Share Offer Details
Kimou intends to offer a total of 280,000,000 shares, of which 252,000,000 shares are for Placing (subject to reallocation and over-allotment option) and 28,000,000 shares are for the Hong Kong Public Offer (subject to reallocation). The indicative Offer Price range is between HK$1.08 and HK$1.44 per Offer Share. After deduction of the underwriting fees paid and payable for the Offer and estimated total expenses and assuming an Offer Price of HK$1.26 per Offer Share, the mid-point of the indicative Offer Price range, the net proceeds are estimated to be approximately HK$312.8 million.
The Hong Kong Public Offer has commenced on 29 June 2019 (Saturday) at 9:00 a.m. and will end at 12:00 noon on 5 July 2019 (Friday). The final Offer Price and allotment results are expected to be announced on 15 July 2019 (Monday). Dealing of Kimou's shares is expected to commence on the Main Board of SEHK on 16 July 2019 (Tuesday) under the stock code 6805. Shares will be traded in board lots of 2,000 shares each.
Shenwan Hongyuan Capital (H.K.) Limited is the Sole Sponsor and the Sole Bookrunner of this listing, and is one of the Joint Lead Managers together with Pacific Foundation Securities Limited.
The largest electroplating industrial park developer and operator in ChinaAccording to the Industry Consultant's Report, Kimou is the largest electroplating industrial park developer and operator in China in terms of total revenue in 2018. The Group's Guangdong Huizhou Park is the only electroplating industrial park in Huizhou. The Tianjin Bingang Park is the only large-scale and one of the two electroplating industrial parks in Tianjin. The Group focuses on, and has gained extensive experience and expertise in, developing large-scale electroplating industrial parks.
Strategically located industrial parks attractive to nearby electroplating companies The Group's industrial parks are located in Huizhou and Tianjin, where there are a large number of manufacturers covering a wide range of industries including automobile-related, electronics, aviation-related and hardware, all of which utilise electroplated parts. Usually electroplating companies choose to stay in close proximity to their manufacturing customers for the purposes of lowering transportation costs and shortening delivery time and thus enhancing inventory control of customers. The Group's parks are in good positions to capture business opportunities and attract reputable and sizeable tenants.
Industrial parks offer comprehensive services to tenantsApart from factory rental and wastewater treatment, Kimou also provides a wide range of ancillary services to its tenants to smoothly facilitate their daily operations. The services include offering procurement services for raw materials, mainly dangerous chemicals applied in the electroplating process. Through its centralised procurement system, Kimou could enjoy deeper bulk purchase discount which could lower raw material costs of its tenants on the one hand, whilst it could more effectively control pollutants discharged by its tenants by controlling the sources of chemicals on the other hand. Moreover, these services broaden its source of revenue and profit from operations. The Group also offers pollutants testing, ancillary facilities such as dormitory and conference rooms as well as general warehouses and depots for dangerous substances.
Operates large-scale electroplating industrial parks serving large number of tenants with variable production scale and treating industrial wastewater to meet stricter discharge standardsThe State Government has promulgated environmental protection policies for the electroplating industry, such as the Notice on Specific Conditions for the Electroplating Industry and The 13th Five-Year Plan for Protection of Ecological Environment. Certain local environmental protection bureaus have planned to close down those electroplating companies that eventually failed to relocate into industrial parks. To protect the environment without impeding local economic and industrial development, the electroplating industrial parks, especially those in major industrial zones, must be of sufficient size offering adequate space and wastewater treatment capacity to fulfil the needs of market players. According to the Industry Consultant's Report, Kimou's Guangdong Huizhou Park and Tianjin Bingang Park are both categorised as large-scale electroplating industrial parks in terms of site area. Daily handling capacities for wastewater of these two parks, at 10,000 tonnes and 6,000 tonnes respectively, are adequate to support its existing tenants' operational needs. In light of its operating scale and capability in fulfilling environmental protection requirements at different times, the Group is able to accommodate electroplating companies of different operating scale. As at 21 June 2019, the occupancy rate of its Guangdong Huizhou Park reached 100%; whilst the rate of its Tianjin Bingang Park was 67.4%.
A high quality customer base with established long-term relationships Due to high demand for space in industrial parks, Kimou can pick and choose its tenants based on technology and raw material used by the prospective tenants in their electroplating operation and the resultant level of pollutants that will be generated. According to the Industry Consultant's Report, Kimou's parks applied advanced technology and are more efficient and cost effective in wastewater treatment. The presence of sizeable and reputable tenants in its industrial parks may further enhance Kimou's image as the first-choice industrial park for electroplating companies. In addition, the Group's typical lease term is five years with no break clause. For the factory premises customized in accordance with tenants' requirement, the lease term will be extended to 10 years to recover its construction cost. Through the duration of its leases, the Group has established long-term relationships with its customers.
Future Growth Strategy
Kimou plans to develop additional electroplating industrial parks to secure its market position, enhance its reputation and to enjoy economies of scale when it bargains with its suppliers. The Group has signed the Hubei Jingzhou Project agreement in November 2017. The project was approved by the Environmental Protection Bureau of Jingzhou Municipality in June 2018. On 19 February 2019, the Group won the tender for the land use rights of three parcels of land, with a total site area of 325,981 sq. m., for the Hubei Jingzhou Project at a total consideration of RMB 65.8 million. The development and operation of Phase One of the project are expected to commence in the third quarter of 2020 and the first quarter of 2022 respectively.
At the same time, as an electroplating industrial park operator, the Group continuously reviews its wastewater treatment capacity and expands it when necessary, to keep up with the needs of tenants as it expands its operation. The development of Tianjin Bingang Park is divided into four stages. The first two (factory premises with an aggregate GFA of 274,000 sq m, 256,000 sq m of which are leasable with the remaining space for public facilities or for self-use) have been completed and put into use. The Group's planned Phase III is to build additional factory premises with an aggregate GFA of 140,000 sq m. To manage continuous increasing wastewater treatment from tenants, service demand and the mentioned business expansion, the Group needs to increase its daily wastewater treatment capacity from 6,000 tonnes at present to 22,000 tonnes, by adding four facilities modules with a daily treatment capacity of 4,000 tonnes each. The Group has commenced the wastewater treatment expansion works in June 2018. The construction of buildings that house the additional facilities has to be completed in one go, while the purchase and installation of wastewater treatment facilities is to be carried out in phases with the first phase of a capacity of 4,000 tonnes to be operational by the end of 2020.
In addition to seeking a new site for development of new electroplating industrial park, the Group also needs to fully utilise existing land resources available to increase the GFA available for leasing and to raise the number of tenants that can be accommodated in its industrial parks, thereby generating more revenue for the Group. It has constructed two factory buildings in Guangdong Huizhou Park to increase its GFA available for leasing. The construction has been completed and has passed government inspection at the end of April 2019.
Use of proceeds Assuming the over-allotment option is not exercised and the Offer Price is HK$1.26 per share (being the mid-point of the indicative range of Offer Price), after deducting the underwriting fees, commission and estimated expenses payable by the Group in connection with the Share Offer, net proceeds from the Share Offer is expected to be approximately HK$312.8 million and will be used as follows:
Uses / PercentageExpansion of the current wastewater treatment facilities of Tianjin Bingang Park: 36.8%Acquisition of land for the Hubei Jingzhou Project and construction of relevant infrastructure: 22.0%Fund the construction cost of two factory buildings in Guangdong Huizhou Park: 18.4%Repayment of short term bank loans: 18.4%General working capital: 4.4%Total: 100%
About Kimou Environmental Holding Limited Kimou Environmental Holding Limited is a large-scale electroplating industrial park developer and operator in China. The Group develops and operates large-scale industrial parks specially designed for the electroplating industry, and provides factory premises and centralised wastewater treatment services to tenants. It has large electroplating industrial parks in Huizhou, Guangdong and Bingang, Tianjin, in China, being the only electroplating industrial park operator in Huizhou and one of two operators in Tianjin. According to Industry Consultant's Report, the Group was the largest electroplating industrial park developer and operator in China in 2018 in terms of total revenue.
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