HONG KONG, Aug 8, 2022 – (ACN Newswire) – Swang Chai Chuan Limited (“Swang Chai Chuan” or the “Group”), a recognised distributor of Food & Beverage (“F&B”) along with other products for recognised international and domestic third-party brands and own brands in Malaysia, today announced the facts of its proposed listing on the primary Board of The STOCK MARKET of Hong Kong Limited (“HKEX”).
Swang Chai Chuan plans to provide a complete of 241,000,000 shares beneath the Global Offering (at the mercy of the Over-allotment Option), which comprises 216,900,000 Shares (at the mercy of re-allocation and the Over-allotment Option) for the International Placing, and 24,100,000 Shares (at the mercy of re-allocation) for the Hong Kong Public Offering. In line with the Offer Price HK$0.54 per Share (being the mid-point of the indicative offer cost range of HK$0.52 to HK$0.56 per Share) assuming the Over-allotment Option isn’t exercised, after deducting estimated underwriting fees along with other expenses, net arises from the Global Offering are estimated at approximately HK$86.0 million.
The Hong Kong Public Offering will commence from 9: 00 a.m. on 8 August 2022 (Monday) and end at 12: 00 noon on 11 August 2022 (Thursday). Outcomes of allocations are anticipated to be announced on 18 August 2022 (Thursday), and dealing of the Group’s shares is likely to commence on the primary Board of HKEX on 19 August 2022 (Friday) beneath the stock code of 2321. Shares will undoubtedly be traded in board plenty of 5,000 Shares each.
Sunny Fortune Capital Limited may be the Sole Sponsor and Sunny Fortune Capital Limited and Elstone Securities Limited will be the Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers. BOCOM International Securities Limited, China Galaxy International Securities (Hong Kong) Co., Limited, CMBC Securities Company Limited, Haitong International Securities Company Limited and Phillip Securities (Hong Kong) Limited will be the other Joint Bookrunners along with other Joint Lead Managers.
Established F&B distributor of Own Brands, international and domestic brands in Malaysia
Swang Chai Chuan is among the top 5 companies(1) in Malaysia F&B distribution industry. Using its long years of experience in and dedication to the F&B distribution industry in Malaysia, the Group is becoming a recognised local F&B distributor with substantial scale, supporting over 200 international and domestic brands. Third-Party Brands written by the Group included Oreo, Cadbury, Ajinomoto, a British multinational ice-cream frozen dessert brand and a fresh Zealand international dairy product brand. The Group in addition has served numerous well-established retail chains such as for example Nirwana, TF Value-Mart, BS Group and Sabasun. To determine the reputation and improve the market penetration, Swang Chai Chuan is focused on offering an array of products under different brands to customers with timely delivery service. Simultaneously, the Group has received awards and recognitions by Malaysian associations in recognition of the wonderful product and services, like the Superbrands Status and the Sin Chew Business Excellence Awards.
Strong sourcing network and long-term relationship with recognised international and domestic brand owners
The Group distributed and actively managed the diverse portfolio of F&B along with other brands of a broad collection of quality products covering 4,000 SKUs, which may be split into nine different core categories, namely milk products, frozen food, packaged food and commodities, sauce, oil and condiments, beverages and specialty products, personal and baby maintenance systems, pet maintenance systems and cleaning and kitchen supplies. The Group has generated long-term method of trading which range from approximately 5 to 26 years using its five largest suppliers up to now, thus enabling the Group to make sure a stable way to obtain products.
Since 2007, the Group started experiencing the development of certain Own-Brand Products, all of the that was gradually expanded. The Group could provide different alternatives of F&B along with other products to the clients under over 200 Third-Party Brands, comprising approximately 140 international brands and approximately 80 domestic brands, as well as products under five major Own Brands, such as for example CED, Mega Fresh, Mega Food, Sayangku and Snowcat, covering various product types and prices. Specialty products, salt, frozen seafood, frozen meat, and pet maintenance systems, etc. beneath the major Own Brands further enlarged the brand and product portfolio and consumer foot of the Group. The Group will continue steadily to explore new brands and products which are likely to have growth potential also to diversify the merchandise offerings.
Large and diverse customer base with a solid concentrate on large retail chains and channels
The Group has generated and maintained a big customer base with an increase of than 11,000 active customers through the years with a concentrate on well-established retail chains. Most of the Group’s customers are established international retail chains and local retail chains which will make purchases frequently and in huge quantities. Because of your time and effort to diversify customer portfolio, the Group also serves F&B dealers and merchandisers, school canteens, hospitality along with other customers. As at 30 April 2022, the Group had established long-term method of trading with the five largest customers through the background period which range from approximately 11 to 26 years. The Group achieved high customer retention rate with revenue generated from repeat customer accounts contributing over 90% of the full total revenue through the background period. With the large and diverse customer base as illustrated above, the increasing scale and complexity of the customers’ business operation have driven demand for F&B products sourced from suppliers that scale up the procurement along with other business activities, thereby growing the revenue. The Group also enjoys economies of scale and continues to optimise its cost structure and increase its profitability.
Expansive distribution network is situated near commercial establishments and well built with temperature-controlled facilities
The Group’s distribution network, which form the cornerstone of warehousing and logistics management services, can effectively facilitate the supply chain of F&B distribution and deliver products to more customers on a timely basis with delivery lead time as short as within 24 hours. The Group currently operated 12 warehouses situated near commercial establishments in the major sales regions in Peninsular Malaysia, with designated storage capacity of around 25,600 CBM, nine which include cold storage facilities having an aggregate of around 4,550 CBM mainly for storage of frozen food and milk products. The Group also operated a fleet of over 140 self-operated logistics vehicles, which approximately 100 are refrigerated trucks, which facilitate a highly effective and efficient flow of warehousing and logistics management operations.
Proven history of financial performance
Through the background period, the gross profit percentage of the Group showed an upward trend, with the gross profit percentage in FY2021 reaching 14.1%. Gross profit amounted to approximately RM94.5 million (equal to approximately HK$181.7 million) in FY2021, representing a year-on-year increase of around 18.5% from FY2020. Adjusted net profit also rose by approximately 29.9% year-on-year from FY2020 to approximately RM28.6 million (equal to approximately HK$54.9 million) in FY2021. (2)
RM’000(approximately) FY2019 FY2020 FY2021 4M2022(As at 30 April)
Revenue 497,435 564,632 668,738(equal to approximately HK$1,286,035) 266,652(equal to approximately HK$512,792)
Gross profit 66,187 79,733 94,508(equal to approximately HK$181,746) 38,753(equal to approximately HK$74,525)
Gross profit percentage 13.3% 14.1% 14.1% 14.5%
Adjusted net profit17,686 21,985 28,562(equal to approximately HK$54,927) 13,556(equal to approximately HK$26,069)
Adjusted net profit margin3.6% 3.9% 4.3% 5.1%
Adjusted net profit was calculated in line with the profit for the entire year excluding listing expenses through the background period
Through the background period, the Group recorded ongoing growth in revenue, gross profit and adjusted net profit. Simultaneously, gross profit percentage and adjusted net profit percentage also continued to go up.
Experienced and dedicated senior management team
The Group comes with an experienced, dedicated and capable management team led by the executive Directors, the Soon Brothers, who’ve been instrumental in spearheading the growth of the Group and also have over 30 years of experience available of distribution of F&B products in Malaysia. They’re responsible for the entire business strategy, planning, operational and sales management and development of the Group. Furthermore, the Group includes a loyal, experienced and capable senior management team with extensive operational expertise and in-depth knowledge of the F&B distribution industry in Malaysia and can set up a high amount of product differentiation and an easy brand portfolio.
Future Growth Strategies
Further enhancing distribution and sales capabilities by buying cold chain along with other infrastructure
Through the background period, the Group’s revenue generated from frozen food and milk products represented approximately 50% of the full total revenue. Both frozen food and milk products can be purchased by the Group under, along with Third-Party Brands, Own Brands or on a White-Label basis which generally have an increased profit margin when compared with the distribution and sales of Third-Party Brand Products. In the years ahead, the principal business strategies of the Group should pivot around enhancing the cold chain warehousing and logistics capabilities and management. The Group plans to (i) create a fresh warehouse with cold storage facilities and upgrade the self-owned warehouses with advanced functions; (ii) acquire and upgrade cold along with other logistics vehicles; (iii) enhance cold chain along with other management and information systems.
Aside from cold storage facilities, the expected upsurge in designated general storage capacity would also facilitate the optimisation of the space for storage and improve the efficiency in sales of the merchandise which are stored under general condition and enhance the operational results.
Enhanced development of Own Products
Own Products and White-Label Products generally like a high gross profit percentage, which drives the expansion of relevant segments. The Group plans to build up the business enterprise of the Own Products and White-Label Products by purchasing new processing machines for processing in order to use up more orders, save labour costs and enhance processing efficiency. The Group may also conduct marketing and promotional activities of the Own-Brand Products to help expand conduct media marketing and build relationships more potential prospects.
Development of e-commerce business by launching a mobile application
Due to the large and diverse customer base with an increase of than 11,000 active customers, the Group receives and processes numerous orders from numerous kinds of customers each day. To streamline the ordering process and good market trend, the Group plans to build up the e-commerce operations by engaging an external party company to create and customise a mobile application. The Ordering App is likely to be launched and placed into use by the fourth quarter of FY2023 in fact it is expected to develop a far more convenient and pleasant purchasing experience for customers and improve the efficiency of the Group.
Strategic acquisitions and investments across the supply value chain
Because of the expected growth in the F&B distribution industry in Malaysia, the Group plans to keep to expand the business enterprise and explore potential work at home opportunities by acquiring majority or entire shareholding of, or buying, local company(ies) or acquiring business(es) in the F&B supply value chain, including horizontal and vertical acquisitions and investments.
Usage of proceeds
In line with the Offer Price of HK$0.54 per Share (being the mid-point of the indicative Offer Cost range of HK$0.52 to HK$0.56 per Share) and assuming the Over-allotment Option isn’t exercised, after deducting estimated underwriting fees along with other expenses, net arises from the Global Offering are estimated at approximately HK$86.0 million. The Group currently intends to utilize the net arises from the Global Offering for the next manner:
Applications / Percentage
— To help expand improve the distribution and sales capabilities by buying cold chain along with other infrastructure
— To build up the Own Products business by acquiring new processing machines and conducting marketing and promotional activities 18.0%
— To build up e-commerce business by launching a mobile application 7.0%
— For strategic acquisitions and investments across the supply value chain 17.2%
— As general working capital 10.0%
The Group has entered into cornerstone investment agreements with four cornerstone investors separately, namely Mr. Tee Kian Heng, Huihuang Resources Limited, Dato’ Sri Ng Chong Keong and Dato’ Sri Pek Kok Sam (each a “Cornerstone Investor” and together the “Cornerstone Investors”), pursuant to that your Cornerstone Investors have decided to, at the mercy of certain conditions, subscribe for such amount of Shares (rounded right down to the nearest board large amount of 5,000 Shares) at the Offer Price, which might be purchased having an aggregate quantity of approximately HK$47.0 million. The Group believes that introducing the Cornerstone Investors to the Global Offering and securing the subscription of a substantial amount of Offer Shares will set a good platform for the launch of the Global Offering by demonstrating the Cornerstone Investors’ confidence in the Global Offering.
Swang Chai Chuan Limited
Swang Chai Chuan Limited is among the top 5 companiesin Malaysia F&B distribution industry and can be an established distributor of F&B along with other products for recognised international and domestic third-party brands and own brands. Swang Chai Chuan Limited also provides suppliers with warehousing, logistics, sales and marketing support along with other value-added services
When it comes to revenue in 2021, in accordance with Frost & Sullivan
Capitalised terms used herein shall have exactly the same meanings as those defined in the prospectus dated 8 August 2022, unless the context otherwise requires.
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(1) When it comes to revenue in 2021, in accordance with Frost & Sullivan
(2) These amounts are converted from Malaysian Ringgit to Hong Kong dollars or Hong Kong dollars to Malaysian Ringgit at an exchange rate of RM0.52 to HK$1.00. No representation is manufactured that Malaysian Ringgit/Hong Kong dollars amount have already been, might have been or could be changed into Hong Kong dollars/Malaysian Ringgit at that rate or at all.
1. This news release is for information purposes only and will not constitute or include any recommendation or invitation or offer (nor is calculated to invite this type of recommendation, offer or invitation) by anybody for acquisition, purchase or subscription of the securities of the business nor does it plan to become a recommendation of the sale of securities or any invitation or offer for acquisition, purchase or subscription of securities. This news release should accordingly not total an advertisement or invitation within this is of section 103(1) of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) or perhaps a prospectus or an extract from or abridged version of a prospectus within this is of sections 2 and 38B, respectively of the firms (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). Investors should browse the prospectus of the business for detailed information regarding the business and the proposed offering before making a decision whether to get any securities of the business. An application a subscription for the shares described in this news release by any persons will be made solely in line with the prospectus and the application form forms to be issued by the business on 8 August 2022.
2. No application for the shares of the business should be created by anybody nor would such application be accepted minus the completion of a formal form or other application procedure that’s issued with or according of the prospectus.
3. The directors of the business collectively and individually accept full responsibility for the accuracy of the info within this news release and confirm, having made all reasonable enquiries, that to the very best of these knowledge and belief, you can find no other facts the omission which would make any statement herein misleading.
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