BUSINESS

– 170 –

View of our Directors

Our Directors consider that the abovementioned non-compliance incidents would not affect

the suitability of our Directors under Rules 3.08 and 3.09 of the Listing Rules or the suitability of

[REDACTED] of our Group having taken into account that (i) we have adopted proper internal

control measures to avoid recurrence of non-compliance incidents; (ii) no further non-compliance

incident has taken place since adoption of the internal control measures; and (iii) the above non-

compliance incidents were unintentional and inadvertent, did not involve any fraudulent act on the

part of our Directors and did not undermine the integrity of our Directors.

LICENCES AND PERMITS

As confirmed by our Directors, save for business registration licenses, the operation of our

business is not subject to any specific licensing requirements. Our Directors confirm that during

the Track Record Period and up to the Latest Practicable Date, to the best of their knowledge and

belief, we had obtained all necessary approvals, permits, consents and licences that are material to

our business operations from the relevant government authorities and all of them were in force,

and we did not experience any material difficulties in renewing our licenses.

Our management reviews our business practices regularly to ensure our compliance with all

licensing requirements and the successful renewal of our licences. To the best knowledge and

belief of our Directors, our Directors do not foresee any major legal impediment for the continual

renewal of our licences.

INTERNAL CONTROL AND RISK MANAGEMENT

Our Directors recognise that corporate governance and risk management are crucial to the

development and success of our business. We have adopted corporate governance measures and

risk management measures in various aspects of our business operations such as financial

reporting, legal compliance, information system, work safety and human resources management.

Internal Control

In preparation for the [REDACTED], our Company has engaged an Independent Third

Party consultant (the ‘‘Internal Control Consultant’’) to assist us in reviewing the design and

effectiveness of certain financial reporting related to internal controls of our Company. The scope

of work of the review was discussed with and agreed by our Company and the Sponsor. The

review covers entity level controls and business level controls for the processes of revenue and

receivables, purchases, procurements and payables, inventory management, cash management and

treasury, tax, human resources and payroll, work safety, health and environment management,

financial reporting, insurance management, property, plant and equipment and information

technology general controls. The internal control review described above was conducted based on

information provided by our Company and no assurance or opinion on internal controls was

expressed by the Internal Control Consultant.


BUSINESS

– 171 –

The Internal Control Consultant completed an initial review on 30 April 2021 and a follow-

up review (the ‘‘Follow-up Review’’) on 6 July 2021 to review the status of the management

actions by our Group to address the findings of the internal control review. The Internal Control

Consultant identified no material deficiencies and raised no further recommendation in the

Follow-up Review. Our Directors confirm that remedial actions have been implemented according

to suggestions of the Internal Control Consultant, accordingly, the Follow-up Review did not

identify any material deficiency.

Our Group has adopted and implemented a series of written internal control policies and

procedures to meet our specific business needs and to minimise our risk exposure. The written

policies and procedures are designed to assure effective internal control, reliable financial

reporting and compliance with related laws and regulations.

Corporate governance

In terms of corporate governance, our Group [has], among others, (i) appointed three

independent non-executive Directors to ensure the effective exercise of independent judgment

during our Board’s decision-making process and to provide independent advice to our Board; (ii)

established our Audit Committee to review our financial reporting system, risk management and

internal control system; (iii) appointed [Ample Capital Limited] as our compliance adviser in

compliance with the applicable Listing Rules; and (iv) provided and will continue to provide our

Directors and senior management with training on applicable legal and regulatory requirements

from time to time.

Risk management

We recognise the need for risk management in our strategic and operational planning, day-

to-day operations and decision making process. We are committed to managing and minimising

risks by identifying, evaluating and mitigating risk exposures that may impact our operations or

prevent our Group from achieving its business objectives. Our Board is principally responsible for

the risk management process. The objectives of risk management are to, among others, ensure our

Group’s effectiveness in safeguarding itself against unacceptable levels of risks and losses. The

risk management process of our Group will involve, among others, (i) an annual risk

identification exercise; (ii) assessing identified risks, the related impact, likelihood of risks and

the risk mitigating actions with a documented report in form of a risk register; (iii) reducing the

current level of risk to an acceptable level through implementation of additional controls or risk

mitigating actions; and (iv) ensuring that the risk control and treatment measures are effective for

mitigating the identified risks and reporting the status to our Board.

The following sets out the key risks of our business and the internal control procedures to

mitigate and minimise the corresponding risks:


BUSINESS

– 172 –

Regulatory risk management

Our Group may be exposed to the risk of non-compliance with regard to the applicable laws

and regulations, including the Listing Rules, upon the [REDACTED]. Our Group [has] appointed

Ample Capital Limited as our compliance adviser to advise us on compliance with the Listing

Rules upon the [REDACTED]. In relation to the applicable laws and regulations, our Group will

also appoint a legal adviser to advise us in that regard if and when necessary. For further

information, please refer to the paragraph headed ‘‘Internal control and risk management –

Corporate governance’’ in this section.

Credit risk management

Our Group is exposed to the risk of whether we are able to collect the receivables from our

counterparties, failure of which will result in financial loss. The finance department would prepare

a monthly report on the revenue by customer and their outstanding overdue payments for our

Directors and alert our Directors on new overdue payments for them to closely monitor, evaluate

the risk level and decide on follow-up actions depending on, among others, the relationship with

the particular customer, and the financial strength and payment history of the customer.

Operational risk management

Our Directors are responsible for managing our daily operation and assessing the relevant

operational risks. Our Directors are also responsible for implementing and reviewing our

operation-related internal control policies and procedures.

Our Group places emphasis on ethical values and the prevention of fraud and bribery. To

achieve this, we have established a whistleblower programme for employees to report

irregularities anonymously to our Directors directly. In addition, our staff, including all

employees and Directors, are provided with our staff handbook and internal control manual.

Based on the above, our Directors are of the view that our Group has adequate corporate

governance measures and risk management procedures in place for the business operations of our

Group.

Market risk management

Our Group is generally exposed to market risks regarding changes in macroeconomic

environment and movements in market variables such as GDP, interest rates and property price in

Hong Kong. Our Directors are responsible for identifying and assessing potential market risks and

formulating policies to mitigate the potential market risks. Such potential market risks should then

be included in a risk register.


BUSINESS

– 173 –

BOARD OF DIRECTORS

Our Board consists of seven Directors, including four executive Directors and three

independent non-executive Directors. The table below sets forth the information regarding our

Board:

Name Age Position

Responsibilities

in our Group

Date of

joining our

Group

Date of

appointment

as Director

Relationship

with other

Directors,

members of

our senior

management

and

Substantial

Shareholders

Mr. Kok Yun

Kuen

（郝潤權）

58 Executive Director

and chairman

of our Board

Overall strategic planning

and management of our

Group’s business

development and

operations

October

1998

19 March

2021

Father of Mr.

Jason Kok

Mr. Kok Kwai

Leung

（郝桂良）

31 Executive Director

and chief

executive

officer

Overall strategic planning

and daily management

of our Group’s

business and operations

November

2011

19 March

2021

Son of Mr.

Kok

Ms. Kwan Suet

Man

（關雪敏）

56 Executive Director Overseeing our Group’s

administration, human

resources and financial

management, and daily

management of our

Group’s business and

operations

October

1998

19 March

2021

N/A

Mr. Poon Ka

Chun Carson

（潘家俊）

52 Executive Director Overseeing our Group’s

sales and marketing,

and rental and sale of

equipment

November

1999

19 March

2021

N/A

Mr. Chung Kau

Cheong

（鍾球昌）

68 Independent non-

executive

Director

Supervising and providing

independent judgement

to our Board, Audit

Committee and

Nomination Committee

[•] [•] N/A


DIRECTORS AND SENIOR MANAGEMENT

– 174 –

Name Age Position

Responsibilities

in our Group

Date of

joining our

Group

Date of

appointment

as Director

Relationship

with other

Directors,

members of

our senior

management

and

Substantial

Shareholders

Mr. Tsui Pui Hung

（徐沛雄）

46 Independent non-

executive

Director



to our Board, Audit

Committee,

Remuneration

Committee and


[•] [•] N/A

Ms. Chu Moune

Tsi Stella

（崔滿枝）

47 Independent non-

executive

Director



to our Board, Audit

Committee and

Remuneration

Committee

[•] [•] N/A

Executive Directors

Mr. Kok Yun Kuen（郝潤權）, aged 58, is the founder of our Group, chairman of our

Board, our executive Director and one of our Controlling Shareholders. He is also a member of

our Remuneration Committee and Nomination Committee. He is primarily responsible for overall

strategic planning and management of our Group’s business development and operations. He is

also a director of Ace Honour, Chi Shing Equipment Trading, Chi Shing Machinery Rental, Chi

Shing Machinery, Chi Shing Human Resources, Chi Shing (Hong Kong) Group and Chi Shing

Industries.

Mr. Kok founded our Group in October 1998 and has more than 35 years of experience in

the construction equipment rental and sales industry. Prior to forming our Group, Mr. Kok took

an apprenticeship in repair and maintenance of generators from 1980 to 1981. From 1982 to 1983,

he worked as a sole proprietor and engaged in the provision of equipment repair and maintenance

services. From 1983 to 1998, he engaged in provision of equipment rental services and sales of

equipment as a sole proprietor under the name of Chi Shing Electrical Machine Company*（志成

電機公司）.

Mr. Kok completed high school at Guangzhou No. 18 Middle School*（廣州市第十八中學）

in the PRC in 1979. Mr. Kok is the father of Mr. Jason Kok.



– 175 –

Mr. Kok Kwai Leung（郝桂良）, aged 31, is our executive Director and chief executive

officer. He is responsible for overall strategic planning and daily management of our Group’s

business and operations. He is also the supervisor of Guangdong Zhigui.

Mr. Jason Kok joined our Group in November 2011 as an operation manager and he has

been the general manager of our Group since December 2020. He has more than nine years of

experience in the construction equipment rental and sales industry.

Mr. Jason Kok was awarded a degree in bachelor of arts by the University of California,

Irvine in March 2010. Mr. Jason Kok is the son of Mr. Kok.

Ms. Kwan Suet Man（關雪敏）, aged 56, is our executive Director. She is responsible for

overseeing our Group’s administration, human resources and financial management, and daily

management of our Group’s business and operations. She is also a director of Chi Shing

Equipment Trading, Chi Shing Machinery Rental, Chi Shing Machinery and Chi Shing Human

Resources.

Ms. Kwan has more than 29 years of experience in the construction equipment rental and

sales industry. Prior to joining our Group, she worked as a senior clerk at Chi Shing Electrical

Machine Company*（志成電機公司）, which was a sole proprietorship of Mr. Kok, from 1990 to

1998. Ms. Kwan joined our Group in October 1998.

Ms. Kwan completed form 5 at St. Margaret’s Girls’ College, Hong Kong in 1983.

Mr. Poon Ka Chun Carson（潘家俊）, aged 52, is our executive Director. He is responsible

for overseeing our Group’s sales and marketing, and rental and sale of equipment.

Mr. Carson Poon has more than 25 years of experience in the construction equipment rental

and sales industry. Prior to joining our Group, he worked as a sales representative at Ajax Pong

(Holdings) Limited from 1993 to 1994. From 1995 to 1996, he worked as a sales representative at

Heavy Equipment International Limited. From 1997 to 1999, he worked as a sales engineer at

Atlas Copco China/Hong Kong Limited. Subsequently, he joined our Group in November 1999 as

sales manager.

Mr. Carson Poon completed form 5 at Cheung Sha Wan Catholic Secondary School in Hong

Kong in 1987.


Mr. Chung Kau Cheong（鍾球昌）, aged 68, is our independent non-executive Director. He

is also the chairperson of our Nomination Committee and a member of our Audit Committee. He

was appointed as an independent non-executive Director on [•]. He is currently responsible for

supervising and providing independent judgement to our Board, Audit Committee and Nomination

Committee.



– 176 –

Mr. Chung has substantial experience and involvement in the engineering industry. Prior to

joining our Group, Mr. Chung was employed as a purchaser and assistant engineer by Pyrofoe

Engineering Co., Ltd from 1982 to 1985. He worked as a production manager for Safers

Electrical Manufacturing Co., Ltd. from 1985 to 1989. From 1989 to 1993, he was employed as a

maintenance officer by Hang Lee Engineering Co., Limited. He was employed as a technical

supervisor (building services) by Taikoo Shing (Management) Limited from November 1994 to

June 2012. He worked as a technical manager at Funing Property Management Limited from June

2012 to 2016, during which he was transferred to Best Creation Engineering Limited as Manager

(Acting) for a period of six months from 1 October 2012. He has been working as a freelance

lecturer in waterproofing and plumbing for the Employees Retraining Board since 2016. Mr.

Chung was employed as a consultant of Chun Fai Engineering Co. from September 2019 to

March 2021. He has been employed as a consultant of Kui Fung Engineering Limited and

Property Care Management Services Limited since May 2013 and April 2018, respectively.

Mr. Chung is qualified for minor works of class I (part D and E), class II (part A, B, D, E,

F and G) and class III (part A, B, D, E, F and G) under the Minor Works Control System of the

Buildings Department. He was admitted as a member of the Society of Operations Engineers and

the Institution of Fire Engineer in May 2013 and November 2013, respectively.

He obtained a degree of bachelor of business administration at Chu Hai College of Higher

Education in 1983. Mr. Chung was awarded the BTEC Higher National Certificate in fire safety

engineering, a degree of bachelor of engineering in fire engineering and a degree of master of

science in fire safety engineering by the University of Central Lancashire in August 2005, August

2009 and August 2011, respectively.

Directorship in Heyuan Zhenchang

Background and non-compliance of Heyuan Zhenchang

Heyuan Zhenchang Fire Fighting Equipment Company Limited*（河源振昌消防設備有限公

司）(‘‘Heyuan Zhenchang’’) was established as a company with limited liability in the PRC on 6

September 1994. Mr. Chung was the legal representative and the chairman of the board of

directors of Heyuan Zhenchang. To the best knowledge and belief of Mr. Chung, the business

licence（企業法人營業執照）of Heyuan Zhenchang was revoked by the relevant PRC authority in

2004 as Heyuan Zhenchang had no business operation since its establishment and no capital was

injected into Heyuan Zhenchang.



– 177 –

As advised by our PRC Legal Advisers, under the PRC Company Law（中華人民共和國公

司法）and Registration Management Regulations on Legal Representative of Enterprise Entity（企

業法人法定代表人登記管理規定）, for any person (i) being the legal representative of a PRC

company of which the business licence has been revoked due to violation of laws or regulations;

and (ii) bearing personal responsibility for such violation of laws or regulations, he/she is

prohibited from acting as legal representative, director, supervisor or member of senior

management of PRC companies within three years upon the revocation of the business licence.

Therefore, Mr. Chung was prohibited from acting as legal representative, director, supervisor or

member of senior management in PRC companies for three years subsequent to the revocation of

the business licence of Heyuan Zhenchang in 2004. Mr. Chung confirmed that, during this

prohibition period, he did not act as legal representative, director, supervisor or member of senior

management in any PRC company.

As advised by our PRC Legal Advisers, given that the business licence of Heyuan

Zhenchang was revoked in 2004, the aforesaid time limited of prohibition on Mr. Chung to act as

the legal representative, director, supervisor or member of senior management of PRC companies

has been exceeded during the Track Record Period and as at the Latest Practicable Date.

Mr. Tsui Pui Hung（徐沛雄）, aged 46, is our independent non-executive Director. He is

also the chairperson of our Remuneration Committee, and a member of our Audit Committee and

Nomination Committee. He was appointed as an independent non-executive Director on [•]. He is

currently responsible for supervising and providing independent judgement to our Board, Audit

Committee, Remuneration Committee and Nomination Committee.

Mr. Tsui is a practicing solicitor in Hong Kong and has substantial experience and

involvement in the legal industry. He was admitted as a solicitor of High Court of Hong Kong in

March 2006. He has been the founding partner and principal solicitor of WT Law Offices since

October 2010. He is currently also a certified financial consultant and a licensed insurance agent

in Hong Kong.

Mr. Tsui has been the director of Family Network Capital (Asia Pacific) Limited since July

2014. He has also been an independent non-executive director of KEYNE LTD (formerly known

as Mandarin Entertainment (Holdings) Limited) (stock code: 0009), a company listed on the Main

Board of the Stock Exchange, since September 2007.

Mr. Tsui was awarded a degree of bachelor of science (with honours) by The Chinese

University of Hong Kong in December 1997, a degree of bachelor of laws (with honours) by the

Manchester Metropolitan University in September 2001, a degree of master of laws by the

University of London in November 2004 and a postgraduate certificate in laws by The University

of Hong Kong in September 2003.



– 178 –

Mr. Tsui was a director of the following company, which was dissolved, with details as

follows:

Name of company

Place of

incorporation

Date of

dissolution

Nature of

proceeding

Nature of

business before

dissolution

Vast Wit Limited Hong Kong 8 October 2010 Deregistration(Note) No business

operation

Note: Under section 291AA of the Predecessor Companies Ordinance, an application for deregistration can only be

made if (a) all members of such company agree to such deregistration; (b) such company has never

commenced business or operation, or has ceased to carry on business or ceased operation for more than three

months immediately before the application; and (c) such company has no outstanding liabilities.

Mr. Tsui confirmed that the above-mentioned company had remained solvent and had no

outstanding liability on or before its dissolution, and has not been involved in any material non-

compliance incidents, claims, litigations or legal proceedings and there were no claims against

himself in relation to the above-mentioned company.

Non-compliance of the GEM Listing Rules by Easy Repay Finance & Investment Limited

(then known as B.A.L. Holdings Limited) during the period when Mr. Tsui was an

independent non-executive director

Mr. Tsui was an independent non-executive director of Easy Repay Finance & Investment

Limited (then known as B.A.L. Holdings Limited and later known as Unlimited Creativity

Holdings Limited) (Stock Code: 8079) (‘‘Easy Repay’’) during the period from June 2007 to June

2014. During this period, Easy Repay breached certain rules of the Rules Governing the Listing

of Securities on GEM of The Stock Exchange of Hong Kong Limited (then known as the Rules

Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of

Hong Kong Limited) (the ‘‘GEM Listing Rules’’) and was later criticised by the Stock Exchange

in January 2009.

Between September 2007 and February 2008, Easy Repay, entered into several sale and

purchase agreements in relation to acquisition and disposal of a number of properties (the

‘‘Transaction(s)’’). One of the Transactions constituted a major transaction and each of the other

Transactions constituted a discloseable transaction. Easy Repay failed to (i) notify the Stock

Exchange; (ii) publish the relevant announcements; and (iii) request a short suspension of trading

of shares pending the relevant announcements on a timely basis for the Transactions which

constituted discloseable transactions according to the GEM Listing Rules. As for the major

transaction, in addition to failure to comply with requirements (i) to (iii) described above, Easy

Repay also failed to obtain prior shareholders’ approval on a timely basis in accordance with the

then GEM Listing Rules.



– 179 –

Easy Repay also failed to publish announcements that were accurate and complete in all

material respects and not misleading and deceptive, as four of its standard announcements

published between September 2007 and October 2007 in response to the Stock Exchange’s

enquires on unusual trading in the shares of Easy Repay did not mention any of the Transactions,

and therefore breached the then GEM Listing Rules.

Further, in January 2008, Easy Repay also failed to publish a circular for a transaction that

constituted a discloseable transaction and a connected transaction, which was subjected to

announcement and circular requirements, on a timely basis according to the then GEM Listing

Rules.

The Stock Exchange, among others:

(1) criticised Easy Repay for its breach of the then GEM Listing Rules 17.56, 19.34,

19.37, 19.38 and 19.40;

(2) directed Easy Repay to appoint a professional adviser satisfactory to the Stock

Exchange to conduct a thorough review of and make recommendations to improve

Easy Repay’s internal control and compliance system to ensure Easy Repay’s GEM

Listing Rules compliance;

(3) directed Easy Repay to appoint a compliance adviser satisfactory to the Stock

Exchange for consultation on compliance matters including GEM Listing Rules

compliance and corporate governance matters on an ongoing basis for a duration of

two years;

(4) directed each of the then directors of Easy Repay, including Mr. Tsui, to undertake

training in compliance and corporate governance matters on courses held by the Hong

Kong Institute of Directors, the Hong Kong Institute of Chartered Secretaries or other

institutions satisfactory to the Stock Exchange for at least 24 hours within six months

from 19 January 2009.

Mr. Tsui confirmed that he had fully undertaken the 24 hours of training in compliance and

corporate governance matters as requested by the Stock Exchange with the last training taken in

July 2009. He further confirmed that he has not been subject to further criticism or sanction by

the Stock Exchange as a result of the non-compliance of Easy Repay with the then GEM Listing

Rules.

Ms. Chu Moune Tsi Stella（崔滿枝）, aged 47, is our independent non-executive Director.

She is also the chairperson of our Audit Committee and a member of our Remuneration

Committee. She was appointed as an independent non-executive Director on [•]. She is currently

responsible for supervising and providing independent judgement to our Board, Audit Committee

and Remuneration Committee.



– 180 –

Ms. Chu is a certified accountant in Macau and has substantial experience and involvement

in the accounting and auditing industry. Prior to joining our Group, Ms. Chu was employed by

Deloitte Touche Tohmatsu from 1997 to 1998. She worked at Tong Ka Lok – Contabilista, an

accounting firm, from 1999 to 2000. She worked at Baker Tilly Macao Certified Public

Accountants from 2001 to 2009, with her last position as director. From 2009 to 2014, she

worked as a self-practising accountant who offered accounting and consulting services. She was

employed by Macau Institute of Management from 2011 to 2017, with her last position as part

time lecturer. She has been a partner of Gracemind Registered Accountants & Associates since

July 2014.

Ms. Chu currently holds positions at various organisations, including as a consultant of

Associação dos Investigadores, Praticantes e Promotores da Medicina Chinesa de Macau（澳門中

醫藥學會）, a director of Macau Society of Registered Accountants, a chief supervisor of Macau

Institute for Corporate Social Responsibility in Greater China, a chief supervisor of Macau

Association of Women Accountants*（澳門女會計師協會）, a chief supervisor of Macau

Association of Chinese Accountants*（澳門華人會計師協會）, a vice president of Association of

Small and Medium Enterprises in the Guangdong-Hong Kong-Macao Greater Bay Area, a vice

president of Macau Association of Business Consultants, and a member of the supervisory

committee of The Chinese University of Hong Kong Alumni Association in Macau.

Ms. Chu was awarded a degree of bachelor of business administration majoring in finance

by the University of Macau in July 1997 and a degree of master of accountancy by The Chinese

University of Hong Kong in December 2010. She has been a registered accountant of Macau

under Comissão Profissional dos Contabilistas （會計師專業委員會） since June 1998. She

obtained the registered practicing certificate for Hong Kong and Macau tax professionals to

practice in China (Guangdong) Pilot Free Trade Zone, Qianhai & Shekou Area of Shenzhen

issued by Shenzhen Tax Service, State Taxation Administration in March 2021.

Ms. Chu has been an independent non-executive director of WAC Holdings Limited (stock

code: 8619), a company listed on GEM of the Stock Exchange, since August 2018.

Other disclosure pursuant to Rule 13.51(2) of the Listing Rules

Save as disclosed above, each of our Directors confirmed with respect to himself or herself

that: (i) he/she is independent from and had no other relationships with any Directors, members of

our senior management, Substantial Shareholders or Controlling Shareholders as at the Latest

Practicable Date; (ii) apart from our Company, in the last three years leading up to and as at the

Latest Practicable Date, he/she is not holding, nor had he/she held directorships in any other

public company the securities of which are listed on any securities market in Hong Kong and/or

overseas; (iii) he/she did not hold other positions in our Company or other members of our Group

as at the Latest Practicable Date; (iv) he/she does not have any interests in our Shares within the

meaning of Part XV of the SFO, save as disclosed in the paragraph headed ‘‘Statutory and

General Information – C. Further information about Substantial Shareholders, Directors and



– 181 –

experts – 1. Disclosure of interests – (a) Interests of Directors and chief executive in Shares,

underlying Shares and debentures of our Company and the associated corporations’’ in Appendix

IV to this document; (v) he/she does not have any interests in any business which competes or

may compete, directly or indirectly, with us, which is discloseable under the Listing Rules, save

as disclosed in the section headed ‘‘Relationship with our Controlling Shareholders’’ of this

document; and (vi) to the best of the knowledge, information and belief of our Directors having

made all reasonable enquiries, there is no additional information relating to our Directors or

senior management that is required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules

and no other matters with respect to their appointments that need to be brought to the attention of

our Shareholders as at the Latest Practicable Date.

BOARD DIVERSITY POLICY

In order to enhance the effectiveness of our Board and to maintain the high standard of

corporate governance, we have adopted a board diversity policy which sets out the objectives and

approaches to achieve and maintain diversity of our Board. Pursuant to the board diversity policy,

our Nomination Committee reviews and assesses our Board composition on behalf of our Board

and recommends the appointment of new Directors, taking into account a number of factors,

including but not limited to gender, age, cultural and educational background, ethnicity,

professional experience, skills, knowledge, industry and regional experience, and length of

service. The ultimate decision of the appointment will be based on merits and the contribution

which the selected candidates will bring to our Board.

Our Nomination Committee will disclose the composition of our Board annually in the

corporate governance report and monitor the implementation of the board diversity policy. Our

Nomination Committee will review the board diversity policy and assess its effectiveness, and

where necessary, make any revisions that may be required and recommend any such revisions to

our Board for consideration and approval.

Our Board comprises five male and two female members, with four executive Directors and

three independent non-executive Directors. We consider that our Board has a balanced mix of

experiences and industry background, including experiences in construction equipment rental and

sales industry, engineering industry, legal industry, and accounting and auditing industry. Our

independent non-executive Directors have a diverse education background and industry

background in accounting, legal and engineering, and have obtained professional qualifications.

Taking into account our Company’s business model and the background and abilities of our

Directors, we believe the composition of our Board satisfies the board diversity policy. Our

Company will continue to take steps to promote gender diversity at all levels of our Group,

including at the senior management level. Our Company will continue to apply the principle of

appointments based on merits with reference to the board diversity policy as a whole.



– 182 –

SENIOR MANAGEMENT

The table below sets forth information regarding our senior management:

Name Age Position

Responsibility in our

Group

Date of

joining our

Group

Relationship with

other Directors,

members of our

senior

management and

Substantial

Shareholders

Mr. Ng Lok Ki

（伍樂淇）

32 Chief financial

officer and

company secretary

Overseeing our financial

reporting, financial

planning, treasury,

financial control and

company secretarial

matters

March 2021 N/A

Mr. Ng Lok Ki（伍樂淇）, aged 32, joined our Group in March 2021 and is currently our

chief financial officer and company secretary. Mr. Ng is responsible for overseeing our financial

reporting, financial planning, treasury, financial control and company secretarial matters.

Mr. Ng has over nine years of experience in the accounting and auditing industry. Prior to

joining our Group, he was employed by W.H. Tang & Partners CPA Limited from May 2011 to

December 2014, with his last position as an audit senior. He worked as an audit senior at Sky

Base Partners CPA Limited from January 2015 to February 2015. He worked as a group

accounting manager at Best Metro (Hong Kong) Limited from March 2015 to April 2019. From

April 2019 to February 2021, he was employed as a finance manager by Jiayuan (Hong Kong)

Holdings Limited.

Mr. Ng was awarded a degree of bachelor of business administration in professional

accounting by The Open University of Hong Kong in August 2011 and a degree of master of

corporate governance by The Hong Kong Polytechnic University in September 2019. He has been

certified as a certified public accountant of the Hong Kong Institute of Certified Public

Accountants since January 2015 and admitted as an associate of The Hong Kong Institute of

Chartered Secretaries since November 2019.



– 183 –

Save as disclosed above, our senior management confirmed with respect to himself that: (i)

as at the Latest Practicable Date, he had no interests in our Shares within the meaning of Part XV

of the SFO; (ii) he did not have any relationships with any Directors, Substantial Shareholders or

Controlling Shareholders as at the Latest Practicable Date; and (iii) he did not hold any

directorships in any public company the securities of which were listed on any securities market

in Hong Kong and/or overseas in the last three years prior to the Latest Practicable Date.

COMPANY SECRETARY

Mr. Ng Lok Ki（伍樂淇）, aged 32, is our company secretary. Details of his qualifications

and experience are set out in the paragraph headed ‘‘Senior management’’ in this section.

AUTHORISED REPRESENTATIVES

Mr. Jason Kok and Mr. Ng Lok Ki are our authorised representatives under Rule 3.05 of the

Listing Rules.

COMPLIANCE ADVISER

We have appointed [Ample Capital Limited] as our compliance adviser in compliance with

Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, we will consult

with and seek advice from our compliance adviser in the following circumstances:

(a) before the publication of any regulatory announcement, circular or financial report;

(b) where a transaction, which might be a notifiable or connected transaction, is

contemplated including share issues and share repurchases;

(c) where we propose to use the [REDACTED] of the [REDACTED] in a manner

different from that detailed in this document or where our business activities,

developments or results of operations deviate from any information in this document;

and

(d) where the Stock Exchange makes an inquiry of us regarding unusual movements in the

price or trading volume of our Shares or any other matters under Rule 13.10 of the

Listing Rules.

The term of the engagement will commence on the [REDACTED] and end on the date on

which we distribute our annual report as required under Rule 13.46 of the Listing Rules for the

first full financial year commencing after the [REDACTED], or when the appointment of [Ample

Capital Limited] is terminated, whichever is earlier. Such appointment may be subject to

extension by mutual agreement.



– 184 –

BOARD PRACTICES

In the absence of extraordinary events, it is the practice of our Board to meet at least four

times a year. At such meetings, our Directors conduct, among other things, an operational review

of our business.

BOARD COMMITTEES

Our Board delegates certain responsibilities to various committees. In accordance with the

Articles and the Listing Rules, we have formed three board committees, namely Audit Committee,

Nomination Committee and Remuneration Committee.

Audit Committee

Our Company established an Audit Committee in compliance with Rule 3.21 of the Listing

Rules and with the written terms of reference in compliance with the Corporate Governance Code.

The primary duties of our Audit Committee are (i) to make recommendations to our Board on the

appointment and removal of external auditors; (ii) to review the financial statements; (iii) to

review the effectiveness of our Company’s internal audit activities, internal controls and risk

management systems; and (iv) to develop and implement policy on engaging external auditor to

supply non-audit services. Our Audit Committee currently consists of all our independent non-

executive Directors, namely Ms. Chu Moune Tsi Stella, Mr. Tsui Pui Hung and Mr. Chung Kau

Cheong. Ms. Chu Moune Tsi Stella is the chairperson of our Audit Committee.


Our Company established a nomination committee with written terms of reference in

compliance with the Corporate Governance Code. The primary duties of our Nomination

Committee are (i) to review the structure, size, composition and diversity of our Board on a

regular basis; (ii) to identify individuals suitably qualified to become Board members; (iii) to

assess the independence of independent non-executive Directors; (iv) to make recommendations to

our Board on relevant matters relating to the appointment or re-appointment of Directors and

succession planning for directors; and (v) to make recommendations to our Board regarding

candidates to fill vacancies on our Board and/or in senior management. Our Nomination

Committee currently consists of an executive Director, namely Mr. Kok, and two of our

independent non-executive Directors, namely Mr. Chung Kau Cheong and Mr. Tsui Pui Hung.

Mr. Chung Kau Cheong is the chairperson of our Nomination Committee.



– 185 –

Remuneration Committee

Our Company established a remuneration committee in compliance with Rule 3.25 of the

Listing Rules and with the written terms of reference in compliance with the Corporate

Governance Code. The primary duties of our Remuneration Committee are (i) to review and make

recommendations to our Board on the overall remuneration policy and structure relating to all

Directors and senior management of our Group; (ii) to review and make recommendations to our

Board on other remuneration-related matters, including benefits-in-kind and other compensation

payable to our Directors and senior management; and (iii) to review performance based

remuneration and to establish a formal and transparent procedure for developing policy in relation

to remuneration. Our Remuneration Committee currently consists of an executive Director,

namely Mr. Kok, and two of our independent non-executive Directors, namely Mr. Tsui Pui Hung

and Ms. Chu Moune Tsi Stella. Mr. Tsui Pui Hung is the chairperson of our Remuneration

Committee.

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

Service contract/Letter of appointment with Directors

Each of our executive Directors has entered into a service contract with our Company for a

term of three years commencing from [•] (subject to termination in certain circumstances as

stipulated in the relevant service contract). Each of our executive Directors is entitled to their

respective basic salaries set out below and may be entitled to a discretionary bonus. The current

basic annual salaries of our executive Directors to their respective executive and management

roles in our Group are as follows:

Name

Approximate

annual salary

HK$

Mr. Kok 1,056,000

Mr. Jason Kok 921,000

Ms. Kwan 327,600

Mr. Carson Poon 444,000



– 186 –

Each of our independent non-executive Directors has entered into a letter of appointment

with our Company for a period of three years commencing from [•] (subject to termination in

certain circumstances as stipulated in the relevant letter of appointment). The appointments are

subject to the provisions of the Articles of Association with regard to vacation of office of

Directors and removal and retirement by rotation of Directors. Each of our independent non-

executive Director Mr. Chung Kau Cheong and Mr. Tsui Pui Hung is entitled to a director’s fee

of HK$[96,000] per annum and Ms. Chu Moune Tsi Stella, our independent non-executive

Director, is entitled to a director’s fee of HK$[120,000] per annum. Save for the directors’ fee,

none of our independent non-executive Directors is expected to receive any other remuneration

for holding their office as an independent non-executive Director and a member of any board

committees of our Company.

Save as disclosed above, no Director has entered into any service agreement with any

member of our Group (excluding contracts expiring or determinable by the employer within one

year without payment of compensation (other than statutory compensation)).

Emoluments paid during the Track Record Period

For the three years ended 31 March 2021, the aggregate amount of emoluments (including

fees, salaries and other allowance, discretionary bonus and retirement benefits scheme

contributions) paid by our Group to our Directors amounted to approximately HK$2.0 million,

HK$2.1 million and HK$3.2 million, respectively. It is estimated that an aggregate sum of

approximately HK$2.9 million is payable by our Group to our Directors as emoluments

(excluding payment pursuant to any discretionary benefits or bonus or other fringe benefits) for

the year ending 31 March 2022.

For the three years ended 31 March 2021, the aggregate amount of emoluments (including

salaries and other allowance, discretionary bonus and retirement benefit scheme contributions)

paid by our Group to the five highest paid individuals, excluding our Directors, were

approximately HK$0.8 million, HK$0.4 million and HK$0.3 million, respectively. For details of

the emoluments of our Directors and the five highest paid individuals of our Group during the

Track Record Period, please refer to note 14 in Appendix I to this document.

During the Track Record Period, no emoluments were paid by our Group to any of the

Directors or any of the aforementioned five highest paid individuals as an inducement to join or

upon joining our Group as a compensation for loss of office. There was no arrangement under

which any of our Directors waived or agreed to waive any remuneration during the Track Record

Period. Save as disclosed in note 14 in Appendix I to this document, no other emoluments have

been paid, or are payable, by us to our Directors in respect of the three years ended 31 March

2021.

Subject to the review by and the recommendations of our Remuneration Committee, the

remuneration policy we intend to adopt after the [REDACTED] for our Directors and senior

management members will be based on comparable market levels and their performance and

qualifications.



– 187 –

EMPLOYEES

As at the Latest Practicable Date, our Group had 22 and 13 full-time employees who were

directly employed by us in Hong Kong and in the PRC, respectively. For details about our

employees and staff policy, please refer to the paragraph headed ‘‘Business – Employees’’ in this

document.

Our staff cost (including directors’ remuneration, contribution to defined contribution

retirement plans, salaries and wages, and other staff cost) for the three years ended 31 March

2021 amounted to approximately HK$8.8 million, HK$7.3 million and HK$8.6 million,

respectively.

In Hong Kong, we operate a defined contribution retirement benefits scheme (the ‘‘MPF

Scheme’’) under the Mandatory Provident Fund Scheme Ordinance (Chapter 485 of the Laws of

Hong Kong) for all of our employees in Hong Kong who joined us after the commencement of

this ordinance. Contributions are made based on a percentage of the employees’ basic salaries.

We contribute the lower of HK$1,500 or 5% of the relevant monthly salary to the MPF Scheme, a

contribution to be matched by our employees.

As required by the PRC regulations, we participate in social insurance and housing

provident fund schemes operated by relevant local government authorities. As advised by our

PRC Legal Advisers, we and our PRC employees have entered into labour contracts according to

the relevant laws and regulations. As confirmed by the relevant governmental department

respectively regulating the areas of labour security, social insurance and housing provident fund,

there has been no administrative penalty imposed on us for violation of the applicable laws and

regulations in the PRC during the Track Record Period. For details of our historical non-

compliance, please refer to the paragraph headed ‘‘Business – Legal proceedings and compliance’’

in this document.

Share Option Scheme

Our Company has conditionally adopted the Share Option Scheme on [•] under which

certain selected classes of participants (including, among others, full-time employees and

Directors) may be granted options to subscribe for our Shares. The principal terms of the Share

Option Scheme are summarised in the paragraph headed ‘‘Statutory and General Information – D.

Share Option Scheme’’ in Appendix IV to this document.



– 188 –

OUR CONTROLLING SHAREHOLDERS

Our Controlling Shareholders

So far as our Directors are aware, immediately following completion of the Capitalisation

Issue and the [REDACTED] (without taking into account any Shares which may be issued upon

the exercise of the [REDACTED] or any options which may be granted under the Share Option

Scheme), the following person and entity will individually and/or collectively be entitled to

exercise or control the exercise of 30% or more of the voting power at general meetings of our

Company:

Name

Number of Shares

immediately

following

completion of the

Capitalisation

Issue and the

[REDACTED]

Shareholding

percentage in our

Company

immediately

following

completion of the

Capitalisation

Issue and the

[REDACTED]

Mr. Kok [REDACTED] [REDACTED]

CS Investment(Note) [REDACTED] [REDACTED]

Note: CS Investment is wholly-owned by Mr. Kok.

Mr. Kok

Mr. Kok is one of our Controlling Shareholders. Further information on the profile and

background of Mr. Kok has been disclosed in the section headed ‘‘Directors and Senior

Management’’ in this document.

CS Investment

CS Investment is one of our Controlling Shareholders and is a private company incorporated

in the BVI with limited liability on 9 September 1998 and is authorised to issue a maximum of

50,000 shares with a par value of US$1.00 each. CS Investment is a holding company and one of

our Controlling Shareholders.

During the Track Record Period and up to the Latest Practicable Date, CS Investment had

two shares in issue and was wholly-owned by Mr. Kok. Mr. Kok was the sole director of CS

Investment during the same period.



– 189 –

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Our Controlling Shareholders comprise Mr. Kok and CS Investment.

Our Directors do not expect that there will be any significant transactions between our

Group and our Controlling Shareholders immediately following the [REDACTED].

Save as disclosed below, to the best knowledge of our Directors, there will not be any other

continuing connected transactions upon the [REDACTED].

Employment with family member and relative

During the Track Record Period and up to the Latest Practicable Date, we had employed one

employee, Mr. Bobby Kok, who is the son of Mr. Kok and younger brother of Mr. Jason Kok,

and had employed one employee who is a relative of Mr. Kok (the ‘‘Connected Employees’’).

Each of them has entered into a written employment contract with our Group (the ‘‘Connected

Employee Employment Contracts’’). It is expected that they will continue to be employed by

our Group following the [REDACTED].

Our Directors consider that the entering into of the Connected Employee Employment

Contracts with each Connected Employee is within our ordinary and usual course of business and

the terms therein are on normal commercial terms or better, are fair and reasonable, and in the

interests of our Group and our Shareholders as a whole.

The remuneration paid to the Connected Employees for the three years ended 31 March

2021 amounted to approximately HK$0.5 million, HK$0.5 million and HK$0.3 million,

respectively. The remuneration paid to each Connected Employee was commensurate with his

experience, position and performance.

Our Directors estimate that the annual total remuneration (including contribution to defined

contribution retirement plans, salaries and wages, and other staff cost) payable to the Connected

Employees will not exceed HK$3 million for each of the years ending 31 March 2022, 2023 and

2024, as determined by our Directors with reference to the contractual amounts payable under the

Connected Employee Employment Contracts and the expected adjustments in their remuneration

during the relevant contractual period.



– 190 –

Since each of the percentage ratios (other than the profits ratio) with respect to the annual

total remuneration payable to the Connected Employees (whether on a standalone basis or on an

aggregate basis with each other) pursuant to the Connected Employee Employment Contracts is

less than 5% and the annual total remuneration is less than HK$3 million, the transactions

constitute de minimis continuing connected transactions under Chapter 14A of the Listing Rules

and will be fully exempt from independent Shareholders’ approval, annual review and all

disclosure requirements under Chapter 14A of the Listing Rules.

Having taken into consideration the following factors, our Directors are of the view that we

are capable of carrying on our business independently from, and do not place undue reliance on

our Controlling Shareholders and his/its respective close associates after the [REDACTED]:

Management independence

Board

Our Board consists of seven Directors, among which four are executive Directors and three

are independent non-executive Directors. Mr. Kok, an executive Director of our Company, is also

the sole director of CS Investment, our Controlling Shareholder.

Each of our Directors is aware of his/her fiduciary duties as a Director which require,

among other things, that he/she acts for the benefit and in the best interests of our Company and

not to allow any conflict between the interests of our Company and his/her personal interests. In

the event that a potential conflict of interests arises out of any transaction to be entered into

between us and our Directors or their respective close associates, the interested Director(s) is/are

to abstain from voting at the relevant Board meetings in respect of such transactions and not to be

counted in the quorum.

Our Group’s strategies, management, operations and affairs are formulated, led, managed

and/or surpervised by the Board and not by any individual Director. All major and important

corporate actions of our Group are and will be fully deliberated and determined by the Board

collectively and objectively as a collective body.

Our Company has also established internal control mechanism to identify related party

transactions and/or connected transactions that are subject to the requirements under the Listing

Rules, including the requirements or reporting, announcement, circular and independent

Shareholders’ approval (where appropriate).

Committees

We have established an audit committee, a remuneration committee and a nomination

committee. Each committee consists of a majority of independent non-executive Directors.



– 191 –

Our Audit Committee is responsible for reviewing and supervising our financial reporting

process and internal control system whereas our Remuneration Committee’s role is to ensure that

our Directors are properly remunerated without being influenced by our Controlling Shareholders.

Our Nomination Committee is mainly responsible for making recommendations to our Board on

appointment of Directors and succession planning for our Directors.

Our Directors are of the view that we are capable of managing our business independently

of our Controlling Shareholders after the [REDACTED].

Operational independence

Our operations are independent from and not connected with our Controlling Shareholders.

Our Group does not rely on our Controlling Shareholders for any operating licences, and has

sufficient capital, equipment and employees which we require to operate the business

independently from our Controlling Shareholders. Our Board is responsible for determining the

strategic development and management of our Group. Reporting to our Board is a team of

experienced staff employed by us who is responsible for all essential operational functions,

including sales and rental, technical, administration, logistics and finance and who makes

operational decisions within the authorisation and parameters set by our Board only. Further, we

also own all the equipment relating to our business operations. Save for Hung Yun together with

Guangzhou Yonggui and Mr. Kok, all our top five customers and suppliers during the Track

Record Period are all independent from our Controlling Shareholders. Our Company has also

established a set of internal controls to facilitate the effective operation of our business.

Although it is disclosed in the paragraph headed ‘‘Transactions entered into before

[REDACTED] which would otherwise constitute connected transactions’’ below in this section

that our Group has entered into the Tenancy Agreements (as defined below) with Mr. Kok, Hung

Yun and Guangzhou Yonggui, respectively, our Directors are of the view that the Tenancy

Agreements would not affect our operational independence as our Directors believe that our

Group would be able to rent similar premises with terms no less favourable than the Tenancy

Agreements if any of the Tenancy Agreements are terminated.

Financial independence

Our Company will be financially independent from our Controlling Shareholders upon the

[REDACTED]. All outstanding loans and non-trade payables owed to and from our Controlling

Shareholders and their respective close associates, if any, will be settled before the

[REDACTED].



– 192 –

As at 31 March 2021, our Group’s banking facilities were secured by, among others, charges

over a property and corporate guarantee of a related company, charges over a property and

personal guarantee of Mr. Kok and charges over certain plant and machinery of our Group. The

corresponding banks with banking facilities granted to our Group as at the date of this document

have agreed in principle that the above personal guarantees will be released and replaced by

corporate guarantees to be issued by our Company and the pledged properties will also be

released upon [REDACTED].

Our Group has an independent internal control and financial system and carried out our

financial function through our finance department. Our Group also has sufficient capital to

operate our business independently and has adequate internal resources and credit profile to

support our daily operations.

UNDERTAKINGS

Our Controlling Shareholders have jointly and severally given certain undertakings in

respect of our Shares (including those as set out in Rule 10.07 of the Listing Rules) to our

Company and the [REDACTED], the [REDACTED], the [REDACTED] and the [REDACTED],

details of which are set out in the paragraph headed ‘‘[REDACTED] – [REDACTED]

arrangements and expenses – [REDACTED] – Lock-up undertakings pursuant to the

[REDACTED] – [REDACTED] by our Controlling Shareholders’’ in this document.

DISCLOSURE PURSUANT TO RULE 8.10 OF THE LISTING RULES

None of our Controlling Shareholders and his/its respective close associates nor our

Directors is interested in any business which competes or is likely to compete directly or

indirectly with the business of our Group which must be disclosed in this document pursuant to

Rule 8.10 of the Listing Rules.



– 193 –

NON-COMPETITION UNDERTAKING AND CORPORATE GOVERNANCE MEASURES

TO MANAGE CONFLICT OF INTERESTS

Undertakings

Mr. Kok and CS Investment (each the ‘‘Covenantor’’ and collectively the ‘‘Covenantors’’)

entered into a deed of non-competition dated [•] in favour of our Company and our subsidiaries

(the ‘‘Deed of Non-Competition’’). Pursuant to the Deed of Non-Competition, each of the

Covenantors has irrevocably and unconditionally undertaken to our Company (for itself and for

the benefit of our subsidiaries), among others, that, during the period which (i) the Shares remain

[REDACTED] on the Stock Exchange; and (ii) the Covenantors and their close associates (other

than members of our Group) individually or jointly, are entitled to exercise, or control the

exercise of, not less than 30% of the voting power at general meeting of our Company or the

Covenantors and/or their relevant close associates remain as a director of any member of our

Group, he/it shall not, and shall procure that his/its close associates (other than any member of

our Group) not to carry on or be engaged, concerned or interested, or otherwise be involved,

directly or indirectly, in any business in competition with or likely to be in competition with the

existing business activity, i.e. provision of equipment rental services and sale of construction

equipment in Hong Kong or the PRC, of any member of our Group or any business activity to be

conducted by any member of our Group from time to time (the ‘‘Restricted Business’’).

Each of the Covenantors further undertakes that if any business investment or other

commercial opportunity relating to the Restricted Business (the ‘‘Business Opportunity’’) is

identified by or offered to him/it, he/it shall procure his/its close associates to promptly within

seven days notify our Group in writing and our Group shall have a right of first refusal to take up

such opportunity. Our Group shall, within 30 days after receipt of the written notice (or such

longer period if our Group is required to complete any approval procedures as set out under the

Listing Rules from time to time), notify the Covenantor(s) whether our Group will exercise the

right of first refusal.

Our Group shall only exercise the right of first refusal upon the approval of all independent

non-executive Directors (who do not have a material interest in such opportunity) (‘‘Independent

Board’’). The relevant Covenantor(s) and the other conflicting Directors (if any) shall abstain

from participating in and voting at and shall not be counted as quorum at all meetings of the

Board where there is a conflict of interest or potential conflict of interest including but not limited

to the relevant meeting of our independent non-executive Directors for considering whether or not

to exercise the right of first refusal.

The undertakings contained in the Deed of Non-Competition are conditional upon the

[REDACTED] becoming unconditional. If any such condition is not fulfilled on or before the

date falling 30 days after the date of this document, the Deed of Non-Competition shall become

null and void without prejudice to any right of the party in respect of antecedent breaches.



– 194 –

Governance to manage conflict of interests

We will adopt the following corporate governance measures to manage any potential conflict

of interests arising from any future potential competing business and to safeguard the interests of

our Shareholders:

(i) our independent non-executive Directors will review, at least on an annual basis, the

compliance with and enforcement of the terms of the Deed of Non-Competition by our

Covenantors;

(ii) our Company will disclose decisions with basis on matters reviewed by the

independent non-executive Directors relating to non-compliance and enforcement of

the Deed of Non-Competition (including why business opportunities referred to it by

our Controlling Shareholders were not taken up) either through annual report, or by

way of announcement and/or other documents issued or published by our Company as

required under the Listing Rules;

(iii) our Controlling Shareholders have undertaken to provide all information necessary to

our Company for the annual review by our independent non-executive Directors and

the enforcement of the Deed of Non-Competition;

(iv) we will disclose in the corporate governance report of our annual report whether the

terms of the Deed of Non-Competition have been complied with and enforced;

(v) in addition to each Director being aware of his/her fiduciary duties as a Director,

which require, among other things, that he/she acts for the benefit of our Company and

the Shareholders as a whole and does not allow any conflict of interests between his/

her duties as a Director and his/her personal interests, our Articles of Association

require each Director to declare to our Board any potential conflict of interests with

our Group at Board meetings. Our Articles of Association provide that a Director shall

not vote (nor be counted in the quorum) on any resolution of our Board approving any

contract or arrangement or other proposal in which he/she or any of his/her close

associates is materially interested except in certain circumstances as set out in the

Articles. Our Board (including our independent non-executive Directors) will monitor

the potential conflict of interests of Directors and our Directors have to submit

confirmations to the Board disclosing details of any interests in competing businesses

in any interim or annual reports to be issued by our Company. If potential conflict of

interests arises, the interested Director(s) will bring the matter to our independent non-

executive Directors and shall not be present during the discussion of the relevant

resolution in which the conflict of interests may arise and shall abstain from voting on

such proposed resolution;



– 195 –

(vi) our Company [has] engaged Ample Capital Limited as our compliance adviser who

shall ensure that our Company is properly guided and advised as to compliance with

the Listing Rules and any other applicable laws and regulations; and

(vii) our independent non-executive Directors may engage independent professional advisers

in appropriate circumstances at our Company’s cost.

Our Directors consider that the above corporate governance measures are sufficient to

manage any potential conflict of interests between our Covenantors and our Group and to protect

the interests of our Shareholders, in particular, our minority Shareholders.

DELINEATION OF BUSINESSES

Our Controlling Shareholders have interest in Hung Yun and Guangzhou Yonggui.

Our Directors consider that there is clear delineation between our Group’s business and

Hung Yun’s and Guangzhou Yonggui’s businesses because Hung Yun is a property investment

and investment holding company, while Guangzhou Yonggui is a company holding PRC Property

1.

Hung Yun

Hung Yun is a private company incorporated in Hong Kong with limited liability on 10 May

2002 with an authorised share capital of HK$10,000.00 divided into 10,000 ordinary shares of

HK$1.00 each. As at the Latest Practicable date, Hung Yun had two shares in issue and was

wholly-owned by CS Investment. Hung Yun is a property investment and investment holding

company, which holds the HK Property 1 situated at G/F and Portion of 1/F, Chi Sing Centre, 2

Ping Fuk Lane, Tong Yan San Tsuen, Yuen Long, New Territories, Hong Kong.

As at 1 April 2018, being the commencement date of the Track Record Period, Hung Yun

had two shares in issue, and was owned as to one share by CS Investment and as to one share by

Ms. Kwan (who held such one share on trust for CS Investment), respectively.

On 24 September 2020, Ms. Kwan transferred one share of Hung Yun to CS Investment at

nil consideration. Immediately after the aforesaid transfer of share, Hung Yun became directly

wholly-owned by CS Investment.

As at the Latest Practicable Date, Mr. Kok and Ms. Kwan were the directors of Hung Yun.



– 196 –

Guangzhou Yonggui

Guangzhou Yonggui was established in the PRC as a limited liability company on 10

November 2014 and had an initial registered capital of RMB10,000,000. The then entire equity

interest of Guangzhou Yonggui was owned by Hung Yun. Guangzhou Yonggui holds PRC

Property 1 situated at 26 Liye Road, Nansha District, Guangzhou City, Guangdong Province, the

PRC.

On 20 April 2015, Hung Yun, the sole shareholder of Guangzhou Yonggui, resolved to

increase the registered capital of Guangzhou Yonggui from RMB10,000,000 to RMB15,000,000.

During the Track Record Period and up to the Latest Practicable Date, the registered capital

of Guangzhou Yonggui was RMB15,000,000 and Guangzhou Yonggui was wholly-owned by

Hung Yun.

As at the Latest Practicable Date, Mr. Jason Kok was the director and legal representative of

Guangzhou Yonggui, and Mr. Kok was the supervisor of Guangzhou Yonggui.

TRANSACTIONS ENTERED INTO BEFORE [REDACTED] WHICH WOULD

OTHERWISE CONSTITUTE CONNECTED TRANSACTIONS

The following transactions have been entered into by our Group prior to the [REDACTED]

which constitute one-off transactions.

Tenancy Agreements

(A) HK Property 1 Tenancy Agreement

Chi Shing Machinery, as lessee, entered into a tenancy agreement (the ‘‘HK Property 1

Tenancy Agreement’’) with Hung Yun, as lessor, under which we agreed to lease the premises

situated at G/F and Portion of 1/F, Chi Shing Centre, 2 Ping Fuk Lane, Tong Yan San Tsuen,

Yuen Long, New Territories, Hong Kong (i.e. HK Property 1), with a gross floor area of

approximately 44,323.0 sq.ft. and an exclusive use on the part of driveway area with 1,771.0

sq.ft. as our office and storage of construction equipment in Hong Kong, for a term of three years

commencing from 1 March 2021 to 29 February 2024.



– 197 –

Our Directors confirmed that the monthly fixed rent of HK$469,000 was determined after

arm’s length negotiations between the parties, in accordance with normal commercial terms, at

prevailing market rent and on terms no less favourable to Chi Shing Machinery than the terms

offered to Chi Shing Machinery by Independent Third Parties. In this connection, we have

engaged an independent property valuer to assess the fairness and reasonableness of the rent of

the HK Property 1 Tenancy Agreement, based on which our Directors are of the opinion that the

terms of the HK Property 1 Tenancy Agreement, including the rental level, were fair and

reasonable, and were in line with the market level for similar premises in similar locations as at

the date of commencement of the HK Property 1 Tenancy Agreement.

For the three years ended 31 March 2021, the amount paid by our Group to Hung Yun for

leasing of HK Property 1 amounted to approximately HK$5.6 million, HK$5.8 million and

HK$5.6 million, respectively.

(B) HK Property 2 Tenancy Agreement

Chi Shing Machinery, as lessee, entered into a tenancy agreement (the ‘‘HK Property 2

Tenancy Agreement’’) with Mr. Kok, as lessor, under which we agreed to lease the premises

situated at the Remaining Portion of Lot No. 391 in D.D. 106, Shek Wu Tong, Kam Tin, Yuen

Long, New Territories, Hong Kong (i.e. HK Property 2), with a registered land area of

approximately 24,275.8 sq.ft. and temporary structures with total floor area of approximately

5,565.0 sq.ft. as our storage of construction equipment in Hong Kong, for a term of three years

commencing from 1 March 2021 to 29 February 2024.

Our Directors confirmed that the monthly fixed rent of HK$76,000 was determined after


prevailing market rent and on terms no less favourable to Chi Shing Machinery than the terms

offered to Chi Shing Machinery by Independent Third Parties. In this connection, we have

engaged an independent property valuer to assess the fairness and reasonableness of the rent of

the HK Property 2 Tenancy Agreement, based on which our Directors are of the opinion that the

terms of the HK Property 2 Tenancy Agreement, including the rental level, were fair and

reasonable, and were in line with the market level for similar premises in similar locations as at

the date of commencement of the HK Property 2 Tenancy Agreement.

For the three years ended 31 March 2021, the amount paid by our Group to Mr. Kok

(through Hung Yun) for leasing of HK Property 2 amounted to approximately HK$0.9 million,

HK$1.0 million and HK$0.9 million, respectively.

(C) PRC Property 1 Tenancy Agreement

Guangdong Zhigui, as lessee, entered into a tenancy agreement (the ‘‘PRC Property 1

Tenancy Agreement’’) with Guangzhou Yonggui, as lessor, under which we agreed to lease part

of the premises situated at 26 Liye Road, Dongchong Town, Nansha District, Guangzhou City,



– 198 –

Guangdong Province, the PRC (i.e. PRC Property 1), with a total gross floor area of

approximately 5,035.0 sq.m. as our office and storage of construction equipment in the PRC, for

a term of three years commencing from 1 March 2021 to 29 February 2024.

Our Directors confirmed that the monthly fixed rent of RMB88,189 was determined after


prevailing market rent and on terms no less favourable to Guangdong Zhigui than the terms

offered to Guangdong Zhigui by Independent Third Parties. In this connection, we have engaged

an independent property valuer to assess the fairness and reasonableness of the rent of the PRC

Property 1 Tenancy Agreement, based on which our Directors are of the opinion that the terms of

the PRC Property 1 Tenancy Agreement, including the rental level, were in fair and reasonable

terms and were in line with the market level for similar premises in similar locations as at the

date of commencement of the PRC Property 1 Tenancy Agreement.

For the three years ended 31 March 2021, the amount paid by our Group to Guangzhou

Yonggui for leasing of the PRC Property 1 amounted to approximately RMB1.0 million, RMB1.0

million and RMB1.0 million (equivalent to approximately HK$1.1 million, HK$1.1 million and

HK$1.1 million), respectively.

Implications under the Listing Rules

Mr. Kok is our Controlling Shareholder and executive Director. Guangzhou Yonggui is

wholly-owned by Hung Yun, which is in turn wholly-owned by CS Investment, which is in

turn wholly-owned by Mr. Kok. As such, each of Mr. Kok, Hung Yun and Guangzhou

Yonggui is a connected person of our Company under Chapter 14A of the Listing Rules.

HKFRS 16 ‘‘Leases’’ which is consistently applied to our Group throughout the Track

Record Period. In accordance with HKFRS 16 ‘‘Leases’’, our Group has recognised the

value of the right-of-use assets on its balance sheet in connection with the transactions

contemplated under the HK Property 1 Tenancy Agreement, the HK Property 2 Tenancy

Agreement and the PRC Property 1 Tenancy Agreement (together, the ‘‘Tenancy

Agreements’’), as such, the transactions contemplated thereunder would be regarded as

acquisitions for the purposes of the Listing Rules.

The transactions contemplated under the Tenancy Agreements (whether on a

standalone basis or on an aggregate basis with each other) are one-off transactions entered

into by Chi Shing Machinery or Guangdong Zhigui prior to the [REDACTED]. Such

transactions will not, following the [REDACTED], constitute continuing connected

transactions of our Group under Chapter 14A of the Listing Rules, and will not be subject

to further requirements under the Listing Rules. Our Group will comply with the relevant

requirements under Chapter 14A of the Listing Rules should there be any material change to

the terms thereof if we enter into any other connected transaction in relation thereto after the

[REDACTED].



– 199 –

SUBSTANTIAL SHAREHOLDERS

Our Substantial Shareholders for the purposes of the Listing Rules are set forth below:

Interests in our Company

Name

Number of

Shares as at

the date

of this

document

Shareholding

percentage in

our Company

as at the

date of this

document

Number of

Shares

immediately

following

completion of

the

Capitalisation

Issue and the

[REDACTED](Note 2)

Shareholding

percentage in

our Company

immediately

following

completion of

the

Capitalisation

Issue and the

[REDACTED](Note 2)

Mr. Kok(Note 1) 2 [100%] [REDACTED] [REDACTED]

CS Investment(Note 1) 2 [100%] [REDACTED] [REDACTED]

Notes:

1. CS Investment is wholly-owned by Mr. Kok.

2. Such numbers or percentages are calculated without taking into account of any Shares which may be allotted

and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the

Share Option Scheme. If any new Shares are to be allotted and issued pursuant to the exercise of the

[REDACTED] or any options which may be granted under the Share Option Scheme, such percentages shall

be reduced on a pro rata basis.


SUBSTANTIAL SHAREHOLDERS

– 200 –

SHARE CAPITAL

Without taking into account any Shares to be issued upon the exercise of the [REDACTED]

or any options which may be granted under the Share Option Scheme, our issued share capital

immediately following the completion of the Capitalisation Issue and the [REDACTED] will be

as follows:

Authorised share capital:

HK$

[10,000,000,000] Shares of par value of HK$ 0.01 each [100,000,000]

Shares issued and to be issued, fully paid or credited as fully paid, upon completion of

the Capitalisation Issue and the [REDACTED]:

HK$

2 Shares in issue as at the date of this document 0.02

[REDACTED]

Shares to be issued pursuant to the Capitalisation

Issue [REDACTED]

[REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED]

[REDACTED] Shares in total [REDACTED]

MINIMUM PUBLIC FLOAT

Pursuant to Rule 8.08(1) of the Listing Rules, at the time of the [REDACTED] and at all

times thereafter, our Company must maintain the minimum prescribed percentage of 25% of our

Company’s issued share capital in the hands of the public (as defined in the Listing Rules).

RANKING

The [REDACTED] will rank pari passu in all respects with all the Shares now in issue or to

be issued as mentioned in this document, and in particular, will qualify in full for all dividends or

other distributions declared, made or paid on the Shares in respect of a record date which falls

after the date of [REDACTED].


SHARE CAPITAL

– 201 –

CAPITALISATION ISSUE

Pursuant to the written resolutions of our then sole Shareholder passed on [•], subject to the

share premium account of our Company having sufficient balance, or otherwise being credited as

a result of the allotment and issuance of new Shares pursuant to the [REDACTED], our Directors

are authorised to allot and issue a total of [REDACTED] Shares credited as fully paid at par to

person(s) whose name(s) appear on the register of members or principal share register of our

Company at the close of business on the date the resolution was passed by way of capitalisation

of the sum of HK$[REDACTED] standing to the credit of the share premium account of our

Company, and our Shares to be allotted and issued pursuant to the resolutions shall rank pari

passu in all respects with the then existing issued Shares.

GENERAL MANDATE TO ISSUE SHARES

Conditional on the conditions stated in the paragraph headed ‘‘Structure of the

[REDACTED] – Conditions of the [REDACTED]’’ in this document, our Directors have been

granted a general unconditional mandate to allot, issue and deal with Shares and to make or grant

offers, agreements or options which might require such Shares to be allotted and issued or dealt

with subject to the requirement that the total number of our Shares so allotted and issued or

agreed conditionally or unconditionally to be allotted and issued (otherwise than pursuant to a

right issue, or scrip dividend scheme or similar arrangements, or a specific authority granted by

our Shareholders) shall not exceed:

(a) 20% of the total number of our Shares in issue immediately following the completion

of the Capitalisation Issue and the [REDACTED] (but excluding any Shares which

may be allotted and issued pursuant to the exercise of the [REDACTED] or any

options which may be granted under the Share Option Scheme); and

(b) the total number of our Shares repurchased pursuant to the authority granted to our

Directors referred to in the paragraph headed ‘‘General mandate to repurchase shares’’

in this section below.

This mandate does not cover Shares to be allotted, issued or dealt with under a rights issue

or pursuant to the exercise of any option which may be granted under the Share Option Scheme.

This general mandate to issue Shares will remain in effect until the earliest of:

(a) the conclusion of the next annual general meeting of our Company;

(b) the expiration of the period within which the next annual general meeting of our

Company is required by the Articles of Association or any applicable laws to be held;

or

(c) the time when such mandate is revoked or varied by an ordinary resolution of our

Shareholders in general meeting.


SHARE CAPITAL

– 202 –

For further details of this general mandate, please refer to the paragraph headed ‘‘Statutory

and General Information – A. Further information about our Company – 3. Written resolutions of

our then sole Shareholder passed on [•]’’ in Appendix IV to this document.

GENERAL MANDATE TO REPURCHASE SHARES

Conditional on the conditions stated in the section headed ‘‘Structure of the [REDACTED]

– Conditions of the [REDACTED]’’ in this document, our Directors have been granted a general

unconditional mandate to exercise all the powers to repurchase Shares (Shares which may be

[REDACTED] on the Stock Exchange or on any other stock exchange which is recognised by the

SFC and the Stock Exchange for this purpose) with a total number of not more than 10% of the

total number of our Shares in issue immediately following completion of the Capitalisation Issue

and the [REDACTED] (excluding Shares which may be issued pursuant to the exercise of the

[REDACTED] or any options that may be granted under the Share Option Scheme).

This mandate only relates to repurchases made on the Stock Exchange, or on any other

stock exchange on which our Shares may be [REDACTED] (and which is recognised by the SFC

and the Stock Exchange for this purpose), and made in connection with all applicable laws and

regulations and the requirements of the Listing Rules. A summary of the relevant Listing Rules is

set out in the paragraph headed ‘‘Statutory and General Information – A. Further information

about our Company – 6. Repurchase of our Shares by our Company’’ in Appendix IV to this

document.

The general mandate to repurchase Shares will remain in effect until the earliest of:

(a) the conclusion of the next annual general meeting of our Company;

(b) the expiration of the period within which the next annual general meeting of our

Company is required by the Articles of Association or any other applicable laws to be

held; or

(c) the time when such mandate is revoked or varies by an ordinary resolution of our

Shareholders in general meeting.

For further details of this general mandate, please refer to the paragraph headed ‘‘Statutory

and General Information – A. Further information about our Company – 3. Written resolutions of

the then sole Shareholder passed on [•]’’ in Appendix IV to this document.


SHARE CAPITAL

– 203 –

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme. Details of the principal

terms of the Share Option Scheme are summarised in the paragraph headed ‘‘Statutory and

General Information – D. Share Option Scheme’’ in Appendix IV to this document.

Our Group did not have any outstanding share options, warrants, convertible instruments, or

similar rights convertible into our Shares as at the Latest Practicable Date.

CIRCUMSTANCES WHERE MEETINGS ARE REQUIRED

Our Company has only one class of Shares, namely ordinary Shares, each of which ranks

pari passu with the other Shares.

As a matter of the Companies Act, an exempted company is not required by law to hold any

annual general meeting unless the articles of association otherwise provide. The holding of

general meeting or class meeting is prescribed for under the articles of association of a company.

Accordingly, our Company will hold general meetings as prescribed for under the Articles of

Association, a summary of which is set out in the section headed ‘‘Summary of the Constitution

of the Company and Cayman Islands Company Law’’ in Appendix III to this document.


SHARE CAPITAL

– 204 –

You should read the following discussion and analysis in conjunction with our combined

financial information and notes thereto set forth in the Accountants’ Report as set out in

Appendix I to this document and our selected historical combined financial information and

operating data included elsewhere in this document. Our combined financial information has

been prepared in accordance with HKFRSs issued by the HKICPA, which may differ in certain

material respects from generally accepted accounting principles in other jurisdictions.

The following discussion and analysis contain forward-looking statements that reflect our

current views with respect to future events and financial performance. These statements are

based on our assumptions and analyses made by us in light of our experience and perception of

historical trends, current conditions and expected future developments, as well as other factors

we believe are appropriate under the circumstances. However, whether actual outcomes and

developments will meet our expectations and predictions depends on a number of risks and

uncertainties over which we do not have control. Please refer to the sections headed ‘‘Risk

Factors’’ and ‘‘Forward-looking Statements’’ in this document for discussions of those risks

and uncertainties.

Our financial year begins on 1 April and ends on 31 March. Any discrepancies in any

table or elsewhere in this document between the totals and sums of amounts listed herein are

due to rounding.

OVERVIEW

We are a well-established construction equipment provider principally offering construction

equipment rental services and sale of construction equipment in Hong Kong and the PRC. We

mainly offer a wide range of power and energy equipment, high reach and earthmoving equipment

sourced from internationally renowned equipment manufacturers located in Japan, Germany and

the United States. We have developed a large and diversified customer base which includes,

among others, construction companies, manufacturing companies, education institutions,

government bodies and other construction equipment providers. Our ‘‘Chi Shing’’ brand was

established with the aspiration of providing reliable, high quality, environmentally friendly and

innovative construction equipment to customers. By leveraging our technical expertise and

accumulated industry experience, we successfully developed our own-branded KCG generator in

2012. We sold our first KCG generator in 2012 and first rented out our KCG generator in 2013.

According to the CHFT Report, we ranked second in the power and energy equipment and high

reach equipment rental market in Hong Kong in terms of revenue with a market share of

approximately 6.2% in 2020.


FINANCIAL INFORMATION

– 205 –

We recorded revenue of approximately HK$53.8 million, HK$93.9 million and HK$128.8

million for the three years ended 31 March 2021, respectively, whilst our total net profit for the

same years amounted to approximately HK$17.4 million, HK$30.5 million and HK$51.2 million,

respectively. The following table sets forth the breakdown of our revenue by business segment

during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %


Total 53,802 100.0 93,880 100.0 128,785 100.0

BASIS OF PRESENTATION

Pursuant to the Reorganisation as more fully explained in the paragraph headed ‘‘History,

Reorganisation and Group Structure – Reorganisation’’ in this document, our Company became

the holding company of the companies now comprising our Group on 17 June 2021. The

companies now comprising our Group were under the common control of Mr. Kok (the

‘‘Controlling Shareholder’’) before and after the Reorganisation. Accordingly, for the purpose of

this report, the historical financial information has been prepared on a combined basis by

applying the principles of merger accounting as if the Reorganisation had been completed at the

beginning of the Track Record Period.

The combined statements of profit or loss and other comprehensive income, combined

statements of changes in equity and combined statements of cash flows of our Group for the

Track Record Period, as set out in the Accountants’ Report in Appendix I to this document,

include the results, changes in equity and cash flows of companies comprising our Group as if our

group structure upon completion of the Reorganisation had been in existence throughout the

Track Record Period, or since their respective dates of incorporation, where there is a shorter

period. The combined statements of financial position of our Group as at 31 March 2019, 2020

and 2021 present the assets and liabilities of the companies comprising our Group which had been

incorporated or registered on those dates and as if our current group structure had been in

existence as at those dates.

The financial information relating to our Group has been prepared in accordance with all

applicable HKFRSs which collective term includes all applicable individual HKFRSs, Hong Kong

Accounting Standards (HKASs) and Interpretations issued by the HKICPA. For further details,

please refer to Note 3 to the Accountants’ Report as set out in Appendix I to this document.



– 206 –

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our financial condition and results of operation have been and will continue to be affected

by a number of factors, including those factors as set out in the section headed ‘‘Risk Factors’’ in

this document. In particular:

Market conditions in Hong Kong and the PRC

During the Track Record Period, we generated revenue from construction equipment rental

services and sale of construction equipment, which mainly included (i) power and energy

equipment; (ii) high reach equipment; and (iii) earthmoving equipment, in Hong Kong and the

PRC. As a substantial portion of our revenue was derived from the construction equipment rental

and sales market in Hong Kong, the demand for our services is dependent on the general market

condition and the availability of construction projects in Hong Kong in general which may

materially and adversely affect our business operations, operating results and financial conditions.

For more information relating to the construction equipment rental and sales industry in Hong

Kong, please refer to the paragraph headed ‘‘Industry Overview – Overview of the construction

equipment rental and sales industry in Hong Kong’’ in this document.

Our reputation in the construction equipment rental and sales industry

The reputation that our Group has built up over the years plays a significant role in

attracting customers and maintaining customer relationships. We believe that our leading position,

industry reputation and strong relationship with major suppliers and customers provide us with a

favourable position to capture the overall growth trend of the construction equipment rental and

sales market in Hong Kong and the PRC. Our ability to maintain our market position and industry

reputation thus affects our ability to generate revenue.

Fluctuations in our cost of sales and services

Our cost of sales and services mainly comprise of (i) cost of inventories sold; (ii) staff cost;

(iii) depreciation; and (iv) rental cost. Cost of inventories sold mainly represents the procurement

cost of new and used construction equipment we procured from third party construction

equipment providers for sale to our customers, the net carrying amount of used construction

equipment transferred from our plant and equipment to inventory which become held for sale to

our customers and other direct costs incurred for our sale of construction equipment business

segment such as cost of spare parts. The cost of new construction equipment may increase, which

may cause us to spend significantly more for the procurement and replacement of construction

equipment. Our staff cost relates to the remuneration and other benefits paid to our employees.

Depreciation refers to the deprecation expense of our rental fleet and right-of-use assets in

relation to our leased properties. Rental cost refers to the rental fees incurred for the storage of

our construction equipment, our inventories and our office. These expenses in aggregate account

for over 90% of our Group’s total cost of sales and services and any significant increases in such

expenses will have an adverse impact on the financial performance and profitability of our Group.



– 207 –

SENSITIVITY ANALYSIS

The following sensitivity analysis illustrates the impact of hypothetical fluctuations in (i)

cost of inventories sold; (ii) staff cost; (iii) depreciation; and (iv) rental cost on profit before

taxation for the Track Record Period. Fluctuations are assumed to be 10.0%, 15.0% and 20.0%

for each of the years ended 31 March 2019, 2020 and 2021, respectively, which are determined

by reference to the relevant historical fluctuations during the Track Record Period.

+/- 10.0% +/- 15.0% +/- 20.0%

HK$’000 HK$’000 HK$’000

Decrease/increase in profit before taxation

Hypothetical fluctuations in cost of

inventories sold

Year ended 31 March 2019 156 233 311

Year ended 31 March 2020 1,140 1,710 2,280

Year ended 31 March 2021 1,929 2,894 3,859

Hypothetical fluctuations in staff cost

Year ended 31 March 2019 274 410 547

Year ended 31 March 2020 274 410 547

Year ended 31 March 2021 260 389 519

Hypothetical fluctuations in depreciation

Year ended 31 March 2019 2,287 3,430 4,573

Year ended 31 March 2020 2,172 3,258 4,344

Year ended 31 March 2021 2,181 3,272 4,363

Hypothetical fluctuations in rental cost

Year ended 31 March 2019 643 965 1,286

Year ended 31 March 2020 678 1,017 1,356

Year ended 31 March 2021 600 899 1,199

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have identified certain accounting policies that are significant to the preparation of our

combined financial statements and important for understanding our financial position and results

of operations.



– 208 –

Our significant accounting policies, judgments and estimates that are important for you to

understand our financial condition and results of operations, are set out in detail in Notes 4 and 5

to the Accountants’ Report as set out in Appendix I to this document, respectively. Some of our

accounting policies involve subjective assumptions and estimates, as well as complex judgments

relating to accounting items. Our estimates are based on historical experience, latest information

and other assumptions that we believe to be reasonable under the current circumstances. Actual

results may differ under different assumptions and conditions.

RESULT OF OPERATIONS

The following table sets forth our combined statements of profit or loss and other

comprehensive income for the years indicated, as derived from the Accountants’ Report in

Appendix I to this document.

COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME


HK$’000 HK$’000 HK$’000

Revenue 53,802 93,880 128,785Cost of sales and services (36,672) (45,462) (52,955)

Gross profit 17,130 48,418 75,830Other income 756 125 1,318Other net gains/(losses) 13,254 (1,251) 1,322Administrative and other operating expenses (9,172) (8,937) (11,114)Finance costs (1,725) (1,239) (1,232)[REDACTED] [REDACTED] [REDACTED] [REDACTED]

Profit before taxation 20,243 36,741 61,857Income tax expense (2,830) (6,207) (10,614)

Profit for the year 17,413 30,534 51,243

Other comprehensive (expense)/incomeItem that may be reclassified subsequently to

profit or loss:Exchange differences on translation of foreign

operation (973) (899) 1,275

Total comprehensive income for the year 16,440 29,635 52,518



– 209 –

DESCRIPTION OF SELECTED ITEMS FROM COMBINED STATEMENTS OF PROFIT

OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue

During the Track Record Period, our revenue was mainly generated from construction

equipment rental services and sale of construction equipment in Hong Kong and the PRC. Our

total revenue amounted to approximately HK$53.8 million, HK$93.9 million and HK$128.8

million for the three years ended 31 March 2021, respectively.

Revenue by business segment

The following table sets forth the details of our revenue by business segment during the

Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

Rental servicesRental income 47,492 88.3 68,154 72.6 90,403 70.2Rental related services 2,828 5.2 3,269 3.5 5,442 4.2

50,320 93.5 71,423 76.1 95,845 74.4

Sale of construction equipment 3,482 6.5 22,457 23.9 32,940 25.6

Total 53,802 100.0 93,880 100.0 128,785 100.0

Rental services

Revenue from our rental services amounted to approximately HK$50.3 million, HK$71.4

million and HK$95.8 million, representing approximately 93.5%, 76.1% and 74.4% of our

Group’s total revenue for the three years ended 31 March 2021, respectively.

Rental income

Rental income from our rental services principally involves the rental of our fleet of

construction equipment which mainly comprises three categories (i) power and energy equipment;

(ii) high reach equipment; and (iii) earthmoving equipment. The minimum rental period we offer

to our customers is seven days in Hong Kong and one day in the PRC. For further details of the

construction equipment we offer, please refer to the paragraph headed ‘‘Business – Our

construction equipment’’ in this document.



– 210 –

Our rental income is primarily affected by the utilisation rate of our rental fleet during the

Track Record Period. For further details on our utilisation rates, please refer to the paragraph

headed ‘‘Business – Our fleet management – Equipment utilisation’’ in this document. Rental

income amounted to approximately HK$47.5 million, HK$68.2 million and HK$90.4 million,

respectively, representing approximately 88.3%, 72.6% and 70.2% of our Group’s total revenue

for the three years ended 31 March 2021, respectively.

The following table sets forth the details of our rental income generated from our rental fleet

by type during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

Power and energy equipment 15,707 33.1 33,200 48.7 52,829 58.5

High reach equipment 31,071 65.4 34,331 50.4 35,234 39.0Earthmoving equipment 680 1.4 553 0.8 2,212 2.4Other equipment (Note) 34 0.1 70 0.1 128 0.1

Total 47,492 100.0 68,154 100.0 90,403 100.0

Note:

Other equipment mainly include forklift, drainage pump and electric hammer.

Revenue generated from the rental of power and energy equipment amounted to

approximately HK$15.7 million, HK$33.2 million and HK$52.8 million for the three years ended

31 March 2021, respectively, representing approximately 33.1%, 48.7% and 58.5% of our rental

income, respectively.

Revenue generated from the rental of high reach equipment amounted to approximately

HK$31.1 million, HK$34.3 million and HK$35.2 million for the three years ended 31 March

2021, respectively, representing approximately 65.4%, 50.4% and 39.0% of our rental income,

respectively.

Revenue generated from the rental of earthmoving equipment amounted to approximately

HK$0.7 million, HK$0.6 million and HK$2.2 million for the three years ended 31 March 2021,

respectively, representing approximately 1.4%, 0.8% and 2.4% of our rental income, respectively.

Revenue generated from the rental of other equipment amounted to approximately

HK$34,000, HK$70,000 and HK$128,000 for the three years ended 31 March 2021, respectively,

representing approximately 0.1%, 0.1% and 0.1% of our rental income, respectively.



– 211 –

Rental related services

Revenue from our rental related services mainly consists of transportation services, repair

and maintenance services and other labour services. Such services are offered under our rental

arrangement depending on our customers’ needs. Transportation services involve delivery of our

construction equipment to and from customers’ designated sites in Hong Kong and the PRC.

Repair and maintenance services involve on-site repair and maintenance of our construction

equipment. Other labour services mainly involve technician standby charges. Revenue attributable

to rental related services amounted to approximately HK$2.8 million, HK$3.3 million and

HK$5.4 million, respectively, representing approximately 5.2%, 3.5% and 4.2% of our Group’s

total revenue for the three years ended 31 March 2021, respectively.

The following table sets forth the details of our revenue generated from rental related

services during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

Transportation services 1,824 64.5 1,768 54.1 2,387 43.9Repair and maintenance services 931 32.9 1,145 35.0 2,886 53.0Other labour services 73 2.6 356 10.9 169 3.1

Total 2,828 100.0 3,269 100.0 5,442 100.0

Revenue generated from transportation services amounted to approximately HK$1.8 million,

HK$1.8 million and HK$2.4 million for the three years ended 31 March 2021, respectively,

representing approximately 64.5%, 54.1% and 43.9% of revenue attributable to our rental related

services, respectively.

Revenue generated from repair and maintenance services amounted to approximately

HK$0.9 million, HK$1.1 million and HK$2.9 million for the three years ended 31 March 2021,

respectively, representing approximately 32.9%, 35.0% and 53.0% of revenue attributable to our

rental related services, respectively.

Revenue generated from other labour services amounted to approximately HK$73,000,

HK$356,000 and HK$169,000 for the three years ended 31 March 2021, respectively,

representing approximately 2.6%, 10.9% and 3.1% of revenue attributable to our rental related

services, respectively.



– 212 –


Our sale of construction equipment business segment principally involves the sale of new

and used construction equipment. Our construction equipment which are typically available for

sale are mainly (i) power and energy equipment; (ii) high reach equipment; and (iii) earthmoving

equipment. New equipment mainly represents construction equipment sourced from internationally

renowned manufacturers and from our OEM manufacturer in the PRC. Used equipment mainly

represents second-hand construction equipment sourced from other construction equipment

providers and construction equipment phased out from our rental fleet. In addition, depending on

our customers’ needs, we also sell spare parts from our inventory to our customers. Revenue

from the sale of construction equipment amounted to approximately HK$3.5 million, HK$22.5

million and HK$32.9 million, representing approximately 6.5%, 23.9% and 25.6% of our Group’s

total revenue for the three years ended 31 March 2021, respectively.

The following table sets forth the details of our revenue generated from the sale of new and

used construction equipment during the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

New equipment 1,689 48.5 1,236 5.5 15,750 47.8Used equipment (Note) 1,558 44.7 20,741 92.4 16,133 49.0

Spare parts 235 6.8 480 2.1 1,057 3.2

Total 3,482 100.0 22,457 100.0 32,940 100.0

Note:

Used equipment includes second-hand equipment which were sourced externally from third party construction

equipment providers and internally from our rental fleet.

For the three years ended 31 March 2021, revenue from the sale of new equipment


approximately 48.5%, 5.5% and 47.8% of total revenue from the sale of construction equipment

business segment, respectively. For the same years, revenue from the sale of used equipment


approximately 44.7%, 92.4% and 49.0% of total revenue from the sale of construction equipment

business segment, respectively.



– 213 –

Revenue by geographical location

The following table sets forth the details of our revenue by geographical location during the



HK$’000 % HK$’000 % HK$’000 %

Hong Kong 42,547 79.1 82,361 87.7 118,635 92.1

The PRC 11,255 20.9 11,519 12.3 10,150 7.9

Total 53,802 100.0 93,880 100.0 128,785 100.0

For the three years ended 31 March 2021, our services provided in Hong Kong contributed

to approximately HK$42.5 million, HK$82.4 million and HK$118.6 million of revenue,

representing approximately 79.1%, 87.7% and 92.1% of our total revenue, respectively. For the

same years, our services provided in the PRC contributed to approximately HK$11.3 million,

HK$11.5 million and HK$10.2 million of revenue, representing approximately 20.9%, 12.3% and

7.9% of our total revenue, respectively.

Cost of sales and services

Our cost of sales and services mainly represents the direct costs incurred for our

construction equipment rental services and sale of construction equipment.

Our cost of sales and services amounted to approximately HK$36.7 million, HK$45.5

million and HK$53.0 million for the three years ended 31 March 2021, respectively. The

following table sets forth the details of our cost of sales and services by business segments during

the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

Rental services 34,818 94.9 32,803 72.2 32,406 61.2

Sale of construction equipment 1,854 5.1 12,659 27.8 20,549 38.8

Total 36,672 100.0 45,462 100.0 52,955 100.0



– 214 –

Our direct costs primarily consist of cost of inventories sold, staff cost, depreciation and

rental cost. The following table sets forth the breakdown of our cost of sales and services during

the Track Record Period:


HK$’000 % HK$’000 % HK$’000 %

Cost of inventories sold 1,556 4.2 11,399 25.1 19,295 36.4Staff cost 2,736 7.5 2,735 6.0 2,596 4.9Depreciation 22,867 62.4 21,718 47.8 21,813 41.2

Rental cost 6,432 17.5 6,780 14.9 5,995 11.3Transportation and handling cost 1,562 4.3 1,349 3.0 1,441 2.7Cost of consumables andspare parts 853 2.3 820 1.8 1,157 2.2

Others (Note) 666 1.8 661 1.4 658 1.3

Total 36,672 100.0 45,462 100.0 52,955 100.0

Note:

Others mainly consist of equipment certification fees and insurance premium.

Cost of inventories sold

Cost of inventories sold mainly represents the procurement cost of new and used

construction equipment we procured from third party construction equipment providers for sale to

our customers, the net carrying amount of used construction equipment transferred from our plant

and equipment to inventory which have become held for sale to our customers and other direct

costs incurred for our sale of construction equipment business segment such as cost of spare parts.

For the three years ended 31 March 2021, cost of inventories sold amounted to approximately

HK$1.6 million, HK$11.4 million and HK$19.3 million, respectively, representing approximately

4.2%, 25.1% and 36.4% of our cost of sales and services for the corresponding years,

respectively.

Staff cost

Staff cost mainly represents remuneration paid to our operational employees, contributions

made to staff benefit plans and other staff benefits. For the three years ended 31 March 2021,

staff cost amounted to approximately HK$2.7 million, HK$2.7 million and HK$2.6 million,

respectively, representing approximately 7.5%, 6.0% and 4.9% of our cost of sales and services

for the corresponding years, respectively.



– 215 –

Depreciation

Depreciation mainly represents the depreciation expense of (i) our rental fleet; and (ii) right-

of-use assets in relation to leased properties for our rental services business segment, namely HK

Property 1, HK Property 2 and PRC Property 1. For the three years ended 31 March 2021,

depreciation expense of our rental fleet amounted to approximately HK$21.8 million, HK$20.7

million and HK$20.3 million, respectively. Depreciation of right-of-use assets of HK Property 1

and HK Property 2 was approximately HK$0.5 million for the year ended 31 March 2021 as a

lease agreement for a term of three years was entered into on 1 March 2021 for each of them. For

the three years ended 31 March 2021, depreciation of right-of-use assets of PRC Property 1 was

approximately HK$1.0 million, HK$1.0 million and HK$1.0 million, respectively. Depreciation

expenses accounted for approximately 62.4%, 47.8% and 41.2% of our cost of sales and services

for the corresponding years, respectively.

Rental cost

Rental cost mainly represents the rental our Group incurred for the storage of our

construction equipment, our inventories and our office. During the Track Record Period, we had

leased HK Property 1 and HK Property 2 and applied the short-term lease recognition exemption

and recognised lease payments as expense. For the three years ended 31 March 2021, rental cost

amounted to approximately HK$6.4 million, HK$6.8 million and HK$6.0 million, respectively,

representing approximately 17.5%, 14.9% and 11.3% of our cost of sales and services for the

corresponding years, respectively.

On 1 March 2021, our Group entered into a lease agreement for each of HK Property 1, HK

Property 2, and PRC Property 1 for a term of three years and we have recognised the value of the

right-of-use assets and depreciation in accordance with HKFRS 16. For further details of the lease

agreements, please refer to the paragraph headed ‘‘Relationship with our Controlling Shareholders

– Transactions entered into before [REDACTED] which would otherwise constitute connected

transactions’’ in this document.



– 216 –

Gross profit and gross profit margin

Our gross profit were approximately HK$17.1 million, HK$48.4 million and HK$75.8

million, representing gross profit margin of approximately 31.8%, 51.6% and 58.9% for the three

years ended 31 March 2021, respectively. The following table sets forth the details of our gross

profit and gross profit margin by business segments during the Track Record Period:


Grossprofit

HK$’000% of our

gross profit

Grossprofit

margin%

Grossprofit

HK$’000% of our

gross profit

Grossprofit

margin%

Grossprofit

HK$’000% of our

gross profit

Grossprofit

margin%

Rental services 15,502 90.5 30.8 38,620 79.8 54.1 63,439 83.7 66.2Sale of construction equipment 1,628 9.5 46.8 9,798 20.2 43.6 12,391 16.3 37.6

Total 17,130 100.0 31.8 48,418 100.0 51.6 75,830 100.0 58.9

Gross profit of our rental services accounted for approximately 90.5%, 79.8% and 83.7% of

our total gross profit for the three years ended 31 March 2021, respectively. Gross profit of our

sale of construction equipment accounted for approximately 9.5%, 20.2% and 16.3% of our total

gross profit for the three years ended 31 March 2021, respectively.

Gross profit margin of our rental services were approximately 30.8%, 54.1% and 66.2% for

the three years ended 31 March 2021, respectively. Gross profit margin of our sale of construction

equipment were approximately 46.8%, 43.6% and 37.6% for the three years ended 31 March

2021, respectively.

The gross profit margin of our rental services segment is mainly affected by utilisation rate

of our rental fleet and cost of services which is of a relatively stable nature. Meanwhile, the gross

profit margin of our sale of construction equipment segment is mainly affected by the pricing of

our construction equipment as we generally charge on a cost-plus basis.

(i) The utilisation rate of our rental fleet is mainly determined by the rental days to our

customers. For further details on our rental fleet’s utilisation rates, please refer to the

paragraph headed ‘‘Business – Our fleet management – Equipment utilisation’’ in this

document.

(ii) The primary cost components of our rental services include depreciation and staff cost,

which are relatively stable and together account for approximately 73.5%, 74.5% and

75.0% of our cost of sales and services of our rental services business segment during

the Track Record Period. Our Group’s plant and machinery are depreciated on a

straight-line basis over their respective useful lives, ranging from five to 10 years.

Therefore, any incremental increase in the utilisation rate of our rental fleet may not

necessarily result in a direct increase in our cost of sales and services of equal



– 217 –

magnitude. Moreover, our rental fleet consists of a combination of brands of

construction equipment, including our own-branded KCG generators. The procurement

cost of our own-branded KCG generators is generally lower than most generators

supplied by other construction equipment providers as we procure directly from our

OEM manufacturer. As such, due to its lower base cost, the corresponding depreciation

expense is comparatively lower when compared to the depreciation expense of other

brands of generators in our rental fleet. We also maintained a relatively stable

headcount of employees for routine maintenance and servicing of our rental fleet

during the Track Record Period.

(iii) The selling price we charge for construction equipment is generally determined by our

pricing for each type of new or used construction equipment. During the Track Record

Period, the selling price of new construction equipment ranged from HK$53,820 to

HK$695,000, while the selling price for used construction equipment ranged from

HK$3,000 to HK$600,600.

Other income

Our other income mainly consists of dividend income, interest income, management fee

income, sundry income, compensation income and government subsidy. For the three years ended

31 March 2021, we recorded other income of approximately HK$0.8 million, HK$0.1 million and

HK$1.3 million, respectively. The following table sets forth the breakdown of our other income

during the Track Record Period:

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Dividend income 116 121 61

Interest income 11 4 5

Management fee income 96 – –

Sundry income – – 432

Compensation income 531 – –

Government subsidy 2 – 820

Total 756 125 1,318



– 218 –

Government subsidy represents the grants received from the COVID-19 Anti-epidemic Fund

under the Employment Support Scheme as launched by the Government. For the three years

ended 31 March 2021, government subsidy amounted to nil, nil and approximately HK$0.8

million, respectively.

Other net gains/(losses)

Our other net gains/(losses) mainly consists of (i) gains/(losses) on foreign exchange which

represents the gain or loss on the difference of exchange rates between Hong Kong dollars and

foreign currencies; (ii) gain on disposal of plant and equipment; (iii) fair value (losses)/gains on

financial assets at fair value through profit or loss; and (iv) impairment losses on trade

receivables. For the three years ended 31 March 2021, we recorded other net gains/(losses) of

approximately HK$13.3 million, HK$(1.3) million and HK$1.3 million, respectively. The

following table sets forth the breakdown of other net gains/(losses) during the Track Record

Period:

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Net exchange gains/(losses) 418 28 (145)

Gain on disposal of plant and equipment 13,248 – 200

Loss on write off of plant and equipment – (13) –

Fair value (losses)/gains on financial assets

at fair value through profit or loss (272) (826) 1,066

Impairment losses on trade receivables, net (140) (440) –

Reversal of impairment losses on trade

receivables, net – – 201

Total 13,254 (1,251) 1,322

Prior to and during the Track Record Period, our Group, in its ordinary course of business,

routinely phase out and sell used construction equipment from our rental fleet which were held

for rental by our customers. For the year ended 31 March 2019, the net gain from the sale of used

construction equipment was recognised as gain on disposal of plant and equipment in other net

gains/(losses). In order to have a better segregation between the rental and sales of our

construction equipment, our Directors consider that our fleet management strategy should be

enhanced, where used construction equipment from our rental fleet which have been phased out or

assessed to be replaced will be transferred to Chi Shing Equipment Trading, an indirect wholly-

owned subsidiary of our Company, at their respective carrying amounts and become our

inventories held for sale to our customers.



– 219 –

As such, beginning on 1 April 2019 and in line with our enhanced fleet management

strategy, the proceeds from the sale of used construction equipment was recognised as revenue for

the year ended 31 March 2020 and onwards in accordance with the applicable accounting

standards. Such recognition was mainly due to the different forms of accounting treatment

between the respective years. In substance, the sale of used construction equipment has been and

would continue to be a part of our Group’s ordinary course of business subsequent to the Track

Record Period to satisfy our customers’ different equipment services needs.

Administrative and other operating expenses

Our administrative and other operating expenses mainly consist of staff cost, professional

fees, marketing and promotion expenses, depreciation, travelling expenses, office expenses and

other miscellaneous expenses. The following table sets forth the breakdown of our administrative

and other operating expenses during the Track Record Period:

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Staff cost 6,023 4,558 6,005

Professional fee 420 1,502 1,773

Marketing and promotion expenses 82 916 1,472

Depreciation 607 485 552

Travelling expenses 962 621 480

Office expenses 351 308 490

Other miscellaneous expenses 727 547 342

Total 9,172 8,937 11,114

For the three years ended 31 March 2021, our administrative and other operating expenses

amounted to approximately HK$9.2 million, HK$8.9 million and HK$11.1 million, which

accounted for approximately 17.0%, 9.5% and 8.6% of our total revenue, respectively.

The largest component of our administrative and other operating expenses was our staff

cost, which amounted to approximately HK$6.0 million, HK$4.6 million and HK$6.0 million,

representing approximately 65.7%, 51.0% and 54.0% of our administrative and other operating

expenses for the three years ended 31 March 2021, respectively. Staff cost under our

administrative and other operating expenses represents remuneration, contributions made to staff

benefit plans and others staff benefits paid to our management and administrative employees.



– 220 –

Professional fee mainly represents fees paid to legal and accounting professionals.

Marketing and promotion expenses mainly represent advertising and promotion expenses

incurred by our sales and rental team for business development purposes.

Depreciation mainly represents depreciation expense of our furniture and equipment and

motor vehicles, which are not directly attributable to the generation of revenue.

Travelling expenses mainly represents local and overseas travelling expenses and motor

vehicle expenses, such as fuel costs, toll fee, parking fee, vehicle registration and vehicle license

fees.

Office expenses mainly represents our office and stationary expenses and utility expenses.

Other miscellaneous expenses mainly represent bank charges, insurance premium and sundry

expenses.

Finance costs

Our finance costs mainly consist of interest expenses on borrowings and lease liabilities. For

the three years ended 31 March 2021, our finance costs amounted to approximately HK$1.7

million, HK$1.2 million and HK$1.2 million, respectively.

Income tax expenses

Our income tax consists of current and deferred tax expenses for jurisdictions in which we

are subject to tax. During the Track Record Period, the amount of taxation charged to our

combined statements of profit or loss and other comprehensive income comprised (i) Hong Kong

profits tax; and (ii) PRC taxation.

On 21 March 2018, the Hong Kong Legislative Council passed The Inland Revenue

(Amendment) (No. 7) Bill 2017 (the ‘‘Bill’’) which introduces the two-tiered profits tax rates

regime. The Bill was signed into law on 28 March 2018 and was gazetted on the following day.

Under the two-tiered profits tax rates regime, the first HK$2.0 million of profits of qualifying

corporations will be taxed at 8.25%, and profits above HK$2.0 million will be taxed at 16.5%.

The two-tiered profits tax rates regime is applicable to one of the companies in our Group with

estimated assessable profits for our annual reporting periods ending on or after 1 April 2018,

including the three years ended 31 March 2021.

The current income tax in the PRC is calculated based on the statutory rate of 25.0% of the

assessable profit of our PRC operations as determined in accordance with the PRC Enterprise

Income Tax Law.



– 221 –

For more details, please refer to Note 12 to the Accountants’ Report as set out in Appendix

I to this document. For the three years ended 31 March 2021, our income tax expenses were

approximately HK$2.8 million, HK$6.2 million and HK$10.6 million, respectively. This

represents an effective tax rate of approximately 14.0%, 16.9% and 17.2%, respectively, for the

corresponding years. Our effective tax rate is dependent on the location of the assessable profits

and also upon the incident of items affecting assessable profits, including but not limited to, tax

effect of non-deductible expenses, tax effect of non-taxable income and effect of concessionary

tax rate.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Year ended 31 March 2021 compared to year ended 31 March 2020

Revenue

Our Group’s revenue increased by approximately HK$34.9 million, or 37.2%, from

approximately HK$93.9 million for the year ended 31 March 2020 to approximately HK$128.8

million for the year ended 31 March 2021.

Rental services

Revenue of rental services increased by approximately HK$24.4 million, or 34.2%, from



Rental Income

Rental income increased by approximately HK$22.2 million, or 32.6%, from approximately

HK$68.2 million for the year ended 31 March 2020 to approximately HK$90.4 million for the

year ended 31 March 2021. The increase was mainly attributable to the increase in demand from

our customers for (i) power and energy equipment; (ii) high reach equipment; and (iii)

earthmoving equipment, as illustrated by an increase in utilisation rates of these respective types

of construction equipment.


Revenue generated from the rental of power and energy equipment increased by

approximately HK$19.6 million, or 59.1%, from approximately HK$33.2 million for the year

ended 31 March 2020 to approximately HK$52.8 million for the year ended 31 March 2021. The

increase was mainly due to the increase in revenue from the rental of generators and air

compressors by our customers in Hong Kong.



– 222 –

Revenue from the rental of generators by our customers in Hong Kong increased by

approximately HK$12.3 million from approximately HK$16.6 million for the year ended 31

March 2020 to approximately HK$29.0 million for the year ended 31 March 2021. Such increase

was mainly attributable to (i) the increase in revenue from Customer C; but partially offset by (ii)

the decrease in revenue from Customer F. Net increase in revenue from the aforementioned major

customers amounted to approximately HK$1.1 million between the respective years. The

remaining increase of approximately HK$11.2 million was generally contributed by a wide range

of customers, illustrated by an increase in the number of customers renting generators between the

respective years. As a result of the above, we recorded a net increase in utilisation rate of our

generators from approximately 52.1% to 89.5% over the corresponding years.

Revenue from the rental of air compressors by our customers in Hong Kong increased by

approximately HK$7.6 million from approximately HK$14.1 million for the year ended 31 March

2020 to approximately HK$21.7 million for the year ended 31 March 2021. Such increase was

mainly attributable to (i) the increase in revenue from Customer H and Customer F; but partially

offset by (ii) the decrease in revenue from Customer B and Customer E. Net increase in revenue

from the aforementioned major customers amounted to approximately HK$1.2 million. The

remaining increase of approximately HK$6.4 million was generally contributed by a wide range

of customers, illustrated by an increase in the number of customers renting air compressors

between the respective years. As a result of the above, we recorded a net increase in utilisation

rate of our air compressors from approximately 85.5% to 90.4% over the corresponding years.


Revenue generated from the rental of high reach equipment increased by approximately

HK$0.9 million, or 2.6%, from approximately HK$34.3 million for the year ended 31 March 2020

to approximately HK$35.2 million for the year ended 31 March 2021. The increase was mainly

due to the increase in revenue from the rental of high reach equipment by our customers in Hong

Kong.

Revenue from the rental of high reach equipment by our customers in Hong Kong increased

by approximately HK$1.9 million from approximately HK$25.7 million for the year ended 31


was mainly attributable to the increase in revenue from Customer F by approximately HK$1.5

million. In addition, there was an increase in number of customers renting high reach equipment

between the respective years. As a result of the above, we recorded a net increase in utilisation

rate of our high reach equipment from approximately 47.4% to 53.1% over the corresponding

years.



– 223 –

Earthmoving equipment

Revenue from the rental of earthmoving equipment by our customers in Hong Kong

increased by approximately HK$1.7 million from approximately HK$0.6 million for the year

ended 31 March 2020 to approximately HK$2.2 million for the year ended 31 March 2021. Such

increase was mainly attributable to the increase in revenue from Customer F and Customer H.

Revenue from the aforementioned major customers increased by approximately HK$1.0 million.

As a result of the above, we recorded an increase in utilisation rate of our earthmoving equipment

from approximately 31.4% to 58.5% over the corresponding years.

Rental related services

Revenue of rental related services increased by approximately HK$2.2 million, or 66.5%,

from approximately HK$3.3 million for the year ended 31 March 2020 to approximately HK$5.4

million for the year ended 31 March 2021 mainly due to the increase in repair and maintenance

services of approximately HK$1.7 million between the respective years.


Revenue of the sale of construction equipment increased by approximately HK$10.5 million,

or 46.7%, from approximately HK$22.5 million for the year ended 31 March 2020 to

approximately HK$32.9 million for the year ended 31 March 2021. This was mainly due to the

increase in revenue of the sale of power and energy equipment of approximately HK$13.6 million

comprising of 148 generators and 65 air compressors for the year ended 31 March 2021,

compared to 94 generators and 29 air compressors sold for the year ended 31 March 2020. This

was offset by the decrease in revenue from the sale of high reach equipment comprising 123 high

reach equipment of approximately HK$3.7 million for the year ended 31 March 2020 compared to

37 high reach equipment sold for the year ended 31 March 2021.


Our Group’s cost of sales and services increased by approximately HK$7.5 million, or

16.5%, from approximately HK$45.5 million for the year ended 31 March 2020 to approximately

HK$53.0 million for the year ended 31 March 2021. This was mainly due to increase in cost of

sales and services of approximately HK$7.9 million from the sale of construction equipment

business segment and partially offset by the decrease in cost of sales and services from the rental

services business segment. Other items such as depreciation, staff cost and transportation and

handling cost remained relatively stable over the respective years.



– 224 –

The increase of our cost of sales and services from sale of construction equipment business

segment was mainly due to the increase in cost of inventories sold of approximately HK$7.9

million, or 69.3%, from approximately HK$11.4 million for the year ended 31 March 2020 to

approximately HK$19.3 million for the year ended 31 March 2021, which was in line with the

increase in revenue from sale of construction equipment as described above.


Our overall gross profit increased by approximately HK$27.4 million, or 56.6%, from



Gross profit of rental services increased by approximately HK$24.8 million, or 64.3%, from


million for the year ended 31 March 2021. Gross profit margin of rental services increased from

approximately 54.1% for the year ended 31 March 2020 to approximately 66.2% for the year

ended 31 March 2021. This was mainly attributable to the increase in revenue from rental services

as described above while cost of sales and services of rental services remained relatively stable at

approximately HK$32.8 million and HK$32.4 million for the years ended 31 March 2020 and

2021, respectively.

Gross profit of sale of construction equipment increased by approximately HK$2.6 million,


approximately HK$12.4 million for the year ended 31 March 2021. Gross profit margin of sale of

construction equipment decreased from approximately 43.6% for the year ended 31 March 2020

to approximately 37.6% for the year ended 31 March 2021. This was mainly attributable to the

increase in sale of new construction equipment which generally recorded a slightly lower gross

profit margin.

Consequently, as a whole, gross profit margin increased from approximately 51.6% for the

year ended 31 March 2020 to approximately 58.9% for the year ended 31 March 2021.

Other income

Other income increased by approximately HK$1.2 million, or 954.4%, from approximately

HK$0.1 million for the year ended 31 March 2020 to approximately HK$1.3 million for the year

ended 31 March 2021. The increase was mainly due to the increase in government subsidy of

approximately HK$0.8 million in relation to the COVID-19 Anti-epidemic Fund under the

Employment Support Scheme launched by the Government.



– 225 –


Other net gains/(losses) increased by approximately HK$2.6 million from a loss of

approximately HK$1.3 million for the year ended 31 March 2020 to a gain of approximately

HK$1.3 million for the year ended 31 March 2021. The increase was mainly due to the increase

in fair value gain of financial assets at fair value through profit or loss of approximately HK$1.9

million from a loss of approximately HK$0.8 million for the year ended 31 March 2020 to a gain

of approximately HK$1.1 million for the year ended 31 March 2021.


Administrative and other operating expenses increased by approximately HK$2.2 million, or


HK$11.1 million for the year ended 31 March 2021. The increase was mainly attributable to (i)

the increase in staff cost of approximately HK$1.4 million due to increase in staff bonus; (ii)

increase in marketing and promotion expenses of approximately HK$0.6 million; and (iii) increase

in professional fee of approximately HK$0.3 million.

Finance costs

Finance costs remained relatively stable at approximately HK$1.2 million and HK$1.2

million for the years ended 31 March 2020 and 2021, respectively.

[REDACTED]

[REDACTED] increased by approximately HK$[REDACTED], or [REDACTED], from

approximately HK$[REDACTED] for the year ended 31 March 2020 to approximately

HK$[REDACTED] for the year ended 31 March 2021.

Income tax expense

Income tax expense increased by approximately HK$4.4 million, or 71.0%, from


million for the year ended 31 March 2021. It was mainly due to the increase in profit before

taxation for reasons as described above. Our effective tax rates for the years ended 31 March

2020 and 2021 were approximately 16.9% and 17.2%, respectively. The variances between the

effective tax rate and the standard tax rate was primarily due to the non-deductible expenses

arising from the [REDACTED].



– 226 –

Profit for the year and net profit margin

As a result of the foregoing, profit for the year increased by approximately HK$20.7


approximately HK$51.2 million for the year ended 31 March 2021. Net profit margin increased

from approximately 32.5% for the year ended 31 March 2020 to approximately 39.8% for the year

ended 31 March 2021.

Year ended 31 March 2020 compared to year ended 31 March 2019

Revenue

Our Group’s revenue increased by approximately HK$40.1 million, or 74.5%, from



Rental services

Revenue of rental services increased by approximately HK$21.1 million, or 41.9%, from



Rental income

Rental income increased by approximately HK$20.7 million, or 43.5%, from approximately


year ended 31 March 2020. The increase was mainly attributable to the increase in revenue from

our customers for (i) power and energy equipment; and (ii) high reach equipment, as illustrated by

an increase in utilisation rates of these respective types of construction equipment.


Revenue generated from the rental of power and energy equipment increased by

approximately HK$17.5 million, or 111.4%, from approximately HK$15.7 million for the year

ended 31 March 2019 to approximately HK$33.2 million for the year ended 31 March 2020. The

increase was primarily due to the increase in revenue from the rental of generators and air

compressors by our customers in Hong Kong.



– 227 –

Revenue from the rental of generators by our customers in Hong Kong increased by



mainly attributable to the increase in revenue from Customer F, Customer H and Customer I.

Revenue from the aforementioned major customers increased by approximately HK$6.3 million

between the respective years. In addition, there was an increase in number of customers renting

generators between the respective years. As a result of the above, we recorded an increase in

utilisation rate of our generators from approximately 26.2% to 52.1% over the corresponding

period.

Revenue from the rental of air compressors by our customers in Hong Kong increased by



mainly attributable to the increase in revenue from Customer B and Customer F. Revenue from

the aforementioned major customers increased by approximately HK$1.8 million between the

respective years. The remaining increase of approximately HK$7.2 million was generally

contributed by a wide range of customers, illustrated by an increase in the number of customers

between the respective years. As a result of the above, we recorded an increase in utilisation rate

of our air compressors from approximately 29.6% to 85.5% over the corresponding years.


Revenue generated from the rental of high reach equipment increased by approximately

HK$3.3 million, or 10.5%, from approximately HK$31.1 million for the year ended 31 March

2019 to approximately HK$34.3 million for the year ended 31 March 2020. The increase was

mainly due to the increase in revenue from the rental of high reach equipment by our customers

in Hong Kong.

Revenue from the rental of high reach equipment by our customers in Hong Kong increased

by approximately HK$3.3 million from approximately HK$22.5 million for the year ended 31


was mainly attributable to (i) the increase in revenue from Customer B, Customer F and Customer

C; but partially offset by (ii) the decrease in revenue from Customer A. Net increase in revenue

from the aforementioned major customers amounted to approximately HK$2.9 million between

the respective years. In addition, there was an increase in number of customers between the

respective years. As a result of the above, we recorded an increase in utilisation rate of our high

reach equipment from approximately 43.6% to 47.4% over the corresponding years.



– 228 –


Revenue of the sale of construction equipment increased by approximately HK$19.0 million,


approximately HK$22.5 million for the year ended 31 March 2020. This was mainly due to the

increase in revenue of the sale of power and energy equipment of approximately HK$11.4 million

comprising of 94 generators, 29 air compressors and one diesel welder for the year ended 31

March 2020, compared to three generators and four air compressors sold during the year ended 31

March 2019. Revenue of the sale of high reach equipment increased by approximately HK$6.3

million where our Group sold 123 high reach equipment for the year ended 31 March 2020

compared to five high reach equipment for the year ended 31 March 2019. In addition, in line

with our enhanced fleet management strategy, the proceeds from the sale of used construction

equipment from our rental fleet was recognised as revenue for the year ended 31 March 2020 in

accordance with the applicable accounting standards, thus contributing to the increase in revenue

between the corresponding years. For further details, please refer to the paragraph headed

‘‘Description of selected items from combined statements of profit or loss and other

comprehensive income – Other net gains/(losses)’’ in this section.


Our Group’s cost of sales and services increased by approximately HK$8.8 million, or


HK$45.5 million for the year ended 31 March 2020. This was mainly due to the increase in cost

of sales and services of approximately HK$10.8 million from the sale of construction equipment

business segment and partially offset by the decrease in cost of sales and services of

approximately HK$2.0 million from the rental services business segment.

The increase of our cost of sales and services from sale of construction equipment business

segment was mainly due to the increase in cost of inventories sold of approximately HK$9.8


approximately HK$11.4 million for the year ended 31 March 2020. In line with the recognition of

the sale of used construction equipment from our rental fleet as revenue as described above, the

corresponding cost of inventories sold was recognised in cost of sales and services for the year

ended 31 March 2020, thus contributing to the increase in cost of sales and services between the

corresponding years. For further details, please refer to the paragraph headed ‘‘Description of

selected items from combined statements of profit or loss and other comprehensive income –

Other net gains/(losses)’’ in this section.



– 229 –

The decrease of our cost of sales and services from rental services business segment was

mainly due to the decrease in depreciation expense of approximately HK$1.1 million, or 5.0%,

from approximately HK$22.9 million for the year ended 31 March 2019 to approximately

HK$21.7 million for the year ended 31 March 2020. This was mainly attributable to the decrease

in depreciation expense of our rental fleet by approximately HK$1.1 million from approximately


year ended 31 March 2020 due to the decrease in the size of our rental fleet from 1,349 units to

1,182 units over the respective years.


Our overall gross profit increased by approximately HK$31.3 million, or 182.7%, from



Gross profit of rental services increased by approximately HK$23.1 million, or 149.1%,

from approximately HK$15.5 million for the year ended 31 March 2019 to approximately

HK$38.6 million for the year ended 31 March 2020. Gross profit margin of rental services

increased from approximately 30.8% for the year ended 31 March 2019 to approximately 54.1%

for the year ended 31 March 2020. This was mainly due to the increase in revenue of our rental

services as described above and decrease in cost of sales and services as described above.

Gross profit of the sale of construction equipment increased by approximately HK$8.2


approximately HK$9.8 million for the year ended 31 March 2020. Gross profit margin of the sale

of construction equipment remained relatively stable at approximately 46.8% and 43.6% for the

years ended 31 March 2019 and 2020, respectively.

Consequently, as a whole, gross profit margin increased from approximately 31.8% for the

year ended 31 March 2019 to approximately 51.6% for the year ended 31 March 2020.

Other income

Other income remained at a relatively minimal level of approximately HK$0.8 million and

approximately HK$0.1 million for the two years ended 31 March 2020, respectively.


Other net gains/(losses) decreased by approximately HK$14.5 million from a gain of

approximately HK$13.3 million for the year ended 31 March 2019 to a loss of approximately

HK$1.3 million for the year ended 31 March 2020. Our Group recorded gain on disposal of plant

and equipment of approximately HK$13.2 million for the year ended 31 March 2019, arising from

the sale of used construction equipment from our rental fleet. Gain on disposal of plant and

equipment was nil for the year ended 31 March 2020. In line with our enhanced fleet management



– 230 –

strategy, beginning on 1 April 2019, our used construction equipment which have been phased

out or assessed to be replaced will be transferred to Chi Shing Equipment Trading at their

respective carrying amounts and become our inventories held for sale to our customers. The sales

proceed from the sale of such construction equipment was recognised as revenue for the year

ended 31 March 2020 and onwards in accordance with the applicable accounting standards. For

more details, please refer to the paragraph headed ‘‘Description of selected items from combined

statements of profit or loss and other comprehensive income – Other net gains/(losses)’’ in this

section. In addition, there was an increase in fair value loss on financial assets at fair value

through profit or loss of approximately HK$0.6 million, or 203.7%, from approximately HK$0.3

million for the year ended 31 March 2019 to approximately HK$0.8 million for the year ended 31

March 2020.


Administrative and other operating expenses remained relatively stable at approximately

HK$9.2 million and HK$8.9 million for the years ended 31 March 2019 and 2020, respectively.

Finance costs

Finance costs decreased by approximately HK$0.5 million, or 28.2%, from approximately

HK$1.7 million for the year ended 31 March 2019 to approximately HK$1.2 million for the year

ended 31 March 2020. The decrease was mainly due to the decrease in interest from bank

borrowings, which was in line with the decrease in bank borrowings between the respective years.

[REDACTED]

[REDACTED] increased from [REDACTED] for the year ended 31 March 2019 to

approximately HK$[REDACTED] for the year ended 31 March 2020.

Income tax expense

Income tax expense increased by approximately HK$3.4 million, or 119.3%, from


million for the year ended 31 March 2020 due to the increase in profit before taxation with

reasons as described above. Our effective tax rates for the years ended 31 March 2019 and 2020

were approximately 14.0% and 16.9%, respectively. The variances between the effective tax rate

and the standard tax rate was primarily due to the non-deductible expenses arising from the

[REDACTED].



– 231 –

Profit for the year and net profit margin

As a result of the foregoing, profit for the year increased by approximately HK$13.1


approximately HK$30.5 million for the year ended 31 March 2020. Net profit margin remained

relatively stable at approximately 32.4% and 32.5% for the years ended 31 March 2019 and 2020,

respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our primary uses of cash are to satisfy our working capital needs. Our working capital

needs have been financed through a combination of funds generated from operations and bank

borrowings. As at 31 March 2019, 2020 and 2021, we had cash and cash equivalents of

approximately HK$19.2 million, HK$15.3 million and HK$18.7 million respectively. Going

forward, we expect to fund our working capital and other capital requirements with a combination

of various sources, including but not limited to cash generated from our operations and short-term

and long-term indebtedness.

The following table sets forth a summary of net cash flows for the years indicated:


HK$’000 HK$’000 HK$’000

Operating cash flows before movements inworking capital 32,479 61,337 83,921

Movements in working capital (5,704) 3,433 3,646Purchase of plant and machinery (21,101) (24,016) (34,204)Net income tax and interest paid (2,749) (3,362) (11,179)

Net cash generated from operating activities 2,925 37,392 42,184Net cash generated from/(used in) investing

activities 14,249 (34,850) (47,787)Net cash (used in)/generated from financing

activities (15,661) (6,281) 8,652

Net increase/(decrease) in cash and cashequivalents 1,513 (3,739) 3,049

Effect of foreign exchange rate changes, net (336) (195) 328Cash and cash equivalents at the beginning

of the year 18,045 19,222 15,288

Cash and cash equivalents at end ofthe year 19,222 15,288 18,665



– 232 –

Net cash generated from operating activities

For the year ended 31 March 2021, our net cash generated from operating activities were

approximately HK$42.2 million, reflecting mainly profit before taxation of approximately

HK$61.9 million, net of income tax and interest paid of approximately HK$11.2 million,

purchase of plant and machinery of approximately HK$34.2 million and adjusted by non-cash

items including deprecation of plant and equipment of approximately HK$20.8 million. This is

further adjusted by movements in working capital including (i) decrease in trade and other

receivables of approximately HK$3.5 million; (ii) increase in trade and other payables of

approximately HK$11.2 million; and (iii) increase in inventory of approximately HK$10.2

million. For further explanations of fluctuations for the aforesaid items from the combined

statements of financial position, please refer to the paragraph headed ‘‘Description of selected

items of combined statements of financial position’’ in this section.


approximately HK$37.4 million, reflecting mainly profit before taxation of approximately

HK$36.7 million, net of income tax and interest paid of approximately HK$3.4 million, purchase

of plant and machinery of approximately HK$24.0 million and adjusted by non-cash items

including deprecation of plant and equipment of approximately HK$20.7 million. This is further

adjusted by movements in working capital including (i) increase in trade and other receivables of

approximately HK$10.7 million; (ii) decrease in amount due from a related company of

approximately HK$6.8 million; (iii) decrease in trade and other payables of approximately

HK$2.2 million; and (iv) decrease in inventory of approximately HK$9.2 million. For further

explanations of fluctuations for the aforesaid items from the combined statements of financial

position, please refer to the paragraph headed ‘‘Description of selected items of combined

statements of financial position’’ in this section.


approximately HK$2.9 million, reflecting mainly profit before taxation of approximately HK$20.2

million, net of income tax and interest paid of approximately HK$2.7 million, purchase of plant

and machinery of approximately HK$21.1 million and adjusted by non-cash items including

depreciation of plant and equipment of approximately HK$21.7 million and gain on disposal of

plant and equipment of approximately HK$13.2 million. This is further adjusted by movements in

working capital including (i) increase in trade and other receivables of approximately HK$8.1

million; (ii) decrease in trade and other payables of approximately HK$1.4 million; (iii) decrease

in amount due from a related company of approximately HK$6.3 million; and (iv) increase in

inventory of approximately HK$1.3 million. For further explanations of fluctuations for the

aforesaid items from the combined statements of financial position, please refer to the paragraph

headed ‘‘Description of selected items of combined statements of financial position’’ in this

section.



– 233 –

Net cash used in from/(used in) investing activities

For the year ended 31 March 2021, our net cash generated from investing activities were

approximately HK$47.8 million. This was primarily attributable to (i) advances to controlling

shareholders of approximately HK$47.9 million; (ii) advances to a related company of

approximately HK$5.0 million; and offset by (iii) proceeds from disposal of financial assets at

fair value through profit or loss of approximately HK$5.8 million.

For the year ended 31 March 2020, our net cash used in investing activities were

approximately HK$34.9 million. This was primarily attributable to (i) advances to controlling

shareholders of approximately HK$32.2 million; and (ii) advances to a related company of


For the year ended 31 March 2019, our net cash generated from investing activities were

approximately HK$14.2 million. This was primarily attributable to (i) proceeds from disposal of

plant and equipment of approximately HK$17.2 million; (ii) repayment from a related company of

approximately HK$10.6 million; and offset by (iii) advances to controlling shareholders of

approximately HK$4.8 million; and (iv) advances to a related company of approximately

HK$11.8 million.

Net cash (used in)/generated from financing activities

For the year ended 31 March 2021, our net cash generated from financing activities were

approximately HK$8.7 million. This was primarily attributable to (i) new bank borrowings raised

of approximately HK$32.4 million; and offset by (ii) repayments of bank borrowings of

approximately HK$16.8 million; (iii) repayment to related parties of approximately HK$4.1

million; and (iv) repayments of lease liabilities of approximately HK$1.6 million.

For the year ended 31 March 2020, our net cash used in financing activities were

approximately HK$6.3 million. This was primarily attributable to (i) repayments of bank

borrowings of approximately HK$20.4 million; (ii) repayments of lease liabilities of

approximately HK$2.9 million; and offset by (iii) new bank borrowings raised of approximately

HK$17.3 million.

For the year ended 31 March 2019, our net cash used in financing activities were

approximately HK$15.7 million. This was primarily attributable to (i) repayments of bank

borrowings of approximately HK$19.3 million; (ii) repayments of lease liabilities of

approximately HK$3.4 million; and (iii) new bank borrowings raised of approximately HK$7.9

million.



– 234 –

Capital commitment

Our Group had no material capital commitments outstanding as at 31 March 2019, 2020 and

2021 not provided for in this section.

Capital expenditure

Our capital expenditure for the years ended 31 March 2019, 2020 and 2021 amounted to

approximately HK$22.0 million, HK$24.2 million and HK$35.6 million, respectively, comprising

mainly for the purchase of plant and machinery.

Save for the planned capital expenditure as set out in the section headed ‘‘Future Plans and

[REDACTED]’’ in this document and the additions of plant and equipment such as furniture and

equipment, leasehold improvements and motor vehicles for our business operations from time to

time, currently, we do not have any material capital expenditure planned as at the Latest

Practicable Date.

SUFFICIENCY OF WORKING CAPITAL

Taking into account the financial resources available to our Group, including the internally

generated funds, available facilities and the estimated [REDACTED] from the issue of Shares

under the [REDACTED], our Directors are of the opinion that our Group has sufficient working

capital for its present requirements, that is, for at least the next 12 months from the date of this

document.

NET CURRENT ASSETS

The following table sets forth our current assets and current liabilities of the combined

statements of financial position as at the respective dates indicated:

As at 31 MarchAs at

31 May2019 2020 2021 2021

HK$’000 HK$’000 HK$’000 HK$’000

Current assetsInventories 1,963 2,426 15,572 14,735Trade and other receivables 29,571 37,771 34,409 44,925Financial assets at fair value through profit or loss 5,451 4,700 – –

Amount due from controlling shareholder 21,305 – 6,410 9,660Amount due from a related company 2,667 – 5,000 –

Tax recoverable 468 91 2,293 2,876Bank balances and cash 19,222 15,288 18,665 14,337

80,647 60,276 82,349 86,533



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As at 31 MarchAs at

31 May2019 2020 2021 2021

HK$’000 HK$’000 HK$’000 HK$’000

Current liabilitiesTrade and other payables 10,200 8,000 19,301 13,346Amounts due to ultimate holding company 2,762 – – –

Amounts due to related parties 14,491 13,562 8,253 7,478Contract liabilities – 44 1,434 583Lease liabilities 2,920 774 6,872 6,957Income tax payable 139 3,762 3,882 6,028Bank borrowings 23,818 20,773 36,389 38,046

54,330 46,915 76,131 72,438

Net current assets 26,317 13,361 6,218 14,095

Our Group recorded net current assets of approximately HK$26.3 million, HK$13.4 million,HK$6.2 million and HK$14.1 million as at 31 March 2019, 2020 and 2021 and 31 May 2021,respectively.

Our net current assets increased from approximately HK$6.2 million as at 31 March 2021 toapproximately HK$14.1 million as at 31 May 2021. Such increase was mainly attributable to (i)increase in trade and other receivables of approximately HK$10.5 million; (ii) decrease in tradeand other payables of approximately HK$6.0 million; but partially offset by (iii) decrease inamount due from a related company of approximately HK$5.0 million; and (iv) decrease in taxrecoverable of approximately HK$0.6 million. For further explanations of fluctuations for theaforesaid items from the combined statements of financial position, please refer to the paragraphheaded ‘‘Description of selected items of combined statements of financial position’’ in thissection.

Our net current assets decreased from approximately HK$13.4 million as at 31 March 2020to approximately HK$6.2 million as at 31 March 2021. Such decrease was mainly attributable to(i) increase in trade and other payables of approximately HK$11.3 million; (ii) increase in bankborrowings of approximately HK$15.6 million; but partially offset by (iii) the increase ininventories of approximately HK$13.1 million; and (iv) increase in amount due from controllingshareholder of approximately HK$6.4 million. For further explanations of fluctuations for theaforesaid items from the combined statements of financial position, please refer to the paragraphheaded ‘‘Description of selected items of combined statements of financial position’’ in thissection.

Our net current assets decreased from approximately HK$26.3 million as at 31 March 2019to approximately HK$13.4 million as at 31 March 2020. Such decrease was mainly attributable to(i) the decrease in amount due from controlling shareholder of approximately HK$21.3 million;(ii) decrease in bank balances and cash of approximately HK$3.9 million; but partially offset by(iii) increase in trade and other receivables of approximately HK$8.2 million; and (iv) decrease inbank borrowings of approximately HK$3.0 million. For further explanations of fluctuations forthe aforesaid items from the combined statements of financial position, please refer to theparagraph headed ‘‘Description of selected items of combined statements of financial position’’ inthis section.



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DESCRIPTION OF SELECTED ITEMS OF COMBINED STATEMENTS OF FINANCIAL

POSITION

Plant and equipment

Our Group’s plant and equipment mainly consist of (i) plant and machinery; (ii) furniture

and equipment; (iii) leasehold improvements; and (iv) motor vehicles. The following table sets

forth the carrying amounts of each type of plant and equipment as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Plant and machinery 115,345 112,136 124,707

Furniture and equipment 85 105 194

Leasehold improvements – – 875

Motor vehicles 1,576 1,089 797

Total 117,006 113,330 126,573

The carrying amount of plant and machinery decreased from approximately HK$115.3

million as at 31 March 2019 to approximately HK$112.1 million as at 31 March 2020 mainly due

to the disposal of 261 units of construction equipment and partly offset by the acquisition of 90

units of construction equipment. The carrying amount of plant and machinery increased from

approximately HK$112.1 million as at 31 March 2020 to approximately HK$124.7 million as at

31 March 2021 mainly due to the acquisition of 167 units of construction equipment and partly

offset by the disposal of 117 units of construction equipment.



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Right-of-use assets

Right-of-use assets represent the capitalisation of the lease payments under the leases of

plant and equipment and properties. The right-of-use assets are depreciated over their estimated

useful lives, using straight-line method, over the lease term per annum. The following table sets

forth the breakdown of our right-of-use assets at net carrying amounts as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Plant and machinery 3,927 – –

Motor vehicles 277 – –

Leased properties 1,832 734 20,948

Total 6,036 734 20,948

Our right-of-use assets primarily consist of leased properties and obligations under finance

lease for certain plant and machinery and motor vehicles, amounted to approximately HK$6.0

million, HK$0.7 million and HK$20.9 million as at 31 March 2019, 2020 and 2021, respectively.

During the Track Record Period, we entered into a lease agreement on 1 March 2021 with Mr.

Kok, our Controlling Shareholder, and companies held by him for each of HK Property 1, HK

Property 2 and PRC Property 1 which were accounted for as one-off in nature under HKFRS 16.

If these transactions were entered into after the [REDACTED], such transactions would constitute

connected transactions for our Group. We had consistently adopted HKFRS 16 to our combined

financial statements throughout the Track Record Period. Pursuant to HKFRS 16, at the

commencement of a lease, our Group as lessee shall recognise a liability to make lease payments

and an asset representing the right to the underlying asset during the lease term. Accordingly, the

lease transaction under each of the leases would be regarded as an acquisition of an asset by the

tenant for the purpose of the Listing Rules. For further details, please refer to the paragraph

headed ‘‘Relationship with our Controlling Shareholder – Transactions entered into before

[REDACTED] which would otherwise constitute connected transactions’’ in this document.



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Inventories

Our inventories represent our new and used construction equipment and spare parts. Our

inventories amounted to approximately HK$2.0 million, HK$2.4 million and HK$15.6 million as

at 31 March 2019, 2020 and 2021, respectively. The following table sets forth the average

inventory turnover days for the Track Record Period:

As at 31 March

2019 2020 2021

Average inventory turnover days (Note) 307.3 70.3 170.2

Note: Average inventory turnover day is calculated as the average of the beginning and ending inventory balance

for the year, divided by the cost of inventories sold included in cost of sales and services for that year,

multiplied by the number of days in the year.

For the three years ended 31 March 2021, our Group recorded average inventory turnover

days of approximately 307.3 days, 70.3 days and 170.2 days, respectively. Average inventory

turnover days decreased from approximately 307.3 days for the year ended 31 March 2019 to

approximately 70.3 days for the year ended 31 March 2020. Such decrease was mainly

attributable to the increase in cost of inventories sold, which was in line with the recognition of

the sale of used construction equipment from our rental fleet as revenue and the corresponding

cost of inventories sold was recognised as cost of sales and services for the year ended 31 March

2020, thus contributing to the increase. Average inventory turnover days increased from

approximately 70.3 days for the year ended 31 March 2020 to approximately 170.2 days for the

year ended 31 March 2021. Such increase was mainly attributable to the increase in inventory

balance from approximately HK$2.4 million as at 31 March 2020 to approximately HK$15.6

million as at 31 March 2021 primarily due to the acquisition of six generators, 18 air compressors

and four high reach equipment, which had not been sold during the year ended 31 March 2021,

resulting in a higher closing inventory balance as at the respective year end.

As at the Latest Practicable Date, approximately HK$2.4 million (or approximately 15.6%)

of our inventories as at 31 March 2021 had been sold to our customers or transferred to our rental

fleet.

Trade and other receivables

Trade receivables

Our trade receivables represent trade receivables from our customers of the sale of

construction equipment business segment and trade receivables from lessees of the rental services

business segment. Our trade receivables amounted to approximately HK$16.5 million, HK$33.8

million and HK$29.8 million as at 31 March 2019, 2020 and 2021, respectively.



– 239 –

The following table sets forth our trade receivables as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Trade receivables 719 5,195 3,861

Less: provision for loss allowance (19) (66) (53)

700 5,129 3,808

Trade receivables – lessees 16,073 29,325 26,458

Less: provision for loss allowance (301) (690) (510)

15,772 28,635 25,948

16,472 33,764 29,756

The following is an ageing analysis of trade receivables, net of allowance for impairment,

presented based on the invoice date as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Within 30 days 4,821 10,631 12,074

31 days to 60 days 2,919 4,876 4,395

61 days to 90 days 1,375 5,050 3,596

91 days to 180 days 3,787 7,080 6,943

181 days to 1 year 2,783 5,273 2,369

Over 1 year 787 854 379

16,472 33,764 29,756

Our Group closely monitors the credit quality of trade receivables and considers the debtors

that are neither past due nor impaired to be of a good credit quality. Before accepting any new

customer, our Group will assess the potential customer’s credit quality and determine the credit

limits of each customer.



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Our Group has a policy for allowance of impairment loss which is based on the evaluation

of collectability and ageing analysis of accounts and on management’s judgement including the

creditworthiness and the past collection history of each customer. Based on past experience, our

Directors are of the opinion that the trade receivables which were past due were still considered

fully recoverable due to sound repayment record of the relevant customers and that no further

provision for impairment is necessary as there has not been a significant change in their credit

quality.

The following table sets out our average trade receivables turnover days for the Track

Record Period:

As at 31 March

2019 2020 2021

Average trade receivables turnover days (Note) 107.1 97.7 90.0

Note: Average trade receivables turnover days is calculated as the average of the beginning and ending trade

receivables for the year, divided by our revenue for that year, multiplied by the number of days in the year.

For the three years ended 31 March 2021, our Group recorded average trade receivables

turnover days of approximately 107.1 days, 97.7 days and 90.0 days, respectively.

We generally offer our customers a credit term of up to 60 days, following our issue of

invoice. Average trade receivables turnover days decreased from approximately 107.1 days for the

year ended 31 March 2019 to approximately 97.7 days for the year ended 31 March 2020, and

further decreased to approximately 90.0 days for the year ended 31 March 2021. Such decreases

were mainly attributable to the faster settlement of outstanding receivables from our customers

between the respective years.

As at the Latest Practicable Date, approximately 63.4% (or approximately HK$18.9 million)

of our net trade receivables as at 31 March 2021 had been settled.



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Other receivables

Other receivables mainly consist of receivables for disposal of plant and equipment, value-

added tax recoverable, prepayments and deposits. Other receivables amounted to approximately

HK$13.1 million, HK$4.0 million and HK$4.7 million as at 31 March 2019, 2020 and 2021,

respectively.

Other receivables decreased from approximately HK$13.1 million as at 31 March 2019 to

approximately HK$4.0 million as at 31 March 2020. Such decrease was mainly due to our Group

having recorded receivables for disposal of plant and machinery of approximately HK$8.8 million

as at 31 March 2019 relating to the sale of used construction equipment from our rental fleet,

where the net gain from such sale was recognised as gain on disposal of plant and equipment in

other net gains/(losses) for the year ended 31 March 2019. In line with our enhanced fleet

management strategy as more fully described in the paragraph headed ‘‘Description of selected

items from combined statements of profit or loss and other comprehensive income – Other net

gains/(losses)’’ in this section above, receivables from the sale of used construction equipment

from our rental fleet were recognised in trade receivables as at 31 March 2020 and thus

receivables for disposal of plant and machinery in other receivables was nil as at 31 March 2020.

Other receivables remained relatively stable at approximately HK$4.0 million and HK$4.7 million

as at 31 March 2020 and 2021, respectively.

Trade and other payables

Trade and other payables primarily consist of trade and bills payables, rental deposits from

lessees and accruals and other payables. Trade and other payables amounted to approximately

HK$10.2 million, HK$8.0 million and HK$19.3 million as at 31 March 2019, 2020 and 2021,

respectively.

The following table sets forth our trade and other payables as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Trade and bills payables 7,273 2,139 15,953

Rental deposits from lessees 604 3,233 379

Accruals and other payables 2,323 2,628 2,969

10,200 8,000 19,301



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Trade and bills payables

The following table sets forth the ageing analysis of trade and bills payables presented based

on invoice date as at the dates indicated:

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Within 30 days 4,241 82 6,648

31 days to 60 days 1,552 2,057 3,642

61 days to 90 days 1,480 – 5,656

Over 90 days – – 7

7,273 2,139 15,953

The following table sets forth our average trade and bills payables turnover days for the


As at 31 March

2019 2020 2021

Average trade and bills payables

turnover days (Note) 83.1 37.8 62.4

Note: Average trade and bills payables turnover days is calculated as the average of the beginning and ending trade

and bills payables for the year, divided by our cost of sales and services for that year, multiplied by the

number of days in the year.

During the Track Record Period, our trade and bills payables decreased by approximately

HK$5.1 million from approximately HK$7.3 million as at 31 March 2019 to approximately

HK$2.1 million as at 31 March 2020 mainly due to the settlement of bills payable in relation to

our purchase of plant and machinery. Our trade and bills payables then increased by

approximately HK$13.8 million from approximately HK$2.1 million as at 31 March 2020 to

approximately HK$16.0 million as at 31 March 2021 mainly due to the acquisition of new plant

and machinery during the year ended 31 March 2021 which had not been paid as at 31 March

2021.



– 243 –

The credit term offered by our major suppliers is typically up to 90 days. As at 31 March

2019, 2020 and 2021, our Group recorded average trade and bills payables turnover days of

approximately 83.1 days, 37.8 days and 62.4 days, respectively. Average trade and bills payables

turnover days decreased from approximately 83.1 days to approximately 37.8 days mainly due to

the decrease in bills payable as described above. Average trade and bills payables turnover days

then increased to approximately 62.4 days mainly due to the increase in bills payable as described

above.

As at the Latest Practicable Date, approximately 97.5% (or approximately HK$15.6 million)

of our trade and bills payables as at 31 March 2021 had been settled.

Accruals and other payables

Accruals and other payables mainly consist of accrued expenses, accrued staff costs and

other payables.

Our accruals and other payables remained relatively stable at approximately HK$2.3 million,

HK$2.6 million and HK$3.0 million as at 31 March 2019, 2020 and 2021, respectively.

Amount due from controlling shareholder

Our amount due from controlling shareholder mainly represented advances to Mr. Kok, our

executive Director and Controlling Shareholder. The amounts were non-trade in nature,

unsecured, interest free and repayable on demand.

The amount due from controlling shareholder amounted to approximately HK$21.3 million,

nil and HK$6.4 million as at 31 March 2019, 2020 and 2021, respectively.

Amount due from a related company

Our amount due from a related company mainly represented amounts due from Hung Yun.

The amounts were non-trade in nature, unsecured, interest free and repayable on demand.

The amount due from a related company amounted to approximately HK$2.7 million, nil

and HK$5.0 million as at 31 March 2019, 2020 and 2021, respectively.



– 244 –

INDEBTEDNESS

The table below sets forth the indebtedness of our Group as at the respective dates

indicated:

As at 31 MarchAs at

31 May2019 2020 2021 2021

HK$’000 HK$’000 HK$’000 HK$’000

CurrentBank borrowings 23,818 20,773 36,389 38,046Lease liabilities 2,920 774 6,872 6,957

26,738 21,547 43,261 45,003

Non-currentLease liabilities 827 – 14,117 12,998

Total 27,565 21,547 57,378 58,001

Borrowings

As at 31 March 2019, 2020, 2021 and 31 May 2021, we recorded bank borrowings of

approximately HK$23.8 million, HK$20.8 million, HK$36.4 million and HK$38.0 million,

respectively.

The effective interest rates of our Group’s bank borrowings ranged from 4.5% to 5.375%,

4.13% to 5.375%, 2.75% to 5.25% and 2.75% to 4.75% per annum for the years ended 31 March

2019, 2020, 2021 and the two months ended 31 May 2021, respectively.

The following table sets forth the maturity profile of our bank borrowings as at the dates

indicated:

As at 31 MarchAs at

31 May2019 2020 2021 2021

HK$’000 HK$’000 HK$’000 HK$’000

Bank borrowings are analysed as carrying amountsrepayable:On demand or within one year 16,703 11,872 19,724 22,863More than one year, but not exceeding two years 6,212 6,859 7,619 7,170More than two years, but not exceeding five years 903 2,042 9,046 8,013

23,818 20,773 36,389 38,046



– 245 –

All bank borrowings contain a repayment on demand clause and are shown under current

liabilities.

Our Group’s bank borrowings are secured by charges over a certain property and corporate

guarantee of a related company, charges over a certain property and personal guarantee by our

executive Director in their personal capacities and charges over certain plant and machinery of

our Group. Our Directors confirm that the aforementioned guarantee and charges will be fully

released and replaced by corporate guarantee(s) to be provided by our Company and/or other

member(s) of our Group upon the [REDACTED].

During the Track Record Period and up to the Latest Practicable Date, our Directors confirm

that our Group had not had any delay or default in repayment of bank borrowings, been requested

for early repayment of borrowings nor breached any covenants under its borrowings. During the

Track Record Period and up to the Latest Practicable Date, our Group had complied with the

covenant requirements of its borrowings.

Save as aforesaid or as otherwise disclosed herein, our Group did not have any loan capital

issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar

indebtedness, liabilities under acceptance or acceptance credits, debentures, mortgages, charges,

hire purchases commitments, guarantees or other contingent liabilities outstanding as at the

closure of business as at 31 May 2021, being the date of this indebtedness statement.

Our Directors confirm that there had been no material adverse change in our indebtedness

since 31 May 2021 and up to the Latest Practicable Date.

As at 31 May 2021, our total amount of banking facilities was approximately HK$81.9

million and we had unutilised banking facilities of approximately HK$37.2 million.

Lease liabilities

As at 31 March 2019, 2020, 2021 and 31 May 2021, we recorded current lease liabilities of

approximately HK$2.9 million, HK$0.8 million, HK$6.9 million and HK$7.0 million,

respectively, and non-current lease liabilities of approximately HK$0.8 million, nil, HK$14.1

million and HK$13.0 million, respectively. Our lease liabilities mainly represent the lease

agreements entered into for each of HK Property 1, HK Property 2 and PRC Property 1, and

purchase of certain plant and machinery and motor vehicles under finance leases.



– 246 –

The following table sets forth the exposure of our lease liabilities as at the respective dates

indicated:

As at 31 MarchAs at

31 May2019 2020 2021 2021

HK$’000 HK$’000 HK$’000 HK$’000

Minimum lease payments due:Within one year 3,022 786 7,690 7,724More than one year, but not exceeding

two years 840 – 7,690 7,724More than two years, but not exceeding

five years – – 7,049 5,794

3,862 786 22,429 21,242Less: future finance charges (115) (12) (1,440) (1,287)

Present value of lease liabilities 3,747 774 20,989 19,955

We leased HK Property 1, HK Property 2 and PRC Property 1 during the years ended 31

March 2019, 2020 and 2021. On 1 March 2021, we entered into lease agreements for leasing HK

Property 1, HK Property 2 and PRC Property 1 for the storage of our construction equipment and

our office for a lease term of three years.

For further details, please refer to Note 25 of the Accountants’ Report in Appendix I to this

document.

Contingent liabilities

For details on our contingent liabilities, please refer to Note 30 as set in the Accountants’

Report in Appendix I to this document.

OFF-BALANCE SHEET ARRANGEMENTS

During the Track Record Period and up to the Latest Practicable Date, we did not have any

off-balance sheet arrangements.



– 247 –

RELATED PARTY TRANSACTIONS

We entered into certain related party transactions during the Track Record Period including

(i) short term lease payments; and (ii) payment of lease liabilities and interest relating to our

leased properties. For further details of the related party transactions, please refer to Note 21(e) to

the Accountants’ Report as set out in Appendix I to this document. Our Directors confirm that

these transactions were entered into on normal commercial terms and/or on terms not less

favourable than terms available from Independent Third Parties, and are considered fair,

reasonable and in the interest of our Shareholders as a whole. Our Directors are also of the view

that the related party transactions would not distort our track record results or make our historical

results not reflective of our performance.

KEY FINANCIAL RATIOS

The following table sets forth certain of our key financial ratios as at the dates or for the

year indicated:

As at/

year ended 31 March

2019 2020 2021

Gross profit margin (1) 31.8% 51.6% 58.9%

Net profit margin (2) 32.4% 32.5% 39.8%

Current ratio (3) 1.5 1.3 1.1

Gearing ratio (4) 20.3% 18.7% 45.4%

Interest coverage ratio (5) 12.7 30.7 51.2

Return on assets (6) 8.5% 17.3% 21.9%

Return on equity (7) 12.8% 26.6% 40.5%

Notes:

1. Gross profit margin is calculated by dividing the gross profit for the respective year by total revenue for the

respective year and multiplied by 100%. Please refer to the paragraph headed ‘‘Period to period comparison

of results of operations’’ in this section for more details on our gross profit margin.

2. Net profit margin is calculated by dividing profit for the respective year by total revenue for the respective

year and multiplied by 100%. Please refer to the paragraph headed ‘‘Period to period comparison of results

of operations’’ in this section for more details on our net profit margin.

3. Current ratio is calculated based on the total current assets divided by the total current liabilities as at the

respective year end.

4. Gearing ratio is calculated based on the total debt (including all bank borrowings and lease liabilities)

divided by the total equity as at the respective year end and multiplied by 100%.



– 248 –

5. Interest coverage ratio is calculated based on profit before interest and tax divided by interest expense for the

respective year.

6. Return on assets is calculated by net profit for the year divided by the total assets as at the respective year

end and multiplied by 100%.

7. Return on equity is calculated by net profit for the year divided by the total equity as at the respective year

end and multiplied by 100%.

Current ratio

Our current ratio remained relatively stable at approximately 1.5 times, 1.3 times and 1.1

times as at 31 March 2019, 2020 and 2021, respectively.

Gearing ratio

Our gearing ratio decreased from approximately 20.3% as at 31 March 2019 to

approximately 18.7% as at 31 March 2020. The decrease was mainly attributable to

approximately 21.8% decrease in the sum of bank borrowings and lease liabilities from

approximately HK$27.6 million as at 31 March 2019 to approximately HK$21.5 million as at 31

March 2020 due to repayments of bank borrowings and lease liabilities between the respective

years.

Our gearing ratio increased from approximately 18.7% as at 31 March 2020 to

approximately 45.4% as at 31 March 2021. The increase was mainly attributable to

approximately 166.3% increase in the sum of bank borrowings and lease liabilities from

approximately HK$21.5 million as at 31 March 2020 to approximately HK$57.4 million as at 31

March 2021 due to new bank borrowings raised and recognition of lease liabilities in relation to

our leased properties between the respective years.

Interest coverage ratio

Our interest coverage ratio increased from approximately 12.7 times for the year ended 31

March 2019 to approximately 30.7 times for the year ended 31 March 2020. The increase was

mainly attributable to approximately 72.9% increase in profit before interest and tax from


million for the year ended 31 March 2020 which was mainly due to the increase in revenue as

described above.

Our interest coverage ratio increased from approximately 30.7 times for the year ended 31

March 2020 to approximately 51.2 times for the year ended 31 March 2021. The increase was

mainly attributable to approximately 66.1% increase in profit before interest and tax from


million for the year ended 31 March 2021 which was mainly due to the increase in revenue as

described above.



– 249 –

Return on assets

Our return on assets increased from approximately 8.5% for the year ended 31 March 2019

to approximately 17.3% for the year ended 31 March 2020. The increase was mainly attributable

to approximately 75.4% increase in net profit from approximately HK$17.4 million for the year

ended 31 March 2019 to approximately HK$30.5 million for the year ended 31 March 2020 due

to the increase in revenue as described above.

Our return on assets increased from approximately 17.3% for the year ended 31 March 2020


to approximately 67.8% increase in net profit from approximately HK$30.5 million for the year

ended 31 March 2020 to approximately HK$51.2 million for the year ended 31 March 2021 due

to the increase in revenue as described above.

Return on equity

Our return on equity increased from approximately 12.8% for the year ended 31 March 2019


to the increase in net profit as described above.

Our return on equity increased from approximately 26.6% for the year ended 31 March 2020


to the increase in net profit as described above.

DIVIDENDS AND DIVIDEND POLICY

During the year ended 31 March 2019, total dividends of approximately HK$104.0 million

was recognised as distribution by Chi Shing Machinery and Chi Shing Machinery Rental to its

then shareholder. The dividends payable was settled through amount due from controlling

shareholder and amount due to ultimate holding company.

During the year ended 31 March 2020, Chi Shing Machinery and Chi Shing Machinery

Rental declared and paid total dividends of approximately HK$50.3 million to its then

shareholder. The dividends payable was settled through amount due from controlling shareholder.

During the year ended 31 March 2021, Chi Shing Machinery Rental declared and paid total

dividends of approximately HK$41.0 million to its then shareholder. The dividends payable was

settled through amount due from controlling shareholder.



– 250 –

After completion of the [REDACTED], our Shareholders will be entitled to receive

dividends that we declare. The declaration of dividends is subject to the discretion of our Board,

our Articles of Association and applicable laws and regulations. Any declaration of final dividend

shall also be subject to the approval of our Shareholders in a Shareholders’ meeting. In deciding

whether to propose a dividend and in determining the dividend amount, our Directors will take

into account our operations and earnings, capital requirements and surplus, general financial

condition, capital expenditure and future development requirements, Shareholders’ interest and

other factors which they may deem relevant at such time. Subject to those factors and our Articles

of Association, we intend to distribute dividend in cash each year up to 30.0% of the distributable

profit in our combined financial statements for that year. Our dividend distribution record in the

past may not be used as a reference or basis to determine the level of dividends that may be

declared or paid by us in the future.

RECENT DEVELOPMENT AND MATERIAL ADVERSE CHANGE

Our Directors confirm that, save for the [REDACTED] to be incurred as stated in the

paragraph headed ‘‘Financial Information – [REDACTED]’’ in this document, (i) there was no

material adverse change in the market conditions or the industry environment in which we operate

that materially and adversely affected our financial or operating position since 31 March 2021 and

up to the date of this document; (ii) there was no material adverse change in the trading and

financial position or prospects of our Group since 31 March 2021 and up to the date of this

document; and (iii) no event had occurred since 31 March 2021 and up to the Latest Practicable

Date that would materially and adversely affect the information shown in the Accountants’ Report

set out in Appendix I to this document. For details of our recent development, please refer to the

paragraph headed ‘‘Summary – Recent development and material adverse change’’ in this

document.

FINANCIAL RISKS

Our Group is or may be exposed to interest rate risk, currency risk, credit risk and liquidity

risk carried at other than fair value in the normal course of business. Further details on our

financial risk management policies and practices are set out in the paragraph headed ‘‘Notes to the

historical financial information – 7. Financial instructions – Financial risk management objectives

and policies’’ in the Accountants’ Report in Appendix I to this document.

UNAUDITED PRO FORMA ADJUSTED COMBINED NET TANGIBLE ASSETS

Please see section headed ‘‘Unaudited Pro Forma Financial Information’’ in Appendix II to

this document for details.

DISTRIBUTABLE RESERVES

As at the Latest Practicable Date, our Company had no distributable reserves available for

distribution to our Shareholders.



– 251 –

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Except as otherwise disclosed in this document, our Directors confirm that, as at the Latest

Practicable Date, there were no circumstances that would give rise to a disclosure requirement

under Rules 13.13 to 13.19 of the Listing Rules.

[REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the

indicative [REDACTED] range of HK$[REDACTED] to HK$[REDACTED] per Share, the total

estimated [REDACTED] in connection with the [REDACTED] is approximately

HK$[REDACTED], of which approximately HK$[REDACTED] will be accounted for as a

deduction from our equity upon the [REDACTED] and the remaining amount of approximately

HK$[REDACTED] is expected to be charged to our combined statements of profit or loss and

o the r comprehens ive income (o f wh ich approx imate ly HK$ [REDACTED] and

HK$[REDACTED] was charged for the two years ended 31 March 2021, respectively, and the

remaining approximately HK$[REDACTED] is expected to be charged for the year ending 31

March 2022).

SUBSEQUENT EVENTS

For significant events that took place subsequent to the Track Record Period, please refer to

Note 31 of the Accountants’ Report set forth in Appendix I to this document.



– 252 –

BUSINESS STRATEGIES AND FUTURE PLANS

For details of our business strategies and future plans, please refer to the paragraph headed

‘‘Business – Business strategies’’ in this document.

[REDACTED]

Our Directors consider that the net [REDACTED] from the [REDACTED] are crucial for

financing our Group’s business strategies. Our Directors estimate that the net [REDACTED] from

the [REDACTED] which we will receive (after deducting estimated expenses payable by our

Group in connection with the [REDACTED]) will be approximately HK$[REDACTED] based

on an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-point of the

[REDACTED] range of HK$[REDACTED] and HK$[REDACTED] per [REDACTED],

assuming the [REDACTED] is not exercised). It is at present intended that the net

[REDACTED] will be applied as follows:

• approximately HK$[REDACTED], representing approximately [REDACTED] of the

estimated net [REDACTED], for the expansion of power and energy equipment in our

rental fleet in Hong Kong;


estimated net [REDACTED], for the optimisation of our rental fleet in Hong Kong;


estimated net [REDACTED], for the upgrade of our rental fleet in the PRC with China

IV construction equipment;


estimated net [REDACTED], for strengthening the development of our own-branded

products and enhancing of the marketing of our brand;


estimated net [REDACTED], for the installation of app-enabled centralised rental fleet

management system;


estimated net [REDACTED], for the hiring of additional workforce; and


estimated net [REDACTED], for general working capital of our Group.



– 253 –

If the [REDACTED] is set at the high-end of the indicative [REDACTED] range at

HK$[REDACTED] per [REDACTED] (assuming the [REDACTED] is not exercised), the net

[REDACTED] from the [REDACTED] which we will receive will increase to approximately

HK$[REDACTED]. If the [REDACTED] is set at the low-end of the indicative [REDACTED]

range at HK$[REDACTED] per [REDACTED] (assuming the [REDACTED] is not exercised),

the net [REDACTED] from the [REDACTED] which we will receive will decrease to

approximately HK$[REDACTED]. If the [REDACTED] is finally determined to be less than

HK$[REDACTED] per [REDACTED] (being the mid-point of the indicative [REDACTED]

range), our Group will reduce the proposed allocation of net [REDACTED] to (i) general

working capital; and (ii) our plan to strengthen the development of our own-branded products and

enhance of the marketing of our brand and will finance such shortfall by internal resources,

working capital and/or other financing, as and when appropriate. If the [REDACTED] is finally

determined to be more than HK$[REDACTED] per [REDACTED] (being the mid-point of the

indicative [REDACTED] range), our Group will increase the proposed use of net [REDACTED]

based on a pro-rata basis.

If the [REDACTED] is exercised in full, the additional net [REDACTED] received from

the additional Shares allotted and issued will be allocated in accordance with the above

allocations on a pro-rata basis. For details of the [REDACTED], please refer to the section

headed ‘‘Structure of the [REDACTED]’’ in this document.

To the extent that the net [REDACTED] from the [REDACTED] are not immediately

required for the above purposes, it is the present intention of our Directors that such net

[REDACTED] will be placed as short-term deposits with authorised banks and/or financial

institutions in Hong Kong. Our Directors consider that the net [REDACTED] from the

[REDACTED] together with the internal resources of our Group will be sufficient to finance the

implementation of our Group’s business plans as set out in the paragraph headed ‘‘Business –

Business strategies’’ in this document.

Investors should be aware that any part of the business plans of our Group may or may not

proceed according to the timeframe as described in the paragraph headed ‘‘Business – Business

strategies’’ in this document due to various factors such as changes in customers’ demand and

changes in market conditions. Under such circumstances, our Directors will evaluate carefully the

situations and will hold the funds as short-term deposits in authorised banks and/or financial

institutions in Hong Kong until the relevant business plan materialises. We will issue an

announcement in the event that there is any material change in the [REDACTED] from the

[REDACTED] as set out above.



– 254 –

REASONS FOR [REDACTED]

Our Directors consider that the construction equipment rental and sales business is capital

intensive and believe that the [REDACTED] will facilitate the implementation of our business

strategies by accessing the capital market for raising funds both at the time of the [REDACTED]

and at later stages. Our Directors consider that while we maintain sufficient cashflow to support

our Group’s existing operations, the net [REDACTED] from the [REDACTED] are necessary for

the implementation of our future plans which require considerable financial resources.

As disclosed in the paragraph headed ‘‘Business – Business strategies’’ in this document, the

total expenditure for the implementation of our future plans is estimated to be not less than

HK$[REDACTED]. The net [REDACTED] from the [REDACTED] of approximately

HK$[REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per Share, being the

mid-point of the indicative [REDACTED] range) will fulfill part of the funding needs for our

business strategies, while the remaining funding needs for our business strategies (‘‘Remaining

Portion’’) will be satisfied by internal resources which consists of (i) available cash in excess of

our cash flow requirement for operation; (ii) unutilised banking facilities; and (iii) future cash

flows generated from operation. Our Directors believe that our Group will be able to generate

sufficient cash flow from operation to finance the Remaining Portion. In the event that our

internal resources are not sufficient to cover the Remaining Portion, we will adjust the

implementation period of our business strategies taking into account our internal resources from

time to time.

In light of our diverse business strategies which require considerable financial resources, our

Directors consider that it is impracticable to fund them solely by future cash flows generated from

our operating activities and debt financing. Considering that our major bank could only provide

limited banking facilities to us, it would be difficult for us to formulate a comprehensive and

solid schedule for our future plans solely relying on future cash flows to be generated from

operating activities, since our plan will be subject to uncertainties in relation to the timing of

generating sufficient cash flow from our operations. We may be required to modify our future

plans from time to time depending on the amount of cash flow generated from our operations. As

a result, we would have less control over the timing of implementing our business strategies or

we may only be able to implement some of our business strategies partially, thereby failing to

capture the forecasted growth of the construction equipment rental and sales markets in Hong

Kong and the PRC, and losing our market position.



– 255 –

Our Directors believe that the [REDACTED] will benefit our Group as it will: (i) provide a

solid financing platform for us to raise funds from the capital market and facilitate the

implementation of our business strategies, future business expansion and long-term development

goals; (ii) enhance the liquidity of our Shares which will be freely traded on the Stock Exchange

as compared to the limited liquidity of Shares that are privately held before the [REDACTED];

(iii) enhance our corporate profile and recognition and assist us in reinforcing our brand

awareness and image which could facilitate us in soliciting construction equipment rental and sale

business in Hong Kong and the PRC; (iv) enhance our staff’s morale which will improve our

ability to recruit, motivate and retain key personnel so as to expediently and effectively capture

business opportunities that may arise; and (v) boost our profile on an international level and

enhance our transparency and credibility which will enable better customer retention and

development, thus improving our competitiveness. Our Directors believe that the enhanced level

of information transparency after the [REDACTED] will enable our existing and prospective

customers, suppliers, employees and the public to have better access to our corporate and

financial information and could generate further confidence in our services among our

stakeholders.

The [REDACTED] is strategically critical to our long-term growth as it will strengthen our

competitiveness, capture more business opportunities, provide us with access to the capital market

with additional avenues to raise capital in the long run and ultimately lay a solid foundation for

our business. Our Directors also believe that the [REDACTED] status will allow us to gain

leverage in obtaining bank financing with more favourable terms thus providing our Group with

more flexibility in our financing options.



– 256 –

[REDACTED]


[REDACTED]

– 257 –

[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

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[REDACTED]


[REDACTED]

– 265 –

[REDACTED]


[REDACTED]

– 266 –

[REDACTED]

Commission and expenses

According to the [REDACTED], the [REDACTED] will receive [REDACTED]

commissions of [REDACTED] of the aggregate [REDACTED] payable for the [REDACTED]

under the [REDACTED], out of which they will pay any [REDACTED] commission in

connection with the [REDACTED]. The [REDACTED] are expected to receive an

[REDACTED] commission on the aggregate [REDACTED] payable for the [REDACTED]

initially [REDACTED] under the [REDACTED]. The commissions payable to the

[REDACTED] will be borne by our Company in full. The Sponsor will receive a sponsor’s fee

in relation to the [REDACTED] and will be reimbursed for its expenses.

Based on the [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-

point of the indicative range of the [REDACTED]), the aggregate commission and fees payable

to the [REDACTED], together with Stock Exchange [REDACTED], SFC transaction levy, Stock

Exchange trading fees, legal and other professional fees and printing and other expenses relating

to the [REDACTED] are estimated to amount to approximately HK$[REDACTED] in total

(assuming the [REDACTED] is not exercised). We will also pay for all expenses in connection

with any exercise of the [REDACTED].


[REDACTED]

– 267 –

SPONSOR’S AND [REDACTED] INTEREST IN OUR COMPANY

The Sponsor will receive a documentation fee. The [REDACTED] and the [REDACTED]

will receive an [REDACTED] commission. Particulars of these [REDACTED] commission and

expenses are set forth under the paragraph headed ‘‘[REDACTED] arrangements and expenses –

Commission and expenses’’ above.

We have appointed [Ample Capital Limited] as our compliance adviser pursuant to Rule

3A.19 of the Listing Rules for the period commencing on the [REDACTED] and ending on the

date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results

for the first full financial year commencing after the [REDACTED].

As at the Latest Practicable Date and save as disclosed above, none of the Sponsor, the

compliance adviser and the [REDACTED] is interested legally or beneficially in shares of any

members of our Group or has any right or option (whether legally enforceable or not) to subscribe

for or purchase or to nominate persons to subscribe for or purchase securities in any members of

our Group or has any interest in the [REDACTED].

The Sponsor satisfies the independence criteria applicable to sponsor set out in Rule 3A.07

of the Listing Rules.

[REDACTED]


[REDACTED]

– 268 –

[REDACTED]


STRUCTURE OF THE [REDACTED]

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HOW TO APPLY FOR THE [REDACTED]

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– 302 –

The following is the text of a report set out on pages I-1 to I-80, received from the

Company’s reporting accountants, Wellink CPA Limited, Certified Public Accountants, Hong

Kong, for the purposes of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE

DIRECTORS OF KOK’S HOLDINGS LIMITED AND AMPLE CAPITAL LIMITED

Introduction

We report on the historical financial information of Kok’s Holdings Limited (the

‘‘Company’’) and its subsidiaries (together, the ‘‘Group’’) set out on pages I-4 to I-80, which

comprises the combined statements of financial position of the Group as at 31 March 2019, 2020

and 2021, the statement of financial position of the Company as at 31 March 2021, and the

combined statements of profit or loss and other comprehensive income, the combined statements

of changes in equity and the combined statements of cash flows of the Group for each of the three

years ended 31 March 2021 (the ‘‘Track Record Period’’) and a summary of significant

accounting policies and other explanatory information (together, the ‘‘Historical Financial

Information’’). The Historical Financial Information set out on pages I-4 to I-80 forms an

integral part of this report, which has been prepared for inclusion in the document of the

Company dated [REDACTED] (the ‘‘Document’’) in connection with the initial [REDACTED]

of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the

‘‘Stock Exchange’’).

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial

Information that gives a true and fair view in accordance with the basis of preparation and

presentation set out in Note 2 to the Historical Financial Information, and for such internal

control as the directors of the Company determine is necessary to enable the preparation of the

Historical Financial Information that is free from material misstatement, whether due to fraud or

error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to

report our opinion to you. We conducted our work in accordance with Hong Kong Standard on

Investment Circular Reporting Engagements 200 ‘‘Accountants’ Reports on Historical Financial

Information in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public

Accountants (the ‘‘HKICPA’’). This standard requires that we comply with ethical standards and

plan and perform our work to obtain reasonable assurance about whether the Historical Financial

Information is free from material misstatement.


APPENDIX I ACCOUNTANTS’ REPORT

I – 1

Our work involved performing procedures to obtain evidence about the amounts and

disclosures in the Historical Financial Information. The procedures selected depend on the

reporting accountants’ judgement, including the assessment of risks of material misstatement of

the Historical Financial Information, whether due to fraud or error. In making those risk

assessments, the reporting accountants consider internal control relevant to the entity’s preparation

of Historical Financial Information that give a true and fair view in accordance with the basis of

preparation and presentation set out in Note 2 to the Historical Financial Information in order to

design procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating

the appropriateness of accounting policies used and the reasonableness of accounting estimates

made by the directors of the Company, as well as evaluating the overall presentation of the

Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the

accountants’ report, a true and fair view of the Group’s combined financial position as at 31

March 2019, 2020 and 2021 and the Company’s financial position as at 31 March 2021, and of

the Group’s combined financial performance and combined cash flows for the Track Record

Period in accordance with the basis of preparation and presentation set out in Note 2 to the

Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock

Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying

Financial Statements as defined on page I-4 have been made.

Dividends

We refer to Note 13 to the Historical Financial Information which contains information

about dividends declared or paid by group entities and states that no dividends have been paid by

the Company in respect of the Track Record Period.



I – 2

No historical financial statements for the Company

As at the date of this report, no statutory financial statements have been prepared for the

Company since the date of its incorporation.

Wellink CPA Limited

Certified Public Accountants

Chan Yan Ting

Practising Certificate number P06380

Hong Kong

[Date]



I – 3

HISTORICAL FINANCIAL INFORMATION

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this

accountants’ report.

The combined financial statements of the Group for the Track Record Period (the

‘‘Underlying Financial Statements’’), on which the Historical Financial Information is based,

were audited by Wellink CPA Limited in accordance with Hong Kong Standards on Auditing

issued by the HKICPA.

The Historical Financial Information is presented in Hong Kong Dollar (‘‘HK$’’) and all

values are rounded to the nearest thousand (HK$’000) except when otherwise indicated.



I – 4

COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME


Notes HK$’000 HK$’000 HK$’000

Revenue 8 53,802 93,880 128,785

Cost of sales and services (36,672) (45,462) (52,955)

Gross profit 17,130 48,418 75,830

Other income 9 756 125 1,318

Other net gains/(losses) 10 13,254 (1,251) 1,322

Administrative and other operating expenses (9,172) (8,937) (11,114)

Finance costs 11(a) (1,725) (1,239) (1,232)

[REDACTED] [REDACTED] [REDACTED] [REDACTED]

Profit before taxation 20,243 36,741 61,857

Income tax expense 12 (2,830) (6,207) (10,614)

Profit for the year 17,413 30,534 51,243

Other comprehensive (expense)/income

Item that may be reclassified subsequently toprofit or loss:

– Exchange differences on translation

of foreign operation (973) (899) 1,275

Total comprehensive income for the year 11 16,440 29,635 52,518

Profit for the year attributable to:

Owners of the Company 17,413 30,534 51,243

Non-controlling interests – – –

17,413 30,534 51,243

Total comprehensive income for the year

attributable to:

Owners of the Company 16,440 29,635 52,518

Non-controlling interests – – –

16,440 29,635 52,518



I – 5

COMBINED STATEMENTS OF FINANCIAL POSITION

As at 31 March

2019 2020 2021

Notes HK$’000 HK$’000 HK$’000

Non-current assets

Plant and equipment 16 117,006 113,330 126,573

Right-of-use assets 17 6,036 734 20,948

Deposits paid 19 40 577 2,614

Deferred tax assets 27 1,674 1,935 1,645

124,756 116,576 151,780

Current assets

Inventories 18 1,963 2,426 15,572

Trade and other receivables 19 29,571 37,771 34,409

Financial assets at fair value through

profit or loss 20 5,451 4,700 –

Amount due from controlling shareholder 21(a) 21,305 – 6,410

Amount due from a related company 21(b) 2,667 – 5,000

Tax recoverable 468 91 2,293

Bank balances and cash 22 19,222 15,288 18,665

80,647 60,276 82,349

Current liabilities

Trade and other payables 23 10,200 8,000 19,301

Amount due to ultimate holding company 21(c) 2,762 – –

Amounts due to related parties 21(d) 14,491 13,562 8,253

Contract liabilities 24 – 44 1,434

Lease liabilities 25 2,920 774 6,872

Income tax payable 139 3,762 3,882

Bank borrowings 26 23,818 20,773 36,389

54,330 46,915 76,131

Net current assets 26,317 13,361 6,218

Total assets less current liabilities 151,073 129,937 157,998



I – 6

COMBINED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

As at 31 March

2019 2020 2021

Notes HK$’000 HK$’000 HK$’000

Non-current liabilities

Deferred tax liabilities 27 14,663 15,019 17,445

Lease liabilities 25 827 – 14,117

15,490 15,019 31,562

Net assets 135,583 114,918 126,436

Capital and reserves

Share capital 28 2,120 2,120 2,120

Reserves 133,462 112,797 124,315

Equity attributable to owners of

the Company 135,582 114,917 126,435

Non-controlling interests 1 1 1

Total equity 135,583 114,918 126,436



I – 7

STATEMENT OF FINANCIAL POSITION OF THE COMPANY

As at 31 March

2021

Note HK$’000

Current liabilities

Amount due to a fellow subsidiary 64

64

Net current liability and net liability (64)

Capital and reserves

Share capital 28 –*

Reserves (64)

Capital deficiency (64)

* The balances represent amount less than HK$1,000.



I – 8

COMBINED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Company

Sharecapital

Exchangereserve

Retainedprofits Total

Non-controlling

interests TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Note a)

At 1 April 2018 2,120 740 220,282 223,142 1 223,143Profit for the year – – 17,413 17,413 – 17,413Other comprehensive expense for the year – (973) – (973) – (973)

Total comprehensive income for the year – (973) 17,413 16,440 – 16,440Dividend declared by subsidiaries

(note 13) – – (104,000) (104,000) – (104,000)

At 31 March 2019 2,120 (233) 133,695 135,582 1 135,583Profit for the year – – 30,534 30,534 – 30,534Other comprehensive expense for the year – (899) – (899) – (899)

Total comprehensive income for the year – (899) 30,534 29,635 – 29,635Dividend declared by subsidiaries

(note 13) – – (50,300) (50,300) – (50,300)

At 31 March 2020 2,120 (1,132) 113,929 114,917 1 114,918Profit for the year – – 51,243 51,243 – 51,243Other comprehensive income for the year – 1,275 – 1,275 – 1,275

Total comprehensive income for the year – 1,275 51,243 52,518 – 52,518Issuance of shares –* – – –* – –*Dividend declared by subsidiaries

(note 13) – – (41,000) (41,000) – (41,000)

At 31 March 2021 2,120 143 124,172 126,435 1 126,436


Notes:

(a) (i) The share capital of the Group at 31 March 2019 and 2020 represents the aggregate share capital of Chi

Shing Machinery Company Limited (‘‘Chi Shing Machinery’’), Chi Shing Machinery Rental Company

Limited (‘‘Chi Shing Machinery Rental’’), Chi Shing Equipment Trading Company Limited (formerly

known as Chi Shing Aerial Work Equipment Company Limited) (‘‘Chi Shing Equipment Trading’’), Chi

Shing Human Resources Company Limited (‘‘Chi Shing Human Resources’’) and Chi Shing (Hong Kong)

Group Company Limited (‘‘Chi Shing (Hong Kong) Group’’).

(ii) The share capital of the Group at 31 March 2021 represents the aggregate share capital of the Company, Ace

Honour Global Limited (‘‘Ace Honour’’), Chi Shing Machinery, Chi Shing Machinery Rental, Chi Shing

Equipment Trading, Chi Shing Human Resources and Chi Shing (Hong Kong) Group.



I – 9

COMBINED STATEMENTS OF CASH FLOWS

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Operating activities


Adjustments for:

Depreciation of plant and equipment 21,701 20,728 20,815

Depreciation of right-of-use assets 1,773 1,475 1,550

Fair value loss/(gain) on financial assets at fair value

through profit or loss 272 826 (1,066)

Impairment loss/(reversal of impairment loss) on

trade receivables 140 440 (201)

Loss on write off of plant and equipment – 13 –

Gain on disposal of plant and equipment (13,248) – (200)

Dividend income (116) (121) (61)

Bank interest income (11) (4) (5)

Finance costs 1,725 1,239 1,232

Operating cash flows before movements

in working capital 32,479 61,337 83,921

(Increase)/decrease in inventories (1,306) 9,183 (10,152)

(Increase)/decrease in trade and other receivables (8,097) (10,673) 3,453

Decrease in amount due from a related company 6,336 6,790 –

(Decrease)/increase in trade and other payables (1,432) (2,153) 11,214

Increase/(decrease) in amounts due to related parties 334 242 (2,259)

(Decrease)/increase in contract liabilities (1,539) 44 1,390

Cash generated from operations 26,775 64,770 87,567

Purchase of plant and machinery (21,101) (24,016) (34,204)

Income tax paid (1,024) (2,123) (9,947)

Interest paid (1,725) (1,239) (1,232)

Net cash generated from operating activities 2,925 37,392 42,184



I – 10

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Investing activities

Purchase of furniture and equipment, leasehold

improvements and motor vehicles (889) (221) (1,409)

Proceeds from disposal of plant and equipment 17,161 1,201 200

Investment in financial assets at fair value through

profit or loss (64) (75) (36)

Proceeds from disposal of financial assets

at fair value through profit or loss – – 5,802

Repayment from controlling shareholder 3,830 500 500

Advances to controlling shareholder (4,797) (32,195) (47,910)

Advances to ultimate holding company (9) (62) –

Repayment from a related company 10,648 254 –

Advances to a related company (11,758) (4,377) (5,000)

Dividend received 116 121 61

Interest received 11 4 5

Net cash generated from/(used in) investing activities 14,249 (34,850) (47,787)

Financing activities

Issuance of share capital – – –*

Payment of prepaid share issuance costs – (125) (1,422)

New bank borrowings raised 7,923 17,320 32,367

Repayments of lease liabilities (3,406) (2,878) (1,551)

Advances from related parties 52 3,073 149

Repayment to related parties (931) (3,306) (4,140)

Repayments of bank borrowings (19,299) (20,365) (16,751)

Net cash (used in)/generated from financing activities (15,661) (6,281) 8,652

Net increase/(decrease) in cash and cash equivalents 1,513 (3,739) 3,049

Effect of foreign exchange rate changes, net (336) (195) 328

Cash and cash equivalents at the beginning of the year 18,045 19,222 15,288

Cash and cash equivalents at the end of the year 19,222 15,288 18,665




I – 11

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands as an exempted company with

limited liability on 19 March 2021 under the Companies Act, (as revised) of the Cayman Islands.

The address of the Company’s registered office and the principal place of business is disclosed in

the section headed ‘‘Corporate Information’’ in the Document. The ultimate holding company of

the Company is CS Investment Limited (‘‘CS Investment’’), which was incorporated in the

British Virgin Islands (‘‘BVI’’) and is owned by Mr. Kok Yun Kuen (‘‘Mr. Kok’’).

The Company is an investment holding company and has not carried on any business since

the date of its incorporation save for the group reorganisation mentioned in note 2. Its subsidiaries

are principally engaged in (i) provision of construction equipment rental services; and (ii) sale of

construction equipment.

The Historical Financial Information is presented in HK$ which is the same as the

functional currency of the Company.

2. BASIS OF PREPARATION AND PRESENTATION OF THE HISTORICAL


The Historical Financial Information has been prepared based on the accounting policies set

out in Note 4 which conforms with Hong Kong Financial Reporting Standards (the ‘‘HKFRSs’’)

issued by the HKICPA and the principles of merger accounting under Accounting Guideline 5

‘‘Merger Accounting for Common Control Combinations’’ (‘‘AG5’’) issued by the HKICPA.

In the preparation of the [REDACTED] of the Company’s shares on the Stock Exchange

(the ‘‘[REDACTED]’’), the companies comprising the Group underwent the reorganisation as

detailed in the section ‘‘History, Reorganisation and Corporate Structure’’ (the ‘‘Reorganisation’’)

in the Document.

Upon completion of the Reorganisation on 17 June 2021, the Company has become the

holding company of the companies now comprising the Group and Mr. Kok is considered as the

ultimate controlling shareholder of the Group (the ‘‘Controlling Shareholder’’).



I – 12

Upon completion of the Reorganisation and as at the date of this report, the Company has

direct or indirect interests in the following subsidiaries, all of which are private companies:

Particulars of subsidiaries

Company name

Place and date ofincorporation andplace of operation

Particulars ofissued andpaid-up capital

Proportion of ownership interestAt 31 March At the date

2019 2020 2021 of this report Principal activities

Directly heldAce Honour (Note a) BVI/23 July 2020 6 ordinary

shares ofUS$1 each

– – 100% 100% Investment holding

Indirectly heldChi Shing Machinery (Note b) Hong Kong/

16 September 1998HK$1,000,000 100% 100% 100% 100% Provision of construction

equipment rentalservices and sale ofconstruction equipment

Chi Shing Machinery Rental (Noteb)

Hong Kong/24 January 2003

HK$100,000 100% 100% 100% 100% Investment holding andprovision of constructionequipment rentalservices

Chi Shing Equipment Trading (Noteb)

Hong Kong/24 December 2002

HK$1,000,000 100% 100% 100% 100% Sale of constructionequipment, provision ofrepairing services andother ancillary services

Chi Shing Human Resources (Noteb)

Hong Kong/24 December 2002

HK$10,000 100% 100% 100% 100% Provision of humanresources for the groupcompanies

Chi Shing (Hong Kong) Group(Note b)

Hong Kong/6 July 2011

HK$10,000 100% 100% 100% 100% Investment holding

Chi Shing Industries (Hong Kong)Company Limited (Note b)

Hong Kong/13 February 2012

HK$10,000 100% 100% 100% 100% Holding of trademarks

Chi Shing Machinery CompanyLimited (Macau) (Note a, d)

Macau/20 May 2016

MOP25,000 96% 96% 96% – Inactive

廣東志桂設備租賃有限公司 (‘‘Guangdong Zhigui’’)(Note a and c)

The People’s Republicof China (‘‘PRC’’)/13 July 2015

RMB20,000,000 100% 100% 100% 100% Provision of constructionequipment rentalservices and sale ofconstruction equipment

Except for Guangdong Zhigui, which has adopted 31 December as its financial year end

date, all companies now comprising the Group have adopted 31 March as their financial year end

date.

Notes:

(a) There are no statutory audit requirements under the relevant rules and regulations in its country/jurisdiction

of incorporation for these entities.

(b) The statutory financial statements of these entities for the years ended 31 March 2019, 2020 and 2021 were

audited by Wellink CPA Limited.

(c) Guangdong Zhigui is registered as a wholly-foreign-owned enterprise under PRC Law.

(d) The remaining 4% share holding was hold by Mr. Kok Kwai Man, the son of Mr. Kok. This company has

dissolved on 7 May 2021 and no business operation prior to its dissolution.



I – 13

The combined statements of profit or loss and other comprehensive income, combined

statements of changes in equity and combined statements of cash flows of the Group for the

Track Record Period have been prepared to present the results and cash flows of the companies

now comprising the Group, as if the group structure upon the completion of the Reorganisation

had been in existence throughout the Track Record Period or since their respective dates of

incorporation or establishment where this is a shorter period. The combined statements of

financial position of the Group as at 31 March 2019, 2020 and 2021 have been prepared to

present the assets and liabilities of the companies now comprising the Group, using their existing

carrying amounts, as if the current group structure upon the completion of the Reorganisation had

been in existence at those dates.

3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Historical Financial Information for the

Track Record Period, the Group has consistently applied all new and revised HKFRSs, Hong

Kong Accounting Standards (‘‘HKASs’’), amendments and interpretations issued by the HKICPA

which are effective for the accounting period beginning on 1 April 2020 throughout the Track

Record Period. Specifically, the Group has adopted HKFRS 16 ‘‘Leases’’ on a consistent basis

throughout the Track Record Period.

Up to the date of issue of the Historical Financial Information, the HKICPA has issued the

following new standards and amendments which are not yet effective for the Track Record Period

and which have not been adopted in the Historical Financial Information.

Effective foraccountingperiodsbeginning on orafter

Amendments to HKFRS 4, 7, 9 and 16 and HKAS 39, Interest RateBenchmark Reform – Phase 2

1 January 2021

Amendments to HKFRS 3, Reference to the Conceptual Framework 1 January 2022Amendments to HKAS 16, Property, Plant and Equipment –Proceeds before Intended Use

1 January 2022

Amendments to HKAS 37, Onerous Contracts – Cost of Fulfilling aContract

1 January 2022

Amendments to HKFRSs, Annual Improvements to HKFRSs 2018-2020 1 January 2022Amendments to HKAS 1, Classification of Liabilities as Current orNon-current and Related Amendments to Hong KongInterpretation 5 (2020)

1 January 2023

HKFRS 17, Insurance Contracts 1 January 2023Amendments to HKAS 1, Disclosure of Accounting Policies 1 January 2023Amendments to HKAS 8, Definition of Accounting Estimates 1 January 2023Amendments to HKFRS 10 and HKAS 28, Sale or Contribution ofAssets between an Investor and its Associate or Joint Venture

To be determined



I – 14

The directors of the Company anticipate that the application of these new standards and

amendments will have no material impact on the Group’s financial performance and positions and/

or on the disclosures in the Historical Financial Information.

4. SIGNIFICANT ACCOUNTING POLICIES

The Historical Financial Information has been prepared in accordance with the accounting

policies described below, which conform with HKFRSs issued by the HKICPA. For the purpose

of preparation of the Historical Financial Information, information is considered material if such

information is reasonably expected to influence decisions made by primary users. In addition, the

Historical Financial Information includes applicable disclosures required by the Rules Governing

the Listing of Securities of the Main Board of the Stock Exchange and by the Hong Kong

Companies Ordinance.

The Historical Financial Information has been prepared on the historical cost basis except

for investment in financial assets at fair value through profit or loss, which are measured at fair

value at the end of each reporting periods, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange

for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants at the measurement date, regardless of whether

that price is directly observable or estimated using another valuation technique. In estimating the

fair value of an asset or a liability, the Group takes into account the characteristics of the asset or

liability if market participants would take those characteristics into account when pricing the asset

or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the

Historical Financial Information is determined on such a basis, except for leasing transactions that

are within the scope of HKFRS 16 ‘‘Leases’’ (‘‘HKFRS 16’’), and measurements that have some

similarities to fair value but are not fair value, such as net realisable value in HKAS 2

‘‘Inventories’’ or value in use in HKAS 36 ‘‘Impairment of Assets’’.

A fair value measurement of a non-financial asset takes into account a market participant’s

ability to generate economic benefits by using the asset in its highest and best use or by selling it

to another market participant that would use the asset in its highest and best use.

In addition, for financial reporting purposes, fair value measurements are categorised into

Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are

observable and the significance of the inputs to the fair value measurement in its entirety, which

are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or

liabilities that the entity can access at the measurement date;



I – 15

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are

observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation

The Historical Financial Information incorporates the financial statements of the

Company and entities controlled by the Company and its subsidiaries. Control is achieved

when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the

investee; and

• has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the

subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income

and expenses of a subsidiary acquired or disposed of during the Track Record Period are

included in the combined statements of profit or loss and other comprehensive income from

the date the Group gains control until the date when the Group ceases to control the

subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the

owners of the Company and to the non-controlling interests. Total comprehensive income of

subsidiaries is attributed to the owners of the Company and to the non-controlling interest

even if this results in non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to

bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating

to transactions between members of the Group are eliminated in full on combination.



I – 16

Merger accounting for business combination involving entities under common control

The Historical Financial Information incorporates the financial statements items of the

combining entities or businesses as if they had been combined from the date when the

combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are combined using the existing

carrying values from the controlling party’s perspective. No amount is recognised in respect

of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable

assets, liabilities and contingent liabilities over cost at the time of common control

combination, to the extent of the continuation of the controlling party’s interest.

The combined statements of profit or loss and other comprehensive income includes

the results of each of the combining entities or businesses from the earliest date presented or

since the date when the combining entities or businesses first came under the common

control, where this is a shorter period, regardless of the date of the common control

combination.

Impairment losses on tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its

tangible assets, including right-of-use assets, and intangible assets with finite useful lives to

determine whether there is any indication that those assets have suffered an impairment loss.

If any such indication exists, the recoverable amount of the asset is estimated in order to

determine the extent of the impairment loss (if any). When it is not possible to estimate the

recoverable amount of an individual asset, the Group estimates the recoverable amount of

the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis

of allocation can be identified, corporate assets are also allocated to individual cash-

generating units, or otherwise they are allocated to the smallest group of cash-generating

units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present

value using a pre-tax discount rate that reflects current market assessments of the time value

of money and the risks specific to the asset for which the estimates of future cash flows

have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less

than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is

reduced to its recoverable amount. An impairment loss is recognised immediately in profit

or loss.



I – 17

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a

cash-generating unit) is increased to the revised estimate of its recoverable amount, but so

that the increased carrying amount does not exceed the carrying amount that would have

been determined had no impairment loss been recognised for the asset (or a cash-generating

unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or

loss.

Revenue recognition

Revenue from contracts with customers

Revenue is recognised to depict the transfer of promised goods or services to

customers in an amount that reflects the consideration to which the Group expects to be

entitled in exchange for those goods or services. Specifically, the Group uses a 5-step

approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the

contract

• Step 5: Recognise revenue when (or as) the entity satisfies a performance

obligation

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e.

when ‘‘control’’ of the goods or services underlying the particular performance obligation is

transferred to the customers.

A performance obligation represents a good or service (or a bundle of goods or

services) that is distinct or a series of distinct goods or services that are substantially the

same.

Control is transferred over time and revenue is recognised over time by reference to

the progress towards complete satisfaction of the relevant performance obligation if one of

the following criteria is met:

• The customer simultaneously receives and consumes the benefits provided by the

entity’s performance as the entity performs; or

• The Group’s performance creates and enhances an asset that the customer

controls as the Group performs; or



I – 18

• The Group’s performance does not create an asset with an alternative use to the

Group and the Group has an enforceable right to payment for performance

completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control

of the distinct good or service.

For sales contract for which the control of the goods or services is transferred at a

point in time, revenue is recognised when the customer obtains the physical possession of

the goods or control over the services and the Group has present right to payment and the

collection of the consideration is probable.

In determining the transaction price, the Group adjusts the promised amount of

consideration for the effect of a financing component if it is significant.

A contract asset represents the Group’s right to consideration in exchange for goods or

services that the Group has transferred to a customer that is not yet unconditional. It is

assessed for impairment in accordance with HKFRS 9 Financial Instruments (‘‘HKFRS 9’’).

In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only

the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer goods or services to a

customer for which the Group has received consideration (or an amount of consideration is

due) from the customer.

Further details of the Group’s revenue recognition policies are as follows:

(i) Revenue from sales of construction equipment is recognised at a point in time

when the customer obtains control of the goods. Revenue is recognised when

control of the goods has transferred, being when the goods have been transferred

to the customer. The customer has full discretion over the usage and consumes

the goods, and has the primary responsibility when on selling the goods and

bears the risks of obsolescence and loss in relation to the goods.

(ii) Revenue from construction equipment rental services under operating lease is

recognised on a straight-line-basis over the term of relevant lease.

(iii) Lease related operating service income including provision of labour and training

services is recognised as a performance obligation satisfied over time as the

customer simultaneously receives and consumes the benefits provided by the

Group’s performance as the Group performs. The invoice is issued upon the

completion of service.



I – 19

(iv) The Group’s other service income, which arise from rental arrangements

including repair and maintenance and transportation services are recognised at a

point in time. Revenue from transportation services are recognised when the

goods have been delivered to the customer’s specific location. Revenue from

repair and maintenance services are recognised when the services rendered are

completed.

Other income

(i) Interest income from a financial asset is recognised when it is probable that the

economic benefits will flow to the Group and the amount of income can be

measured reliably. Interest income is accrued on a time basis, by reference to the

principal outstanding and at the effective interest rate applicable, which is the

rate that exactly discounts the estimated future cash receipts through the expected

life of the financial asset to that asset’s net carrying amount on initial

recognition.

(ii) Dividend income is recognised when the right to receive payment is established.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of

qualifying assets, which are assets that necessarily take a substantial period of time to get

ready for their intended use or sale, are added to the cost of those assets, until such time as

the assets are substantially ready for their intended use or sale.

To the extent that funds are borrowed generally and used for the purpose of obtaining

a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by

applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the

weighted average of the borrowing costs applicable to the borrowings of the Group that are

outstanding during the period, other than borrowings made specifically for the purpose of

obtaining a qualifying asset.

All other borrowing costs are recognised in profit or loss in the period in which they

are incurred.

Leases

Definition of a lease

A contract is, or contains, a lease if the contract conveys the right to control the use of

an identified asset for a period of time in exchange for consideration.



I – 20

For contracts entered into or modified on or after the date of initial application or

arising from business combinations, the Group assesses whether a contract is or contains a

lease based on the definition under HKFRS 16 at inception, modification date or acquisition

date, as appropriate. Such contract will not be reassessed unless the terms and conditions of

the contract are subsequently changed.

The Group as a lessor

Leases that do not substantially transfer to the lessees all the risks and rewards of

ownership of assets are accounted for as operating leases. Rental income from operating

leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct

costs incurred in negotiating and arranging an operating lease are added to the carrying

amount of the leased asset and recognised as an expense on a straight-line basis over the

lease term.

Rental income which are derived from the Group’s ordinary course of business are

presented as revenue.

The Group as a lessee

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to leases that have a

lease term of 12 months or less from the commencement date and do not contain a purchase

option. It also applies the recognition exemption for lease of low-value assets. Lease

payments on short-term leases and leases of low-value assets are recognised as expense on a

straight-line basis over the lease term.

Right-of-use assets

Except for short-term leases and leases of low value assets, the Group recognises right-

of-use assets at the commencement date of the lease (i.e. the date the underlying asset is

available for use). Right-of-use assets are measured at cost, less any accumulated

depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

The cost of right-of-use asset includes:

• the amount of the initial measurement of the lease liability;

• any lease payments made at or before the commencement date, less any lease

incentives received;

• any initial direct costs incurred by the Group; and



I – 21

• an estimate of costs to be incurred by the Group in dismantling and removing the

underlying assets, restoring the site on which it is located or restoring the

underlying asset to the condition required by the terms and conditions of the

lease.

Right-of-use assets in which the Group is reasonably certain to obtain ownership of the

underlying leased assets at the end of the lease term is depreciated from commencement date

to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line

basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the combined

statements of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted for under HKFRS 9 and initially

measured at fair value. Adjustments to fair value at initial recognition are considered as

additional lease payments and included in the cost of right-of-use assets.

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease

liability at the present value of lease payments that are unpaid at that date. In calculating the

present value of lease payments, the Group uses the incremental borrowing rate at the lease

commencement date if the interest rate implicit in the lease is not readily determinable.

The lease payments include:

• fixed payments (including in-substance fixed payments) less any lease incentives

receivable;

• variable lease payments that depend on an index or a rate;

• amounts expected to be paid under residual value guarantees;

• the exercise price of a purchase option reasonably certain to be exercised by the

Group; and

• payments of penalties for terminating a lease, if the lease term reflects the Group

exercising the option to terminate the lease.

After the commencement date, lease liabilities are adjusted by interest accretion and

lease payments.



I – 22

The Group remeasures lease liabilities (and makes a corresponding adjustment to the

related right-of-use assets) whenever:

• the lease term has changed or there is a change in the assessment of exercise of a

purchase option, in which case the related lease liability is remeasured by

discounting the revised lease payments using a revised discount rate at the date

of reassessment.

• the lease payments change due to changes in market rental rates following a

market rent review/expected payment under a guaranteed residual value, in which

cases the related lease liability is remeasured by discounting the revised lease

payments using the initial discount rate.

The Group presents lease liabilities as a separate line item on the combined statements

of financial position.

Lease modifications

The Group accounts for a lease modification as a separate lease if:

• the modification increases the scope of the lease by adding the right to use one

or more underlying assets; and

• the consideration for the leases increases by an amount commensurate with the

stand-alone price for the increase in scope and any appropriate adjustments to

that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group

remeasures the lease liability based on the lease term of the modified lease by discounting

the revised lease payments using a revised discount rate at the effective date of the

modification.

Employee benefits

(a) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when

they accrue to employees. A provision is made for the estimated liability for annual leave

and long service leave as a result of services rendered by employees up to the end of the

reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the

time of leave.



I – 23

(b) Retirement benefits

Payments to the Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’) in respect

of employees in Hong Kong are recognised as an expense when employees have rendered

service entitling them to the contributions.

The entity within the Group in the PRC participates in PRC local retirement schemes

organised by relevant government authorities for its employees in the PRC and contributes

to these schemes based on certain percentage of the salaries of the employees on a monthly

basis, up to a maximum fixed monetary amount, as stipulated by the relevant government

authorities. The government authorities undertake to assume the retirement contribution

obligations payable to all existing and future retired employees under these schemes.

Contributions to these schemes vest immediately.

(c) Termination benefits

Termination benefits are recognised at the earlier of the dates when the Group can no

longer withdraw the offer of those benefits and when the Group recognises restructuring

costs and involves the payment of termination benefits.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs

from ‘profit before taxation’ as reported in the combined statements of profit or loss and

other comprehensive income because of items of income or expense that are taxable or

deductible in other years and items that are never taxable or deductible. The Group’s

liability for current tax is calculated using tax rates that have been enacted or substantively

enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of

assets and liabilities in the Historical Financial Information and the corresponding tax bases

used in the computation of taxable profits. Deferred tax liabilities are generally recognised

for all taxable temporary differences. Deferred tax assets are generally recognised for all

deductible temporary differences to the extent that it is probable that taxable profits will be

available against which those deductible temporary differences can be utilised. Such

deferred tax assets and liabilities are not recognised if the temporary difference arises from

the initial recognition (other than in a business combination) of assets and liabilities in a

transaction that affects neither the taxable profit nor the accounting profit. In addition,

deferred tax liabilities are not recognised if the temporary difference arises from the initial

recognition of goodwill.



I – 24

Deferred tax liabilities are recognised for taxable temporary differences associated with

investment in subsidiaries, except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred tax assets arising from deductible temporary differences

associated with such investments and interests are only recognised to the extent that it is

probable that there will be sufficient taxable profits against which to utilise the benefits of

the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting

period and reduced to the extent that it is no longer probable that sufficient taxable profits

will be available to allow all or part of the assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to

apply in the period in which the liability is settled or the asset is realised, based on tax rates

(and tax laws) that have been enacted or substantively enacted by the end of the reporting

period.

The measurement of deferred tax liabilities and assets reflects the tax consequences

that would follow from the manner in which the Group expects, at the end of the reporting

period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to

items that are recognised in other comprehensive income or directly in equity, in which

case, the current and deferred tax are also recognised in other comprehensive income or

directly in equity, respectively.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a

party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value except for

trade receivables arising from contracts with customers which are initially measured in

accordance with HKFRS 15 ‘‘Revenue from Contracts with Customers’’. Transaction costs

that are directly attributable to the acquisition or issue of financial assets and financial

liabilities (other than financial assets or financial liabilities at fair value through profit or

loss (‘‘FVTPL’’)) are added to or deducted from the fair value of the financial assets or

financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at FVTPL are

recognised immediately in profit or loss.



I – 25

Financial assets

Financial assets are recognised and derecognised on a trade date basis where the

purchase or sale of a financial asset is under a contract whose terms require delivery of

financial assets within the timeframe established by the market concerned.

All recognised financial assets are required to be subsequently measured at amortised

cost or fair value on the basis of the Group’s business model for managing the financial

assets and the contractual cash flow characteristics of the financial assets.

Financial assets of the Group are classified under the following categories:

(i) Financial assets at fair value through profit or loss; and

(ii) Financial assets at amortised cost.

(i) Financial assets at fair value through profit or loss

Financial assets are subsequently measured at fair value through profit or loss if

they do not meet the conditions to be measured at amortised cost and the conditions of

debt investments at fair value through other comprehensive income unless the financial

assets are investment in equity instruments that are not held for trading and the Group

designates the investments as at fair value through other comprehensive income on

initial recognition.

Investments at fair value through profit or loss are subsequently measured at fair

value with any gains or losses arising from changes in fair values recognised in profit

or loss. The fair value gains or losses recognised in profit or loss are net of any

interest income and dividend income. Interest income and dividend income are

recognised in profit or loss.

(ii) Financial assets at amortised cost

Debt instruments that meet the following conditions are subsequently measured at

amortised cost:

• the financial asset is held within a business model whose objective is to

hold the financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on a specified dates to

cash flows that are solely payments of principal and interest on the

principal amount outstanding.



I – 26

Amortised cost and effective interest rate

The amortised cost of a financial asset is the amount at which the financial asset is

measured at initial recognition minus the principal repayments, plus the cumulative

amortisation using the effective interest method of any difference between that initial

amount and the maturity amount, adjusted for any loss allowance.

The effective interest method is a method of calculating the amortised cost of debt

instrument and of allocating interest income over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash

receipts (including all fees paid or received that form an integral part of the effective

interest rate, transaction costs and other premiums or discounts) through the expected life of

the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of

the debt instrument on initial recognition.

Interest income is recognised using the effective interest method for debt instruments

measured subsequently at amortised cost. Interest income is calculated by applying the

effective interest rate to the gross carrying amount of a financial asset, except for financial

assets that have subsequently become credit-impaired.

For financial assets that have subsequently become credit-impaired, interest income is

recognised by applying the effective interest rate to the amortised cost of the financial asset.

If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument

improves so that the financial asset is no longer credit-impaired, interest income is

recognised by applying the effective interest rate to the gross carrying amount of the

financial asset.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses (‘‘ECL’’) on

financial assets which are subject to impairment under HKFRS 9 (including trade and other

receivables, amount due from controlling shareholder, amount due from a related company

and bank balances). The amount of ECL is updated at the end of each reporting period to

reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over

the expected life of the relevant instrument. In contrast, 12-month ECL represents the

portion of lifetime ECL that is expected to result from default events that are possible within

12 months after the reporting date. Assessment are done based on the Group’s historical

credit loss experience, adjusted for factors that are specific to the debtors, general economic

conditions and an assessment of both the current conditions at the reporting date as well as

the forecast of future conditions.



I – 27

The Group always recognises lifetime ECL for trade receivables (including receivables

from lessees) and assesses the lifetime ECL for these trade receivables individually. The

estimate of the credit loss is determined based on the Group’s historical credit loss

experience, adjusted for factors that are specific to the debtors, general economic conditions

and an assessment of both the current as well as forecast direction of conditions at the end

of each reporting period, including time value of money where appropriate.

For all other financial instruments, the Group measures the loss allowance equal to 12-

month ECL, unless when there has a significant increase in credit risk since initial

recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL

should be recognised is based on significant increases in the likelihood or risk of a default

occurring since initial recognition.

Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition,

the Group compares the risk of a default occurring on the financial instrument as at the

reporting date with the risk of a default occurring on the financial instrument as at the date

of initial recognition. In making this assessment, the Group considers both quantitative and

qualitative information that is reasonable and supportable, including historical experience

and forward-looking information that is available without undue cost or effort. In particular,

the following information is taken into account when assessing whether the credit risk has

increased significantly:

• an actual or expected significant deterioration in the financial instrument’s

external (if available) or internal credit rating;

• existing or forecast adverse changes in business, financial or economic conditions

that are expected to cause a significant decrease in debtor’s ability to meet its

debt obligations;

• an actual or expected significant deterioration in the operating results of the

debtor; and

• an actual or expected significant adverse change in the regulatory, economic, or

technological environment of the debtor that results in a significant decrease in

the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the

credit risk has increased significantly since initial recognition when contractual payments are

more than 30 days past due, unless the Group has reasonable and supportable information

that demonstrates otherwise.



I – 28

Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has

not increased significantly since initial recognition if the debt instrument is determined to

have low credit risk at the reporting date. A debt instrument is determined to have low

credit risk if (i) it has a low risk of default; (ii) the borrower has a strong capacity to meet

its contractual cash flow obligations in the near term; and (iii) adverse changes in economic

and business conditions in the longer term may, but will not necessarily, reduce the ability

of the borrower to fulfill its contractual cash flow obligations. The Group considers a debt

instrument to have low credit risk when it has an internal or external credit rating of

‘‘investment grade’’ as per globally understood definitions.

Definition of default

The Group considers the following as constituting an event of default for internal

credit risk management purposes as historical experience indicates that receivables that meet

either of the following criteria are generally not recoverable.

• when there is a breach of financial covenants by the counterparty; or

• information developed internally or obtained from external sources indicates that

the debtor is unlikely to pay its creditors, including the Group, in full (without

taking into account any collaterals held by the Group).

In addition, the Group considers that default has occurred when the instrument is more

than 90 days past due unless the Group has reasonable and supportable information to

demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assets

A financial asset is ‘‘credit-impaired’’ when one or more events that have a detrimental

impact on the estimated future cash flows of the financial assets have been occurred.

Evidence that a financial asset is credit-impaired includes observable data about the

following events:

• Significant financial difficulty of the issuer or the borrower; or

• A breach of contract, such as a default or past due event; or

• The lender(s) of the borrower, for economic or contractual reasons relating to the

borrower’s financial difficulty, having granted to the borrower a concession(s)

that the lender(s) would not otherwise consider; or

• It is becoming probable that the borrower will enter bankruptcy or other financial

reorganisation.



I – 29

Write-off policy

The Group writes off a financial asset when there is information indicating that the

counterparty is in severe financial difficulty and there is no realistic prospect of recovery,

e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy

proceedings, or in the case of trade receivables, when the amounts are over two years past

due, whichever occurs sooner. Financial assets written off may still be subject to

enforcement activities under the Group’s recovery procedures, taking into account legal

advice when appropriate. Any recoveries made are recognised in profit or loss.

Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default

(i.e. the magnitude of the loss if there is a default) and the exposure at default. The

assessment of the probability of default and loss given default is based on historical data

adjusted by forward-looking information.

The ECL is estimated as the difference between all contractual cash flows that are due

to the Group in accordance with the contract and all the cash flows that the Group expects

to receive, discounted at the effective interest rate determined at initial recognition.

The Group recognises an impairment gain or loss in profit or loss for all financial

instruments by adjusting their carrying amount with the exception of trade receivables where

the correspondence adjustment is recognised through a loss allowance account.

If the Group has measured the loss allowance for a financial instrument at an amount

equal to lifetime ECL in the previous reporting period, but determines at the current

reporting date that the conditions for lifetime ECL are no longer met, the Group measures

the loss allowance at an amount equal to 12-month ECL at the current reporting date.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial

liabilities or as equity in accordance with the substance of the contractual arrangements

entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of a

group entity after deducting all of its liabilities. Equity instruments issued by a group entity

are recognised at the proceeds received, net of direct issue costs.



I – 30

Effective interest method

The effective interest method is a method of calculating the amortised cost of a

financial liability and of allocating interest expense over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash payments (including all

fees and points paid or received that form an integral part of the effective interest rate,

transaction costs and other premiums or discounts) through the expected life of the financial

liability, or, where appropriate, a shorter period, to the net carrying amount on initial

recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities (including trade and other payables, lease liabilities, amount due to

ultimate holding company, amounts due to related parties and bank borrowings) are

subsequently measured at amortised cost using the effective interest method.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash

flows from the asset expire, or when it transfers the financial asset and substantially all the

risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the asset’s

carrying amount and the sum of the consideration received and receivable is recognised in

profit or loss.

The Group derecognises financial liabilities when, and only when, the Group’s

obligations are discharged, cancelled or have expired. The difference between the carrying

amount of the financial liability derecognised and the consideration paid and payable is

recognised in profit or loss.

Foreign currencies

Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured

using the currency of the primary economic environment in which the entity operates (the

‘‘functional currency’’). The combined financial statements are presented in HK$, which is

the Company’s functional and presentation currency.



I – 31

(ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency on initial

recognition using the exchange rates prevailing on the transaction dates. Monetary assets

and liabilities in foreign currencies are translated at the exchange rates at the end of each

reporting period. Gains and losses resulting from this translation policy are recognised in

profit or loss. Non-monetary items that are measured at fair values in foreign currencies are

translated using the exchange rates at the dates when the fair values are determined. When a

gain or loss on a non-monetary item is recognised in other comprehensive income, any

exchange component of that gain or loss is recognised in other comprehensive income.

When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange

component of that gain or loss is recognised in profit or loss.

(iii) Translation on consolidation

The results and financial position of all the Group entities that have a functional

currency different from the Company’s presentation currency are translated into the

Company’s presentation currency as follows:

– Assets and liabilities for each statement of financial position presented are

translated at the closing rate at the date of that statement of financial position;

– Income and expenses are translated at average exchange rates (unless this average

is not a reasonable approximation of the cumulative effect of the rates prevailing

on the transaction dates, in which case income and expenses are translated at the

exchange rates on the transaction dates); and

– All resulting exchange differences are recognised in the foreign currency

translation reserve. On combination, exchange differences arising from the

translation of the net investment in foreign entities and of borrowings are

recognised in the foreign currency translation reserve. When a foreign operation

is sold, such exchange differences are recognised in combined profit or loss as

part of the gain or loss on disposal. Goodwill and fair value adjustments arising

on the acquisition of a foreign entity are treated as assets and liabilities of the

foreign entity and translated at the closing rate.

Plant and equipment

Plant and equipment are stated in the combined statements of financial position at cost

less subsequent accumulated depreciation and accumulated impairment losses, if any.



I – 32

Depreciation is provided to write off the cost of items of plant and equipment over

their estimated useful lives and after taking into account of their estimated residual values,

using the straight-line method, at the following rates per annum:

Plant and machinery 10%-20%

Furniture and equipment 10%-33%

Leasehold improvements 20%-33%

Motor vehicles 20%

An item of plant and equipment is derecognised upon disposal or when no future

economic benefits are expected to arise from the continued use of the asset. Any gain or

loss arising on the disposal or retirement of an item of property, plant and equipment is

determined as the difference between the sales proceeds and the carrying amount of the asset

and is recognised in profit or loss.

The Group, in the course of its ordinary activities, routinely sells its plant and

machinery that it has held for rental to others. Transfers of such assets are made from plant

and equipment to inventories at their carrying amount when they cease to be rented and

become held for sale.

Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is calculated

using the first-in, first-out basis and comprises all costs of purchase and other costs incurred

in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business

less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as

an expense in the period in which the related revenue is recognised. The amount of any

write-down of inventories to net realisable value and all losses of inventories are recognised

as an expense in the period the write-down or loss occurs. The amount of any reversal of

any write-down of inventories is recognised as a reduction in the amount of inventories

recognised as an expense in the period in which the reversal occurs.

Interest-bearing borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred.

Borrowings are subsequently carried at amortised cost; any difference between the proceeds

(net of transaction costs) and the redemption value is recognised in the profit or loss over

the period of the borrowings using the effective interest method.



I – 33

Borrowings are classified as current liabilities unless the Group has an unconditional

right to defer settlement of the liability for at least 12 months after the end of the reporting

period.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits with

banks and other financial institutions, and short-term, highly liquid investments that are

readily convertible into known amounts of cash and which are subject to an insignificant

risk of changes in value, having been within three months of maturity at acquisition.

Related parties

(1) A person, or a close member of that person’s family, is related to the Group if that

person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s

parent.

(2) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each

parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or

joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate

of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of

either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (1).

(vii) A person identified in (1)(i) has significant influence over the entity or is a

member of the key management personnel of the entity (or of a parent of the

entity).



I – 34

(viii) The entity, or any member of a group of which it is a part, provides key

management personnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be

expected to influence, or be influenced by, that person in their dealings with the entity.

Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the

Group has a legal or constructive obligation arising as a result of a past event, it is probable

that an outflow of economic benefits will be required to settle the obligation and a reliable

estimate can be made. Where the time value of money is material, provisions are stated at

the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the

amount cannot be estimated reliably, the obligation is disclosed as a contingent liability,

unless the probability of outflow of economic benefits is remote. Possible obligations,

whose existence will only be confirmed by the occurrence or non-occurrence of one or more

future events are also disclosed as contingent liabilities unless the probability of outflow of

economic benefits is remote.

Segment reporting

Operating segments, and the amounts of each segment item reported in the Historical

Financial Information, are identified from the financial information provided regularly to the

Group’s chief operating decision maker for the purposes of allocating resources to, and

assessing the performance of, the Group’s various lines of business and geographical

locations.

Individually material operating segments are not aggregated for financial reporting

purposes unless the segments have similar economic characteristics and are similar in

respect of the nature of products and services, the nature of production processes, the type

or class of customers, the methods used to distribute the products or provide the services,

and the nature of the regulatory environment. Operating segments which are not individually

material may be aggregated if they share a majority of these criteria.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, the

directors of the Group are required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities that are not readily apparent from other sources. The

estimates and underlying assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.



I – 35

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period or in the period of the revision and future periods if the revision affects

both current and future periods.

The followings are the key assumptions concerning the future, and other key sources of

estimation uncertainty at the end of the reporting period, that have a significant risk of causing a

material adjustment to the carrying amounts of assets and liabilities within the next twelve

months.

Impairment assessment of trade receivables

The management of the Group estimates the amount of lifetime ECL of trade

receivables, including receivables from lessees, based on individual assessment, after

considering internal credit ratings of trade debtors, ageing, repayment history and/or past

due status of respective trade receivables. Estimated loss rates are based on historical

observed default rates over the expected life of the debtors and are adjusted for forward-

looking information. At every reporting date, the historical observed default rates are

reassessed and changes in the forward-looking information are considered. The provision of

ECL is sensitive to changes in estimates. The information about the ECL and the Group’s

trade receivables are disclosed in notes 7 and 19 respectively. As at 31 March 2019, 2020

and 2021, the carrying amounts of trade receivables are approximately HK$16,472,000,

HK$33,764,000 and HK$29,756,000, respectively. Impairment loss of approximately

HK$140,000, HK$440,000 and reversal of impairment loss of HK$201,000 respectively

have been made in the combined profit or loss on trade receivables.

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course

of business less estimated costs of completion and the estimated costs necessary to make the

sale. These estimates are based on the current market conditions and the historical

experience of selling the products with similar nature. Any change in the assumptions would

increase or decrease the amount of inventories write-down or the related reversals of write-

down made in prior periods and affect the Group’s net assets value. Management reassesses

these estimates at the end of each reporting period to ensure inventories are shown at the

lower of cost and net realisable value.



I – 36

Depreciation of plant and equipment

Plant and equipment are depreciated on a straight-line basis over their estimated useful

lives. The determination of the useful lives involves management’s estimation. The Group

assesses annually the useful lives of the plant and equipment and if the expectation differs

from the original estimate, such a difference may impact the depreciation in the year and the

estimate will be changed in the future period. As at 31 March 2019, 2020 and 2021, the

carrying amounts of plant and equipment are approximately HK$117,006,000,

HK$113,330,000 and HK$126,573,000 respectively.

Estimated impairment of plant and equipment and right-of-use assets

The Group assesses annually whether plant and equipment have any indication of

impairment, in accordance with relevant accounting policies. The recoverable amounts of

plant and equipment and right-of-use assets have been determined based on value-in-use

calculations if there is indication of impairment. The calculations and valuations require the

use of judgement and estimates on future operating cash flows and discount rates adopted.

As at 31 March 2019, 2020 and 2021, the managements of the Group considered that there

is no impairment indication and no impairment is recognised for the years.

6. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue

as a going concern while maximising the return to equity shareholders through the optimisation of

the debt and equity balance. The Group’s overall strategy remains unchanged during the Track

Record Period.

The capital structure of the Group consists of net debt, which includes lease liabilities and

bank borrowings disclosed in Notes 25 and 26 respectively, net of cash and cash equivalents and

equity attributable to the owners of the Company, comprising issued share capital and reserves.

The Group monitors capital with reference to its debt position. The Group’s strategy is to

maintain the equity and debt in a balanced position and ensure there was adequate working capital

to serve its debt obligations. At 31 March 2019, 2020 and 2021, the ratio of the Group’s total

liabilities over its total assets was 34%, 35% and 46% respectively.



I – 37

7. FINANCIAL INSTRUMENTS

Categories of financial instruments

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000Financial assetsFinancial assets at fair value through

profit or loss 5,451 4,700 –

Amortised cost 68,688 49,578 60,479

Financial liabilitiesAmortised cost 53,294 38,828 83,662

Financial risk management objectives and policies

The Group’s financial instruments include trade and other receivables (excluding

prepayment), amount due from controlling shareholder and a related company, financial

assets at fair value through profit or loss, bank balances and cash, trade and other payables,

amount due to ultimate holding company, amounts due to related parties, lease liabilities and

bank borrowings. Details of these financial instruments are disclosed in the respective notes.

The risks associated with these financial instruments include market risks (currency risk,

interest rate risk and price risk), credit risk and liquidity risk. The policies on how to

mitigate these risks are set out below. The management of the Group manages and monitors

these exposures to ensure appropriate measures are implemented on a timely and effective

manner.

Market risk

Currency risk

(i) Exposure to currency risk

For presentation purposes, the Group’s financial information is shown in HK$. The

companies within the Group, whose functional currencies are different from HK$, have

translated their financial information into HK$ for combination purpose. The Group is

exposed to currency risk primarily through sales and purchases which give rise to

receivables, payables and cash balances that are denominated in a foreign currency, i.e. a

currency other than the functional currency of the operations to which the transactions

relate. The currency giving rise to this risk is primarily Japanese yen.



I – 38

Since HK$ is pegged to USD, there is no significant exposure expected on HK$

transactions and balances.

The following table details the Group’s exposure at the end of the reporting period to

currency risk arising from recognised assets or liabilities denominated in a currency other

than the functional currency of the entity to which they relate. For presentation purposes,

the amounts of the exposure are shown in HK$, translated using the spot rate at the

reporting dates.

Exposure to foreign currencies(expressed in HK$)As at 31 March

2019 2020 2021Japanese

yenJapanese

yenJapanese

yenHK$’000 HK$’000 HK$’000

Bank balances 2,180 238 20

Trade and other payables (5,157) (2,048) (15,385)

Net exposure arising from

recognised assets and liabilities (2,977) (1,810) (15,365)

(ii) Sensitivity analysis

The following table indicates the instantaneous change in the Group’s profit after

taxation and retained earnings that would arise if foreign exchange rates to which the Group

has significant exposure at the end of the reporting period had changed at that date,

assuming all other risk variables remained constant.

As at 31 March2019 2020 2021

Increase/(decrease)in foreignexchange

rates

Effect onprofit after

taxationand

retainedearnings


rates


taxationand

retainedearnings


rates


taxationand

retainedearnings

HK$’000 HK$’000 HK$’000

Japanese yen 5% 124 5% 76 5% 641



I – 39

Results of the analysis as presented in the above table represent an aggregation of the

instantaneous effects on each of the Group entities’ profit after taxation and equity measured

in the respective functional currency, translated to HK$ at the exchange rate ruling at the

end of the reporting periods for presentation purposes. The sensitivity analysis assumes that

the change in foreign exchange rates had been applied to re-measure those financial

instruments held by the Group which expose the Group to foreign currency risk at the end

of the reporting periods, including inter-company payables and receivables within the Group

which are denominated in a currency other than the functional currency of the lender or the

borrower. The analysis excludes differences that would result from the translation of the

financial statements of foreign operations into the Group’s presentation currency.

At 31 March 2019, 2020 and 2021, if the HK$ weakened 5% against the Japanese yen

with all other variables held constant, the Group’s profit for the year and retained earnings

would have been approximately HK$124,000, HK$76,000 and HK$641,000 lower,

respectively. Conversely, if the HK$ had strengthened 5% against the Japanese yen with all

other variables held constant, the company’s profit for the year and retained earnings would

have been approximately HK$124,000, HK$76,000 and HK$641,000 higher, respectively.

The sensitivity analysis has been prepared with the assumption that the change in

foreign exchange rates had occurred at the end of each reporting periods and had been

applied to the exposure to currency risk for the relevant financial instruments in existence at

that date.

Interest rate risk

The Group’s cash flow interest rate risk relates primarily to variable-rate bank

balances, lease liabilities and bank borrowings (see Note 22 for details of bank balances and

cash and bank balances, Note 25 for details of lease liabilities and Note 26 for details of

bank borrowings). The Group currently does not have an interest rate hedging policy.

However, the management of the Group monitors interest rate exposure and will consider

other necessary actions when significant interest rate exposure is anticipated.

The Group’s and the Company’s exposure to interest rates on financial liabilities is

detailed in the liquidity risk management section of this note.

The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of

the interest rates on Hong Kong Interbank offered rate (‘‘HIBOR’’) arising from the Group’s

bank borrowings.



I – 40

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest

rates for non-derivative financial instruments at the end of the reporting period. For bank

borrowings, the analysis is prepared assuming bank borrowings outstanding at the end of the

reporting period were outstanding for the whole year.

A 50 basis points increase or decrease is used when reporting interest rate risk

internally to key management personnel and represents management’s assessment of the

reasonably possible change in interest rates. If interest rates on bank borrowings had been

50 basis points higher/lower and all other variables were held constant, the Group’s post-tax

profit for each of the three years ended 31 March 2021 would decrease/increase by

approximately HK$99,000, HK$87,000 and HK$152,000, respectively.

Price risk

The Group’s investments at fair value through profit or loss is measured at fair value at

the end of each reporting periods. Therefore, the Group is exposed to unlisted investment

funds’ price risk. The directors of the Company manage this exposure by maintaining a

portfolio of investments with difference risk profiles.

At 31 March 2019, 2020 and 2021, if the unlisted investment fund’s prices of the

investments increase/decrease by 10%, profit after tax for the year would have been

approximately HK$545,000, HK$470,000 and HK$nil respectively, higher/lower

respectively, arising as a result of the fair value gain/loss of the investments.

Credit risk and impairment assessment

At the end of each reporting period, the Group’s and the Company’s maximum

exposure to credit risk which will cause a financial loss to the Group due to failure to

discharge an obligation by the counterparties and financial guarantees is arising from the

carrying amount of the respective recognised financial assets and contract assets as stated in

the combined statements of financial position.

In order to minimise the credit risk, the management has delegated a team responsible

for determination of credit limits, credit approvals and other monitoring procedures to

ensure that follow-up action is taken to recover overdue debts. Before accepting any new

customer, the company uses an internal credit scoring system to assess the potential

customer’s credit quality. Scoring attributed to customers is reviewed once a year. In

additions, the Group performs impairment assessment under ECL model. In this regard, the

directors of the Company consider that the Group’s credit risk is significantly reduced.



I – 41

Bank balances

The credit risk on bank balances is limited because the counterparties are banks with

high credit ratings assigned by international credit-rating agencies.

Trade receivables, including receivables from lessees

The Group is exposed to concentration of credit risk as at 31 March 2019, 2020 and

2021 on trade receivables from the Group’s 5 major customers amounting to approximately

HK$9,254,000, HK$11,910,000 and HK$8,539,000, respectively and accounted for 56%,

35% and 29%, respectively, of the Group’s total trade receivables.

Other receivables

The Group has considered that credit risk on other receivables has not increased

significantly since initial recognition and has assessed the expected credit loss rate under 12-

month ECL method based on the Group’s assessment in the risk of default of the respective

counterparties.

As at 31 March 2019, 2020 and 2021, the Group has assessed that the expected loss

rates for other receivables was immaterial. Thus no loss allowance for other receivables was

recognised.

Amount due from controlling shareholder

No impairment allowance for amount due from controlling shareholder was provided

since loss given default and exposure at default are insignificant based on the historical

credit loss experience. The directors of the Group has also assessed all available forward

looking information, including but not limited to expected growth rate of the industry and

subsequent settlement, and concluded that there is no significant increase in credit loss.

Amount due from a related company

No impairment allowance for amount due from a related company was provided since

loss given default and exposure at default are insignificant based on the historical credit loss

experience. The directors of the Group has also assessed all available forward looking

information, including but not limited to expected growth rate of the industry and

subsequent settlement, and concluded that there is no significant increase in credit loss.

The Group does not provide any guarantees which would expose the company to credit

risk.



I – 42

The Group’s internal credit risk grading assessment comprises the following categories:

Internalcredit rating Description Trade receivables

Otherfinancial assets

High The amount aged under 90 days past due Lifetime ECL –

not credit-impaired

12 months ECL

Medium The amount aged excess 90 days but

under 180 days past due

Lifetime ECL –

not credit-impaired

12 months ECL

Low The amount aged over 180 days past due Lifetime ECL –

not credit-impaired

Lifetime ECL –

not credit-impaired

Loss There is evidence indicating the assets is

credit impaired

Lifetime ECL –

credit-impaired

Lifetime ECL –

credit-impaired

Write-off There is evidence indicating that the

debtor is in severe financial difficulty

and the company has no realistic

prospect of recovery

Amount is written off Amount is written

off

The tables below detail the credit risk exposure of the Group’s financial assets, which

are subject to ECL assessment:

2019Externalcredit rating

Internalcredit rating

12-month orlifetime ECL

Gross carryingamountHK$’000

Financial assets at amortised cost

Trade receivables– others

N/A High Lifetime ECL –

not credit-impaired416

Medium Lifetime ECL –


Low Lifetime ECL –

not credit-impaired235 719

Trade receivables– lessees


not credit-impaired9,122




not credit-impaired3,537 16,073

Other receivables N/A High 12-month ECL 9,022 9,022

Amount due fromcontrolling shareholder

N/A High 12-month ECL 21,305 21,305

Amount due from arelated company


Bank balances A3-Aa1 High 12-month ECL 19,211 19,211



I – 43












not credit-impaired324 5,195








Other receivables N/A High 12-month ECL 526 526













not credit-impaired31 3,861








Other receivables N/A High 12-month ECL 703 703

Amount due fromcontrolling shareholder


Amount due froma related company





I – 44

The following table provides information about the exposure to credit risk for trade

receivables which are assessed based on provision matrix within lifetime ECL (not credit-

impaired).

Gross carrying amount as at 31 March 2019

Trade receivables – others Trade receivables – lessees

Internal credit ratingAverage loss

rate

Grosscarryingamount

Average lossrate

Grosscarryingamount

High 0.35% 416 0.50% 9,122Medium 1.74% 68 1.86% 3,414Low 6.68% 235 5.44% 3,537

719 16,073




rate

Grosscarryingamount

Average lossrate

Grosscarryingamount

High 0.63% 4,773 1.07% 18,929Medium 3.07% 98 2.95% 5,563Low 9.91% 324 6.73% 4,833

5,195 29,325




rate

Grosscarryingamount

Average lossrate

Grosscarryingamount

High 1.21% 3,711 1.18% 20,690Medium 2.92% 119 2.64% 2,869Low 10.55% 31 6.59% 2,899

3,861 26,458

The estimated loss rates are estimated based on historical observed default rates over

the expected life of the debtors and are adjusted for forward-looking information that is

available without undue cost or effort. The grouping is regularly reviewed by management

to ensure relevant information about specific debtors is updated.



I – 45

The following table shows the movement in ECL that has been recognised for trade

receivables under the simplified approach and general approach respectively.

Tradereceivables

– othersLifetime

ECL (notcredit-

Impaired)

Tradereceivables

– lesseesLifetime

ECL (notcredit-

Impaired) TotalHK$’000 HK$’000 HK$’000

As at 31 March 2018 10 171 181

Reversal of impairment losses (6) (155) (161)Impairment losses recognised 15 286 301Exchange adjustment – (1) (1)

9 130 139

As at 31 March 2019 19 301 320

Reversal of impairment losses (10) (265) (275)Impairment losses recognised 58 657 715Exchange adjustment (1) (3) (4)

47 389 436

As at 31 March 2020 66 690 756

Reversal of impairment losses (65) (679) (744)Impairment losses recognised 51 492 543Exchange adjustment 1 7 8

(13) (180) (193)

As at 31 March 2021 53 510 563

Liquidity risk

Individual operating entities within the Group are responsible for their own cash

management, including the short term investment of cash surpluses and the raising of loans

to cover expected cash demands, subject to approval by the senior management when the

borrowings exceed certain predetermined levels of authority. The Group’s policy is to

regularly monitor its liquidity requirements and its compliance with lending covenants (if

any), to ensure that it maintains sufficient reserves of cash and adequate committed lines of

funding from major financial institutions to meet its liquidity requirements in the short and

longer term.



I – 46

The following table shows the remaining contractual maturities at the end of each

reporting period of the Group’s non-derivative financial liabilities, which are based on the

contractual undiscounted cash flows (including interest payments computed using

contractual rates or, if floating, based on rates current at the end of each reporting period)

and the earliest date the Group can be required to pay.

Contractual undiscounted cash flow

At 31 March 2019

Within 1year or on

demand

More than1 year butless than 2

years

More than2 yearsbut lessthan 5years

More than5 years Total

Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Trade and other payables 8,476 – – – 8,476 8,476Amount due to ultimate holding

company 2,762 – – – 2,762 2,762Amounts due to related parties 14,491 – – – 14,491 14,491Lease liabilities 3,022 840 – – 3,862 3,747Bank borrowings 23,818 – – – 23,818 23,818

52,569 840 – – 53,409 53,294


At 31 March 2020

Within 1year or on

demand


years



Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Trade and other payables 3,719 – – – 3,719 3,719Amounts due to related parties 13,562 – – – 13,562 13,562Lease liabilities 786 – – – 786 774Bank borrowings 20,773 – – – 20,773 20,773

38,840 – – – 38,840 38,828


At 31 March 2021

Within 1year or on

demand


years



Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Trade and other payables 18,031 – – – 18,031 18,031Amounts due to related parties 8,253 – – – 8,253 8,253Lease liabilities 7,690 7,690 7,049 – 22,429 20,989Bank borrowings 36,389 – – – 36,389 36,389

70,363 7,690 7,049 – 85,102 83,662



I – 47

Fair value

The fair values of financial assets and financial liabilities are determined in accordance

with generally accepted pricing models based on discounted cash flow analysis, with the

most significant input being the discount rate that reflects the credit risk of counterparties.

The directors of the Company consider that the carrying amounts of financial assets

and financial liabilities recorded at amortised cost in the Historical Financial Information

approximate their fair values.

The following disclosures of fair value measurements use a fair value hierarchy which

has 3 levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or

indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market

data (unobservable inputs).

The Group’s policy is to recognise transfers into and transfers out of any of the three

levels as of the date of the event or change in circumstances that caused the transfer.

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Recurring fair value measurements:

Financial assets at fair value through

profit or loss

– unlisted investment funds 5,451 4,700 –



I – 48

Disclosures of level in fair value hierarchy as at 31 March 2019, 2020 and 2021:

Fair value measurement using: TotalLevel 1 Level 2 Level 3 2019

HK$’000 HK$’000 HK$’000 HK$’000

DescriptionFinancial assets at fair value through

profit or loss– unlisted investment funds – 5,451 – 5,451


HK$’000 HK$’000 HK$’000 HK$’000DescriptionFinancial assets at fair value through

profit or loss– unlisted investment funds – 4,700 – 4,700


HK$’000 HK$’000 HK$’000 HK$’000DescriptionFinancial assets at fair value through

profit or loss– unlisted investment funds – – – –

During the year, there were no transfers between levels.

Level 2 fair value measurements

DescriptionValuationtechnique Inputs

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Financial assets at fair valuethrough profit or loss

N/A Quoted pricesprovided by therelevant banks– unlisted investment funds 5,451 4,700 –



I – 49

8. REVENUE AND SEGMENT INFORMATION

(a) Revenue

(i) Disaggregation of revenue from contracts with customers within the scope of

HKFRS 15

For the year ended 31 March 2019Lease related

operatingservices

Transportationservices

Repair andmaintenance

services

Sale ofconstructionequipment Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Geographical markets (determined based

on the location of customers)Hong Kong 49 1,620 703 1,924 4,296PRC 24 204 228 1,558 2,014

Total 73 1,824 931 3,482 6,310

Timing of revenue recognitionA point in time – 1,824 931 3,482 6,237Over time 73 – – – 73

Total 73 1,824 931 3,482 6,310


operatingservices



services


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Geographical markets (determined basedon the location of customers)

Hong Kong 243 1,557 1,128 21,550 24,478PRC 113 211 17 907 1,248

Total 356 1,768 1,145 22,457 25,726

Timing of revenue recognitionA point in time – 1,768 1,145 22,457 25,370Over time 356 – – – 356

Total 356 1,768 1,145 22,457 25,726



I – 50


operatingservices



services


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Geographical markets (determined basedon the location of customers)

Hong Kong 166 2,229 2,834 31,475 36,704PRC 2 158 53 1,465 1,678

Total 168 2,387 2,887 32,940 38,382

Timing of revenue recognitionA point in time – 2,387 2,887 32,940 38,214Over time 168 – – – 168

Total 168 2,387 2,887 32,940 38,382

Set out below is the reconciliation of the revenue from contracts with customers

with the amounts of revenue presented in the combined statements of profit or loss and

other comprehensive income:

2019 2020 2021HK$’000 HK$’000 HK$’000

Lease related operating services andother services (Note 1) 2,828 3,269 5,442

Sale of construction equipment(Note 2) 3,482 22,457 32,940

Revenue from contracts withcustomers within the scope ofHKFRS 15 6,310 25,726 38,382

Construction equipment rental services 47,492 68,154 90,403

Total revenue 53,802 93,880 128,785

Notes:

1. The contract periods for lease related operating services and other services are one year or less.

As permitted under HKFRS 15, the transaction price allocated to unsatisfied contracts for these

services is not disclosed.

2. All the contracts for sale of construction equipment are completed within one year of the

respective contract dates. As permitted under HKFRS 15, the transaction price allocated to

these unsatisfied contracts is not disclosed.



I – 51

The disaggregation of revenue from sale of construction equipment is as below:

2019 2020 2021HK$’000 HK$’000 HK$’000

Construction equipment – new 1,689 1,236 15,750Construction equipment – used 1,558 19,149 13,556Second hand construction equipment – 1,592 2,577Spare parts 235 480 1,057

3,482 22,457 32,940

The Group, in the course of its ordinary activities, routinely sells items of

construction equipment that it has held for rental to others. Such items are periodically

identified based on the Group’s established criteria for ceasing to be used in its

construction equipment rental services segment and are then transferred from plant and

equipment to inventories at their carrying amount when they cease to be held for rental

purposes and become held for sale. The proceeds from the sale of such items are

recognised as revenue from sale of used construction equipment.

Sale of second hand construction equipment represented the revenue from sale of

second hand construction equipment purchased by the Group from others for resales

purpose.

The Group provides repairs and maintenance services during the specified

warranty period to its customers in relation to the sale of new construction equipment.

The claims for warranty services during the warranty period is insignificant during the

Track Record Period, according to the historical data. The Directors of the Company

consider the warranty provides the customers with assurance that the construction

equipment will function as intended and hence it is not identified as a separate

performance obligation.

(ii) Leases

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

For operating leases

Lease payments that are fixed 47,492 68,154 90,403

For the years ended 31 March 2019, 2020 and 2021, there are no contingent

rental recognised.



I – 52

(b) Segment information

For management purpose, the Group is organised based on its business activities. The

Group determines its operating segments based on financial information about these business

activities that are regularly reviewed by the chief operating decision maker, i.e. the

executive directors of the Company, for the purposes of resources allocation and

performance assessment.

Specifically, the Group’s reportable and operating segments under HKFRS 8 Operating

Segments are as follows:

Construction equipment rental services – Leasing of machineries, repair and related

maintenance services, transportation services and provision of labour and training services.

Sale of construction equipment – Sale of construction equipments, related spare parts

and consumables.

Segment information about these reportable and operating segments is presented

below.

Segment revenue and results

For the year ended 31 March 2019:


Constructionequipment

rentalservices Total

HK$’000 HK$’000 HK$’000

RevenueSegment revenue from external customers 3,482 50,320 53,802

ResultsSegment results 1,619 15,371 16,990

Unallocated income 14,423Unallocated expenses (11,170)

Profit before taxation 20,243



I – 53





HK$’000 HK$’000 HK$’000



Unallocated income 153Unallocated expenses (11,390)






HK$’000 HK$’000 HK$’000



Unallocated income 2,585Unallocated expenses (16,758)


Segment profits represent mainly gross profit derived from sales generated by each

segment. The unallocated income include other income and other net gains, and the

unallocated expenses include administration staff costs, finance costs, other operating

expenses and [REDACTED] as these items are not or cannot be allocated to each segment.

These was no inter-segment revenue from inter-segment sale during the Track Record

Period.



I – 54

No segment assets and liabilities are presented as the information is not regularly

reported to the chief operating decision maker for the purposes of resource allocation and

assessment of performance.

Other segment information





HK$’000 HK$’000 HK$’000

Amounts included in the measure ofsegment results:

Depreciation on plant and equipment – (21,250) (21,250)Depreciation on right-of-use assets – (1,617) (1,617)Impairment on trade receivables, net (9) (131) (140)





HK$’000 HK$’000 HK$’000


Depreciation on plant and equipment – (20,335) (20,335)Depreciation on right-of-use assets – (1,383) (1,383)Impairment on trade receivables, net (48) (392) (440)



I – 55





HK$’000 HK$’000 HK$’000


Depreciation on plant and equipment – (20,263) (20,263)Depreciation on right-of-use assets (95) (1,455) (1,550)Gain on disposal of plant and equipment 200 – 200Reversal of impairment loss on trade

receivables, net 14 187 201

Geographical information

The Group’s revenue from external customers is mainly derived from customers

located in Hong Kong and PRC. The geographical analysis of revenue shown below is

determined based on the location of customers.


HK$’000 HK$’000 HK$’000

External revenue:Hong Kong 42,547 82,361 118,635PRC 11,255 11,519 10,150

53,802 93,880 128,785

The Group’s non-current assets based on the geographical location of the group

companies owning these assets are as follows:

As at 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Non-current assets:Hong Kong 98,296 92,493 128,019PRC 24,786 22,148 22,116

123,082 114,641 150,135



I – 56

Information about major customers

Revenue from customers during the Track Record Period contributing over 10% of the

total revenue of the Group is as follows:


HK$’000 HK$’000 HK$’000

Customer A** 7,291 N/A* N/A*Customer B** N/A* 10,427 N/A*

* Revenue did not contribute over 10% of the total revenue of the Group for the Track Record Period

but was shown for comparison purpose.

** Revenue from these customers were derived in both sale of construction equipment and construction

equipment rental services segments.

9. OTHER INCOME

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Interest income 11 4 5

Dividend income 116 121 61

Sundry income –* – 432

Compensation income 531 – –

Government subsidy (Note) 2 – 820

Management fee income 96 – –

756 125 1,318

Note: Being the subsidy received from the COVID-19 Anti-epidemic Fund under the Employment Support Scheme

and other subsidy schemes as launched by the Government of the Hong Kong Special Administrative Region

of the People’s Republic of China and the People’s Republic of China.




I – 57

10. OTHER NET GAINS/(LOSSES)


HK$’000 HK$’000 HK$’000

Net exchange gains/(losses) 418 28 (145)

Fair value (losses)/gains on financial assets at fair value

through profit or loss (272) (826) 1,066

Gain on disposal of plant and equipment 13,248 – 200

Loss on written off of plant and equipment – (13) –

Impairment losses on trade receivables, net (140) (440) –

Reversal of impairment losses on trade receivables, net – – 201

13,254 (1,251) 1,322

11. PROFIT FOR THE YEAR

Profit for the year is arrived at after charging/(crediting):


HK$’000 HK$’000 HK$’000

(a) Finance costs

Interest on lease liabilities 111 59 96

Interest on bank borrowings 1,461 1,140 1,136

Finance lease charges 153 40 –

1,725 1,239 1,232

(b) Staff costs (including directors’ remuneration)

Directors’ remuneration (note 14(a)) 2,044 2,106 3,220

Salaries, wages and other benefits, excluding

those of directors 6,517 5,054 5,231

Contributions to defined contribution retirement

plan, excluding those of directors 198 133 150

Total staff costs 8,759 7,293 8,601

Less: Amounts included in cost of sales

and services (2,736) (2,735) (2,596)

Total staff costs included in other expense

categories 6,023 4,558 6,005



I – 58


HK$’000 HK$’000 HK$’000

(c) Other items

Depreciation for plant and equipment

– included in cost of sales and services 21,250 20,335 20,263

– included in other expense categories 451 393 552

Depreciation for right-of-use assets

– included in cost of sales and services 1,617 1,383 1,550

– included in other expense categories 156 92 –

Short term lease payments 6,432 6,780 5,995

Auditor’s remuneration 312 456 510

Cost of inventories sold (note 18) 1,556 11,399 19,295

12. INCOME TAX EXPENSE

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Current tax

– Hong Kong Profits Tax

Provision for the year 851 5,489 7,744

– Enterprise Income Tax in the PRC

Provision for the year 139 638 130

990 6,127 7,874

Deferred taxation

Origination and reversal of temporary differences

(note 27) 1,840 80 2,740

2,830 6,207 10,614

Pursuant to the rules and regulations of the Cayman Islands and the BVI, the Group is not

subject to any income tax in the Cayman Islands and the BVI.

The Hong Kong Profits Tax of the elected Hong Kong subsidiary is calculated at 8.25% on

the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated

assessable profits above HK$2 million. Taxation for other Hong Kong subsidiaries are calculated

at 16.5%. The provision for Hong Kong Profits Tax is calculated at 16.5% of the estimated

assessable profits for the Track Record Period.



I – 59

PRC enterprise income tax is calculated at 25% of the estimated assessable profits arising in

the PRC.

The income tax expense for the year can be reconciled to the profit before taxation in the

combined statements of profits or loss and other comprehensive income as follows:

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000


Notional tax on profit before taxation, calculated at the

tax rates applicable to the respective tax jurisdictions 3,184 6,209 10,312

Tax effect of non-deductible expenses 90 259 801

Tax effect of non-taxable income (414) (26) (304)

Effect of concessionary tax rate – (165) (165)

Tax reduction (30) (70) (30)

Income tax expense for the year 2,830 6,207 10,614

Deferred taxation has not been recognised in respect of the undistributed retained profits

earned by the subsidiary in the PRC amounting to HK$830,000 and HK$876,000 for the years

ended 31 March 2020 and 2021 respectively, as the management of the Group is of the opinion

that the Group is able to control the timing of the reversal of the temporary differences and it is

probable that the temporary differences will not reverse in the foreseeable future.

13. DIVIDEND

During the year ended 31 March 2019, total dividend of HK$104,000,000 was recognised as

distribution by Chi Shing Machinery and Chi Shing Machinery Rental to their then shareholder.


Rental declared and paid total dividends of HK$50,300,000 to their then shareholder.


Rental declared and paid total dividends of HK$41,000,000 to their then shareholder.

Other than the above, no dividend has been paid or declared by the Company or other

companies comprising the Group during the Track Record Period.

The rates of dividend and the number of shares ranking for distribution are not present as

such information is not meaningful having regard to the purpose of this report.



I – 60

14. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND EMPLOYEES’

EMOLUMENTS

(a) Directors’ emoluments and chief executive’s emoluments

Executive directors

Details of the emoluments paid or payable by the Group to the directors of the

subsidiaries who were appointed as the directors of the Company for their services

rendered to the Group during the Track Record Period for their services rendered are

as follows:

Year ended 31 March 2019

Name of directors Fees

Salaries andother

allowanceDiscretionary

bonus

Retirementbenefit schemecontributions Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Mr. Kok Yun Kuen – 446 25 18 489Ms. Kwan Suet Man – 324 139 16 479Mr. Poon Ka Chun – 444 96 18 558Mr. Kok Kwai Leung – 453 48 17 518

– 1,667 308 69 2,044



Salaries andother


bonus


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Mr. Kok Yun Kuen – 446 25 18 489Ms. Kwan Suet Man – 328 139 16 483Mr. Poon Ka Chun – 444 136 18 598Mr. Kok Kwai Leung – 470 48 18 536

– 1,688 348 70 2,106



Salaries andother


bonus


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Mr. Kok Yun Kuen – 446 728 18 1,192Ms. Kwan Suet Man – 328 159 16 503Mr. Poon Ka Chun – 444 202 18 664Mr. Kok Kwai Leung – 472 371 18 861

– 1,690 1,460 70 3,220

Note: Mr. Kok Kwai Leung is the chief executive officer of the Company.



I – 61

The executive directors’ emoluments shown above were for their services in

connection with the management of the affairs of the Group. None of the directors of

the Company has waived or agreed to waive any emoluments during the Track Record

Period.

The discretionary bonus is determined based on performance of individual and

the Group.

The emoluments of the above directors include those services rendered by them

to the companies now comprising the Group during the Track Record Period.

(b) Five highest paid individuals

The five highest paid individuals of the Group during the years ended 31 March 2019,

2020 and 2021 include 4, 4 and 4 directors, respectively, details of whose emoluments are

set out in Note 14(a) above. Details of the emoluments of the remaining 1, 1, 1 individual

who is neither a director nor chief executive of the Company for the years ended 31 March

2019, 2020 and 2021, respectively, are as follows:

Year ended 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Salaries and other allowance 805 383 288

Discretionary bonus – – 40

Retirement benefit scheme contributions 12 6 15

817 389 343

The emoluments of the remaining highest paid individual are within the following

band:

Year ended 31 March

2019 2020 2021

No. of

individuals

No. of

individuals

No. of

individuals

Nil to HK$1,000,000 1 1 1

During the Track Record Period, no emoluments were paid by the Group to any of the

directors of the Company or chief executive or five highest paid individuals of the Group as

an inducement to join or upon joining the Group or as compensation for loss of office.



I – 62

15. EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of thisreport, is not considered meaningful with regard to the Reorganisation.

16. PLANT AND EQUIPMENT

Plant andmachinery

Furniture andequipment

Leaseholdimprovements Motor vehicles Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

CostAt 1 April 2018 236,399 729 790 2,585 240,503Additions 21,101 34 – 855 21,990Transferred from ROU assets – – – 1,244 1,244Disposals (23,707) – – – (23,707)Exchange adjustments (1,542) (4) – – (1,546)

At 31 March 2019 232,251 759 790 4,684 238,484Additions 24,016 56 – 165 24,237Transferred from ROU assets 4,531 – – 694 5,225Reclassification from inventories 289 – – – 289Reclassification to inventories (32,346) – – – (32,346)Written off (67) – – – (67)Exchange adjustments (1,688) (7) – – (1,695)

At 31 March 2020 226,986 808 790 5,543 234,127Additions 34,204 121 900 388 35,613Reclassification from inventories 1,463 – – – 1,463Reclassification to inventories (24,801) – – – (24,801)Disposals – – – (839) (839)Exchange adjustments 2,238 12 – – 2,250

At 31 March 2021 240,090 941 1,690 5,092 247,813

Accumulated DepreciationAt 1 April 2018 114,749 648 790 1,574 117,761Charge for the year 20,925 26 – 750 21,701Transferred from ROU assets – – – 784 784Eliminated on disposals (18,593) – – – (18,593)Exchange adjustments (175) – – – (175)

At 31 March 2019 116,906 674 790 3,108 121,478Charge for the year 19,862 30 – 836 20,728Transferred from ROU assets 982 – – 510 1,492Reclassification to inventories (22,412) – – – (22,412)Eliminated on written off (54) – – – (54)Exchange adjustments (434) (1) – – (435)

At 31 March 2020 114,850 703 790 4,454 120,797Charge for the year 20,070 40 25 680 20,815Reclassification to inventories (20,344) – – – (20,344)Eliminated on disposals – – – (839) (839)Exchange adjustments 807 4 – – 811

At 31 March 2021 115,383 747 815 4,295 121,240

Carrying AmountsAt 31 March 2019 115,345 85 – 1,576 117,006

At 31 March 2020 112,136 105 – 1,089 113,330

At 31 March 2021 124,707 194 875 797 126,573



I – 63

As at 31 March 2019, 31 March 2020 and 31 March 2021, the carrying amount of plant and

machinery of the Group amounting to approximately HK$28,703,000, HK$26,207,000 and

HK$20,331,000 respectively were pledged for the Group’s bank borrowings (note 26),

respectively.

The Group as lessor

The Group leases out a number of construction equipment under operating leases.

None of the leases was long-term rental contract, and the minimum rental period is seven

days in Hong Kong and one day in the PRC. None of the leases includes variable lease

payments. These construction equipment under operating leases comprise the plant and

machinery class of plant and equipment.

17. RIGHT-OF-USE ASSETS

Plant and

machinery

Motor

vehicles

Leased

properties Total

HK$’000 HK$’000 HK$’000 HK$’000

Cost

At 1 April 2018 4,531 1,938 3,362 9,831

Transferred to plant and equipment – (1,244) – (1,244)

Exchange adjustments – – (222) (222)

At 31 March 2019 4,531 694 3,140 8,365

Transferred to plant and equipment (4,531) (694) – (5,225)


At 31 March 2020 – – 2,937 2,937

Additions – – 21,625 21,625

Termination of lease – – (3,266) (3,266)

Exchange adjustments – – 250 250

At 31 March 2021 – – 21,546 21,546



I – 64

Plant and

machinery

Motor

vehicles

Leased

properties Total

HK$’000 HK$’000 HK$’000 HK$’000

Accumulated Depreciation

At 1 April 2018 151 929 280 1,360

Charge for the year 453 272 1,048 1,773

Transferred to plant and equipment – (784) – (784)


At 31 March 2019 604 417 1,308 2,329

Charge for the year 378 93 1,004 1,475

Transferred to plant and equipment (982) (510) – (1,492)


At 31 March 2020 – – 2,203 2,203

Charge for the year – – 1,550 1,550

Eliminated on termination of lease – – (3,266) (3,266)

Exchange adjustments – – 111 111

At 31 March 2021 – – 598 598

Carrying Amounts

At 31 March 2019 3,927 277 1,832 6,036

At 31 March 2020 – – 734 734

At 31 March 2021 – – 20,948 20,948

Note:

The right-of-use assets are transferred to plant and equipment when the obligations under finance leases are fully

settled and legal titles become vested in the Group.

The right-of-use assets are depreciated over their estimated useful lives, using straight-line

method, over the lease term per annum.



I – 65

18. INVENTORIES

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Construction equipment – new 1,963 1,844 15,572

Construction equipment – used – 530 –

Second hand construction equipment – 18 –

Spare parts – 34 –

1,963 2,426 15,572

The analysis of the amount of inventories recognised as an expense and included in profit or

loss is as follows:

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Carrying amount of inventories sold (note 11(c)) 1,556 11,399 19,295

19. TRADE AND OTHER RECEIVABLES

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Trade receivables – lessees 16,073 29,325 26,458

Less: Provision for loss allowance (301) (690) (510)

15,772 28,635 25,948

Trade receivables – others 719 5,195 3,861

Less: Provision for loss allowance (19) (66) (53)

700 5,129 3,808

Total trade receivables 16,472 33,764 29,756



I – 66

The trade receivables from others shown above represented the receivables from sale of

construction equipment segment and the trade receivables from lessees represented the receivables

from construction equipment rental services segment.

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Bills receivables for disposal of plant and machinery 1,201 – –

Other receivables, prepayments and deposits 11,898 4,007 4,653

13,099 4,007 4,653

Current portion of trade and other receivables 29,571 37,771 34,409Add: Non-current portion

Deposit paid 40 577 2,614

29,611 38,348 37,023

Other receivables, prepayments and deposits comprised mainly value-added tax recoverable

as at 31 March 2019, 2020 and 2021 of approximately HK$3,899,000, HK$3,007,000 and

HK$2,195,000 respectively, receivables from disposal of plant and equipment as at 31 March

2019, 2020 and 2021 of approximately HK$7,561,000, HK$ nil and HK$ nil respectively and

prepaid share issuance costs as at 31 March 2019, 2020 and 2021 of approximately HK$ nil,

HK$125,000 and HK$1,547,000 respectively.

Trade receivables

The Group allows an average credit period of 0-90 days to its customers. The

following is an aged analysis of trade receivables presented based on invoice dates at the

end of each reporting period, net of allowance for impairment.

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

0 – 30 days 4,821 10,631 12,074

31 – 60 days 2,919 4,876 4,395

61 – 90 days 1,375 5,050 3,596

91 – 180 days 3,787 7,080 6,943

Over 180 days 3,570 6,127 2,748

16,472 33,764 29,756



I – 67

The management of the Group closely monitors the credit quality of trade receivables

and considers the debtors that are neither past due nor impaired to be of a good credit

quality. Before accepting any new customer, the Group’s management will assess the

potential customer’s credit quality and determine the credit limits of each customer. Credit

limits attributable to customers are reviewed periodically.

The Group has a policy for allowance of impairment loss which is based on the

evaluation of collectability and ageing analysis of accounts and on management’s judgement

including the creditworthiness and the past collection history of each customer.

Based on the historical experience of the Group, trade receivables that are past due but

not impaired are generally recoverable.

Details of impairment assessment of trade receivables for the years ended 31 March

2019, 2020 and 2021 are set out in note 7.

20. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The investment funds held by the Group is as follows:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Unlisted investment funds 5,451 4,700 –

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

At beginning of the year 5,659 5,451 4,700

Purchases 64 75 36

Disposals – – (5,802)

Fair value (losses)/gains recognised in profit or loss (#) (272) (826) 1,066

At end of the year 5,451 4,700 –

(#) Include (losses)/gains for assets held at

end of reporting period (272) (826) –



I – 68

As at 31 March 2019 and 2020, the financial assets at fair value through profit or loss

represented investment funds invested in bonds, equity or balanced funds through two local

banks. The fair value of the investment funds was based on the quotation from the banks and

observable through the banks’ official website.

21. AMOUNT(S) DUE FROM/(TO) RELATED PARTIES/CONTROLLING

SHAREHOLDER/RELATED COMPANY/ULTIMATE HOLDING COMPANY

(a) Amount due from controlling shareholder:

At 31 March

Maximum amount outstanding during

Year ended 31 March

2019 2020 2021 2019 2020 2021

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Mr. Kok 21,305 – 6,410 121,649 53,000 47,410

The amount due is unsecured, interest free, non-trade in nature and repayable on

demand.

(b) Amount due from a related company:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Hung Yun (Hong Kong) Limited 2,667 – 5,000

The amount due is unsecured, interest free, non-trade in nature and repayable on

demand.

Hung Yun (Hong Kong) Limited is ultimately owned hold by Mr. Kok, the Controlling

Shareholder.

(c) Amount due to ultimate holding company:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

CS Investment 2,762 – –

Amount due to ultimate holding company presented in the combined statements of

financial position is unsecured, interest free, non-trade in nature and repayable on demand.



I – 69

(d) Amounts due to related parties:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Mr. Kok Kwai Man (note i) 1,405 1,088 –

廣州永桂投資有限公司 (formerly known as 廣州

永桂設備租賃有限公司）(note ii) 13,086 12,474 8,253

14,491 13,562 8,253

Notes:

(i) Mr. Kok Kwai Man is the son of Mr. Kok, the Controlling Shareholder.

(ii) 廣州永桂投資有限公司 is a direct wholly-owned subsidiary of Hung Yun (Hong Kong) Limited.

Amounts due to related parties disclosed in the combined statements of financial

position are unsecured, interest-free, non-trade in nature and repayable on demand.

(e) Related parties transactions:

Year ended 31 MarchNature of transactions 2019 2020 2021

HK$’000 HK$’000 HK$’000

Hung Yun (Hong Kong)Limited (Note i)

Short term lease payment/Payment of leaseliabilities and interest

6,432 6,780 6,464

Management fee income (96) – –

廣州永桂投資有限公司

(Note ii)Payment of lease liabilitiesand interest

1,122 1,076 1,101

Mr. Kok Payment of lease liabilitiesand interest

– – 76

Notes:

(i) Rental expenses were paid to Hung Yun (Hong Kong) Limited for premises located in Hong Kong for

use by the Group for storage and office purposes in accordance with the terms of underlying

contracts. The directors are of the opinion that the above transactions were entered into in normal

course of business.

(ii) Lease payments were made to 廣州永桂投資有限公司 for premises use by the Group for storage and

office purposes located in PRC in accordance with the terms of underlying contracts. The directors are

of the opinion that the above transactions were entered into in normal course of business.



I – 70

(f) Key management personnel transactions:

All members of key management personnel are directors of the Company and their

remuneration is disclosed in Note 14(a).

22. BANK BALANCES AND CASH

As at 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Cash at banks 19,211 15,238 18,610

Cash in hand 11 50 55

19,222 15,288 18,665

The Group’s cash and cash equivalents include cash at banks and in hand of approximately

RMB2,304,000, RMB1,202,000 and RMB152,000 (equivalent to HK$2,690,000, HK$1,313,000

and HK$180,000), held in the PRC as at 31 March 2019, 2020 and 2021 respectively. The

conversion of RMB denominated balances into foreign currencies and the remittance of such

foreign-currency denominated bank balances and cash out of the PRC are subject to the relevant

rules and regulations of foreign exchange control promulgated by the PRC government.

(a) Reconciliation of liabilities arising from financing activities

Amountsdue torelatedparties

Bankborrowings

Leaseliabilities Total

HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2018 16,098 35,194 7,356 58,648Changes from financing cash flows:Proceeds from new bank borrowings – 7,923 – 7,923Advances from related parties 52 – – 52Repayment to related parties (931) – – (931)Repayments of bank borrowings – (19,299) – (19,299)Repayments of lease liabilities – – (3,406) (3,406)

Total changes from financing cash flow (879) (11,376) (3,406) (15,661)

Other changesExchange reserve (1,062) – (203) (1,265)Increase in amounts due to

related parties 334 – – 334

Total other changes (728) – (203) (931)

At 31 March 2019 14,491 23,818 3,747 42,056



I – 71

Amountsdue torelatedparties

Bankborrowings

Leaseliabilities Total

HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2019 14,491 23,818 3,747 42,056Changes from financing cash flows:Proceeds from new bank borrowings – 17,320 – 17,320Advances from related parties 3,073 – – 3,073Repayment to related parties (3,306) – – (3,306)Repayments of bank borrowings – (20,365) – (20,365)Repayments of lease liabilities – – (2,878) (2,878)

Total changes from financing cash flow (233) (3,045) (2,878) (6,156)

Other changesExchange reserve (938) – (95) (1,033)Increase in amounts due to

related parties 242 – – 242

Total other changes (696) – (95) (791)

At 31 March 2020 13,562 20,773 774 35,109

At 1 April 2020 13,562 20,773 774 35,109Changes from financing cash flows:Proceeds from new bank borrowings – 32,367 – 32,367Advances from related parties 149 – – 149Repayment to related parties (4,140) – – (4,140)Repayments of bank borrowings – (16,751) – (16,751)Repayments of lease liabilities – – (1,551) (1,551)

Total changes from financing cash flow (3,991) 15,616 (1,551) 10,074

Other changesExchange reserve 941 – 140 1,081Decrease in amounts due to

related parties (2,259) – – (2,259)Recognition of new lease liabilities – – 21,626 21,626

Total other changes (1,318) – 21,766 20,448

At 31 March 2021 8,253 36,389 20,989 65,631



I – 72

(b) Major non-cash transactions

(a) During the year ended 31 March 2019, Chi Shing Machinery and Chi Shing

Machinery Rental declared dividends of HK$32,000,000 and HK$72,000,000,

respectively to their then shareholder. The dividends payable was settled through

amount due from controlling shareholder and amount due to ultimate holding

company.

(b) During the year ended 31 March 2020, Chi Shing Machinery and Chi Shing



amount due from controlling shareholder.

(c) During the year ended 31 March 2021, Chi Shing Machinery and Chi Shing



amount due from controlling shareholder.

(d) During the year ended 31 March 2020, certain subsidiaries of the Company,

entered into assignment agreements with Mr. Kok and the ultimate holding

company. Pursuant to the agreements, amount due from the controlling

shareholder (Mr. Kok) of approximately HK$2,700,000 were assigned to ultimate

holding company by certain subsidiaries of the Company.

(e) Plant and machinery of carrying amounts of approximately HK$289,000 and

HK$1,463,000 were transferred from inventories during the years ended 31

March 2020 and 2021, respectively.

(f) Plant and machinery of carrying amounts of approximately HK$9,934,000 and

HK$4,457,000 were transferred to inventories during the years ended 31 March

2020 and 2021, respectively.



I – 73

23. TRADE AND OTHER PAYABLES

Trade and other payables at the end of the reporting period comprise amounts outstanding

for trade purposes, daily operating costs and accrued [REDACTED]. The average credit period

taken for trade purchases is 0 to 30 days.

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Trade and bills payables 7,273 2,139 15,953

Rental deposits from lessees 604 3,233 379

Accruals and other payables 2,323 2,628 2,969

Total trade and other payables 10,200 8,000 19,301

Accruals and other payables comprised mainly provision for annual leave, provision for long

service payment and accrued [REDACTED], and provision for the under-contribution of the

amounts to housing provident fund with the amounts of approximately HK$82,000, HK$ 107,000

and HK$117,000, respectively, as at the years ended 31 March 2019, 2020 and 2021 and

provision for the under-contribution of the amounts to social insurance fund including late

payment fee with the amounts of approximately HK$341,000, HK$465,000 and HK$633,000,

respectively, as at the year ended 31 March 2019, 2020 and 2021.

The following is an aged analysis of trade and bills payables presented based on the invoice

dates at the end of each reporting period:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

0 – 30 days 4,241 82 6,648

31 – 60 days 1,552 2,057 3,642

61 – 90 days 1,480 – 5,656

Over 90 days – – 7

7,273 2,139 15,953



I – 74

24. CONTRACT LIABILITIES

Disclosures of revenue-related items:

At 1 April At 31 March

2018 2019 2020 2021

HK$’000 HK$’000 HK$’000 HK$’000

Contract liabilities

Sales of construction equipment 1,637 – 44 1,434

The Group normally receives 10% – 30% of the contract value as deposits from customers

when it signs the sales agreement. The deposits will be recognised as revenue when the customers

obtain control of the construction equipment.

As at 31 March 2019, 2020 and 2021, contract liabilities included receipt in advance from

customers amounting to approximately HK$nil, HK$nil and HK$260,000 respectively.

25. LEASE LIABILITIES

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Non-current 827 – 14,117Current 2,920 774 6,872

3,747 774 20,989

At 31 March 2019 and 2020, the lease liabilities of the Group with its related party, 廣州永

桂投資有限公司, are approximately HK$1,886,000 and HK$774,000 respectively.

At 31 March 2021, the lease liabilities of the Group with its related parties, Mr. Kok, Hung

Yun (Hong Kong) Limited and 廣州永桂投資有限公司, are approximately HK$2,489,000,

HK$15,362,000 and HK$3,138,000 respectively.



I – 75

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Minimum lease payments due:-

Within one year 3,022 786 7,690

More than one year, but not exceeding two years 840 – 7,690

More than two year, but not exceeding five years – – 7,049

3,862 786 22,429

Less: future finance charges (115) (12) (1,440)

Present value of lease liabilities 3,747 774 20,989

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Maturity analysis

Present value of lease liabilities:-

Within one year 2,920 774 6,872

More than one year, but not exceeding two years 827 – 7,204

More than two year, but not exceeding five years – – 6,913

3,747 774 20,989

The Group leased one property to operate for storage and office uses for the years ended 31

March 2019 and 2020. The remaining lease terms were 23 months and 11 months as at 31 March

2019 and 2020 respectively. These lease liabilities were measured at the present value of the lease

payments that were not yet paid.

The Group leased three properties to operate for storage and office uses during the year

ended 31 March 2021. The lease terms were 3 years. These lease liabilities were measured at the

present value of the lease payments that are not yet paid.

The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease

liabilities are monitored within the Group’s treasury function.

The total cash outflows for leases, including repayments of lease liabilities and payment of

interest expenses and short term leases for the years ended 31 March 2019, 2020 and 2021 are

approximately HK$10,102,000, HK$9,757,000 and HK$7,642,000 respectively.



I – 76

The Group acquired certain of its plant and machinery and motor vehicles under finance

leases. The remaining lease terms was 10 months as at 31 March 2019. Interest rates underlying

all obligations under finance leases as at 31 March 2019 and 2020 ranged from 3.82% to 4.75%

per annum and 3.82% to 4.75% per annum, respectively. During the years ended 31 March 2019

and 2020, obligation under certain finance leases were fully settled and the carrying amounts of

approximately HK$460,000 and HK$3,733,000 respectively were transferred from right-of-use

assets to plant and equipment.

As at 31 March 2019, the Group’s obligations under finance leases are secured and

guaranteed by:

• the leased assets; and

• personal guarantees given by the director of the Company, Mr. Kok.

26. BANK BORROWINGS

At 31 March2019 2020 2021

HK$’000 HK$’000 HK$’000

Carrying amounts of the above bank borrowings

repayable (Note b):On demand or within one year 16,703 11,872 19,724

More than one year, but not exceeding two years 6,212 6,859 7,619

More than two year, but not exceeding five years 903 2,042 9,046

23,818 20,773 36,389

Less: Amounts shown under current liabilities (Note d) (23,818) (20,773) (36,389)

Amounts shown under non-current liabilities – – –

Notes:

(a) Interest is charged on the outstanding balances at the rate of 4.5% – 5.375%, 4.13% – 5.375% and 2.75% –

5.25% per annum as at 31 March 2019, 2020 and 2021, respectively.

(b) The amounts due are presented based on scheduled repayment dates.

(c) The Group’s bank borrowings are denominated in the functional currency. These bank borrowings are underbanking facilities for bank loans. The banking facilities are secured by charges over a property and corporateguarantee of a related company, charges over a property and personal guarantee from Mr. Kok and charges

over certain plant and machinery of the Group.

(d) All bank borrowings contain a repayment on demand clause and are shown under current liabilities.

[The aforesaid guarantees on the banking facilities will be released upon [REDACTED].]



I – 77

27. DEFERRED TAX

The analysis of deferred tax assets and deferred tax liabilities were as follows:

At 31 March

2019 2020 2021

HK$’000 HK$’000 HK$’000

Deferred tax asset:

Recoverable after more than 12 months 1,674 1,935 1,645

Deferred tax liabilities:

Payable or to be settled more than 12 months (14,663) (15,019) (17,445)

(12,989) (13,084) (15,800)

The following are the major deferred tax assets and deferred tax liabilities recognised and

movements thereon during the Track Record Period:

Accelerated

tax

depreciation Tax losses

ECL

Provision Total

HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2018 (15,153) 3,985 31 (11,137)

Charge/(credit) to profit or loss (Note 12) 935 (2,800) 25 (1,840)

Exchange adjustment (6) (6) – (12)

At 31 March 2019 (14,224) 1,179 56 (12,989)

Charge to profit or loss (Note 12) 1,025 (1,179) 74 (80)

Exchange adjustment (15) – – (15)

At 31 March 2020 (13,214) – 130 (13,084)

Charge to profit or loss (Note 12) (2,818) 114 (36) (2,740)

Exchange adjustment 23 – 1 24

At 31 March 2021 (16,009) 114 95 (15,800)



I – 78

28. SHARE CAPITAL

The share capital of the Group presented in the combined statements of financial position as

at 31 March 2019 and 2020 represents the aggregate share capital of Chi Shing Machinery, Chi

Shing Machinery Rental, Chi Shing Equipment Trading, Chi Shing Human Resources and Chi

Shing (Hong Kong) Group.

The share capital of the Group presented in the combined statements of financial position as

at 31 March 2021 represents the aggregate share capital of the Company, Ace Honour, Chi Shing

Machinery, Chi Shing Machinery Rental, Chi Shing Equipment Trading, Chi Shing Human

Resources and Chi Shing (Hong Kong) Group.

On 19 March 2021, the Company was incorporated in the Cayman Islands as an exempted

company with limited liability with an authorised share capital of HK$380,000 divided into

38,000,000 ordinary shares with a par value of HK$0.01 per Share. On 19 March 2021, one Share

was issued and fully paid at par.

Pursuant to the sale and purchase agreement dated 17 June 2021, the Company acquired six

ordinary shares of par value of US$1 each of Ace Honour from CS Investment, in consideration

thereof, the Company allotted and issued one Share, credited as fully paid, to CS Investment.

29. FINANCIAL INFORMATION OF THE COMPANY

Movement in the reserve of the Company is as follows:

Accumulated

losses

HK’000

At 19 March 2021 (date of incorporation) –

Loss for the period (64)

At 31 March 2021 (64)



I – 79

30. CONTINGENT LIABILITIES

During the Track Record Period and up to the date of this report, there was one accident

which resulted in bodily injuries of a former employee of our Group and an amount of

approximately HK$473,000, which was covered by insurance, had been compensated to him.

Such former employee filed a personal injury claim against our Group on 5 May 2021. The

amount of claim was not stated in the claim and the amount of the claim will be subject to the

assessment made by the court. Our Directors consider that the exposure of and the financial

impact to our Group are insignificant.

Save as disclosed above, to the best knowledge and belief of our Directors, as at the date of

this report, no member of our Group was engaged in any litigation, claim or arbitration of

material importance, and no litigation, claim or arbitration of material importance was known to

our Directors to be pending or threatened against any member of our Group.

31. SUBSEQUENT EVENTS

On 17 June 2021, the Reorganisation was completed and the Company became the holding

company of the companies comprising the Group.

32. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Group, the Company or any of the companies now

comprising the Group have been prepared in respect of any period subsequent to 31 March 2021.



I – 80

The information set forth in this appendix does not form part of the Accountants’ Report

prepared by Wellink CPA Limited, Certified Public Accountants, Hong Kong, the reporting

accountants of the Company, as set forth in Appendix I to this document, and is included herein

for illustrative purposes only.

The unaudited pro forma financial information should be read in conjunction with the

section headed ‘‘Financial Information’’ in this document and the Accountants’ Report set forth in

Appendix I to this document.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NET

TANGIBLE ASSETS

The following unaudited pro forma adjusted combined net tangible assets of the Group has

been prepared in accordance with Paragraph 4.29 of the Listing Rules is set out below to illustrate

the effect of the [REDACTED] on the audited combined net tangible assets as at 31 March 2021

as if the [REDACTED] had taken place on that date.

The unaudited pro forma adjusted combined net tangible assets has been prepared for

illustrative purpose only and because of its hypothetical nature, it may not give a true picture of

the combined net tangible assets of the Group attributable to the owners of the Company as at 31

March 2021 or any future date following the [REDACTED].

Auditedcombined nettangible assetsof the Groupattributableto owners ofthe Company

as at 31 March2021

Estimated net[REDACTED]

from the[REDACTED]

Unaudited proforma adjustedcombined nettangible assetsof the Groupattributableto owners ofthe Company

Unaudited proforma adjustedcombined nettangible assetsof the Group

per ShareHK$’000 HK$’000 HK$’000 HK$(Note 1) (Note 2 & 4) (Note 3 & 4)

Based on an [REDACTED] ofHK$[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Based on an [REDACTED] ofHK$[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED]


APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

II – 1

Notes:

1. The audited combined net tangible assets of the Group attributable to owners of the Company as at 31 March

2021 is based on the Group’s audited combined net assets of approximately HK$[REDACTED] as at that

date, as shown in the Accountants’ Report, the text of which is set out in Appendix I to this document.

2. The estimated net [REDACTED] from the [REDACTED] are based on [REDACTED] Shares at the

[REDACTED] of HK$[REDACTED] per Share or HK$[REDACTED] per Share, being the low-end and

high-end prices of the stated [REDACTED] range respectively, after deduction of the [REDACTED] fees

payable and other [REDACTED] by the Group, of approximately HK$[REDACTED] or

HK$[REDACTED] based on the [REDACTED] of HK$[REDACTED] per [REDACTED] or

HK$[REDACTED] per [REDACTED] respectively (excluding [REDACTED] of approximately

HK$[REDACTED] which have been accounted for in the profit or loss prior to 31 March 2021).

3. The unaudited pro forma adjusted net tangible assets per Share is arrived at after the adjustments referred to

in the preceding paragraphs and on the basis that [REDACTED] Shares were in issue immediately following

the completion of the [REDACTED]. It does not take into account of any Shares which may be issued upon

the exercise of any options which may be granted under the Share Option Scheme, any Shares which may be

allotted and issued or repurchased by the Company pursuant to the general mandate to issue Shares and to

buy back Shares.

4. No adjustment has been made to the unaudited pro forma adjusted combined net tangible assets to reflect any

trading results or other transactions of the Group entered into subsequent to 31 March 2021.



II – 2

[REDACTED]



II – 3

[REDACTED]



II – 4

[REDACTED]



II – 5

[REDACTED]



II – 6

Set out below is a summary of certain provisions of the Memorandum of Association and

the Articles of Association of the Company and of certain aspects of Cayman Islands company

law.

The Company was incorporated in the Cayman Islands as an exempted company with

limited liability on 19 March 2021 under the Cayman Companies Act. The Company’s

constitutional documents consist of the Memorandum and the Articles.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of the Company is

limited and that the objects for which the Company is established are unrestricted (and

therefore include acting as an investment company), and that the Company shall have

and be capable of exercising any and all of the powers at any time or from time to

time exercisable by a natural person or body corporate whether as principal, agent,

contractor or otherwise and, since the Company is an exempted company, that the

Company will not trade in the Cayman Islands with any person, firm or corporation

except in furtherance of the business of the Company carried on outside the Cayman

Islands.

(b) By special resolution the Company may alter the Memorandum with respect to any

objects, powers or other matters specified in it.

2. ARTICLES OF ASSOCIATION

The Articles were conditionally adopted on [DATE] 2021 with effect from the

[REDACTED]. A summary of certain provisions of the Articles is set out below.

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Cayman Companies Act, if at any time the share capital of the

Company is divided into different classes of shares, all or any of the special rights

attached to any class of shares may (unless otherwise provided for by the terms of

issue of the shares of that class) be varied, modified or abrogated either with the

consent in writing of the holders of not less than three-fourths in nominal value of the

issued shares of that class or with the sanction of a special resolution passed at a

separate general meeting of the holders of the shares of that class. The provisions of

the Articles relating to general meetings shall mutatis mutandis apply to every such


APPENDIX III SUMMARY OF THE CONSTITUTION OFOUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

III – 1

separate general meeting, but so that the necessary quorum (other than at an adjourned

meeting) shall be not less than two persons together holding (or, in the case of a

member being a corporation, by its duly authorized representative) or representing by

proxy not less than one-third in nominal value of the issued shares of that class. Every

holder of shares of the class shall be entitled on a poll to one vote for every such share

held by him, and any holder of shares of the class present in person or by proxy may

demand a poll.

Any special rights conferred upon the holders of any shares or class of shares

shall not, unless otherwise expressly provided in the rights attaching to the terms of

issue of such shares, be deemed to be varied by the creation or issue of further shares

ranking pari passu therewith.

(iii) Alteration of capital

The Company may, by an ordinary resolution of its members: (a) increase its

share capital by the creation of new shares of such amount as it thinks expedient; (b)

consolidate or divide all or any of its share capital into shares of larger or smaller

amount than its existing shares; (c) divide its unissued shares into several classes and

attach to such shares any preferential, deferred, qualified or special rights, privileges or

conditions; (d) subdivide its shares or any of them into shares of an amount smaller

than that fixed by the Memorandum; (e) cancel any shares which, at the date of the

resolution, have not been taken or agreed to be taken by any person and diminish the

amount of its share capital by the amount of the shares so cancelled; (f) make

provision for the allotment and issue of shares which do not carry any voting rights;

and (g) change the currency of denomination of its share capital.

(iv) Transfer of shares

Subject to the Cayman Companies Act and the requirements of The Stock

Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’), all transfers of shares shall

be effected by an instrument of transfer in the usual or common form or in such other

form as the Board may approve and may be under hand or, if the transferor or

transferee is a Clearing House or its nominee(s), under hand or by machine imprinted

signature, or by such other manner of execution as the Board may approve from time

to time.

Execution of the instrument of transfer shall be by or on behalf of the transferor

and the transferee, provided that the Board may dispense with the execution of the

instrument of transfer by the transferor or transferee or accept mechanically executed

transfers. The transferor shall be deemed to remain the holder of a share until the name

of the transferee is entered in the register of members of the Company in respect of

that share.



III – 2

The Board may, in its absolute discretion, at any time and from time to time

remove any share on the principal register to any branch register or any share on any

branch register to the principal register or any other branch register. Unless the Board

otherwise agrees, no shares on the principal register shall be removed to any branch

register nor shall shares on any branch register be removed to the principal register or

any other branch register. All removals and other documents of title shall be lodged

for registration and registered, in the case of shares on any branch register, at the

relevant registration office and, in the case of shares on the principal register, at the

place at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of any

share (not being a fully paid up share) to a person of whom it does not approve or on

which the Company has a lien. It may also decline to register a transfer of any share

issued under any share option scheme upon which a restriction on transfer subsists or a

transfer of any share to more than four joint holders.

The Board may decline to recognise any instrument of transfer unless a certain

fee, up to such maximum sum as the Stock Exchange may determine to be payable, is

paid to the Company, the instrument of transfer is properly stamped (if applicable), is

in respect of only one class of share and is lodged at the relevant registration office or

the place at which the principal register is located accompanied by the relevant share

certificate(s) and such other evidence as the Board may reasonably require is provided

to show the right of the transferor to make the transfer (and if the instrument of

transfer is executed by some other person on his behalf, the authority of that person so

to do).

The register of members may, subject to the Listing Rules, be closed at such time

or for such period not exceeding in the whole 30 days in each year as the Board may

determine.

Fully paid shares shall be free from any restriction on transfer (except when

permitted by the Stock Exchange) and shall also be free from all liens.

(v) Power of the Company to purchase its own shares

The Company may purchase its own shares subject to certain restrictions and the

Board may only exercise this power on behalf of the Company subject to any

applicable requirement imposed from time to time by the Articles or any, code, rules

or regulations issued from time to time by the Stock Exchange and/or the Securities

and Futures Commission of Hong Kong.



III – 3

Where the Company purchases for redemption a redeemable Share, purchases not

made through the market or by tender shall be limited to a maximum price and, if

purchases are by tender, tenders shall be available to all members alike.

(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in the

Company by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The Board may, from time to time, make such calls as it thinks fit upon the

members in respect of any monies unpaid on the shares held by them respectively

(whether on account of the nominal value of the shares or by way of premium) and not

by the conditions of allotment of such shares made payable at fixed times. A call may

be made payable either in one sum or by instalments. If the sum payable in respect of

any call or instalment is not paid on or before the day appointed for payment thereof,

the person or persons from whom the sum is due shall pay interest on the same at such

rate not exceeding 20% per annum as the Board shall fix from the day appointed for

payment to the time of actual payment, but the Board may waive payment of such

interest wholly or in part. The Board may, if it thinks fit, receive from any member

willing to advance the same, either in money or money’s worth, all or any part of the

money uncalled and unpaid or instalments payable upon any shares held by him, and

in respect of all or any of the monies so advanced the Company may pay interest at

such rate (if any) not exceeding 20% per annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed for

payment, the Board may, for so long as any part of the call or instalment remains

unpaid, serve not less than 14 days’ notice on the member requiring payment of so

much of the call or instalment as is unpaid, together with any interest which may have

accrued and which may still accrue up to the date of actual payment. The notice shall

name a further day (not earlier than the expiration of 14 days from the date of the

notice) on or before which the payment required by the notice is to be made, and shall

also name the place where payment is to be made. The notice shall also state that, in

the event of non-payment at or before the appointed time, the shares in respect of

which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect

of which the notice has been given may at any time thereafter, before the payment

required by the notice has been made, be forfeited by a resolution of the Board to that

effect. Such forfeiture will include all dividends and bonuses declared in respect of the

forfeited share and not actually paid before the forfeiture.



III – 4

A person whose shares have been forfeited shall cease to be a member in respect

of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all

monies which, at the date of forfeiture, were payable by him to the Company in

respect of the shares together with (if the Board shall in its discretion so require)

interest thereon from the date of forfeiture until payment at such rate not exceeding

20% per annum as the Board may prescribe.

(b) Directors

(i) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint any

person as a Director either to fill a casual vacancy on the Board or as an additional

Director to the existing Board subject to any maximum number of Directors, if any, as

may be determined by the members in general meeting. Any Director so appointed to

fill a casual vacancy shall hold office only until the first general meeting of the

Company after his appointment and be subject to re-election at such meeting. Any

Director so appointed as an addition to the existing Board shall hold office only until

the first annual general meeting of the Company after his appointment and be eligible

for re-election at such meeting. Any Director so appointed by the Board shall not be

taken into account in determining the Directors or the number of Directors who are to

retire by rotation at an annual general meeting.

At each annual general meeting, one third of the Directors for the time being

shall retire from office by rotation. However, if the number of Directors is not a

multiple of three, then the number nearest to but not less than one third shall be the

number of retiring Directors. The Directors to retire in each year shall be those who

have been in office longest since their last re-election or appointment but, as between

persons who became or were last re-elected Directors on the same day, those to retire

shall (unless they otherwise agree among themselves) be determined by lot.

No person, other than a retiring Director, shall, unless recommended by the

Board for election, be eligible for election to the office of Director at any general

meeting, unless notice in writing of the intention to propose that person for election as

a Director and notice in writing by that person of his willingness to be elected has

been lodged at the head office or at the registration office of the Company. The period

for lodgment of such notices shall commence no earlier than the day after despatch of

the notice of the relevant meeting and end no later than seven days before the date of

such meeting and the minimum length of the period during which such notices may be

lodged must be at least seven days.



III – 5

A Director is not required to hold any shares in the Company by way of

qualification nor is there any specified upper or lower age limit for Directors either for

accession to or retirement from the Board.

A Director may be removed by an ordinary resolution of the Company before the

expiration of his term of office (but without prejudice to any claim which such

Director may have for damages for any breach of any contract between him and the

Company) and the Company may by ordinary resolution appoint another in his place.

Any Director so appointed shall be subject to the ‘‘retirement by rotation’’ provisions.

The number of Directors shall not be less than two.

The office of a Director shall be vacated if he:

(aa) resign;

(bb) dies;

(cc) is declared to be of unsound mind and the Board resolves that his office be

vacated;

(dd) becomes bankrupt or has a receiving order made against him or suspends

payment or compounds with his creditors generally;

(ee) he is prohibited from being or ceases to be a director by operation of law;

(ff) without special leave, is absent from meetings of the Board for six

consecutive months, and the Board resolves that his office is vacated;

(gg) has been required by the stock exchange of the Relevant Territory (as

defined in the Articles) to cease to be a Director; or

(hh) is removed from office by the requisite majority of the Directors or

otherwise pursuant to the Articles.

From time to time the Board may appoint one or more of its body to be

managing director, joint managing director or deputy managing director or to hold any

other employment or executive office with the Company for such period and upon

such terms as the Board may determine, and the Board may revoke or terminate any of

such appointments. The Board may also delegate any of its powers to committees

consisting of such Director(s) or other person(s) as the Board thinks fit, and from time

to time it may also revoke such delegation or revoke the appointment of and discharge

any such committees either wholly or in part, and either as to persons or purposes, but

every committee so formed shall, in the exercise of the powers so delegated, conform

to any regulations that may from time to time be imposed upon it by the Board.



III – 6

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Cayman Companies Act, the Memorandum and

Articles and without prejudice to any special rights conferred on the holders of any

shares or class of shares, any share may be issued with or have attached to it such

rights, or such restrictions, whether with regard to dividend, voting, return of capital or

otherwise, as the Company may by ordinary resolution determine (or, in the absence of

any such determination or so far as the same may not make specific provision, as the

Board may determine). Any share may be issued on terms that, upon the happening of

a specified event or upon a given date and either at the option of the Company or the

holder of the share, it is liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or other

securities of the Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate in respect of such warrants

shall be issued to replace one that has been lost unless the Board is satisfied beyond

reasonable doubt that the original certificate has been destroyed and the Company has

received an indemnity in such form as the Board thinks fit with regard to the issue of

any such replacement certificate.

Subject to the provisions of the Cayman Companies Act, the Articles and, where

applicable, the rules of any stock exchange of the Relevant Territory (as defined in the

Articles) and without prejudice to any special rights or restrictions for the time being

attached to any shares or any class of shares, all unissued shares in the Company shall

be at the disposal of the Board, which may offer, allot, grant options over or otherwise

dispose of them to such persons, at such times, for such consideration and on such

terms and conditions as it in its absolute discretion thinks fit, but so that no shares

shall be issued at a discount.

Neither the Company nor the Board shall be obliged, when making or granting

any allotment of, offer of, option over or disposal of shares, to make, or make

available, any such allotment, offer, option or shares to members or others whose

registered addresses are in any particular territory or territories where, in the absence

of a registration statement or other special formalities, this is or may, in the opinion of

the Board, be unlawful or impracticable. However, no member affected as a result of

the foregoing shall be, or be deemed to be, a separate class of members for any

purpose whatsoever.



III – 7

(iii) Power to dispose of the assets of the Company or any of its subsidiaries

While there are no specific provisions in the Articles relating to the disposal of

the assets of the Company or any of its subsidiaries, the Board may exercise all

powers and do all acts and things which may be exercised or done or approved by the

Company and which are not required by the Articles or the Cayman Companies Act to

be exercised or done by the Company in general meeting, but if such power or act is

regulated by the Company in general meeting, such regulation shall not invalidate any

prior act of the Board which would have been valid if such regulation had not been

made.

(iv) Borrowing powers

The Board may exercise all the powers of the Company to raise or borrow

money, to mortgage or charge all or any part of the undertaking, property and uncalled

capital of the Company and, subject to the Cayman Companies Act, to issue

debentures, debenture stock, bonds and other securities of the Company, whether

outright or as collateral security for any debt, liability or obligation of the Company or

of any third party.

(v) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for their

services, such sums as shall from time to time be determined by the Board or the

Company in general meeting, as the case may be, such sum (unless otherwise directed

by the resolution by which it is determined) to be divided among the Directors in such

proportions and in such manner as they may agree or, failing agreement, either equally

or, in the case of any Director holding office for only a portion of the period in respect

of which the remuneration is payable, pro rata. The Directors shall also be entitled to

be repaid all expenses reasonably incurred by them in attending any Board meetings,

committee meetings or general meetings or otherwise in connection with the discharge

of their duties as Directors. Such remuneration shall be in addition to any other

remuneration to which a Director who holds any salaried employment or office in the

Company may be entitled by reason of such employment or office.

Any Director who, at the request of the Company, performs services which in the

opinion of the Board go beyond the ordinary duties of a Director may be paid such

special or extra remuneration as the Board may determine, in addition to or in

substitution for any ordinary remuneration as a Director. An executive Director

appointed to be a managing director, joint managing director, deputy managing

director or other executive officer shall receive such remuneration and such other

benefits and allowances as the Board may from time to time decide. Such remuneration

shall be in addition to his ordinary remuneration as a Director.



III – 8

The Board may establish, either on its own or jointly in concurrence or

agreement with subsidiaries of the Company or companies with which the Company is

associated in business, or may make contributions out of the Company’s monies to,

any schemes or funds for providing pensions, sickness or compassionate allowances,

life assurance or other benefits for employees (which expression as used in this and the

following paragraph shall include any Director or former Director who may hold or

have held any executive office or any office of profit with the Company or any of its

subsidiaries) and former employees of the Company and their dependents or any class

or classes of such persons.

The Board may also pay, enter into agreements to pay or make grants of

revocable or irrevocable, whether or not subject to any terms or conditions, pensions

or other benefits to employees and former employees and their dependents, or to any

of such persons, including pensions or benefits additional to those, if any, to which

such employees or former employees or their dependents are or may become entitled

under any such scheme or fund as mentioned above. Such pension or benefit may, if

deemed desirable by the Board, be granted to an employee either before and in

anticipation of, or upon or at any time after, his actual retirement.

(vi) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way of

compensation for loss of office or as consideration for or in connection with his

retirement from office (not being a payment to which the Director is contractually or

statutorily entitled) must be approved by the Company in general meeting.

(vii) Loans and provision of security for loans to Directors

The Company shall not directly or indirectly make a loan to a Director or a

director of any holding company of the Company or any of their respective close

associates, enter into any guarantee or provide any security in connection with a loan

made by any person to a Director or a director of any holding company of the

Company or any of their respective close associates, or, if any one or more of the

Directors hold(s) (jointly or severally or directly or indirectly) a controlling interest in

another company, make a loan to that other company or enter into any guarantee or

provide any security in connection with a loan made by any person to that other

company.



III – 9

(viii) Disclosure of interest in contracts with the Company or any of its

subsidiaries

With the exception of the office of auditor of the Company, a Director may hold

any other office or place of profit with the Company in conjunction with his office of

Director for such period and upon such terms as the Board may determine, and may be

paid such extra remuneration for that other office or place of profit, in whatever form,

in addition to any remuneration provided for by or pursuant to any other Articles. A

Director may be or become a director, officer or member of any other company in

which the Company may be interested, and shall not be liable to account to the

Company or the members for any remuneration or other benefits received by him as a

director, officer or member of such other company. The Board may also cause the

voting power conferred by the shares in any other company held or owned by the

Company to be exercised in such manner in all respects as it thinks fit, including the

exercise in favour of any resolution appointing the Directors or any of them to be

directors or officers of such other company.

No Director or intended Director shall be disqualified by his office from

contracting with the Company, nor shall any such contract or any other contract or

arrangement in which any Director is in any way interested be liable to be avoided,

nor shall any Director so contracting or being so interested be liable to account to the

Company for any profit realised by any such contract or arrangement by reason only of

such Director holding that office or the fiduciary relationship established by it. A

Director who is, in any way, materially interested in a contract or arrangement or

proposed contract or arrangement with the Company shall declare the nature of his

interest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to any

share by reason that the person or persons who are interested directly or indirectly in

that share have failed to disclose their interests to the Company.

A Director shall not vote or be counted in the quorum on any resolution of the

Board in respect of any contract or arrangement or proposal in which he or any of his

close associate(s) has/have a material interest, and if he shall do so his vote shall not

be counted nor shall he be counted in the quorum for that resolution, but this

prohibition shall not apply to any of the following matters:

(aa) the giving of any security or indemnity to the Director or his close

associate(s) in respect of money lent or obligations incurred or undertaken

by him or any of them at the request of or for the benefit of the Company

or any of its subsidiaries;



III – 10

(bb) the giving of any security or indemnity to a third party in respect of a debt

or obligation of the Company or any of its subsidiaries for which the

Director or his close associate(s) has/have himself/themselves assumed

responsibility in whole or in part whether alone or jointly under a guarantee

or indemnity or by the giving of security;

(cc) any proposal concerning an offer of shares, debentures or other securities of

or by the Company or any other company which the Company may promote

or be interested in for subscription or purchase, where the Director or his

close associate(s) is/are or is/are to be interested as a participant in the

underwriting or sub-underwriting of the offer;

(dd) any proposal or arrangement concerning the benefit of employees of the

Company or any of its subsidiaries, including the adoption, modification or

operation of either: (i) any employees’ share scheme or any share incentive

or share option scheme under which the Director or his close associate(s)

may benefit; or (ii) any of a pension fund or retirement, death or disability

benefits scheme which relates to Directors, their close associates and

employees of the Company or any of its subsidiaries and does not provide

in respect of any Director or his close associate(s) any privilege or

advantage not generally accorded to the class of persons to which such

scheme or fund relates; and

(ee) any contract or arrangement in which the Director or his close associate(s)

is/are interested in the same manner as other holders of shares, debentures

or other securities of the Company by virtue only of his/their interest in

those shares, debentures or other securities.

(ix) Proceedings of the Board

The Board may meet anywhere in the world for the despatch of business and may

adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any

meeting shall be determined by a majority of votes. In the case of an equality of votes,

the chairman of the meeting shall have a second or casting vote.

(c) Alterations to the constitutional documents and the Company’s name

To the extent that the same is permissible under Cayman Islands law and subject to the

Articles, the Memorandum and Articles of the Company may only be altered or amended,

and the name of the Company may only be changed, with the sanction of a special

resolution of the Company.



III – 11

(d) Meetings of member

(i) Special and ordinary resolutions

A special resolution of the Company must be passed by a majority of not less

than three-fourths of the votes cast by such members as, being entitled so to do, vote

in person or by proxy or, in the case of members which are corporations, by their duly

authorised representatives or, where proxies are allowed, by proxy at a general meeting

of which notice specifying the intention to propose the resolution as a special

resolution has been duly given.

Under Cayman Companies Act, a copy of any special resolution must be

forwarded to the Registrar of Companies in the Cayman Islands within 15 days of

being passed.

An ‘‘ordinary resolution’’, by contrast, is a resolution passed by a simple

majority of the votes of such members of the Company as, being entitled to do so,

vote in person or, in the case of members which are corporations, by their duly

authorised representatives or, where proxies are allowed, by proxy at a general meeting

of which notice has been duly given.

A resolution in writing signed by or on behalf of all members shall be treated as

an ordinary resolution duly passed at a general meeting of the Company duly convened

and held, and where relevant as a special resolution so passed.

(ii) Voting rights and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the time

being attached to any class or classes of shares at any general meeting: (a) on a poll

every member present in person or by proxy or, in the case of a member being a

corporation, by its duly authorised representative shall have one vote for every share

which is fully paid or credited as fully paid registered in his name in the register of

members of the Company but so that no amount paid up or credited as paid up on a

share in advance of calls or instalments is treated for this purpose as paid up on the

share; and (b) on a show of hands every member who is present in person (or, in the

case of a member being a corporation, by its duly authorised representative) or by

proxy shall have one vote. Where more than one proxy is appointed by a member

which is a Clearing House (as defined in the Articles) or its nominee(s), each such

proxy shall have one vote on a show of hands. On a poll, a member entitled to more

than one vote need not use all his votes or cast all the votes he does use in the same

way.



III – 12

At any general meeting a resolution put to the vote of the meeting is to be

decided by poll save that the chairman of the meeting may, pursuant to the Listing

Rules, allow a resolution to be voted on by a show of hands. Where a show of hands

is allowed, before or on the declaration of the result of the show of hands, a poll may

be demanded by (in each case by members present in person or by proxy or by a duly

authorised corporate representative):

(A) at least two members;

(B) any member or members representing not less than one-tenth of the total

voting rights of all the members having the right to vote at the meeting; or

(C) a member or members holding shares in the Company conferring a right to

vote at the meeting on which an aggregate sum has been paid equal to not

less than one-tenth of the total sum paid up on all the shares conferring that

right.

Should a Clearing House or its nominee(s) be a member of the Company, such

person or persons may be authorised as it thinks fit to act as its representative(s) at any

meeting of the Company or at any meeting of any class of members of the Company

provided that, if more than one person is so authorised, the authorisation shall specify

the number and class of shares in respect of which each such person is so authorised.

A person authorised in accordance with this provision shall be deemed to have been

duly authorised without further evidence of the facts and be entitled to exercise the

same rights and powers on behalf of the Clearing House or its nominee(s) as if such

person were an individual member including the right to vote individually on a show

of hands.

Where the Company has knowledge that any member is, under the Listing Rules,

required to abstain from voting on any particular resolution or restricted to voting only

for or only against any particular resolution, any votes cast by or on behalf of such

member in contravention of such requirement or restriction shall not be counted.

(iii) Annual general meetings

The Company must hold an annual general meeting each year other than the year

of the Company’s adoption of the Articles. Such meeting must be held not more than

15 months after the holding of the last preceding annual general meeting, or such

longer period as may be authorised by the Stock Exchange at such time and place as

may be determined by the Board.



III – 13

(iv) Requisition of general meetings

Extraordinary general meetings may be convened on the requisition of one or

more members holding, at the date of deposit of the requisition, not less than one tenth

of the paid up capital of the Company having the right of voting at general meetings.

Such requisition shall be made in writing to the Board or the secretary of the Company

for the purpose of requiring an extraordinary general meeting to be called by the Board

for the transaction of any business specified in such requisition. Such meeting shall be

held within two months after the deposit of such requisition. If within 21 days of such

deposit, the Board fails to proceed to convene such meeting, the requisitionist(s)

himself (themselves) may do so in the same manner, and all reasonable expenses

incurred by the requisitionist(s) as a result of the failure of the Board shall be

reimbursed to the requisitionist(s) by the Company.

(v) Notices of meetings and business to be conducted

An annual general meeting of the Company shall be called by at least 21 days’

notice in writing, and any other general meeting of the Company shall be called by at

least 14 days’ notice in writing. The notice shall be exclusive of the day on which it is

served or deemed to be served and of the day for which it is given, and must specify

the time, place and agenda of the meeting and particulars of the resolution(s) to be

considered at that meeting and, in the case of special business, the general nature of

that business.

Except where otherwise expressly stated, any notice or document (including a

share certificate) to be given or issued under the Articles shall be in writing, and may

be served by the Company on any member personally, by post to such member’s

registered address or (in the case of a notice) by advertisement in the newspapers. Any

member whose registered address is outside Hong Kong may notify the Company in

writing of an address in Hong Kong which shall be deemed to be his registered

address for this purpose. Subject to the Cayman Companies Act and the Listing Rules,

a notice or document may also be served or delivered by the Company to any member

by electronic means.

Although a meeting of the Company may be called by shorter notice than as

specified above, such meeting may be deemed to have been duly called if it is so

agreed:

(i) in the case of an annual general meeting, by all members of the Company

entitled to attend and vote thereat; and



III – 14

(ii) in the case of any other meeting, by a majority in number of the members

having a right to attend and vote at the meeting holding not less than 95%

of the total voting rights in the Company.

All business transacted at an extraordinary general meeting shall be deemed

special business. All business shall also be deemed special business where it is

transacted at an annual general meeting, with the exception of certain routine matters

which shall be deemed ordinary business.

(vi) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is

present when the meeting proceeds to business, and continues to be present until the

conclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or in

the case of a member being a corporation, by its duly authorised representative) or by

proxy and entitled to vote. In respect of a separate class meeting (other than an

adjourned meeting) convened to sanction the modification of class rights the necessary

quorum shall be two persons holding or representing by proxy not less than one-third

in nominal value of the issued shares of that class.

(vii) Proxies

Any member of the Company entitled to attend and vote at a meeting of the

Company is entitled to appoint another person as his proxy to attend and vote instead

of him. A member who is the holder of two or more shares may appoint more than one

proxy to represent him and vote on his behalf at a general meeting of the Company or

at a class meeting. A proxy need not be a member of the Company and shall be

entitled to exercise the same powers on behalf of a member who is an individual and

for whom he acts as proxy as such member could exercise. In addition, a proxy shall

be entitled to exercise the same powers on behalf of a member which is a corporation

and for which he acts as proxy as such member could exercise if it were an individual

member. On a poll or on a show of hands, votes may be given either personally (or, in

the case of a member being a corporation, by its duly authorized representative) or by

proxy.



III – 15

The instrument appointing a proxy shall be in writing under the hand of the

appointor or of his attorney duly authorised in writing, or if the appointor is a

corporation, either under seal or under the hand of a duly authorised officer or

attorney. Every instrument of proxy, whether for a specified meeting or otherwise,

shall be in such form as the Board may from time to time approve, provided that it

shall not preclude the use of the two-way form. Any form issued to a member for

appointing a proxy to attend and vote at an extraordinary general meeting or at an

annual general meeting at which any business is to be transacted shall be such as to

enable the member, according to his intentions, to instruct the proxy to vote in favour

of or against (or, in default of instructions, to exercise his discretion in respect of)

each resolution dealing with any such business.

(e) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of money

received and expended by the Company, and of the assets and liabilities of the Company

and of all other matters required by the Cayman Companies Act (which include all sales and

purchases of goods by the company) necessary to give a true and fair view of the state of

the Company’s affairs and to show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of the

Company or at such other place or places as the Board decides and shall always be open to

inspection by any Director. No member (other than a Director) shall have any right to

inspect any account, book or document of the Company except as conferred by the Cayman

Companies Act or ordered by a court of competent jurisdiction or authorised by the Board

or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before the Company

at its annual general meeting balance sheets and profit and loss accounts (including every

document required by law to be annexed thereto), together with a copy of the Directors’

report and a copy of the auditors’ report, not less than 21 days before the date of the annual

general meeting. Copies of these documents shall be sent to every person entitled to receive

notices of general meetings of the Company under the provisions of the Articles together

with the notice of annual general meeting, not less than 21 days before the date of the

meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in the

Articles), the Company may send summarized financial statements to members who have, in

accordance with the rules of the stock exchange of the Relevant Territory, consented and

elected to receive summarized financial statements instead of the full financial statements.

The summarized financial statements must be accompanied by any other documents as may

be required under the rules of the stock exchange of the Relevant Territory, and must be

sent to those members that have consented and elected to receive the summarised financial

statements not less than 21 days before the general meeting.



III – 16

The Company shall at each annual general meeting appoint auditor(s) to hold office

until the conclusion of the next annual general meeting on such terms and with such duties

as may be agreed with the Board. The Board may fill any casual vacancy in the office of

auditors, but while any such vacancy continues the surviving or continuing auditors (if any)

may act. The auditors’ remuneration shall be fixed by the Company in general meeting or by

the Board if authority is so delegated by the members.

The members may, at a general meeting remove the auditor(s) by a special resolution

at any time before the expiration of the term of office of the auditor(s) and shall, by an

ordinary resolution, at that meeting appoint new auditor(s) in place of the removed

auditor(s) for the remainder of the term.

The auditors shall audit the financial statements of the Company in accordance with

generally accepted accounting principles of Hong Kong, the International Accounting

Standards or such other standards as may be permitted by the Stock Exchange.

(f) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to

the members but no dividend shall be declared in excess of the amount recommended by the

Board.

Except in so far as the rights attaching to, or the terms of issue of, any share may

otherwise provide:

(i) all dividends shall be declared and paid according to the amounts paid up on the

shares in respect of which the dividend is paid, although no amount paid up on a

share in advance of calls shall for this purpose be treated as paid up on the share;

(ii) all dividends shall be apportioned and paid pro rata in accordance with the

amount paid up on the shares during any portion(s) of the period in respect of

which the dividend is paid; and

(iii) the Board may deduct from any dividend or other monies payable to any member

all sums of money (if any) presently payable by him to the Company on account

of calls, instalments or otherwise.

Where the Board or the Company in general meeting has resolved that a dividend

should be paid or declared, the Board may resolve:



III – 17

(aa) that such dividend be satisfied wholly or in part in the form of an allotment

of shares credited as fully paid up, provided that the members entitled to

such dividend will be entitled to elect to receive such dividend (or part

thereof) in cash in lieu of such allotment; or

(bb) that the members entitled to such dividend will be entitled to elect to

receive an allotment of shares credited as fully paid up in lieu of the whole

or such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolution in

respect of any one particular dividend of the Company determine that it may be satisfied

wholly in the form of an allotment of shares credited as fully paid up without offering any

right to members to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may be paid

by cheque or warrant sent through the post. Every such cheque or warrant shall be made

payable to the order of the person to whom it is sent and shall be sent at the holder’s or

joint holders’ risk and payment of the cheque or warrant by the bank on which it is drawn

shall constitute a good discharge to the Company. Any one of two or more joint holders

may give effectual receipts for any dividends or other monies payable or property

distributable in respect of the shares held by such joint holders.

Whenever the Board or the Company in general meeting has resolved that a dividend

be paid or declared, the Board may further resolve that such dividend be satisfied wholly or

in part by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance the same,

and either in money or money’s worth, all or any part of the money uncalled and unpaid or

instalments payable upon any shares held by him, and in respect of all or any of the monies

so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the

Board may decide, but a payment in advance of a call shall not entitle the member to

receive any dividend or to exercise any other rights or privileges as a member in respect of

the share or the due portion of the shares upon which payment has been advanced by such

member before it is called up.

All dividends, bonuses or other distributions unclaimed for one year after having been

declared may be invested or otherwise used by the Board for the benefit of the Company

until claimed and the Company shall not be constituted a trustee in respect thereof. All

dividends, bonuses or other distributions unclaimed for six years after having been declared

may be forfeited by the Board and, upon such forfeiture, shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share

shall bear interest against the Company.



III – 18

The Company may exercise the power to cease sending cheques for dividend

entitlements or dividend warrants by post if such cheques or warrants remain uncashed on

two consecutive occasions or after the first occasion on which such a cheque or warrant is

returned undelivered.

(g) Inspection of corporate records

For so long as any part of the share capital of the Company is [REDACTED] on the

Stock Exchange, any member may inspect any register of members of the Company

maintained in Hong Kong (except when the register of members is closed) without charge

and require the provision to him of copies or extracts of such register in all respects as if the

Company were incorporated under and were subject to the Hong Kong Companies

Ordinance.

(h) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members in

relation to fraud or oppression. However, certain remedies may be available to members of

the Company under Cayman Islands law, as summarized in paragraph 3(f) of this Appendix.

(i) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily

shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of

available surplus assets on liquidation for the time being attached to any class or classes of

shares:

(i) if the Company is wound up, the surplus assets remaining after payment to all

creditors shall be divided among the members in proportion to the capital paid up

on the shares held by them respectively; and

(ii) if the Company is wound up and the surplus assets available for distribution

among the members are insufficient to repay the whole of the paid-up capital,

such assets shall be distributed, subject to the rights of any shares which may be

issued on special terms and conditions, so that, as nearly as may be, the losses

shall be borne by the members in proportion to the capital paid up on the shares

held by them, respectively.



III – 19

If the Company is wound up (whether the liquidation is voluntary or compelled by the

court), the liquidator may, with the sanction of a special resolution and any other sanction

required by the Cayman Companies Act, divide among the members in specie or kind the

whole or any part of the assets of the Company, whether the assets consist of property of

one kind or different kinds, and the liquidator may, for such purpose, set such value as he

deems fair upon any one or more class or classes of property to be so divided and may

determine how such division shall be carried out as between the members or different

classes of members and the members within each class. The liquidator may, with the like

sanction, vest any part of the assets in trustees upon such trusts for the benefit of members

as the liquidator thinks fit, but so that no member shall be compelled to accept any shares or

other property upon which there is a liability.

(j) Subscription rights reserve

Provided that it is not prohibited by and is otherwise in compliance with the Cayman

Companies Act, if warrants to subscribe for shares have been issued by the Company and

the Company does any act or engages in any transaction which would result in the

subscription price of such warrants being reduced below the par value of the shares to be

issued on the exercise of such warrants, a subscription rights reserve shall be established

and applied in paying up the difference between the subscription price and the par value of

such shares.

3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 19

March 2021 subject to the Cayman Companies Act. Certain provisions of Cayman Islands

company law are set out below but this section does not purport to contain all applicable

qualifications and exceptions or to be a complete review of all matters of the Cayman Companies

Act and taxation, which may differ from equivalent provisions in jurisdictions with which

interested parties may be more familiar.

(a) Company operations

An exempted company such as the Company must conduct its operations mainly

outside the Cayman Islands. An exempted company is also required to file an annual return

each year with the Registrar of Companies of the Cayman Islands and pay a fee which is

based on the amount of its authorised share capital.



III – 20

(b) Share capital

Under Cayman Companies Act, a Cayman Islands company may issue ordinary,

preference or redeemable shares or any combination thereof. Where a company issues shares

at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value

of the premiums on those shares shall be transferred to an account, to be called the ‘‘share

premium account’’. At the option of a company, these provisions may not apply to

premiums on shares of that company allotted pursuant to any arrangements in consideration

of the acquisition or cancellation of shares in any other company and issued at a premium.

The share premium account may be applied by the company subject to the provisions, if

any, of its memorandum and articles of association, in such manner as the company may

from time to time determine including, but without limitation, the following:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fully paid

bonus shares;

(iii) any manner provided in section 37 of the Cayman Companies Act;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on, any

issue of shares or debentures of the company.

Notwithstanding the foregoing, no distribution or dividend may be paid to members

out of the share premium account unless, immediately following the date on which the

distribution or dividend is proposed to be paid, the company will be able to pay its debts as

they fall due in the ordinary course of business.

Subject to confirmation by the court, a company limited by shares or a company

limited by guarantee and having a share capital may, if authorised to do so by its articles of

association, by special resolution reduce its share capital in any way.

(c) Financial assistance to purchase shares of a company or its holding company

There are no statutory prohibitions in the Cayman Islands on the granting of financial

assistance by a company to another person for the purchase of, or subscription for, its own,

its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial

assistance provided the directors of the company, when proposing to grant such financial

assistance, discharge their duties of care and act in good faith, for a proper purpose and in

the interests of the company. Such assistance should be on an arm’s-length basis.



III – 21

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share

capital may, if so authorised by its articles of association, issue shares which are to be

redeemed or are liable to be redeemed at the option of the company or a member and, for

the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied,

subject to the provisions of the company’s articles of association, so as to provide that such

shares are to be or are liable to be so redeemed. In addition, such a company may, if

authorised to do so by its articles of association, purchase its own shares, including any

redeemable shares; an ordinary resolution of the company approving the manner and terms

of the purchase will be required if the articles of association do not authorise the manner

and terms of such purchase. A company may not redeem or purchase its shares unless they

are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a

result of the redemption or purchase, there would no longer be any issued shares of the

company other than shares held as treasury shares. In addition, a payment out of capital by a

company for the redemption or purchase of its own shares is not lawful unless, immediately

following the date on which the payment is proposed to be made, the company shall be able

to pay its debts as they fall due in the ordinary course of business.

Shares that have been purchased or redeemed by a company or surrendered to the

company shall not be treated as cancelled but shall be classified as treasury shares if held in

compliance with the requirements of Section 37A(1) of the Cayman Companies Act. Any

such shares shall continue to be classified as treasury shares until such shares are either

cancelled or transferred pursuant to the Cayman Companies Act.

A Cayman Islands company may be able to purchase its own warrants subject to and

in accordance with the terms and conditions of the relevant warrant instrument or certificate.

Thus there is no requirement under Cayman Islands law that a company’s memorandum or

articles of association contain a specific provision enabling such purchases. The directors of

a company may under the general power contained in its memorandum of association be

able to buy, sell and deal in personal property of all kinds.

A subsidiary may hold shares in its holding company and, in certain circumstances,

may acquire such shares.

(e) Dividends and distributions

Subject to a solvency test, as prescribed in the Cayman Companies Act, and the

provisions, if any, of the company’s memorandum and articles of association, a company

may pay dividends and distributions out of its share premium account. In addition, based

upon English case law which is likely to be persuasive in the Cayman Islands, dividends

may be paid out of profits.



III – 22

For so long as a company holds treasury shares, no dividend may be declared or paid,

and no other distribution (whether in cash or otherwise) of the company’s assets (including

any distribution of assets to members on a winding up) may be made, in respect of a

treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English case

law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions to

that rule) which permit a minority member to commence a representative action against or

derivative actions in the name of the company to challenge acts which are ultra vires,

illegal, fraudulent (and performed by those in control of the Company) against the minority,

or represent an irregularity in the passing of a resolution which requires a qualified (or

special) majority which has not been obtained.

Where a company (not being a bank) is one which has a share capital divided into

shares, the court may, on the application of members holding not less than one-fifth of the

shares of the company in issue, appoint an inspector to examine the affairs of the company

and, at the direction of the court, to report on such affairs. In addition, any member of a

company may petition the court, which may make a winding up order if the court is of the

opinion that it is just and equitable that the company should be wound up.

In general, claims against a company by its members must be based on the general

laws of contract or tort applicable in the Cayman Islands or be based on potential violation

of their individual rights as members as established by a company’s memorandum and

articles of association.

(g) Disposal of assets

There are no specific restrictions on the power of directors to dispose of assets of a

company, however, the directors are expected to exercise certain duties of care, diligence

and skill to the standard that a reasonably prudent person would exercise in comparable

circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in

the best interests of the company under English common law (which the Cayman Islands

courts will ordinarily follow).

(h) Accounting and auditing requirements

A company must cause proper records of accounts to be kept with respect to: (i) all

sums of money received and expended by it; (ii) all sales and purchases of goods by it and

(iii) its assets and liabilities.



III – 23

Proper books of account shall not be deemed to be kept if there are not kept such

books as are necessary to give a true and fair view of the state of the company’s affairs and

to explain its transactions.

If a company keeps its books of account at any place other than at its registered office

or any other place within the Cayman Islands, it shall, upon service of an order or notice by

the Tax Information Authority pursuant to the Tax Information Authority Act (2017

Revision) of the Cayman Islands, make available, in electronic form or any other medium, at

its registered office copies of its books of account, or any part or parts thereof, as are

specified in such order or notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in the

Cayman Islands.

(j) Taxation

Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the Cayman

Islands, the Company has obtained an undertaking from the Financial Secretary that:

(i) no law which is enacted in the Cayman Islands imposing any tax to be levied on

profits or income or gains or appreciations shall apply to the Company or its

operations; and

(ii) no tax be levied on profits, income, gains or appreciations or which is in the

nature of estate duty or inheritance tax shall be payable by the Company:

(aa) on or in respect of the shares, debentures or other obligations of the

Company; or

(bb) by way of withholding in whole or in part of any relevant payment as

defined in the Tax Concessions Act (2018 Revision).

The undertaking for the Company is for a period of 30 years from 21 April 2021.

The Cayman Islands currently levy no taxes on individuals or corporations based

upon profits, income, gains or appreciations and there is no taxation in the nature

of inheritance tax or estate duty. There are no other taxes likely to be material to

the Company levied by the Government of the Cayman Islands save for certain

stamp duties which may be applicable, from time to time, on certain instruments.



III – 24

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman

Islands companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

There is no express provision prohibiting the making of loans by a company to any of

its directors. However, the company’s articles of association may provide for the prohibition

of such loans under specific circumstances.

(m) Inspection of corporate records

The members of a company have no general right to inspect or obtain copies of the

register of members or corporate records of the company. They will, however, have such

rights as may be set out in the company’s articles of association.

(n) Register of members

A Cayman Islands exempted company may maintain its principal register of members

and any branch registers in any country or territory, whether within or outside the Cayman

Islands, as the company may determine from time to time. There is no requirement for an

exempted company to make any returns of members to the Registrar of Companies in the

Cayman Islands. The names and addresses of the members are, accordingly, not a matter of

public record and are not available for public inspection. However, an exempted company

shall make available at its registered office, in electronic form or any other medium, such

register of members, including any branch register of member, as may be required of it upon

service of an order or notice by the Tax Information Authority pursuant to the Tax

Information Authority Law (2017 Revision) of the Cayman Islands.

(o) Register of Directors and officers

Pursuant to the Cayman Companies Act, the Company is required to maintain at its

registered office a register of directors, alternate directors and officers which is not available

for inspection by the public. A copy of such register must be filed with the Registrar of

Companies in the Cayman Islands and any change must be notified to the Registrar within

30 days of any change in such directors or officers, including a change of the name of such

directors or officers.

(p) Winding up

A Cayman Islands company may be wound up by: (i) an order of the court; (ii)

voluntarily by its members; or (iii) under the supervision of the court.



III – 25

The court has authority to order winding up in a number of specified circumstances

including where, in the opinion of the court, it is just and equitable that such company be so

wound up.

A voluntary winding up of a company (other than a limited duration company, for

which specific rules apply) occurs where the company resolves by special resolution that it

be wound up voluntarily or where the company in general meeting resolves that it be wound

up voluntarily because it is unable to pay its debt as they fall due.

In the case of a voluntary winding up, the company is obliged to cease to carry on its

business from the commencement of its winding up except so far as it may be beneficial for

its winding up. Upon appointment of a voluntary liquidator, all the powers of the directors

cease, except so far as the company in general meeting or the liquidator sanctions their

continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidators

are appointed for the purpose of winding up the affairs of the company and distributing its

assets.

As soon as the affairs of a company are fully wound up, the liquidator must make a

report and an account of the winding up, showing how the winding up has been conducted

and the property of the company disposed of, and call a general meeting of the company for

the purposes of laying before it the account and giving an explanation of that account.

When a resolution has been passed by a company to wind up voluntarily, the

liquidator or any contributory or creditor may apply to the court for an order for the

continuation of the winding up under the supervision of the court, on the grounds that: (i)

the company is or is likely to become insolvent; or (ii) the supervision of the court will

facilitate a more effective, economic or expeditious liquidation of the company in the

interests of the contributories and creditors. A supervision order takes effect for all purposes

as if it was an order that the company be wound up by the court except that a commenced

voluntary winding up and the prior actions of the voluntary liquidator shall be valid and

binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company and assisting

the court, one or more persons may be appointed to be called an official liquidator(s). The

court may appoint to such office such person or persons, either provisionally or otherwise,

as it thinks fit, and if more than one person is appointed to such office, the court shall

declare whether any act required or authorized to be done by the official liquidator is to be

done by all or any one or more of such persons. The court may also determine whether any

and what security is to be given by an official liquidator on his appointment; if no official

liquidator is appointed, or during any vacancy in such office, all the property of the

company shall be in the custody of the court.



III – 26

(q) Reconstructions

Reconstructions and amalgamations may be approved by a majority in number

representing 75% in value of the members or creditors, depending on the circumstances, as

are present at a meeting called for such purpose and thereafter sanctioned by the courts.

Whilst a dissenting member has the right to express to the court his view that the transaction

for which approval is being sought would not provide the members with a fair value for

their shares, the courts are unlikely to disapprove the transaction on that ground alone in the

absence of evidence of fraud or bad faith on behalf of management, and if the transaction

were approved and consummated the dissenting member would have no rights comparable to

the appraisal rights (i.e. the right to receive payment in cash for the judicially determined

value of their shares) ordinarily available, for example, to dissenting members of a United

States corporation.

(r) Take-overs

Where an offer is made by a company for the shares of another company and, within

four months of the offer, the holders of not less than 90% of the shares which are the

subject of the offer accept, the offeror may, at any time within two months after the

expiration of that four-month period, by notice require the dissenting members to transfer

their shares on the terms of the offer. A dissenting member may apply to the Cayman

Islands courts within one month of the notice objecting to the transfer. The burden is on the

dissenting member to show that the court should exercise its discretion, which it will be

unlikely to do unless there is evidence of fraud or bad faith or collusion as between the

offeror and the holders of the shares who have accepted the offer as a means of unfairly

forcing out minority members.

(s) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of

association may provide for indemnification of officers and directors, save to the extent any

such provision may be held by the court to be contrary to public policy, for example, where

a provision purports to provide indemnification against the consequences of committing a

crime.

4. GENERAL

Appleby, the Company’s legal adviser on Cayman Islands law, has sent to the Company a

letter of advice which summarises certain aspects of the Cayman Islands company law. This

letter, together with a copy of the Cayman Companies Act, is available for inspection as referred

to in the paragraph headed ‘‘Documents Available for Inspection’’ in Appendix V. Any person

wishing to have a detailed summary of Cayman Islands company law or advice on the differences

between it and the laws of any jurisdiction with which he is more familiar is recommended to

seek independent legal advice.



III – 27

A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation of our Company

Our Company was incorporated in the Cayman Islands under the Companies Act as an

exempted company with limited liability on 19 March 2021. Our Company was registered as

a non-Hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on 25

May 2021 and our principal place of business in Hong Kong is at G/F and Portion of 1/F,

Chi Shing Centre, 2 Ping Fuk Lane, Tong Yan San Tsuen, Yuen Long, New Territories,

Hong Kong. Mr. Jason Kok and Mr. Ng Lok Ki have been appointed as the authorised

representatives of our Company for the acceptance of service of process and notices on

behalf of our Company in Hong Kong.

As our Company is incorporated in the Cayman Islands, our Company is subject to the

relevant laws of the Cayman Islands and the constitution which comprises the Memorandum

of Association and the Articles of Association. A summary of various provisions of its

constitution and relevant aspects of the Cayman Islands company law is set out in the

section headed ‘‘Summary of the Constitution of the Company and Cayman Islands

Company Law’’ in Appendix III to this document.

2. Changes in share capital of our Company

(a) As at the date of incorporation, our Company had an authorised share capital of

HK$380,000 divided into 38,000,000 Shares of a par value of HK$0.01 each. On

the same day, one Share was allotted and issued, credited as fully paid at par, to

our Company’s initial subscriber, an Independe’’nt Third Party, which was

subsequently transferred to CS Investment, the holding vehicle of Mr. Kok.

(b) On 17 June 2021, as part of the Reorganisation, our Company allotted and issued

one Share, credited as fully paid, to CS Investment in consideration of CS

Investment transferring its six ordinary shares in Ace Honour (representing all

the issued shares of Ace Honour) to our Company.

(c) On [•], the authorised share capital of our Company was increased from

HK$380,000 divided into 38,000,000 Shares of a par value of HK$0.01 each to

HK$[100,000,000] divided into 10,000,000,000 Shares of a par value of

HK$0.01 each, by the creation of an additional [9,962,000,000] Shares of a par

value of HK$0.01 each, each ranking pari passu in all respect with our Shares

then in issue.


APPENDIX IV STATUTORY AND GENERAL INFORMATION

IV – 1

(d) Immediately following completion of the Capitalisation Issue and the

[REDACTED], and taking no account of any Shares which may be issued

pursuant to the exercise of the [REDACTED] or any options which may be

granted under the Share Option Scheme, [REDACTED] Shares, fully paid or

credited as fully paid, will be in issue, and [REDACTED] Shares will remain

unissued.

(e) Other than pursuant to the general mandate to issue Shares referred to in the

paragraph headed ‘‘A. Further Information about our Company – 3. Written

resolutions of our then sole Shareholder passed on [•]’’ in this appendix and

pursuant to the exercise of the [REDACTED] or the Share Option Scheme, our

Company does not have any present intention to issue any of the authorised but

unissued share capital of our Company and, without prior approval of our

Shareholders in general meeting, no issue of Shares which would effectively alter

the control of our Company will be made.

(f) Save as disclosed under this paragraph and in the section headed ‘‘Share Capital’’

in this document, there has been no alteration in our Company’s share capital

since its incorporation.

3. Written resolutions of our then sole Shareholder passed on [•]

By written resolutions of our then sole Shareholder passed on [•]:

(a) our Company approved and conditionally adopted the Memorandum of

Association and the Articles of Association, upon the fulfilment of the

Conditions (as defined below) and with effect from the [REDACTED];

(b) the authorised share capital of our Company was increased from HK$380,000

divided into 38,000,000 Shares of a par value of HK$0.01 each to

HK$100,000,000 divided into 10,000,000,000 Shares of a par value of HK$0.01

each by the creation of an additional [9,962,000,000] Shares of a par value of

HK$0.01 each, each ranking pari passu in all respects with our Shares then in

issue;



IV – 2

(c) conditional on the Listing Committee granting the [REDACTED] of, and

permission to deal in, our Shares in issue and Shares to be issued as mentioned

in this document, including any Shares which may be issued and allotted

pursuant to the exercise of the [REDACTED] or any options which may be

granted under the Share Option Scheme, and on the obligations of the

[REDACTED] under the [REDACTED] becoming unconditional and not being

terminated in accordance with the terms of the [REDACTED] or otherwise

(together the ‘‘Conditions’’), in each case on or before the date falling 30 days

after the date of this document:

(i) the [REDACTED] and the [REDACTED] were approved and our Directors

were authorised to allot and issue the [REDACTED] pursuant to the

[REDACTED] and such number of Shares as may be required to be

allotted and issued upon the exercise of the [REDACTED] to rank pari

passu with the then existing Shares in all respects;

(ii) the rules of the Share Option Scheme, the principal terms of which are set

out in the paragraph headed ‘‘D. Share Option Scheme’’ of this appendix,

were approved and adopted and our Directors were authorised, at their

absolute discretion, subject to the terms and conditions of the Share Option

Scheme, to grant options to subscribe for Shares thereunder and to allot,

issue and deal with our Shares pursuant to the exercise of subscription

rights attaching to any options which may be granted under the Share

Option Scheme and to take all such actions as they consider necessary or

desirable to implement the Share Option Scheme; and

(iii) the Capitalisation Issue was approved, and conditional on the share

premium account of our Company having sufficient balance, or otherwise

being credited as a result of the allotment and issuance of the

[REDACTED] pursuant to the [REDACTED], our Directors were

authorised to capitalise a sum of HK$[REDACTED] standing to the credit

of the share premium account of our Company by applying such sum in

paying up in full at par [REDACTED] Shares for allotment and issuance to

the person(s) whose name(s) appear on the register of members or principal

share register of our Company at the close of business on the date which

the said resolution was passed in proportion (as nearly as possible without

involving fractions so that no fraction of a Share will be allotted and

issued) to its/their then existing shareholdings in our Company, each

ranking pari passu in all respects with our Shares then in issue, and our

Directors were authorised to give effect to the Capitalisation Issue;



IV – 3

(d) a general unconditional mandate was given to our Directors to exercise all

powers of our Company to allot, issue and deal with, otherwise than by way of

rights or an issue of Shares pursuant to the exercise of the [REDACTED] or any

options which may be granted under the Share Option Scheme or any other share

option scheme of our Company or any Shares allotted and issued in lieu of the

whole or part of a dividend on our Shares or similar arrangement in accordance

with the Memorandum of Association and the Articles or pursuant to a specific

authority granted by our Shareholders in general meetings or pursuant to the

Capitalisation Issue and the [REDACTED], Shares or securities convertible into

Shares or options, warrants or similar rights to subscribe for Shares or such

convertible securities, and to make or grant offers, agreements or options which

might require the exercise of such power, with a total number not exceeding 20%

of the total number of our Shares in issue immediately following completion of

the Capitalisation Issue and the [REDACTED] but excluding any Shares which

may be issued pursuant to the exercise of the [REDACTED] and any options

which may be granted under the Share Option Scheme, and such mandate to

remain in effect until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the expiration of the period within which the next annual general meeting

of our Company is required by the Articles of Association or any applicable

laws of the Cayman Islands to be held; or

(iii) the time when such mandate is revoked or varied by an ordinary resolution

of our Shareholders in general meeting;

(e) a general unconditional mandate was given to our Directors authorising them to

exercise all powers of our Company to repurchase on the Stock Exchange or on

any other stock exchange on which the securities of our Company may

[REDACTED] and which is recognised by the SFC and the Stock Exchange for

this purpose such number of Shares as will represent up to 10% of the total

number of our Shares in issue immediately following completion of the

Capitalisation Issue and the [REDACTED] but excluding any Shares which may

be issued pursuant to the exercise of the [REDACTED] or any options which

may be granted under the Share Option Scheme (the ‘‘Repurchase Mandate’’),

and the Repurchase Mandate to remain in effect until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the expiration of the period within which the next annual general meeting

of our Company is required by the Articles of Association or any applicable

laws of the Cayman Islands to be held; or



IV – 4

(iii) the time when the Repurchase Mandate is revoked or varied by an ordinary

resolution of our Shareholders in general meeting; and

(f) a general unconditional mandate mentioned in sub-paragraph (d) above was

extended by the addition to the total number of Shares which may be allotted or

agreed to be allotted by our Directors pursuant to such general mandate of an

amount representing the total number of Shares repurchased by our Company

pursuant to the Repurchase Mandate to repurchase Shares referred to in sub-

paragraph (e) above, provided that such extended amount shall not exceed 10%

of the total number of Shares in issue immediately following completion of the

Capitalisation issue and the [REDACTED] but excluding any Shares which may

be issued pursuant to the exercise of the [REDACTED] and any options which

may be granted under the Share Option Scheme.

4. Corporate reorganisation

In preparing for the [REDACTED], the companies comprising our Group underwent

the Reorganisation to rationalise the corporate structure of our Group and our Company

became the holding company of our Group. Please refer to the paragraph headed ‘‘History,

Reorganisation and Group structure – Reorganisation’’ in this document for further details.

5. Changes in share capital of subsidiaries

Our subsidiaries are listed in the Accountants’ Report, the text of which is set out in

Appendix I to this document. Save for the alterations described in the paragraph headed ‘‘A.

Further Information about our Company – 4. Corporate reorganisation’’ above and in the

section headed ‘‘History, Reorganisation and Group structure’’ in this document, no changes

in the share capital of our subsidiaries took place within the two years immediately

preceding the date of this document.

6. Repurchase of our Shares by our Company

This section includes information required by the Stock Exchange to be included in

this document concerning the repurchase of our Shares by our Company.

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary listing on the Stock

Exchange to purchase their shares on the Stock Exchange subject to certain

restrictions.



IV – 5

(i) Shareholders’ approval

The Listing Rules provide that all proposed repurchases of shares (which

must be fully paid in the case of shares) by a company with a primary listing on

the Stock Exchange must be approved in advance by an ordinary resolution,

either by way of general mandate or by specific approval of a specific

transaction.

Note: Pursuant to the written resolutions of our then sole Shareholder passed on [•], the

Repurchase Mandate was given to our Directors authorising them to exercise all powers

of our Company to repurchase Shares on the Stock Exchange or any other stock

exchange on which the securities of our Company may be [REDACTED] and which is

recognised by the SFC and the Stock Exchange for this purpose, such number of Shares

representing up to 10% of the total number of our Shares in issue immediately following

completion of the Capitalisation Issue and the [REDACTED] but excluding any Shares

to be issued and allotted pursuant to the exercise of the [REDACTED] and any options

which may be granted under the Share Option Scheme, and the Repurchase Mandate

shall remain in effect until the earliest of the conclusion of the next annual general

meeting of our Company, or the expiration of the period within which the next annual

general meeting of our Company is required by the Articles of Association or any

applicable laws to be held, or the time when the Repurchase Mandate is revoked or

varied by an ordinary resolution of our Shareholders in general meeting.

(ii) Source of funds

Repurchases must be funded out of funds legally available for the purpose

in accordance with the Articles, the Listing Rules and the applicable laws of the

Cayman Islands. A listed company may not repurchase its own shares on the

Stock Exchange for a consideration other than cash or for settlement otherwise

than in accordance with the trading rules of the Stock Exchange as amended from

time to time.

Subject to the foregoing, under the Companies Act, any repurchases by our

Company may be made out of profits of our Company, out of share premium

account of our Company, or out of the proceeds of a fresh issue of Shares made

for the purpose of the repurchase or, if authorised by the Articles and subject to

the Companies Act, out of capital, and, in the case of any premium payable on

the repurchase, out of either or both profits of our Company or the share

premium account of our Company, before or at the time the Shares are

repurchased or, if authorised by the Articles and subject to the Companies Act,

out of capital.



IV – 6

(iii) Connected parties

The Listing Rules prohibit our Company from knowingly repurchasing our

Shares on the Stock Exchange from a core connected person, which includes a

Director, chief executive or Substantial Shareholder of our Company or any of its

subsidiaries or a close associate of any of them and a core connected person shall

not knowingly sell Shares to our Company.

(b) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and our

Shareholders for our Directors to have a general authority from our Shareholders to

enable our Company to repurchase Shares in the market. Such repurchases may,

depending on the market conditions and funding arrangements at the time, lead to an

enhancement of our Company’s net asset value and/or earnings per Share and will only

be made when our Directors believe that such repurchases will benefit our Company

and our Shareholders.

(c) Exercise of the Repurchase Mandate

Exercise in full of the Repurchase Mandate, on the basis of [REDACTED]

Shares in issue after completion of the Capitalisation Issue and the [REDACTED],

could accordingly result in up to [REDACTED] Shares being repurchased by our

Company during the period in which the Repurchase Mandate remains in force.

(d) Funding of repurchases

In repurchasing Shares, our Company may only apply funds legally available for

such purpose in accordance with the Articles, the Listing Rules and the applicable laws

of the Cayman Islands.

Our Directors do not propose to exercise the Repurchase Mandate to such extent

as would, in the circumstances, have a material adverse effect on the working capital

requirements of our Company or the gearing levels which in the opinion of our

Directors are from time to time appropriate for our Company.

(e) General

None of our Directors or, to the best of their knowledge having made all

reasonable enquiries, any of their close associates, has any present intention to sell any

Shares to our Company if the Repurchase Mandate is exercised.

Our Directors have undertaken to the Stock Exchange that, so far as the same

may be applicable, they will exercise the Repurchase Mandate in accordance with the

Articles, the Listing Rules and the applicable laws of the Cayman Islands.



IV – 7

If as a result of a repurchase of Shares pursuant to the Repurchase Mandate, a

Shareholder’s proportionate interest in the voting rights of our Company increases,

such increase will be treated as an acquisition for the purposes of the Takeovers Code.

Accordingly, a Shareholder or a group of Shareholders acting in concert, depending on

the level of increase of our Shareholders’ interest, could obtain or consolidate control

of our Company and may become obliged to make a mandatory offer in accordance

with Rule 26 of the Takeovers Code as a result of any such increase. Save as disclosed

above, our Directors are not aware of any consequence that would arise under the

Takeovers Code as a result of a repurchase if made immediately after the

[REDACTED] pursuant to the Repurchase Mandate.

Our Directors will not exercise the Repurchase Mandate if the repurchase would

result in the number of Shares which are in the hands of the public falling below 25%

of the total number of Shares in issue (or such other percentage as may be prescribed

as the minimum public shareholding under the Listing Rules).

No core connected person of our Company has notified our Company that he or

she has a present intention to sell Shares to our Company, or has undertaken not to do

so, if the Repurchase Mandate is exercised.

B. FURTHER INFORMATION ABOUT THE BUSINESS

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) have

been entered into by members of our Group within the two years preceding the date of this

document and are or may be material:

(a) the sale and purchase agreement dated 16 June 2021 entered into between CS

Investment and Ace Honour, pursuant to which CS Investment transferred (i)

1,000,000 shares of Chi Shing Equipment Trading (representing the entire issued

share capital of Chi Shing Equipment Trading); (ii) 100,000 shares of Chi Shing

Machinery Rental (representing the entire issued share capital of Chi Shing

Machinery Rental); (iii) 1,000,000 shares of Chi Shing Machinery (representing

the entire issued share capital of Chi Shing Machinery); and (iv) 10,000 shares of

Chi Shing Human Resources (representing the entire issued share capital of Chi

Shing Human Resources) to Ace Honour, and as consideration thereof Ace

Honour allotted and issued in aggregate four shares, credited as fully paid, to CS

Investment;

(b) the sale and purchase agreement dated 16 June 2021 entered into between Mr.

Kok and Ace Honour, pursuant to which Mr. Kok transferred 10,000 shares of

Chi Shing (Hong Kong) Group (representing the entire issued share capital of

Chi Shing (Hong Kong) Group) to Ace Honour, and as consideration thereof Ace

Honour allotted and issued one share, credited as fully paid, to CS Investment as

directed by Mr. Kok;



IV – 8

(c) the sale and purchase agreement dated 17 June 2021 entered into between CS

Investment and our Company, pursuant to which CS Investment transferred six

shares of Ace Honour (representing all the issued shares of Ace Honour) to our

Company, and as consideration thereof our Company allotted and issued one

Share, credited as fully paid, to CS Investment;

(d) the Deed of Non-competition;

(e) the Deed of Indemnity; and

(f) the [REDACTED].

2. Intellectual property rights

Set out below is a summary of our material intellectual property rights. Our material

intellectual property rights were determined by our Directors on the basis of their materially

to our business operation, financial position and prospects.

(a) Trademark(s)

As at the Latest Practicable Date, our Group had registered the following

trademark(s) which, in the opinion of our Directors, are material to our business:

Trademark

Registered

owner Class(es)

Place of

registration

Trademark

number Effective period

Chi Shing

Machinery

35 Hong Kong 300339228 From 17 December

2004 to 16

December 2024

Chi Shing

Industries

7 Hong Kong 302592469 From 29 April

2013 to 28

April 2023

Chi Shing

Industries

7 Hong Kong 303018636 From 4 June 2014

to 3 June 2024

Chi Shing

Industries

7 Hong Kong 303018645 From 4 June 2014

to 3 June 2024



IV – 9

Trademark

Registered

owner Class(es)

Place of

registration

Trademark

number Effective period

A B C

Chi Shing

Industries

7 Hong Kong 305198077 From 24 February

2020 to 23

February 2030

A B C

Chi Shing

Industries


2020 to 23

February 2030

A B C

Chi Shing

Industries


2020 to 23

February 2030

A B C

Chi Shing

Industries


2020 to 23

February 2030

A A B CA B C

Chi Shing

Industries


2020 to 23

February 2030

(b) Domain name(s)

As at the Latest Practicable Date, our Group has registered the following domain

names which, in the opinion of our Directors, are material to our business:

Domain name Registrant

Registration

date Expiry date

www.chishing.hk Chi Shing Machinery 9 June 2011 9 June 2025

志成集團 • 香港 Chi Shing Machinery 9 June 2011 9 June 2025

www.csrental.cn Guangdong Zhigui 30 December

2015

30 December

2024

Note: Information contained in the websites does not form part of this document.

(c) Patent(s)

As at the Latest Practicable Date, our Group had not registered any patents

which, in the opinion of our Directors, are material to our business.

Save as disclosed herein, there are no other trade or service marks, patents and

other intellectual property rights which are or may be material to the business of our

Group.



IV – 10

C. FURTHER INFORMATION ABOUT SUBSTANTIAL SHAREHOLDERS,

DIRECTORS AND EXPERTS

1. Disclosure of interests

(a) Interests of Directors and chief executive in Shares, underlying Shares and

debentures of our Company and the associated corporations

Immediately following completion of the Capitalisation Issue and the

[REDACTED] but without taking into account any Shares which may be issued

pursuant to the exercise of the [REDACTED] or any options which may be granted

under the Share Option Scheme, the interests and short positions of our Directors or

chief executive of our Company in the Shares, underlying Shares and debentures of

our Company or any of the associated corporations (within the meaning of Part XV of

the SFO) which, once our Shares are [REDACTED] on the Stock Exchange, would

have to be notified to our Company and the Stock Exchange pursuant to Divisions 7

and 8 of Part XV of the SFO (including any interests or short positions which they are

taken or deemed to have under such provisions of the SFO) or will be required,

pursuant to section 352 of the SFO, to be entered in the register referred to therein, or

will be required, pursuant to the Model Code for Securities Transactions by Directors

of Listed Companies in the Listing Rules, to be notified to our Company and the Stock

Exchange, in each case once our Shares are [REDACTED] on the Stock Exchange,

will be as follows:

(i) Long position in our Shares

Name of

Director

Capacity/Nature of

interest

Number of Shares

held/interested in

immediately

following

completion of the

Capitalisation

Issue and the

[REDACTED]

Percentage of

shareholding

immediately

following

completion of the

Capitalisation

Issue and the

[REDACTED]

Mr. Kok Interest in a controlled

corporation (Note)


Note: [REDACTED] Shares are registered in the name of CS Investment, which is wholly-

owned by Mr. Kok. Under the SFO, Mr. Kok is deemed to be interested in all the

Shares held by CS Investment.



IV – 11

(ii) Long position in the shares of associated corporation

Name of

Director

Name of associated

corporation

Capacity/

Nature

Number of

Shares held

Percentage

of interest

Mr. Kok CS Investment Beneficial owner Two 100%

(b) Interests of substantial and other Shareholders in our Shares and underlying

Shares

So far as is known to our Directors and without taking into account any Shares

which may be issued under the [REDACTED], and Shares which may be issued

pursuant to the exercise of the [REDACTED] or any options which may be granted

under the Share Option Scheme, the following person and entity (not being a Director

or chief executive of our Company) will, immediately following the completion of the

Capitalisation Issue and the [REDACTED], have interests or short positions in Shares

or underlying Shares which would fall to be disclosed to our Company and the Stock

Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who

are, directly or indirectly, interested in 10% or more of the issued voting Shares of our

Company or any other member of our Group:

Name

Capacity/

Nature of interest

Number of

Shares held/

interested in

Percentage of

interest

CS Investment Beneficial owner (Note 1) [REDACTED] [REDACTED]

Ms. Wu Kit Hung

Rainbow

Interest of spouse (Note 2) [REDACTED] [REDACTED]

Notes:

1. CS Investment is wholly-owned by Mr. Kok.

2. Ms. Wu Kit Hung Rainbow is the spouse of Mr. Kok and is deemed or taken to be interested

in all the Shares in which Mr. Kok has, or is deemed to have, an interest for the purposes of

the SFO.



IV – 12

2. Particulars of service agreements and letters of appointment

Each of our executive Directors has entered into a service contract with our Company

and each of our independent non-executive Directors has entered into a letter of appointment

with our Company, in all cases for a term of [three] years commencing from the

[REDACTED], which may be terminated by not less than three months’ notice served by

either party on the other, and is subject to termination provisions therein and provisions on

retirement by rotation of Directors as set out in the Memorandum and Articles.

None of our Directors has entered into any service agreement with any member of our

Group (excluding contracts expiring or determinable by the employer within one year

without payment of compensation other than statutory compensation).

3. Directors’ remuneration

(a) The aggregate amount of emoluments (including fees, salaries and other

allowance, discretionary bonus and retirement benefits scheme contributions)

paid to our Directors by our Group for the three years ended 31 March 2021

were approximately HK$2.0 million, HK$2.1 million and HK$3.2 million,

respectively.

(b) Under the arrangements currently in force, the aggregate emoluments (excluding

payment pursuant to any discretionary benefits or bonus or other fringe benefits)

payable by our Group to our Directors for the year ending 31 March 2022 will be


(c) Under the arrangements currently proposed, conditional upon the [REDACTED],

the basic annual remuneration (excluding payment pursuant to any discretionary

benefits or bonus or other fringe benefits) payable by our Group to each of our

Directors will be as follows:

HK$

Executive Directors

Mr. Kok 1,056,000

Mr. Jason Kok 921,000

Ms. Kwan 327,600

Mr. Carson Poon 444,000


[Mr. Chung Kau Cheong] 96,000

[Mr. Tsui Pui Hung] 96,000

[Ms. Chu Moune Tsi Stella] 120,000



IV – 13

4. Fees or commission received

Save for the fees or commission as disclosed in the paragraph headed ‘‘[REDACTED]

– Sponsor’s and [REDACTED]’ interest in our Company’’ in this document, none of our

Directors or the experts named in the paragraph headed ‘‘E. Other Information – 6.

Qualifications of experts’’ in this appendix had received any agency fees, discounts,

commissions, brokerages or other special terms in connection with the issue or sale of any

capital of any member of our Group within the two years preceding the date of this

document.

5. Related party transactions

Details of the related party transactions are set out under Note 21 to the Accountants’

Report set out in Appendix I to this document.

6. Disclaimers

Save as disclosed in this document:

(a) there are no existing or proposed service agreements (excluding agreements

expiring or determinable by the employer within one year without payment of

compensation other than statutory compensation) between our Directors and any

member of our Group;

(b) none of our Directors or the experts named in the paragraph headed ‘‘E. Other

information – 6. Qualifications of experts’’ in this appendix has any direct or

indirect interest in the promotion of, or in any assets which have been, within the

two years immediately preceding the date of this document, acquired or disposed

of by or leased to, any member of our Group, or are proposed to be acquired or

disposed of by or leased to any member of our Group;

(c) none of our Directors or the experts named in the paragraph headed ‘‘E. Other

information – 6. Qualifications of experts’’ in this appendix is materially

interested in any contract or arrangement subsisting at the date of this document

which is significant in relation to the business of our Group taken as a whole;

(d) none of our Directors or the experts named in the paragraph headed ‘‘E. Other

information – 6. Qualifications of experts’’ in this appendix has any shareholding

in any member of our Group or the right (whether legally enforceable or not) to

subscribe for or to nominate persons to subscribe for securities in any member of

our Group;



IV – 14

(e) taking no account of any Shares to be issued upon exercise of the [REDACTED]

and any options which may be granted under the Share Option Scheme or

repurchased by our Company pursuant to the mandate as referred to in the

paragraph headed ‘‘A. Further information about our Company’’ in this appendix,

and taking no account of Shares which may be taken up under the

[REDACTED], our Directors are not aware of any person (not being a Director

or chief executive of our Company) who will, immediately following completion

of the Capitalisation Issue and [REDACTED], have an interest or short position

in Shares or underlying Shares which would fall to be disclosed to our Company

and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of

the SFO, or who will be directly or indirectly interested in 10% or more of the

nominal value or any class of share capital carrying rights to vote in all

circumstances at general meetings of our Company or any of our subsidiaries;

(f) taking no account of any Shares to be issued upon exercise of the [REDACTED]

and any options which may be granted under the Share Option Scheme, none of

our Directors or chief executive of our Company has any interest or short

position in Shares, underlying Shares or debentures of our Company or any of its

associated corporations (within the meaning of Part XV of the SFO) which would

have to be notified to our Company and the Stock Exchange under Divisions 7

and 8 of Part XV of the SFO (including any interests and short positions which

they are taken or deemed to have under such provisions of the SFO) or would be

required, pursuant to section 352 of the SFO, to be entered in the register

referred to therein, or would be required, pursuant to the Model Code for

Securities Transactions by Directors of Listing Companies in the Listing Rules

relating to securities transactions by our Directors, to be notified to our Company

and the Stock Exchange, in each case once our Shares are [REDACTED]; and

(g) so far as is known to our Directors, none of our Directors, their respective

associates (as defined under the Listing Rules) or Shareholders who are interested

in more than 5% of the issued share capital of our Company has any interests in

the five largest customers or the five largest suppliers of our Group during the

Track Record Period.



IV – 15

D. SHARE OPTION SCHEME

1. Definitions

For the purpose of this section, the following expressions have the meanings set out

below unless the context requires otherwise:

‘‘Adoption Date’’ [•], the date on which the Share Option Scheme is

conditionally adopted by our sole Shareholder by way of

written resolutions

‘‘Board’’ our board of Directors or a duly authorised committee of

our board of Directors

‘‘Business Day’’ any day on which the Stock Exchange is open for the

business of dealings in securities

‘‘Group’’ our Company and any entity in which our Company,

directly or indirectly, holds any equity interest

‘‘Scheme Period’’ the period commencing on the Adoption Date and

expiring at the close of business on the business day

immediately preceding the tenth anniversary thereof,

unless terminated earlier in accordance with the terms of

the Share Option Scheme

2. Summary of terms

The following is a summary of the principal terms of the rules of the Share Option

Scheme conditionally adopted by the written resolutions of our then sole Shareholder passed

on [•]:

(a) Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to attract and retain the best available

personnel, to provide additional incentive to employees (full-time and part-time),

directors, consultants, advisers, distributors, contractors, suppliers, agents, customers,

business partners or service providers of our Group and to promote the success of the

business of our Group.



IV – 16

(b) Who may join and basis of eligibility

Our Board may, at its absolute discretion, grant any employee (full-time or part-

time), director, consultant or adviser of our Group, or any Substantial Shareholder of

our Group, or any distributor, contractor, supplier, agent, customer, business partner or

service provider of our Group, options to subscribe at a price calculated in accordance

with paragraph (c) below for such number of Shares as it may determine in accordance

with the terms of the Share Option Scheme.

The basis of eligibility of any participant to the grant of any option shall be

determined by our Board (or as the case may be, where required under the Listing

Rules, our independent non-executive Directors) from time to time on the basis of his

or her contribution or potential contribution to the development and growth of our

Group.

(c) Price of Shares

The subscription price of a Share in respect of any particular option granted

under the Share Option Scheme shall be a price solely determined by our Board and

notified to a participant and shall be at least the higher of: (i) the closing price of our

Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant of

the option, which must be a Business Day; (ii) the average of the closing prices of our

Shares as stated in the Stock Exchange’s daily quotations sheets for the five Business

Days immediately preceding the date of grant of the option; and (iii) the nominal value

of a Share on the date of grant of the option. For the purpose of calculating the

subscription price where our Company has been [REDACTED] on the Stock

Exchange for less than five Business Days, the issue price of [REDACTED] on the

Stock Exchange shall be used as the closing price for any Business Day falling within

the period before [REDACTED].

(d) Grant of options and acceptance of offers

An offer for the grant of options must be accepted within seven days inclusive of

the day on which such offer was made. The amount payable by the grantee of an

option to our Company on acceptance of the offer for the grant of an option is HK$1.

(e) Maximum number of Shares

(i) Subject to sub-paragraphs (ii) and (iii) below, the maximum number of

Shares issuable upon exercise of all options to be granted under the Share

Option Scheme and any other share option schemes of our Company as

from the Adoption Date (excluding, for this purpose, Shares issuable upon

exercise of options which have been granted but which have lapsed in

accordance with the terms of the Share Option Scheme or any other share

option schemes of our Company) must not in aggregate exceed 10% of all



IV – 17

our Shares in issue as at the [REDACTED]. Therefore, it is expected that

our Company may grant options in respect of up to [REDACTED] Shares

(or such numbers of Shares as shall result from a sub-division or a

consolidation of such [REDACTED] Shares from time to time) to the

participants under the Share Option Scheme.

(ii) The 10% limit as mentioned above may be refreshed at any time by

approval of our Shareholders in general meeting provided that the total

number of Shares which may be issued upon exercise of all options to be

granted under the Share Option Scheme and any other share option schemes

of our Company must not exceed 10% of our Shares in issue as at the date

of approval of the refreshed limit. Options previously granted under the

Share Option Scheme and any other share option schemes of our Company

(including those outstanding, cancelled or lapsed in accordance with the

terms of the Share Option Scheme and any other share option schemes of

our Company) will not be counted for the purpose of calculating the

refreshed 10% limit. A circular must be sent to our Shareholders containing

the information as required under the Listing Rules in this regard.

(iii) Our Company may seek separate approval from our Shareholders in general

meeting for granting options beyond the 10% limit provided the options in

excess of the 10% limit are granted only to grantees specifically identified

by our Company before such approval is sought. In such event, our

Company must send a circular to our Shareholders containing a generic

description of such grantees, the number and terms of such options to be

granted and the purpose of granting options to them with an explanation as

to how the terms of the options will serve such purpose and all other

information required under the Listing Rules.

(iv) The aggregate number of Shares which may be issued upon exercise of all

outstanding options granted and yet to be exercised under the Share Option

Scheme and any other share option schemes of our Company must not

exceed 30% of our Shares in issue from time to time. No options may be

granted under the Share Option Scheme or any other share option schemes

of our Company if this will result in such 30% limit being exceeded.

(v) The exercise of any option shall be subject to our Shareholders in general

meeting approving any increase in the authorised share capital of our

Company. Subject thereto, our Board shall make available sufficient

authorised but unissued share capital of our Company for purpose of

allotment of Shares upon exercise of options.



IV – 18

(f) Maximum entitlement of each participant

The total number of Shares issued and to be issued upon exercise of options

granted to any participant (including both exercised and outstanding options) under the

Share Option Scheme or any other share option schemes of our Company in any 12-

month period up to the date of grant shall not exceed 1% of the Shares in issue. Any

further grant of options in excess of such limit must be separately approved by

Shareholders in general meeting with such grantee and his or her close associates

abstaining from voting. In such event, our Company must send a circular to our

Shareholders containing the identity of the grantee, the number and terms of the

options to be granted (and options previously granted to such grantee), and all other

information required under the Listing Rules. The number and terms (including the

subscription price) of the options to be granted must be fixed before the approval of

our Shareholders and the date of our Board meeting proposing such further grant

should be taken as the date of grant for the purpose of calculating the subscription

price.

(g) Grant of options to certain core connected persons

i. Any grant of an option to a Director, chief executive or Substantial

Shareholder (or any of their respective close associates) must be approved

by our independent non-executive Directors (excluding any independent

non-executive Director who is the grantee of the option).

ii. Where any grant of options to a Substantial Shareholder or an independent

non-executive Director (or any of their respective close associates) will

result in the total number of Shares issued and to be issued upon exercise

of all options already granted and to be granted to such person under the

Share Option Scheme and any other share option schemes of our Company

(including options exercised, cancelled and outstanding) in any 12-month

period up to and including the date of grant:

(a) representing in aggregate over 0.1% of our Shares in issue; and

(b) having an aggregate value, based on the closing price of our Shares at

the date of each grant, in excess of HK$5 million,

such further grant of options is required to be approved by our Shareholders

at a general meeting of our Company, with voting to be taken by way of

poll. Our Company shall send a circular to our Shareholders containing all

information as required under the Listing Rules in this regard. All core

connected persons of our Company shall abstain from voting (except where

any core connected person intends to vote against the proposed grant and

his or her intention to do so has been stated in the aforesaid circular). Any



IV – 19

change in the terms of an option granted to a Substantial Shareholder or an

independent non-executive Director or any of their respective close

associates is also required to be approved by our Shareholders in the

aforesaid manner.

(h) Restrictions on the times of grant of options

(i) Our Company may not grant any options after any inside information has

come to its knowledge until such inside information has been announced

pursuant to the requirements of the Listing Rules and the SFO. In

particular, no options may be granted during the period commencing one

month immediately preceding the earlier of:

(a) the date of our Board meeting (as such date is first notified to the

Stock Exchange in accordance with the Listing Rules) for the approval

of our Company’s results for any year, half-year, quarterly or other

interim period (whether or not required under the Listing Rules); and

(b) the last day on which our Company is to publish an announcement of

our Company’s results for any year or half-year under the Listing

Rules, or quarterly or other interim period (whether or not required

under the Listing Rules),

and ending on the date of the results announcement.

(ii) Further to the restrictions in paragraph (i) above, no option may be granted

to a Director on any day on which financial results of our Company are

published and:

(a) during the period of 60 days immediately preceding the publication

date of the annual results or, if shorter, the period from the end of the

relevant financial year up to the publication date of the results; and

(b) during the period of 30 days immediately preceding the publication

date of the quarterly results (if any) and half-year results or, if shorter,

the period from the end of the relevant quarterly or half-year period

up to the publication date of the results.



IV – 20

(i) Time of exercise of option

An option may be exercised in accordance with the terms of the Share Option

Scheme at any time during a period as our Board may determine which shall not

exceed 10 years from the date of grant subject to the provisions of early termination

thereof.

(j) Performance targets

Save as determined by our Board and provided in the offer of the grant of the

relevant options, there is no performance target which must be achieved before any of

the options can be exercised.

(k) Ranking of Shares

Our Shares to be allotted upon the exercise of an option will be subject to all the

provisions of the Articles for the time being in force and will rank pari passu in all

respects with our fully paid Shares in issue on the date of allotment and accordingly

will entitle the holders to participate in all dividends or other distributions paid or

made after the date of allotment other than any dividend or other distribution

previously declared or recommended or resolved to be paid or made with respect to a

record date which shall be on or before the date of allotment, save that our Shares

allotted upon the exercise of any option shall not carry any voting rights until the

name of the grantee has been duly entered on the register of members of our Company

as the holder thereof.

(l) Rights are personal to grantee

An option shall not be transferable or assignable and shall be personal to the

grantee of the option.

(m) Rights on cessation of employment by death

In the event of the death of the grantee (provided that none of the events which

would be a ground for termination of employment referred to in (n) below arises

within a period of three years prior to the death, in the case the grantee is an employee

at the date of grant), the legal personal representative(s) of the grantee may exercise

the option up to the grantee’s entitlement (to the extent which has become exercisable

and not already exercised) within a period of 12 months following his or her death

provided that where any of the events referred to in (q), (r) and (s) occurs prior to his

or her death or within such period of 12 months following his or her death, then his or

her legal personal representative(s) may so exercise the option within such of the

various periods respectively set forth therein.



IV – 21

(n) Rights on cessation of employment by dismissal

In the event that the grantee is an employee of our Group at the date of grant and

he or she subsequently ceases to be an employee of our Group on any one or more of

the grounds that he or she has been guilty of serious misconduct, or has committed an

act of bankruptcy or has become insolvent or has made any arrangement or

composition with his or her creditors generally, or has been convicted of any criminal

offence involving his or her integrity or honesty or (if so determined by our Board) on

any other ground on which an employer would be entitled to terminate his or her

employment at common law or pursuant to any applicable laws or under the grantee’s

service contract with our Group, his or her option shall lapse automatically (to the

extent not already exercised) on the date of cessation of his or her employment with

our Group.

(o) Rights on cessation of employment for other reasons

In the event that the grantee is an employee, a consultant or an adviser (as the

case may be) of a member of our Group at the date of grant and he or she

subsequently ceases to be an employee, a consultant or an adviser (as the case may be)

of our Group for any reason other than his or her death or the termination of his or her

employment of an employee or engagement of a consultant or an adviser (as the case

may be) on one or more of the grounds specified in (n) above, the option (to the extent

not already lapsed or exercised) shall lapse on the expiry of three months after the date

of cessation of such employment of an employee or engagement of a consultant or an

adviser (as the case may be) (which date will be in the case of an employee the last

actual working day, on which the grantee was physically at work with our Company or

the relevant member of our Group whether salary is paid in lieu of notice or not).

(p) Effects of alterations to share capital

In the event of any alteration in the capital structure of our Company whilst any

option remains exercisable, whether by way of capitalisation of profits or reserves,

rights issue, open offer, consolidation, subdivision or reduction of the share capital of

our Company (other than an issue of Shares as consideration in respect of a transaction

to which any member of our Group is a party), such corresponding adjustments (if

any) shall be made in the number of Shares subject to the option so far as unexercised;

and/or the subscription prices of any unexercised option, as the auditors or

independent financial adviser to our Company shall certify or confirm in writing (as

the case may be) to our Board to be in their opinion fair and reasonable in compliance

with the relevant provisions of the Listing Rules, or any guideline or supplemental

guideline issued by the Stock Exchange from time to time, provided that any alteration

shall give a grantee, as near as possible, the same proportion of the issued share



IV – 22

capital of our Company as that to which he/she/it was previously entitled, but no

adjustment shall be made to the effect of which would be to enable a Share to be

issued at less than its nominal value.

(q) Rights on a general offer

In the event of a general offer or partial offer (whether by way of takeover offer

or share repurchase offer or scheme of arrangement or otherwise in like manner) being

made to all our Shareholders (or all such holders other than the offeror and/or any

persons controlled by the offeror and/or any person acting in association or concert

with the offeror), our Company shall use its best endeavours to procure that an

appropriate offer is extended to all the grantee (on comparable terms, mutatis

mutandis, and assuming that they will become, by exercise in full of the options

granted to them, as Shareholders) and when such offer becoming or being declared

unconditional, the grantee (or, as the case may be, his or her legal personal

representative(s)) shall be entitled to exercise the option in full (to the extent not

already lapsed or exercised) at any time within one month after the date on which the

offer becomes or is declared unconditional.

(r) Rights on winding-up

In the event a notice is given by our Company to our members to convene a

general meeting for the purposes of considering, and if thought fit, approving a

resolution to voluntarily wind-up our Company, our Company shall on the same date

as or soon after it despatches such notice to each member of our Group give notice

thereof to all grantees and thereupon, each grantee (or, as the case may be, his or her

legal personal representative(s)) shall be entitled to exercise all or any of his or her

options at any time not later than two Business Days prior to the proposed general

meeting of our Company by giving notice in writing to our Company, accompanied by

a remittance for the full amount of the aggregate subscription price for our Shares in

respect of which the notice is given whereupon our Company shall as soon as possible

and, in any event, no later than the Business Day immediately prior to the date of the

proposed general meeting referred to above, allot the relevant Shares to the grantee

credited as fully paid.



IV – 23

(s) Rights on compromise or arrangement

In the event of a compromise or arrangement between our Company and our

Shareholders and/or the creditors of our Company being proposed in connection with a

scheme for the reconstruction of our Company or its amalgamation with any other

company or companies pursuant to the Companies Act, our Company shall give notice

thereof to all the grantees (or, as the case may be, their legal personal representatives)

on the same day as it gives notice of the meeting to our Shareholders and/or the

creditors to consider such a compromise or arrangement and the options (to the extent

not already lapsed or exercised) shall become exercisable in whole or in part on such

date not later than two Business Days prior to the date of the general meeting directed

to be convened by the court for the purposes of considering such compromise or

arrangement (the ‘‘Suspension Date’’), by giving notice in writing to our Company

accompanied by a remittance for the full amount of the aggregate subscription price

for our Shares in respect of which the notice is given whereupon our Company shall as

soon as practicable and, in any event, no later than 3:00 p.m. on the Business Day

immediately prior to the date of the proposed general meeting, allot and issue the

relevant Shares to the grantee credited as fully paid. With effect from the Suspension

Date, the rights of all grantees to exercise their respective options shall forthwith be

suspended. Upon such compromise or arrangement becoming effective, all options

shall, to the extent that they have not been exercised, lapse and determine. Our Board

shall endeavour to procure that our Shares issued as a result of the exercise of options

hereunder shall for the purposes of such compromise or arrangement form part of the

issued share capital of our Company on the effective date thereof and that such Shares

shall in all respects be subject to such compromise or arrangement. If for any reason

such compromise or arrangement is not approved by the court (whether upon the terms

presented to the court or upon any other terms as may be approved by such court), the

rights of grantees to exercise their respective options shall with effect from the date of

the making of the order by the court be restored in full but only up to the extent not

already exercised and shall thereupon become exercisable (but subject to the other

terms of the Share Option Scheme) as if such compromise or arrangement had not

been proposed by our Company and no claim shall lie against our Company or any of

our officers for any loss or damage sustained by any grantee as a result of such

proposal, unless any such loss or damage shall have been caused by the act, neglect,

fraud or wilful default on the part of our Company or any of our officers.



IV – 24

(t) Lapse of options

An option shall lapse automatically on the earliest of:

(1) the expiry of the period referred to in paragraph (i) above;

(2) the date on which our Board exercises our Company’s right to cancel,

revoke or terminate the option on the ground that the grantee commits a

breach of paragraph (l);

(3) the expiry of the relevant period or the occurrence of the relevant event

referred to in paragraphs (m), (n), (o), (q), (r) or (s) above;

(4) subject to paragraph (r) above, the date of the commencement of the

winding-up of our Company;

(5) the occurrence of any act of bankruptcy, insolvency or entering into of any

arrangements or compositions with his or her creditors generally by the

grantee, or conviction of the grantee of any criminal offence involving his

or her integrity or honesty;

(6) where the grantee is only a Substantial Shareholder of any member of our

Group, the date on which the grantee ceases to be a Substantial Shareholder

of such member of our Group; or

(7) subject to the compromise or arrangement as referred to in paragraph (s)

becoming effective, the date on which such compromise or arrangement

becomes effective.

(u) Cancellation of options granted but not yet exercised

Any cancellation of options granted but not exercised may be effected on such

terms as may be agreed with the relevant grantee, as our Board may in its absolute

discretion sees fit and in manner that complies with all applicable legal requirements

for such cancellation.

(v) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of 10 years

commencing on the date on the Adoption Date and shall expire at the close of business

on the Business Day immediately preceding the tenth anniversary thereof.



IV – 25

(w) Alteration to the Share Option Scheme

(i) The Share Option Scheme may be altered in any respect by resolution of

our Board except that alterations of the provisions of the Share Option

Scheme which alters to the advantage of the grantees of the options relating

to matters governed by Rule 17.03 of the Listing Rules shall not be made

except with the prior approval of our Shareholders in general meeting.

(ii) Any alterations to any terms and conditions of the Share Option Scheme

which are of a material nature or any change to the terms of options

granted, or any change to the authority of our Board in respect of alteration

of the Share Option Scheme must be approved by our Shareholders in

general meeting except where the alterations take effect automatically under

the existing terms of the Share Option Scheme.

(iii) Any amendment to any terms of the Share Option Scheme or the options

granted shall comply with the relevant requirements of Chapter 17 of the

Listing Rules or any guidelines issued by the Stock Exchange from time to

time.

(x) Termination of the Share Option Scheme

Our Company by resolution in general meeting or our Board may at any time

terminate the operation of the Share Option Scheme and in such event no further

options will be offered but options granted prior to such termination shall continue to

be valid and exercisable in accordance with provisions of the Share Option Scheme.

(y) Conditions of the Share Option Scheme

The Share Option Scheme is conditional upon the Listing Committee granting the

[REDACTED] of, and permission to deal in, any Shares to be issued pursuant to the

exercise of any options which may be granted under the Share Option Scheme and

[REDACTED] in our Shares on the Stock Exchange.

3. Present status of the Share Option Scheme

Application has been made to the Listing Committee for the [REDACTED] of and

permission to deal in [REDACTED] Shares which fall to be issued pursuant to the exercise

of options which may be granted under the Share Option Scheme.

As at the date of this document, no option has been granted or agreed to be granted

under the Share Option Scheme.



IV – 26

E. OTHER INFORMATION

1. Tax and other indemnities

Our Controlling Shareholders have entered into a Deed of Indemnity in favour of our

Company (for ourselves and as trustee for each of our present subsidiaries) (being a contract

referred to in the paragraph headed ‘‘B. Further information about the business – 1.

Summary of material contracts’’ in this appendix) to provide indemnities on a joint and

several basis in respect of, among other things:

(a) any taxation (including estate duty) falling on any member of our Group

resulting from or by reference to any income, profits or gains earned, accrued or

received (or deemed to be so earned, accrued or received) on or before the date

on which the [REDACTED] becomes unconditional or any event, act or

omission occurring or deemed to occur on or before the date on which the

[REDACTED] becomes unconditional;

(b) any liabilities and penalties which may arise as a result of any work injuries,

outstanding litigations (including criminal litigations), claims, and non-

compliances of our Group on or before the date on which the [REDACTED]

becomes unconditional; and

(c) all claims, losses (including operating losses and any loss of revenue), liabilities,

damages, costs, charges, fees, expenses (including relocation cost), actions, suits,

demands, settlements, penalties, fines suffered or incurred by any of our Group

members as a result of or in connection with, amongst others, any dispute as to

the rights to lease and use of our leased real properties in Hong Kong and the

PRC by us as tenant.

Our Controlling Shareholders will, however, not be liable under the Deed of

Indemnity, in relation to item (a) above, to the extent that, among others:

• provision has been made for such liability in the audited consolidated accounts of

our Company or any member of our Group for the Track Record Period;

• the taxation liability arises or is incurred as a result of a retrospective change in

law or a retrospective increase in tax rates coming into force after the date on

which the [REDACTED] becomes unconditional; or

• the taxation liability arises in the ordinary course of business of any member of

our Group or in the ordinary course of acquiring and disposing of capital assets

after the date on which the [REDACTED] becomes unconditional.



IV – 27

Our Directors have been advised that no material liability for estate duty is likely to

fall on our Company or any of our subsidiaries.

2. Litigation

Save as disclosed in the paragraph headed ‘‘Business – Legal proceedings and

compliance’’ in this document, as at the Latest Practicable Date, no member of our Group

was engaged in any litigation or arbitration of material importance and no litigation or claim

of material importance is known to our Directors to be pending or threatened against any

member of our Group.

3. Sponsor

The Sponsor has made an application on behalf of our Company to the Listing

Committee for the [REDACTED] of, and permission to deal in, our Shares in issue and

Shares to be issued as mentioned herein including any Shares falling to be issued pursuant

to the exercise of the [REDACTED] or any options which may be granted under the Share

Option Scheme.

The Sponsor has confirmed to the Stock Exchange that it satisfies the independence

test as stipulated under Rule 3A.07 of the Listing Rules.

Our Company has entered into an agreement with the Sponsor, pursuant to which our

Company agreed to pay HK$[REDACTED] to the Sponsor to act as the Sponsor to our

Company for purposes of the [REDACTED].

4. Preliminary expenses

The preliminary expenses of our Company are estimated to be approximately

HK$42,198 and are payable by our Company.

5. Promoter

Our Company has no promoter for the purpose of the Listing Rules.



IV – 28

6. Qualifications of experts

The following are the qualifications of the experts who have given opinion or advice

which are contained in this document:

Name Qualifications

Ample Capital Limited Corporation licensed by the SFC to carry on type 1

(dealing in securities), type 4 (advising on securities),

type 6 (advising on corporate finance) and type 9 (asset

management) regulated activities under the SFO

Wellink CPA Limited Certified Public Accountants

Appleby Legal advisers of our Company as to the laws of the

Cayman Islands

GFE Law Office PRC legal advisers

CHFT Advisory and

Appraisal Ltd.

Industry consultant

7. Consents of experts

Each of the above experts has given and has not withdrawn its/his/her written consent

to the issue of this document with the inclusion of its/his/her reports and/or letter and/or

advice and/or opinion and/or summary thereof (as the case may be) and/or reference to its/

his/her name included herein, all of which are dated the date of this document, in the form

and context in which it/he/she is respectively included.

8. Binding effect

This document shall have the effect, if an application is made in pursuance hereof, of

rendering all persons concerned bound by all the provisions (other than penal provisions) of

sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)

Ordinance so far as applicable.



IV – 29

9. Registration procedures

The principal share register of our Company will be maintained in the Cayman Islands

by [REDACTED] and a Hong Kong branch share register will be maintained in Hong Kong

by the Hong Kong Branch Share Registrar. Unless our Directors otherwise agree, all

transfers and other documents of title to Shares must be lodged for registration with, and

registered by, the share register in Hong Kong and may not be lodged in the Cayman

Islands.

10. Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on our Company’s Hong Kong branch register of

members will be subject to Hong Kong stamp duty. Profits from dealings in Shares

arising in or derived from Hong Kong may also be subject to Hong Kong profits tax.

(b) Cayman Islands

No stamp duty is payable in the Cayman Islands on transfer of shares of Cayman

Islands companies except those which hold interests in land in the Cayman Islands.

(c) Consultation with professional advisers

Intending holders of our Shares are recommended to consult their professional

advisers if they are in any doubt as to the taxation implications of subscribing for,

purchasing, holding or disposing of or dealing in our Shares. It is emphasised that

none of our Company, our Directors or other parties involved in the [REDACTED]

accepts responsibility for any tax effect on, or liabilities of holders of Shares resulting

from their subscription for, purchase, holding or disposal of or dealing in Shares.

11. No material adverse change

Save as disclosed in this document, our Directors confirm that up to the date of this

document, there has been no material adverse change in our financial or trading position or

prospect since 31 March 2021, and there has been no event since 31 March 2021 which

would materially affect the information shown in our combined financial statements

included in the Accountants’ Report set forth in Appendix I to this document.



IV – 30

12. Miscellaneous

Save as disclosed in this document;

(i) Within the two years immediately preceding the date of this document:

(aa) no share or loan capital of our Company or any of the subsidiaries has been

issued, agreed to be issued or is proposed or intended to be issued fully or

partly paid either for cash or for a consideration other than cash;

(bb) no commissions, discounts, brokerages or other special terms have been

granted or agreed to be granted in connection with the issue or sale of any

share or loan capital of our Company or any of our subsidiaries and no

commission has been paid or is payable in connection with the issue or sale

of any capital of our Company or any of our subsidiaries; and

(cc) no commission has been paid or payable (except to the [REDACTED]) for

subscribing or agreeing to subscribe, procuring or agreeing to procure

subscriptions, for any shares or debenture of our Company or any of the

subsidiaries;

(ii) no founder, management or deferred shares or any debentures of our Company

have been issued or agreed to be issued;

(iii) no share or loan capital of our Company is under option or is agreed

conditionally or unconditionally to be put under option;

(iv) there has not been any interruption in the business of our Group which may have

or have had a significant effect on the financial position of our Group in the 12

months immediately preceding the date of this document;

(v) none of the parties listed in the paragraph headed ‘‘E. Other information – 6.

Qualifications of experts’’ in this appendix:

(aa) is interested beneficially or non-beneficially in any securities in any

member of our Group, including our Shares; or

(bb) has any right or option (whether legally enforceable or not) to subscribe for

or to nominate persons to subscribe for any securities in any member of our

Group, including our Shares;



IV – 31

(vi) our Company and our subsidiaries do not have any debt securities issued or

outstanding, or authorised or otherwise created but unissued, or any term loans

whether guaranteed or secured as at the Latest Practicable Date;

(vii) our Directors have been advised that, under Cayman Islands laws, the use of a

Chinese name pre-approved by the Registrar of Companies in the Cayman Islands

by our Company in conjunction with the English name does not contravene

Cayman Islands laws;

(viii) none of the equity and debt securities of our Company is listed or dealt with in

any other stock exchange nor is any listing or permission to deal being or

proposed to be sought;

(ix) there is no arrangement under which future dividends are waived or agreed to be

waived;

(x) our Group has no outstanding convertible debt securities;

(xi) there is no restriction affecting the remittance of profits or repatriation of capital

by us into Hong Kong and from outside Hong Kong;

(xii) all necessary arrangements have been made enabling our Shares to be admitted

into CCASS;

(xiii) our Directors confirm that none of them shall be required to hold any shares by

way of qualification and none of them has any interest in the promotion of our

Company; and

(xiv) the English text of this document shall prevail over the Chinese text.

13. Bilingual Document

The English language and Chinese language versions of this document are being

published separately in reliance upon the exemption provided in section 4 of the Companies

(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice

(Chapter 32L of the Laws of Hong Kong).



IV – 32

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to a copy of this document and delivered to the Registrar of

Companies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) copies of the material contracts referred to in the paragraph headed ‘‘Statutory and

General Information – B. Further information about the business – 1. Summary of

material contracts’’ in Appendix IV to this document; and

(c) the written consents referred to in the paragraph headed ‘‘Statutory and General

Information – E. Other information – 7. Consents of experts’’ in Appendix IV to this

document.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of David

Fong & Co., at Unit A, 12th Floor, China Overseas Building, 139 Hennessy Road, Wanchai,

Hong Kong during normal business hours up to and including the date which is 14 days from the

date of this document:

(a) the Memorandum of Association and the Articles of Association;

(b) the Accountants’ Report of our Group prepared by Wellink CPA Limited, the text of

which is set out in Appendix I to this document;

(c) the report on the unaudited pro forma financial information of our Group prepared by

Wellink CPA Limited, the text of which is set out in Appendix II to this document;

(d) the audited combined financial statements of our Group for the three years ended 31

March 2021;

(e) the letter of advice prepared by Appleby summarising certain aspects of the Cayman

Islands company law as referred to in Appendix III to this document;

(f) the material contracts referred to in the paragraph headed ‘‘Statutory and General

Information – B. Further information about the business – 1. Summary of material

contracts’’ in Appendix IV to this document;

(g) the written consents referred to in the paragraph headed ‘‘Statutory and General

Information – E. Other information – 7. Consents of experts’’ in Appendix IV to this

document;


APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIESIN HONG KONG AND AVAILABLE FOR INSPECTION

V – 1

(h) the Companies Act;

(i) the rules of the Share Option Scheme;

(j) the legal opinion prepared by our PRC Legal Advisers; and

(k) the CHFT Report.


APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIESIN HONG KONG AND AVAILABLE FOR INSPECTION

V – 2

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