Tongda Hong Tai to be Spun Off from Tongda Group (HKE:698), Announces Details of Listing on Main Board of SEHK

Tongda Hong Tai has been a wholly-owned subsidiary of Tongda Group Holdings Limited ("Tongda Group"; stock code: 698) before the spin-off. Tongda Group will distribute shares by way of a distribution in specie if the spin-off proceeds and each shareholders of Tongda Group will be entitled to one share of Tongda Hong Tai for every 40 shares of Tongda Group held.

Offering DetailsThe Group intends to offer a total of 37,822,500 shares, of which 34,040,000 shares will be for Placing (subject to reallocation) and the remaining 3,782,500 shares will be for the Public Offer (subject to reallocation). After deducting the underwriting fees and estimated expenses and assuming an offer price of HK$2.30 per Offer Share, net proceeds from the Share Offer are estimated to be approximately HK$48.5 million.

The Hong Kong Public Offer will commence on 28 February 2018 (Wednesday) and end at 12:00 noon on 5 March 2018 (Monday). The allotment results are expected to be announced on or before 15 March 2018 (Thursday). Dealing in Tongda Hong Tai's Shares is expected to commence on the SEHK on 16 March 2018 (Friday) under the stock code 2363. The shares are to be traded in board lots of 2,500 shares each.

Messis Capital Limited is the Sponsor of the listing. Sinomax Securities Limited is the Sole Bookrunner. Sinomax Securities Limited, Sinolink Securities (Hong Kong) Company Limited, RHB Securities Hong Kong Limited and Changjiang Securities Brokerage (HK) Limited are the Joint Lead Managers.

Corporate HighlightsComprehensive one-stop manufacturing solutions for notebook and tablet casingsThe Group's services encompass design of manufacturing solutions, mould fabrication, plastic injection moulding, surface decoration, metal tooling and stamping and assembly of notebook and tablet casings. The one-stop manufacturing solution by vertically integrating lengthy and complex production processes can lower production cost, enhance efficiency and mass production capacity.

Efficient production facilities, diversified product portfolio and valuable experience in the manufacture of notebook and tablet casingsThe Group has a diversified notebook and tablet casings product portfolio. The products mainly include metal or plastic notebook and tablet casings and other accessories and components. In 2015, the Group successfully patented the LMF technology to diversify its surface decoration techniques.

Strong research and development capabilities and stringent quality controlThe Group has established a strong research and development team under its engineering department, responsible for the research and development of new production technologies, as well as continuous improvement on product quality and production processes. Furthermore, it has also established quality management systems which conform with international quality standards and has been accredited with ISO9001:2008 certification since August 2010.

Established relationship with OEMs of leading domestic and international brand ownersThe Group has well-established relationships with major customers which are OEMs of leading brand owners, including Quanta Computer Inc. and Compal Electronics, Inc., etc . The Group has maintained business relationships ranging from approximately one to six years with each of its top five customers during the Track Record Period.

Strategic locations of the production facilities and cost advantagesTongda Suzhou's production plants are strategically located in Suzhou, the PRC, which enables the Group to quickly reach most of its customers and benefit from the close proximity to the customers' factories in the eastern region of the PRC. Owing to the relatively lower transportation costs and larger bulk purchase discounts of production materials than those of other smaller manufacturers, the Group is able to purchase production materials at competitive prices and hence maintain better cost controls on its operations.

Future strategiesThe Group aims to expand its market share in the notebook and tablet casings manufacturing industry and to enhance its profitability as well as maximise shareholder value. To enlarge its market shares and maintain its competitiveness within the industry, the Group intends to lease a new factory with a gross floor area of approximately 5,000 sq m for a term of ten years to expand its business and to cater for the future expansion of its production capacity. Besides, the Group intends to expand production facilities and upgrade the production equipment, as extending automation can raise yield and reduce labour costs, which, in turn, also improves its productivity.

The Group will continue to place strong emphasis on research and development (R&D) and enhance related capabilities, including but not limited to recruiting additional qualified technical personnel, providing training to the staff of the R&D department and purchase of additional advanced testing and equipment. To enlarge its market share and maintain its industry competitiveness, the Group seeks to continuously strengthen its distribution network by improving its relationship with its existing customers and soliciting new customers by increasing the number of sales and marketing personnel and bolstering its services before, during and after sales.

The gaming notebook market is expected to expand and become a new driver for the overall notebook sector as well as the notebook casing industry due to its relatively high replacement rate. As at 20 February 2018, three of the existing major brand owners of gaming notebooks are using the Group's products. With the growing popularity of the gaming notebooks and subsequent expansion of that market in the near future, the Group is expected to benefit from the potential business opportunities arising thereof.

Use of proceedsAssuming the offer price is HK$2.3 per offer share, the net proceeds are expected to be approximately HK$48.5 million, and the Group intends to apply the net proceeds in the following manner:

USAGE PERCENTAGE- Leasing a new factory: 15.1%- Refurbish the new factory: 19.9%- Procure additional production facilities and machineries: 46.2%- Enhance automation of manufacturing processes: 16.1%- Enhance sales and marketing activities: 0.3%- Enhance R&D capabilities: 2.4%

Financial performanceFor the years of 2014, 2015 and 2016, the revenue of the Group amounted to approximately HK$376.3 million, HK$422.7 million and HK$463.9 million respectively, at the CAGR of 11.0%. The Group recorded revenue of HK$351.5 million for the eight months ended 31 August 2017.

The Group's net profit for the years of 2014, 2015 and 2016 reached HK$26.0 million, HK$25.7 million and HK$24.1 million, respectively; and it recorded net profit for the period of HK$13.0 million for the eight months ended 31 August 2017. If the listing expenses were excluded, the Group would have recorded net profit for the year of HK$26.0 million, HK$26.3 million and HK$36.6 million respectively. The Group would have recorded a net profit of HK$24.4 million for the eight months ended 31 August 2017.

About Tongda Group Holdings Limited (Stock Code: 698)Tongda Group is the world's leading solutions provider of high-precision components used in smart mobile communication and consumer electronic products. The Group has been listed on the Main Board of The Stock Exchange of Hong Kong Limited since 2000, under the Information Technology - IT Hardware category, and has been selected as a constituent stock in the Hang Seng Composite LargeCap & MidCap Index, Hang Seng Broad Consumption Index, Hang Seng Global Composite Index and the MSCI Global Small Cap Indices - China Index. The Group garners the DHL/SCMP Hong Kong Business Awards 2015 - Enterprise Award and has been selected to the Forbes Asia's 200 "Best Under A Billion" list in 2016. Mr. Wang Ya Nan, Chairman and CEO of the Group has been named the winner in the technology category of EY Entrepreneur of the Year China 2016.

Leveraging its leading In-Mold Lamination ("IML"), metal casing production and rubber parts business technology and first-tier customers in the PRC's robust consumer market, the Group has established a solid presence in the markets for handsets, electrical appliances and notebook computer casings and related products. The Group is dedicated to satisfying customers' needs through establishing global service networks in various regions, with strategically located production bases in Shishi city, Xiamen, Shanghai and Shenzhen, as well as R&D centres in Shanghai and Taiwan.

About Tongda Hong Tai Holdings LimitedFounded in Changshu, the PRC in 2010, Tongda Hong Tai is a one-stop manufacturing solutions provider of casings for notebooks, tablets and other accessories. The Group manufactures and sells a wide variety of casings and components for notebooks and tablets. Its customers are mainly OEMs for leading domestic and international brand owners.

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