Good News on Listing | Frost & Sullivan Assists Yinghui Enterprise Holdings Limited to Successfully List in Hong Kong (2195.HK)

Yinghui Enterprise Holdings Limited (hereinafter referred to as 'Yinghui Enterprise') successfully went public on March 31, 2021, with a global issue of 250 million shares at an offer price ranging from HK$0.50 to HK$0.56, raising approximately HK$125 million to HK$1.40 billion. Frost & Sullivan (Frost & Sullivan, hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Yinghui Enterprise's listing and hereby extends its warmest congratulations on its successful launch.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, 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 with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

The full name of RMAA projects is Renovation, Maintenance, Alteration and Extension works, which include various projects and services carried out in existing buildings for upgrading and refurbishment purposes. Specifically, the market demand for RMAA projects in Hong Kong highly depends on mandatory inspection, renovation, maintenance, alteration and extension requirements for aging buildings. RMAA projects can be divided into (i) renovation and maintenance works, and (ii) alteration and extension works.

● Renovation and maintenance projects usually include the repair, restoration, and improvement of existing buildings and facilities. Examples of renovation and maintenance projects include roof repairs, interior and exterior wall renovations, re-paving of floors and tiles, concrete patching repairs, door and window repairs and replacements, painting projects, water pipes and drainage facilities projects, etc.

● Renovation and addition projects mainly involve the conversion and expansion of building layouts, including structural and decorative works for the existing building environment. Renovation and addition projects of existing buildings include demolition, renovation, decoration works, changes in facility configuration; change of building use; manufacturing, renovation, demolition or installation of hardware and equipment; installation, relocation or demolition of partition walls, doors and windows; as well as changes in types of finishes and flooring materials; construction of swimming pools, etc.

With various mandatory inspection requirements for aging buildings (such as mandatory building inspection programs) and the continuous advancement of renovation and redevelopment of aging buildings, the demand for RMAA works has been steadily increasing in Hong Kong. Revenue increased from approximately HK$678 billion in 2014 to about HK$778 billion in 2019, with a compound annual growth rate of 2.8%. In the future, the stock level of aging buildings in Hong Kong is expected to increase (for example, the number of private residential buildings over 20 years old in Hong Kong is expected to increase from more than 1,000,000 units in 2019 to over 1,100,000 units by 2030), as well as the increase in regular repairs and refurbishments of aging buildings, which are important supports for the development of the Hong Kong RMAA works market. It is estimated that the market size of RMAA works will further grow at a compound annual growth rate of 3.5% from 2020 to 2024, reaching approximately HK$901 billion by 2024.

From 2014 to 2019, the RMAA project income generated by the public sector increased from approximately HK$232 billion to approximately HK$263 billion, with a compound annual growth rate of 2.5%. Meanwhile, the RMAA project income generated by the private sector increased from approximately HK$446 billion to approximately HK$515 billion, with a compound annual growth rate of 2.9%. In the private sector, the growth of the RMAA project market was also driven by the renovation and maintenance of large-scale estates such as Cuihu Garden, Sha Tin First City, and Meijing Garden, which were carried out in phases from 2014 to 2019. In the future, driven by the expected increase in the number of private residential buildings and the demand for renovation and maintenance of aging buildings, the RMAA project income generated by the private sector is expected to grow at a compound annual rate of 4.0% from 2020 to 2024. Meanwhile, due to the demand for regular renovation and maintenance of elderly residential areas (such as Hailey Peninsula, Regency City, and Jiahu Villa), infrastructure, and institutional building facilities, the public sector's RMAA project income is expected to maintain a compound annual growth rate of 2.7% during the same period.

Since January 2020, the construction industry in Hong Kong (including RMAA works and scaffolding markets) has been negatively affected by the outbreak of the 2019 coronavirus disease (COVID-19). Since most major construction materials (such as cement, wall tiles, coatings, UPVP pipes, bamboo, and metal scaffolding) need to be imported from China, the production and logistics of these construction raw materials have been temporarily interrupted due to the early-stage forced closures of relevant enterprises to control the further spread of the disease in China. Some public and private construction sites in Hong Kong were temporarily closed for two weeks or longer in February 2020 to prevent construction workers from contracting the infectious disease. In addition, following the trade war between the United States and China and local social incidents in 2019, the global COVID-19 pandemic and weak economic prospects in Hong Kong further weakened consumer confidence. Nevertheless, given (i) the relatively low number of confirmed COVID-19 cases in Hong Kong compared to other regions, with the number of recoveries increasing continuously, (ii) the Hong Kong government has taken a number of financial measures as outlined in the Epidemic Prevention and Control Fund (specifically, two rounds of subsidy schemes for eligible engineering consultants, contractors, and registered construction workers, amounting to approximately HK$50 billion, known as the Construction Industry "Epidemic Prevention and Control Fund", benefiting over 530,000 workers and 30,000 companies in the construction industry), to alleviate the financial burden on businesses and individuals and thus support the Hong Kong economy, and (iii) the increasing number of aging buildings and the growing demand for related RMAA services in old urban areas. In addition to the direct impacts described above due to the temporary suspension of construction sites and disruptions in material supply in the first half of 2020, the subsequent resurgence of COVID-19 cases in Hong Kong in the fourth quarter of 2020 did not have a significant impact on the RMAA works market, due to (i) the supply chain of major construction materials imported from China not being disrupted; (ii) there were no special restrictions on construction sites and workplace operations except in areas where confirmed COVID-19 cases were reported; and (iii) labor scheduling was not affected during the fourth quarter of 2020. The RMAA works and scaffolding markets are expected to experience a slower growth rate in 2020 and will quickly recover their momentum after the effective control of COVID-19 in the long run. In addition, the recent COVID-19 cases have been transmitted through building drainage systems, which also helps to raise public awareness of the inspection, installation, maintenance, renovation, and demolition of old drainage pipes in residential buildings, which will drive market demand for RMAA works.

Shed structures, as a temporary structure, are widely used in construction projects in Hong Kong, providing a working platform for workers engaged in building construction, especially the installation of upper floors and the renovation, repair, and maintenance of existing buildings. Generally speaking, shed systems can be roughly divided into two main types based on the materials used: (i) bamboo shed systems and (ii) metal shed systems. Hybrid shed systems (such as bamboo-pipe composite sheds) have also developed into reinforced bamboo sheds by adding metal pipes. Bamboo sheds are currently the dominant type of shed system in Hong Kong due to their good flexibility, low cost, and light weight. However, bamboo sheds require skilled workers to install, and bamboo is prone to corrosion, vulnerable to adverse weather, environmental conditions (such as decay in humid environments), and fires, which may pose environmental health and safety risks to workers and the public. On the other hand, although metal shed systems are relatively more costly, they have been widely used in other developed countries. They are easy to manufacture and disassemble, and due to their good structural flexibility, high strength, and strong corrosion resistance, these important characteristics can better ensure worker safety, thus leading to an increasing adoption in Hong Kong's construction projects. Metal sheds generally last about 10 years of reuse, while bamboo sheds only last about 15 months. Therefore, the use of metal sheds is considered more environmentally friendly than bamboo sheds.

Driven by building construction activities, the total consumption of sheds increased from about 6.1 million square meters in 2014 to about 7.2 million square meters in 2019, with a compound annual growth rate of 3.7%. Given the increasing number of aging residential properties and the growing demand for related RMAA projects, it is expected that the consumption of bamboo sheds and metal sheds will grow at a compound annual growth rate of 4.5% during the period from 2020 to 2024, reaching about 8.6 million square meters by 2024. Specifically, due to the safer and more durable metal shed platforms compared to bamboo sheds, the consumption of metal sheds in Hong Kong has increased significantly, from about 1.1 million square meters in 2014 to 1.5 million square meters in 2019, with a compound annual growth rate of 6.4%. With the continuous improvement of workplace safety awareness and government promotion of the use of metal shed systems, the usage of metal sheds is expected to increase from 1.5 million square meters in 2020 to 2.0 million square meters in 2024, growing at a compound annual growth rate of 7.5%.

The market demand for metal canopy services in Hong Kong is driven by the increased safety requirements stipulated by project owners. For example, the Housing Authority has issued guidelines for the provision and use of metal canopy systems in RMAA projects, and the Hong Kong Trade Development Council has emphasized the use of metal canopies by citing the construction and demolition of high-altitude work equipment above 2 meters above ground level at the Hong Kong Convention and Exhibition Centre as an example. In addition, metal canopy systems have been widely used in construction projects for public utilities such as underground rail transit, universities, and theme parks. Major and key building construction projects in Hong Kong and RMAA contractors have adopted metal canopy systems. According to Frost & Sullivan's data, (i) among all five major market participants in Hong Kong's building construction projects by revenue in 2019, and (ii) among the five major market participants in Hong Kong's RMAA projects by revenue in 2019, three companies have adopted metal canopies in their construction and works. In recent years, the supply of registered canopy workers has increased significantly, consistent with the growing demand for metal canopy services. According to the Construction Industry Council's data, the number of effectively registered metal canopy workers increased significantly from 2014 to 2019, with a compound annual growth rate of about 21.4%, while the number of effectively registered bamboo canopy workers increased at a compound annual growth rate of about 7.3% during the same period. The significant increase in the number of registered metal canopy workers indicates the growing demand for canopy services equipped with metal canopy systems in Hong Kong.

Frost & Sullivan has extensive research experience in the construction industry and has assisted well-known enterprises in successfully listing on the capital market. Successful listings include Zhi Xin Group (2187.HK), Guanglian Engineering (1413.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), Tailin Kojian (6193.HK), Fengcheng Holdings (8216.HK), WMCH Global (8208.HK), Huaji Global (2296.HK), Wanya Enterprise Holdings (8173.HK), Home Control (1747.HK), China Tianbao (1427.HK), Yuanda Residential Construction (2163.HK), Anle Engineering (1977.HK), Pujiang International (2060.HK), Lejias Holdings (1867.HK), Weihong Group Holdings (3321.HK), Hon Corp (8259.HK), Aobang Construction (1615.HK), Renhe Technology (8140.HK), Wanshun Group (1746.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), Xianeng Group (1730.HK), WT Group (8422.HK), Jianpeng Holdings (1722.HK), Hebei Construction (1727.HK), Shouyi Holdings (2227.HK), Yikang Tai (8445.HK), Wantong Garden (8199.HK), Progressive Development (1667.HK), ECI Technology (8013.HK), Shanle International (1660.HK), Li's Enterprise Holdings (2266.HK), Zhiseng Group (8370.HK), Aishuo Holdings (8341.HK), Aidewei Construction (6189.HK), Yueneng Development (8423.HK), Fengsheng Electromechanical (0331.HK), Red Star · Midea (1528.HK).