HONG KONG, Feb 24, 2017 - (ACN Newswire) - Microware Group Limited ("Microware" or the "Group"), which ranked first* among the IT infrastructure solutions providers in terms of revenue in Hong Kong offering IT infrastructure solutions services and IT managed services, announced the details of the proposed listing of its shares (the "Listing") on the Main Board of The Stock Exchange of Hong Kong Limited ("SEHK").
Offering Details
The Group intends to issue a total of 60,000,000 Shares, of which 90% or 54,000,000 Shares are for International Placing (subject to adjustment and the Offer Size Adjustment Option); and the remaining 10% or 6,000,000 Shares (subject to adjustment) are for Hong Kong Public Offering (collectively the "Global Offering"). The indicative offer price range is between HK$1.20 and HK$1.46 per Share. Net proceeds to be received by the Group from the Global Offering are estimated to be approximately HK$51.8 million.
The Hong Kong Public Offering commenced from 9:00 a.m. today, and will end at 12:00 noon on 1 March 2017 (Wednesday). The final Offer Price and the results of the allocation are expected to be announced on 7 March 2017 (Tuesday). Dealing in the Shares on the Main Board of SEHK is expected to commence at 9:00 a.m. on 8 March 2017 (Wednesday) under the stock code 1985. The Shares are to be traded in board lots of 2,000 Shares.
Innovax Capital Limited, the Sole Sponsor, and together with Sinolink Securities (Hong Kong) Company Limited, are the Joint Global Coordinators, the Joint Bookrunners and two of the Joint Lead Managers of the Listing.
Investment Highlights
Wide and stable customer base in terms of number and type of recurring clients
For each of the three years ended 31 March 2016 and the five months ended 31 August 2016, the Hong Kong Government was one of the Group's largest clients. The Group's end user clients included educational institutions, public bodies and commercial organisations in various sectors, such as banking and finance and transportation. For each of the three years ended 31 March 2016, the Group served over 2,000 clients per year. The Group had also been able to derive a significant portion of revenue through its customer base as its revenue from recurring clients amounted to approximately 95.9%, 96.4%, 97.2% and 96.6% of its revenue for each of the three years ended 31 March 2016 and the five months ended 31 August 2016, respectively.
Proven track record in providing customised one-stop services to clients
The Group's one-stop business model has allowed it to provide customised IT infrastructure solutions and IT managed services to its clients, who are able to enjoy the convenience of an "one-stop" IT experience which begins with (i) consultation and advice, (ii) hardware and/or software procurement, (iii) implementation, to (iv) management and maintenance of the IT infrastructure solutions. The Group is also able to capitalise the cross-selling and marketing opportunities derived from its one-stop business model, which allows it to have more efficient allocation of resources, deliver services in a manner catering to the actual needs of its clients and accordingly promote clients' confidence in the Group.
Well-established relationships with well-known hardware and/or software manufacturers
The Group is one of the highest-ranking authorised resellers of 11 hardware and/or software manufacturers in Hong Kong. The Group is of the view that it had been able to achieve the highest ranking mainly due to its ability to meet certain benchmarks set by the manufacturers, which include its sales volume each year, its technical capabilities and knowledge, and its service quality. Over the years, the Group had received various awards from the hardware and/or software manufacturers in recognition of its services.
As one of the highest-ranking authorised resellers, the Group is able to obtain more favourable rates and more resources and technical support, thereby allowing it to provide customised, high quality IT infrastructure solutions to clients in a timely and cost-effective manner and maintain its competitiveness in the market.
Leading market position in terms of revenue in Hong Kong and long term presence in the IT infrastructure solutions industry
Microware Ltd., the Group's major operating subsidiary, was incorporated in 1985 and the Group's long operating history has enabled it to develop long-term business relationships with its clients and suppliers and to build brand awareness. According to the Ipsos Report, the Group ranked first among the IT infrastructure solutions providers in terms of revenue in Hong Kong in 2015.
Experienced management team, qualified employees and strong talent pool for public sector projects
The Group is led by, among others, Mr. Yang Peter Shun Tsing, Executive Director, and Mr. Chu Ming Ho, Executive Director, Chairman and Chief Executive Office of the Group, who have over 27 years and over 23 years of experience in the IT industry, respectively. The Group is of the view that the vision of its management team has been fundamental to its success. The Group's senior management had been working with the Group for an average of approximately 12 years.
The Group has expanded its capabilities and service portfolio with particular regard to public sector projects. Due to its long-term experience of public sector projects, the Group has the capability of meeting the needs of the market. The Group also has a dedicated team of sales responsible for public sector projects. Therefore, the Group is able to understand the needs of public sector clients and provide them with advice on the latest market trends based on the competent workforce.
Industry Potential
According to the Ipsos Report, the total IT expenditure in Hong Kong increased from approximately HK$55.1 billion in 2011 to approximately HK$68.1 billion in 2015, representing a CAGR of approximately 5.4%. During the forecast period from 2016 to 2020, it is expected that the total IT expenditure will continue to increase, from approximately HK$71.5 billion to approximately HK$91.5 billion at a CAGR of approximately 6.4%. It is also forecasted that expenditure on IT infrastructure solutions will increase from approximately HK$35.6 billion in 2016 to approximately HK$41.9 billion in 2020, at a CAGR of approximately 4.2%.
Opportunities to and market drivers of the IT infrastructure solutions industry in Hong Kong include supportive government policies and initiatives, growth in business opportunities in Mainland China, and the increasing popularity of big data management.
Growth Strategies
Having considered the benefits of undertaking large-scale contracts, such as the enhancement of public awareness and the likely credit worthiness of the clients of such contracts, it has been part of the Group's business strategy to undertake more large-scale contracts. The number of contracts undertaken which have a contract sum of HK$10 million or above increased from three during the year ended 31 March 2014 to 12 during the year ended 31 March 2016. Through the Listing, the Group would like to significantly enhance its corporate governance and transparency in order to continue its current business strategy of undertaking large-scale contracts, maintain and improve its quality of services to clients, improve efficiency and achieve cost control, and strengthen its market position. Looking forward, the Group intends to continue investing in its employees by recruiting more suitable personnel with the necessary qualifications and experience and offering additional training to existing and new employees.
The Group also plans to undertake more large-scale contracts in the future to enhance its profile and public awareness to attract more potential clients, to provide a stable source of revenue over a measurable period of time, and to improve the quality of its trade receivables due to the likely credit worthiness of the clients of such contracts.
To enhance the public awareness and recognition, the Group intends to allocate more resources to strengthen marketing efforts. Moreover, Microware intends to allocate more resources to continue the maintenance and development of its IT management systems.
Dividends Policy
The Group currently intends, following the Listing, subject to certain limitations, and in the absence of any circumstances which might reduce the amount available for distribution whether by losses or otherwise, to distribute to its shareholders no less than 40% of its profits available for distribution.
Use of Proceeds
Assuming an Offer Price of HK$1.33 per Share (being the mid-point of the indicative Offer Price range), the estimated net proceeds of the Global Offering for the Group will be approximately HK$51.8 million, intended for the following uses:
Uses / Amount (HK$'million) / Percentage (%)
Upgrading IT management systems: 18.1 / 35.0%
Enhancing capability to undertake large-scale contracts by financing performance securities: 12.9 / 25.0%
Recruitment and training of employees: 10.4 / 20.0%
Strengthening marketing efforts: 5.2 / 10.0%
Additional working capital and other general corporate purposes: 5.2 / 10.0%
Total: 51.8 / 100%
Financial Performance
HK$'000 For the years ended 31 March For the five months ended 31 August
2014 2015 2016 2015 2016
(unaudited)
Revenue 1,082,087 1,064,152 1,075,491 413,384 436,835
Gross Profit 119,640 123,958 125,496 47,678 51,888
Gross Profit 11.1 11.6 11.7 11.5 11.9
Margin (%)
Adjusted Net 34,973 33,973 33,580* 10,857 14,666*
Profit*
Adjusted Net 3.2 3.2 3.1* 2.6 3.4*
Profit Margin (%)
* Note: If including listing expenses, net profit for the year ended 31 March 2016 and the five months ended 31 August 2016 would be approximately HK$31.2 million and HK$5.5 million, respectively, while net profit margin would be 2.9% and 1.3% respectively.
HK$'000 For the years ended 31 March For the five months ended 31 August
2014 2015 2016 2016
Bank Balances 85,474 104,489 108,037 43,093
and Cash
Net Assets 166,247 155,541 104,115 109,581
Gearing Ratio# N/A
Current Ratio 1.7x 1.6x 1.4x 1.6x
Adjusted Return 25.1 26.9 32.3^ 32.1^
on Equity (%)^
Adjusted Return 9.0 8.4 9.7^ 11.7^
on Total Assets (%)^
Contact:
Strategic Financial Relations Limited
Vicky Lee Tel: (852) 2864 4834 Email: vicky.lee@sprg.com.hk
Janet Fong Tel: (852) 2864 4817 Email: janet.fong@sprg.com.hk
Antonio Yu Tel: (852) 2114 4319 Email: antonio.yu@sprg.com.hk
Fax: (852) 2527 1196
Website: www.sprg.com.hk
Topic: Press release summary
Source: Microware Group Limited
Sectors: Daily Finance, Daily News
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