Good News on Listing | Frost & Sullivan Assists Yijun Group Holdings Limited to Successfully List in Hong Kong (2442.HK)

Yijun Group Holdings Limited (hereinafter referred to as 'Yijun Group') successfully listed on May 9, 2023. The company plans to issue 10,200,000 ordinary shares at an issue price of HK$1.28 per share, with a net raise of approximately HK$89.1 million.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication between the issuer and the Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Exchange.

The company has a long history of subcontracting passive fire protection solutions in Hong Kong, enjoys a good reputation in the industry, and has achieved remarkable results;

The company is familiar with the specifications and uses of many passive fire protection materials and maintains long-term cooperative relationships with material suppliers;

The Company has a solid relationship with its major clients, including large market participants in the Hong Kong property development and construction industry;

The senior management team and project management team of the company are experienced and stable;

The company is consolidating its position in the passive fire protection engineering industry by continuously bidding on large-scale projects. It is establishing a brand by upgrading its online platform and the group's information technology system.

From 2016 to 2021, passive fire protection projects in Hong Kong's residential and non-residential areas recorded growth rates of about 1.7% and 2.7%, respectively, while the demand for such projects in the private and public sectors increased by about 0.1% and 4.7%, respectively. The estimated total value of the Hong Kong passive fire protection project market increased from about HK$8.354 billion in 2016 to about HK$9.403 billion in 2021, with a compound annual growth rate of about 2.4%. This was mainly driven by the sustainable development of the construction industry, strict requirements for fire safety construction, and the introduction of mandatory urban renewal plans, which have led to increased demand for the installation and renovation of passive fire protection systems.

From 2022 to 2026, passive fire protection projects in residential and non-residential areas are expected to grow at compound annual rates of approximately 6.0% and 6.2%, respectively, while the demand for such projects from the private and public sectors is expected to increase at compound annual rates of approximately 5.2% and 6.9%, respectively. The continuous improvement of building safety and quality standards, as well as the (to a lesser extent) increasing widespread adoption of prefabricated composite construction methods, will continue to drive demand for passive fire protection systems.

The adoption of prefabricated composite building methods is one of the factors contributing to the increasing demand for passive fire protection projects, which has led to an increase in the contract value of passive fire protection projects. It is estimated that the contract value of passive fire protection projects using prefabricated composite building models can be as high as twice that of those without. Given the above, the total value of passive fire protection projects in Hong Kong is expected to reach approximately HK$12.474 billion in 2026, with a compound annual growth rate of about 6.1% from 2022 to 2026.

• Conducive fire safety building policies and regulations

Due to the overall tightening of fire safety regulations, more consideration is being given to necessary passive fire protection works at an early stage in project planning, with related works incorporated into the early design of new building construction. As a result, the demand for passive fire protection works has increased, especially in new buildings. To comply with continuously improving industry standards, new building construction as well as building maintenance and upkeep will use more passive fire protection components or systems in buildings or structures, namely floors-ceiling and roof, fire doors, windows, wall components, fireproof coatings, and other fire and smoke prevention components. On the other hand, with the increasing involvement of the Hong Kong government in legislation and enforcement, the demand for maintenance, upkeep, and upgrading of passive fire protection equipment will increase with market dynamics.

• Support for Building Owners

The Hong Kong government has introduced a series of support measures to help property owners and occupiers improve the overall fire safety condition of buildings, in order to fully comply with the Fire Safety (Buildings) Ordinance and the Fire Safety (Commercial Premises) Ordinance. For example, the 2019 Policy Address allocated an additional HK$35 billion to implement a new round of applications, funding more property owners of old commercial and residential buildings to take fire safety enhancement measures. Therefore, the ongoing support measures introduced by the Hong Kong government will drive the development of the passive fire protection engineering market in Hong Kong.

• Adopting the assembly synthesis building method

Compared with typical projects using traditional construction methods, the adoption of prefabricated assembly building methods generally increases the demand for passive fire protection engineering. In addition, the general design of prefabricated assembly buildings involves fewer sealed connections to ensure compatibility when components are interconnected and assembled. Therefore, interfaces between two or more precast exterior walls can have obvious gaps and openings, allowing flames and smoke to easily pass through. Passive fire protection engineering that seals perimeter openings and joints with fire-resistant acrylic sealant helps solve this problem. It is expected that the increasing popularity of prefabricated assembly building methods in Hong Kong construction projects will drive up demand for passive fire protection engineering and prompt the resolution of related issues involving prefabricated assembly building projects.

• Other economies raise industry standards

The industry standards for passive fire protection engineering in Hong Kong largely depend on the development of various international fire safety testing standards. In recent years, European and North American regulations on building fire safety have become increasingly stringent. To achieve similar international standards, it is expected that the Hong Kong Buildings Department will continue to exert its influence by introducing improvement measures, which are expected to drive demand in all aspects of passive fire protection engineering.

• Sustainable Government Support in the 2021 Policy Address

As outlined in the Chief Executive's 2021 Policy Address, the Hong Kong government aims to build an additional 5,000 units, increasing the overall supply of transitional housing to 20,000 units over the next few years, and to increase the funding for relevant subsidy schemes by HK$116 billion. On the other hand, the Hong Kong government released the Northern Metropolitan Development Strategy in 2021, covering two local administrative regions, namely Yuen Long and North Districts, including developed new towns, new development areas, and development hubs. The total area of about 300 square kilometers will be developed into places highly concentrated with residential units, employed population, and businesses. According to industry reports, since the demand for passive fire protection works is closely related to housing supply, it is also related to the number of tenders circulated between the public and private sectors. It is expected that an increase in housing supply will drive industry demand.

Hong Kong Passive Fire Protection Engineering Market 2022 by Revenue

Frost & Sullivan has extensive research experience in the construction industry, assisting well-known enterprises in successfully accessing capital markets. Successful listing cases include: Zhongtian Hunan Group (2433.HK), GC Construction (1489.HK), Fengcheng Holdings (2295.HK), Yinghui Holdings (2195.HK), Zhi Xin Group (2187.HK), Guanglian Engineering (1413.HK), Dehe Group (0368.HK), Raffles Interior (1376.HK), New Wei Engineering (8676.HK), Yinglan Group (1162.HK), Jianzhong Construction (0589.HK), Shengxing Holdings (1472.HK), Weny Group (1802.HK), Deyi Holdings (9900.HK), Tailinke Construction (6193.HK), Fengcheng Holdings (8216.HK), WMCH Global (8208.HK), Hua Ji Global (2296.HK), Wan Ya Enterprise 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), Bao Yan 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), Yongjian Development (8423.HK), ECI Technology (8013.HK), Shanle International (1660.HK), Lishi Enterprise Holdings (2266.HK), Aishuo Holdings (8341.HK), Aidewei Construction (6189.HK), Kuangwenji (8023.HK), Fengsheng Electromechanical (0331.HK), Konoved (1206.HK), Red Star · Midea (1528.HK).