Good News on Listing | Frost & Sullivan Assists Ming Shing Group Holdings Limited in Successful US Listing (NASDAQ: MSW)

Ming Shing Group Holdings Limited (stock code: NASDAQ: MSW) successfully listed on the US NASDAQ on November 22, 2024. Ming Cheng Group is an architectural industry engineering service provider from Hong Kong, mainly engaged in masonry work including plastering, tile laying, brickwork, floor leveling, and marble projects. Frost & Sullivan (Frost & Sullivan, abbreviated as 'Frost & Sullivan') provided exclusive industry advisory services for Ming Cheng Group's listing in the US and hereby warmly congratulate them on their successful listing.

Overview of the Hong Kong Masonry Market

●Definition and Classification

Masonry work is a subset of renovation projects. In Hong Kong, masonry work usually involves the use of dry building materials mixed with water. Common scopes of masonry work include ceiling, floor and wall plastering, interior and exterior tile laying, brickwork, marble work, painting decoration, and other interior and exterior decorations and repairs. Mason contractors may also provide masonry-related auxiliary services such as cleaning, sanding platforms, applying sealants and cement mortar, on-site logistics services, etc. The demand for masonry work is mainly related to the construction, renovation, maintenance, addition and alteration of buildings (mainly residential such as private residences and public housing, as well as commercial such as hotels, office buildings, retail stores and shopping centers), and also includes industrial buildings, government buildings, community facilities, transportation and public infrastructure.

●market scale

Benefiting from the growing housing supply in Hong Kong and the continuous expansion in the commercial sector (including office buildings and hotels), as well as the residential sector, the total output value of masonry works in Hong Kong increased from about HK$9.5749 billion in 2016 to about HK$11.3352 billion in 2021, with an annual compound growth rate of 3.4%. The decline in the total output value of masonry works in 2020 was mainly due to the outbreak of the COVID-19 pandemic in 2019, which led to economic downturn and further disrupted the construction industry in Hong Kong.

According to the '2021 Policy Address', the government aims to increase the overall supply of transitional housing over the next few years. The introduction of the Northern Metropolitan Area Development Strategy is conducive to the growth of new towns, new development areas, and development nodes. With other supportive government policies and the acceleration of urban renewal, it is expected that the total output value of masonry work will increase from HK$12.1031 billion in 2022 to about HK$15.6093 billion in 2026.

The residential construction sector accounted for 66.0% of the total output value of masonry works in 2021. The completion of large residential projects (such as Kwun Tong Kai Kip Mei and Tseung Kwan O Xing Kai • Embankment) has driven demand for masonry works, increasing the market size of masonry works in the residential construction sector from approximately HK$6.2237 billion in 2016 to approximately HK$7.4812 billion in 2021, with an annual compound growth rate of about 3.7%. It is expected that the residential sector will maintain stable growth in the coming years, supported by policies promoting housing development. In particular, the government will maintain a public-private ratio of 70:30 during the ten-year period from 2021-22 to 2030-31. The total output value of masonry works in the residential construction sector is expected to increase from approximately HK$8.0002 billion in 2022 to approximately HK$10.2709 billion in 2026, with an annual compound growth rate of about 6.4%.

The commercial building sector accounted for 27.2% of the total output value of masonry works in 2021. The annual compound growth rate from 2016 to 2021 was 3.6%, increasing from about HK$2.5852 billion in 2016 to HK$3.0832 billion in 2021, mainly due to the development of new central business districts such as Kowloon City Development Area, Kwun Tong, and Kowloon Bay Business Districts. In the 2020-21 land sale plan, six commercial sites will provide a total construction area of about 833,700 square meters. The land at No. 3 Central Harbour New Harbourfront Commercial Site covers an area of about 4.8 hectares and has a total construction area of about 1.6 million square feet, with a total investment of up to HK$60 billion to HK$65 billion. Looking ahead, the continuous development of commercial districts will support the growth of commercial buildings in Hong Kong. The total output value of masonry works in the commercial building sector is expected to increase from about HK$3.292 billion in 2022 to HK$4.3082 billion in 2026, with an annual compound growth rate of about 7.0%.

●Market Drivers and Opportunities

Sustainable housing supplyThe development of the masonry engineering market is closely related to the construction of buildings and infrastructure. In particular, in 2021, the total value of masonry work in the residential construction sector accounted for more than 60% of the total value of wet work. As stated in the 2021 Policy Address, the government plans to increase the overall supply of transitional housing to 20,000 units over the next few years, providing an additional 5,000 units and increasing the funding for related funding schemes by HK$116 billion. On the other hand, the government issued the Northern Metropolis Development Strategy in 2021, covering two administrative districts, Yuen Long and North District, encompassing mature new towns, new development areas, and development nodes, with a total area of about 300 square kilometers. The plan is to develop it into a high-density residential area with concentrated workforces and businesses. In addition, the Hong Kong government has introduced different policies to promote housing supply, such as the 'Land Sharing Pilot Scheme' mentioned in the 2020 Policy Address, aimed at unlocking the development potential of private farmland through public-private partnerships for public and private housing development; and the deployment of the 'Land Supply Task Force', which identified about 210 potential locations for housing, totaling 3,235 hectares of land, with plans to provide more than 330,000 public and private housing units over the next decade, including locations such as the East Lantau Metropolis, around Country Parks, reclaimed land, and several brownfields. For the private sector, the budget for the 2022-23 fiscal year anticipates an average annual production of about 19,000 units between 2022 and 2026, significantly higher than the average annual production of about 17,000 units between 2016 and 2021. Therefore, the demand for construction engineering and masonry work will continue to drive it forward.

Urban development projectThe Hong Kong government launched the Mandatory Building Inspection Scheme (MBIS) in 2012, requiring property owners with buildings aged 30 years or more to undergo specified inspections. According to the Urban Renewal Authority (URA), by 2046, there will be 326,000 private residential units aged 70 years or more, urgently necessitating accelerated renovation of dilapidated urban areas, especially those located in the dense urban cores such as Sham Shui Po and Kowloon City. According to the URA's 2019-20 annual report, there are more than 10,000 buildings in Hong Kong aged 50 years or more, with the number expected to reach 28,000 by 2046. In addition, to ensure public safety, the Chief Executive announced an allocation of HK$3 billion in the "2017 Policy Address" to cooperate with the Urban Renewal Authority to implement the "Brighter Cities Initiative" to assist property owners in complying with MBIS requirements. As an important construction process, ongoing urban renewal projects are expected to drive related demand for masonry work.

Improved industry standards and customer needsDue to the improvement in living standards and disposable income of Hong Kong citizens, downstream real estate developers tend to expect buildings and facilities to have higher durability and minimal defects. Future maintenance costs and hassle are also expected to be minimized, which is expected to raise higher standards for the material quality, work processes, and craftsmanship of masonry projects. As real estate developers hope to improve the standards of their properties to enhance competitiveness, the demand for high-quality masonry projects has increased to meet the requirements of interior design and inspection. As the demand for the indoor environment of residential apartments and commercial buildings increases, including texture, color, and materials in design, as well as the use of fixtures, furniture, and other accessories, project quality is becoming a key focus of competition in the masonry industry. Therefore, mature masonry contractors with high-quality projects are more favored by real estate developers and major contractors.

●competitive landscape

In terms of the number of market participants, the masonry engineering market in Hong Kong is relatively fragmented. According to data from the Construction Industry Council, by the end of 2021, there were more than 500 contractors registered under the 'post-renovation masonry' category. In 2021, Mingcheng Group had a market share of about 0.4% in the Hong Kong masonry engineering industry and is one of the leading masonry engineering subcontractors.

●entry barriers

Good performance recordA good performance record is one of the key competitive factors in the masonry industry. Reliable project quality records, efficient work division, timely delivery, and budget control are key indicators for evaluating a company's masonry performance. Real estate developers and general contractors in Hong Kong tend to prefer to cooperate with masonry contractors with a good track record. New entrants without a good reputation lack experience in past collaborations with industry stakeholders and service provision, which will affect their overall competitiveness.

capital requirementsCapital requirements are an obstacle for new entrants to enter the masonry engineering market. In the masonry industry, sufficient capital reserves are needed to recruit workers, purchase raw materials, and pay workers' wages. In addition, issuing performance bonds requires a large amount of capital. Market participants with sufficient capital are more likely to undertake large projects, while contractors lacking adequate resources may lose in competition and subsequently exit the market.

Technical expertiseTechnical expertise is one of the main barriers for new entrants in the masonry industry. Existing market participants usually have a deep understanding of plastering, tile laying, brickwork, floor leveling, painting, flooring, and marble work to provide high-quality services. With technical expertise, the performance and quality of existing businesses can be guaranteed and meet quality standards. In contrast, new market entrants without technical expertise and an experienced management team may face weaker competitiveness.

Frost & Sullivan has extensive research experience in the construction industry and has assisted well-known enterprises in successfully listing on the capital market. Successful listing cases include: Rongli Construction (9639.HK), Hongji Group (2535.HK), Zhongshen Jianye (2503.HK), Shanxi Installation (2520.HK), Yijun Group (2442.HK), Zhongtian Hunan Group (2433.HK), GC Construction (1489.HK), Fengcheng Holdings (2295.HK), Yinghui Holdings (2195.HK), Zhixin Group (2187.HK), Guanglian Engineering (1413.HK), Dehe Group (0368.HK), Raffles Interior (1376.HK), Xinwei Engineering (8676.HK), Yinglan Group (1162.HK), Jianzhong Construction (0589.HK), Shengxing Holdings (1472.HK), Weny Group (1802.HK), Deyi Holdings (9900.HK), Tailin Construction (6193.HK), Fengcheng Holdings (8216.HK), WMCH Global (8208.HK), Huaji Global (2296.HK), Wanya Holdings (8173.HK), China Tianbao (1427.HK), Beng Soon (1987.HK), Far East Horizon (2163.HK), Anle Engineering (1977.HK), Kun Group (924.HK), Pujiang International (2060.HK), Lejias Holdings (1867.HK), Weihong Group Holdings (8522.HK), Pipeline Engineering (1865.HK), Hon Corp (8259.HK), Hengyi Holdings (1894.HK), Baoyan Holdings (8601.HK), Aobang Construction (1615.HK), Renhe Technology (8140.HK), Wanshun Group (1746.HK), Liang Zhitian (2262.HK), Tangji (8305.HK), Rongfeng Group Asia (8526.HK), Deyi Holdings (8522.HK), Aoneng Construction (1183.HK), Yingde Holdings (8535.HK), Hengyu Group (2448.HK), WT Group (8422.HK), Jianpeng Holdings (1722.HK), Hebei Construction (1727.HK), Shouyi Holdings (2227.HK), Yinglan Group (8470.HK), Yikang Tai (8445.HK), Wantong Garden (8199.HK), Haobo International (8431.HK), Progressive Development (1667.HK), Yuyan Development (8423.HK), ECI Technology (8013.HK), Shanle International (1660.HK), Li's Enterprise Holdings (2266.HK), Aishuo Holdings (8341.HK), Aidewei Construction (6189.HK), Kuangwenji (8023.HK), Fengsheng Electromechanical (0331.HK), Konevide (1206.HK), Red Star · Midea (1528.HK), Tianjin Jianfa (2515.HK).