HONG KONG, June 7, 2016 - (ACN Newswire) - Chuan Holdings, one of the top five earthworks contractors for the construction industry in Singapore , announced the results of its global offering today. The Hong Kong Public Offering recorded an over-subscription of approximately 510 times whereas the International Offering also received a satisfactory response. The Offer Price was fixed at HK$0.88 per Share, which was the maximum indicative Offer Price.
Chuan Holdings offered a total of 250,000,000 Shares. In view of the strong response to the Hong Kong Public Offering, the Group effected the clawback mechanism. As a result, the final number of Hong Kong Offer Shares increased to 125,000,000 Shares and the number of International Offer Shares was adjusted to 125,000,000 Shares. Based on the final Offer Price of HK$0.88 per Offer Share, the net proceeds raised by the Group were approximately HK$121.5 million after deducting the underwriting fee and other estimated expense payable in respect of the Global Offering which will be applied as follows:
Applications / Approximate percentage
- Purchase of excavation machines and tipper trucks / 42%
- Secure earth filling project which are located at close proximity to the Group's earthwork projects / 25%
- Expand and enhance workforce / 17%
- Purchase of software / 8%
- Working capital / 8%
The dealings in the Shares of Chuan Holdings will commence on the Main Board of The Stock Exchange of Hong Kong Limited at 9:30 a.m. on Wednesday, 8 June 2016. The Shares will be traded in board lots of 4,000 Shares each under the stock code "1420".
VBG Capital Limited is the Sole Sponsor while Pacific Foundation Securities Limited and VBG Capital Limited are the Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers.
Business review
Chuan Holdings has over 20 years of experience in the provision of earthworks to the construction industry in Singapore. The Group's scope of business covers two major areas: provision of earthworks and related services and include land clearing, demolition, rock breaking, mass excavation, deep basement excavation, foundation excavation, earth disposal, earth filling and shore protection; and the provision of general construction works and the construction of new buildings. Chuan Holdings can manage and execute earthworks projects on a timely and reliable basis, including large-scale and complex projects. Leveraging the Group's proven track record and experienced management team, the Group managed to build its reputation in the Singaporean construction industry.
Chuan Holdings holds a GB1 Licence issued by BCA which enables it to undertake contracts for general building works in both public and private sectors. The Group has diversified customers, which comprise mainly main contractors of building projects, property developers, Mass Rapid Transit (MRT) and government agencies in Singapore. The Group had 114, 129 and 127 customers for earthworks and general construction projects for the three years ended 31 December 2013, 2014 and 2015, respectively.
During the Track Record Period, the Group had completed 199 projects in relation to the provision of earthworks and related services and a total of seven ongoing or completed MRT projects of an aggregate contract value of approximately S$38.9 million, mainly involving earthworks, civil engineering works, disposal of excavated materials, earth fill and related drainage and roadworks.
One of the top five earthworks contractors for the construction industry in Singapore with large-scale, sound and reliable operations
According to the Euromonitor Report, more than 50% of the industry's total revenue for 2014 was attributable to the top five earthworks contractors. As one of the top five earthworks contractors for the construction industry in Singapore, Chuan Holdings accounted for a market share of approximately 8.17% of total market value and accordingly, the Group has a leading position in the industry. The Group has not experienced any material disputes on its projects relating to the quality of earthworks and general construction works nor significant delay in the delivery of projects during the Track Record Period and has contributed to its reputation and track record. Chuan Holdings is competent to undertake sizable projects and is also registered under the CW01 workhead for "General Building" at B1 Grade and CW02 workhead for "Civil Engineering" at B2 Grade, which would enable us to tender directly for Singapore public sector projects of amounts up to S$42 million and S$14 million respectively, demonstrating an outstanding strengths in the industry.
Business performance steadily grows
The revenue and gross profit of the Group have gradually increased over the past three years, representing a year-on-year increase of 7.5% and 6.3% respectively in 2015, to approximately S$99.3 million and approximately S$19.9 million. The gross profit margin remained stable at approximately 20% during the Track Record Period. General construction works as a percentage of revenue increased from 10.5% in 2013 to 51% in 2015 by segment. Its gross profit even significantly increased by approximately six times from S$1.1 million to S$8 million, representing the Group's successful diversification of its income stream; the gross profit of earthworks has remained stable over the past three years. The gross profit margin increased from 21.3% in 2013 to 24.3% in 2015, mainly attributable to the four major earthwork projects which brought an aggregate revenue of approximately S$11.4 million. The overall financial position of the Group is strong and its gearing ratio was recorded as low as 0.1 time in 2015.
Comprehensive machinery and equipment as well as civil engineering experts and are competent to undertake projects with different depth requirements
Chuan Holdings has its own fleet of over 90 tipper trucks and over 90 excavators, including mini and telescopic excavators, which can be expediently deployed to various locations as required, and enables us to undertake various earthworks projects and large-scale projects at the same time. Meanwhile, the Group has built an experienced in-house servicing team for tipper trucks and excavation machines to keep equipment under proper maintenance and effective operation. On the other hand, the Group has specially employed civil engineering experts and are capable of undertaking additional scope in earthwork projects as it has the capability to plan and execute civil engineering works to meet customers' requirement, such as earthwork projects that require civil engineering services of sewerage, cable trench and road works. This allows Chuan Holdings to expand its market share in this industry.
Solid working relationship with suppliers and subcontractors enable to implement projects on a timely and reliable basis
Chuan Holdings has an established and maintained a good relationship with a network of suppliers and subcontractors, some of whom have worked with Chuan Holdings for over 5 years. The Group engages subcontractors for civil engineering works of large-scale projects, so that the Group itself can focus on the earthworks scope of the project, whereby the Group can complete the earthworks of the project more efficiently and not to acquire and maintain special equipment required for such works. The Group maintains close communication with suppliers and subcontractors on the project matters including time allocation and the civil engineering requirements of the project, so that the suppliers and subcontractors can also follow the project schedule of the Group to deliver the works on time.
Experienced management possesses the necessary expertise for the industry
The management team of Chuan Holdings is experienced in the earthworks and construction industries. Each of the executive directors has over 15 years of experience in the construction industry in Singapore. They have the management expertise, knowledge of the industry and ability to complete projects reliably. Among which, Mr. Lim Kui Teng, the founder, chairman and executive director of the Group, has over 20 years of experience in the provision of earthworks. He is responsible for the Group's overall management, strategic planning and business development. Mr. Quek Sze Whye, the executive director of the Group, has more than 20 years of experience in the earthworks industry. He is capable of handling large-scale projects, including analyses in tenders for potential projects and allows the Group to evaluate a project's specifications, resource needs and level of difficulty accurately.
Achieve sustainable business growth with a promising prospect
Looking forward, the Group will continue to focus on the earthworks sector. As of 16 May 2016, the Group has secured 17 new projects for earthworks and related services in 2016, with an aggregate contract value of approximately S$28.5 million. The number of orders remained steady. In order to grasp the development opportunities, Chuan Holdings plans to acquire more tipper trucks and excavators to expand its capabilities of undertaking more large-scale projects. At the same time, the Group also puts effort in saving material and direct costs to enhance its competitiveness through securing earth filling projects for disposal of earth and streamlining the work processes with the help of technology, so as to consolidate its leading position among the earthworks contractors in Singapore. In response to the needs for business expansion, the Group will employ additional staff to strengthen its workforce. Meanwhile, it will also enhance the quality and skills of the staff to ensure sufficient workforce required for business operations and catch up with the pace of business expansion.
Mr. Lim Kui Teng, Founder, Chairman and Executive Director of Chuan Holdings, concluded "Having established Chuan Holdings for over 20 years, today I am so delighted to witness our Group marks an important milestone for its business development. Since its establishment, we have been managing and implementing all of the earthworks projects for our customers on a timely and reliable basis. By leveraging our solid and professional technical skills with enthusiasm and passion, the Group has gained reputation in the construction industry in Singapore. We believe that its listing in Hong Kong does not only strengthen the Group's capital base, but more importantly, it can also further enhance the corporate image and reputation of the Group as well as the confidence of and recognition from our customers, and this in turn promote the long-term development of the Group. Thanks to our vast experience in operating business and unique competitive advantages, we are well-positioned to consolidate our market position in the earthworks industry in Singapore so as to yield long-term and considerable returns to our shareholders."
Financial Summary
For the year ended December 31
FY2013 FY2014 FY2015 Change
(S$'000) (S$'000) (S$'000) (FY2014 to FY2015)
Revenue 61,386 92,412 99,322 +7.5%
Gross profit 12,904 18,741 19,923 +6.3%
Gross profit margin 21.0% 20.3% 20.1% -0.2 ppt
Profit for the year 10,176 14,261 11,536 -19.1%
Profit margin 16.6% 15.4% 11.6% -3.8 ppt
Gearing ratio 0.3(times) 0.2(times) 0.1(times) nil
Return on equity 34.5% 35.1% 24.0% nil
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Topic: Press release summary
Source: Chuan Holdings Limited
Sectors: Daily Finance, Daily News
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