luen wong group prospectus

8/18/2019 Luen Wong Group Prospectus

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Sponsor

Joint Bookrunners and Joint Lead Managers

PLACING

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 8217

LUEN WONG GROUP HOLDINGS LIMITED


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If you are in any doubt abou t any of the cont ents of this prospect us, you shou ld obtain indep enden t prof essi onal advi ce.

LUEN WONG GROUP HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

LISTING ON THE GROWTH ENTERPRISE MARKET OF

THE STOCK EXCHANGE OF HONG KONG LIMITED

BY WAY OF PLACING

Number of Placing Shares : 312,000,000 Shares (comprising208,000,000 New Shares to be offeredby our Company and 104,000,000 SaleShares to be offered by the SellingShareholder)

Placing Price : HK$0.26 per Placing Share, plusbrokerage of 1%, SFC transaction levyof 0.0027% and Stock Exchangetrading fee of 0.005% (payable in fullon application in Hong Kong dollars)

Nominal value : HK$0.01 per Share

Stock code : 8217

Sponsor

TC Capital Asia Limited

Joint Bookrunners and Joint Lead Managers

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong KongSecurities Clearing Company Limited take no responsibility for the contents of this prospectus, make norepresentation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.

A copy of this prospectus, having attached thereto the documents specified in the section headed “DocumentsDelivered to the Registrar of Companies and Available for Inspection” in Appendix VI to this prospectus, has beenregistered with the Registrar of Companies as required by Section 342C of the Companies (Winding Up andMiscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Registrar of Companies inHong Kong and the Securities and Futures Commission of Hong Kong take no responsibility as to the contents of this prospectus or any of the other documents referred to above.

Prior to making an investment decision, prospective investors should consider carefully all of the information setout in this prospectus, including but not limited to the risk factors set out in the section headed “Risk Factors” inthis prospectus.

Prospective investors of the Placing Shares should note that the Sponsor and/or the Joint Bookrunners (forthemselves and on behalf of the Underwriters) are entitled to terminate the obligations of the Underwriters underthe Underwriting Agreement by means of a notice in writing to our Company (for itself and on behalf of theSelling Shareholder) given by the Sponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters) upon the occurrence of any of the events set out in the section headed “Underwriting –Underwriting Arrangements and Expenses – Grounds for termination” in this prospectus, at any time prior to 8:00a.m. (Hong Kong time) on the Listing Date. Should the Sponsor and/or the Joint Bookrunners (for themselves andon behalf of the Underwriters) terminate the Underwriting Agreement, the Placing will not proceed and will lapse.

IMPORTANT

31 March 2016


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GEM has been positioned as a market designed to accommodate companies to

which a higher investment risk may be attached than other companies listed on the Stock

Exchange. Prospe ctive investors should be aware of the potenti al risk s of investing in

such companies and should make the decision to invest only after due and careful

consideration. The greater risk profile and other characteristics of GEM mean that it is a

market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that

securities traded on GEM may be more susceptible to high market volatility than

securities traded on the Main Board and no assurance is given that there will be a liquid

market in the securities traded on GEM.

CHARACTERISTICS OF GEM

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2016(Note 1)

Announcement of the level of indication of interest

in the Placing to be published on

(i) the Stock Exchange’s website at www.hkexnews.hk; and

(ii) our Company’s website at www.luenwong.hk

on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 11 April

Allotment of Placing Shares to placees on or about . . . . . . . . . . . . . . . . Monday, 11 April

Deposit of share certificates for

the Placing Shares into CCASS on or about (Note 2) . . . . . . . . . . . . . . Monday, 11 April

Dealings in the Shares on GEM to

commence at 9:00 a.m. on (Notes 3 & 4) . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 12 April

Note s:

1. All times and dates refer to Hong Kong local times and dates.

2. Share certificates for the Placing Shares allotted and issued to the placees are expected to be deposited

directly into CCASS on or about Monday, 11 April 2016 for credit to the respective CCASS participants’ or

the CCASS investor participants’ stock accounts designated by the Underwriter), the placees or their agents

(as the case may be). No temporary documents or evidence of title will be issued by our Company.

3. If there is any change to the above expected timetable, we will make an appropriate announcement on the

Stock Exchange’s website at www.hkexnews.hk and on our Company’s website at www.luenwong.hk to

inform investors accordingly.

4. All share certificates for the Placing Shares will only become valid certificates of title when the Placing has

become unconditional in all respects and the Underwriting Agreement has not been terminated in

accordance with its terms at any time prior to 8:00 a.m. on the Listing Date. If the Placing does not become

unconditional or the Underwriting Agreement is terminated in accordance with its terms, we will make an

announcement on the Stock Exchange’s website at www.hkexnews.hk and on our Company’s website at

www.luenwong.hk as soon as possible.

EXPECTED TIMETABLE

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You should rely only on the information contained in this prospectus to make your

investment decision. Our Company has not authorised anyone to provide you with

information that is different from what is contained in this prospectus. Any information or

representation not contained or made in this prospectus must not be relied on by you as

having been authorised by our Company, the Selling Shareholder, the Sponsor, the Joint

Bookrunners, the Joint Lead Managers, any of the Underwriters, any of their respective

directors, affiliates, employees or representatives or any other person or party involved in

the Placing.

Page

CHARACTERISTICS OF GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i i

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING . . . . . . . . . . 41

DIRECTORS AND PARTIES INVOLVED IN THE PLACING . . . . . . . . . . . . . . . . 45

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

HISTORY AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS . . . . . . . . . . . 193

CONTENTS

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Page

SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

STATEMENT OF BUSINESS OBJECTIVE AND USE OF PROCEEDS . . . . . . . . 260

UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

STRUCTURE AND CONDITIONS OF THE PLACING . . . . . . . . . . . . . . . . . . . . . 276

APPENDIX I – ACCOUNTANTS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

APPENDIX II – UNAUDITED PRO FORMA FINANCIAL INFORMATION . . II-1

APPENDIX III – PROPERTY VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

APPENDIX IV – SUMMARY OF THE CONSTITUTION OF

OUR COMPANY AND

CAYMAN ISLANDS COMPANY LAW . . . . . . . . . . . . . . . . . IV-1

APPENDIX V – STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . V-1

APPENDIX VI – DOCUMENTS DELIVERED TO

THE REGISTRAR OF COMPANIES ANDAVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . VI-1

CONTENTS

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This summary aims to give you an overview of the information contained in this prospe ctus. As this is a summary, it does not contain all the information that may beimportant to you. You should read the whole prospectus before you decide to invest in thePlacing Shares. There are risks associated with any investment. Some of the particular risks in investing in the Placing Shares are set forth in the section headed “Risk factors”in this prospectus. You should read that section carefully before you decide to invest in

the Placing Shares.

Various expressions used in this summary are defined in the sections headed“Definitions” and “Glossary” in this prospectus.

OUR BUSINESS

We are an established subcontractor engaged in civil engineering works. We have over16 years of experience in providing civil engineering works as a subcontractor and areflexible in deploying resources to meet our customers’ demand.

The civil engineering works undertaken by us are mainly related to (i) roads anddrainage works (including construction and improvement of local road, carriageway with junction improvement and the associated footpaths, planting areas, drains, sewers, water

mains and utilities diversion); (ii) structural works (including construction of reinforcedconcrete structures for bridges and retaining walls); and (iii) site formation works (includingexcavation and/or filling works for forming a new site or achieving designed formation levelfor later development). During the Track Record Period, the average duration of completedprojects (from the date of engagement to the date of completion) was approximately 2.2years. Depending on the nature and complexity of a project as well as the existence of anyunforeseen circumstances (such as bad weather conditions, industrial accidents, variationorders requested by customers, etc., if any), the duration of a contract generally ranges fromapproximately 2 years to 4 years.

Our direct customers are primarily main contractors of various different types of civilengineering projects in Hong Kong. During the Track Record Period, the majority of ourrevenue was derived from public sector projects, i.e. projects which the main contractors areemployed by the Government or statutory bodies, representing approximately 93.3%, 93.9%

and 87.8% of our revenue for the two years ended 31 March 2015 and the eight monthsended 30 November 2015, respectively. Our civil engineering projects are non-recurring innature. As a subcontractor, we secure our projects from main contractors after a competitivetendering process whereby we are invited to submit our tender.

We possess our own site equipment for carrying out our projects and therefore are notmaterially reliant on third parties for site equipment rental. We believe that our investmentin site equipment has placed us in a position to cater to civil engineering projects of different scales and complexity and to meet the expected growing demand of our customers.For further information regarding our site equipment, please refer to the section headed“Business – Site equipment” in this prospectus.

During the Track Record Period and up to the Latest Practicable Date, we hadundertaken 51 civil engineering contracts, of which 31 contracts had been completed. As atthe Latest Practicable Date, we had 20 contracts on hand with an aggregate contract sum of

approximately HK$1,384,140,000, of which (i) approximately HK$234,304,000 of revenuehas been recognised as at 30 November 2015 (with approximately HK$6,241,000 of revenuerecognised exceeding the original contract sum); and (ii) approximately HK$191,737,000 isexpected to be recognised as revenue for the period from 1 December 2015 to 31 March2016 (with approximately HK$3,547,000 of revenue expected to be recognised exceeding theoriginal contract sum) and HK$824,469,000, HK$109,706,000 and HK$33,713,000 areexpected to be recognised as revenue during the three years ending 31 March 2019,respectively. The amount of revenue expected to be recognised is subject to change due tothe actual progress and commencement and completion dates of our projects. Further detailsof our contracts are set out in the section headed “Business – Our civil engineering contracts− Contracts on hand” in this prospectus.

SUMMARY

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Subcontractors

Subject to our capacity, resources level, types of civil engineering works, costeffectiveness, complexity of the projects and customers’ requirements, we may subcontractour works to other subcontractors in a project. During the Track Record Period, oursubcontracted works primarily included steel fixing, formwork erection and drainage works.For each of the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our Group’s total subcontracting charges incurred to our Group’slargest subcontractor amounted to approximately 17.3%, 17.7% and 15.0% of our Group’stotal subcontracting charges incurred, respectively, while the percentage of our Group’s totalsubcontracting charges incurred attributable to our Group’s five largest subcontractorscombined amounted to approximately 61.8%, 53.3% and 55.7% of our Group’s totalsubcontracting charges incurred, respectively, for the same periods. Among our five largestsubcontractors (in terms of subcontracting charges incurred) during the Track Record Period,we have developed business relationship with them for a period ranging from 2 to 10 years.

COMPETITIVE LANDSCAPE

According to the Ipsos Report, the top five civil engineering contractors act as maincontractors in the overall civil engineering construction industry, and they accounted forabout 54.6% of the total revenue of the civil engineering construction industry in 2014.

Meanwhile, the civil engineering subcontracting industry in Hong Kong is fragmented. As atthe Latest Practicable Date, there were over 700 structural and civil engineeringsubcontractors registered under the Construction Industry Council. In 2014, our Groupaccounted for approximately 1.8% (or HK$254 million) of the total revenue in the civilengineering construction industry generated by civil engineering subcontractors (HK$14.1billion) in Hong Kong. Our Directors consider that technical expertise, quality of work,relationship with customers, suppliers and subcontractors, site equipment capability, projectpricing and safety records are the determinants of competitiveness of a civil engineeringsubcontractor in Hong Kong, and our Group is well-positioned to capture the growingdemand for civil engineering construction services in Hong Kong.

COMPETITIVE STRENGTHS

We believe the following competitive strengths, details of which are set out in thesection headed “Business – Competitive strengths” in this prospectus, contribute to oursuccess and differentiate us from our competitors:

Well-established presence in the civil engineering construction industry in HongKong

Experienced project management team

Possession of a variety of site equipment for performing different types of civilengineering works

Stable relationship with our major customers, suppliers and subcontractors

Our commitment to maintaining safety standard, quality control and environmentalprotection

BUSINESS OBJECTIVES AND STRATEGIES

Our principal business objective is to further strengthen our position as an establishedsubcontractor for roads and drainage works, structural works and site formation works inHong Kong and to create long-term shareholder’s value. We intend to achieve our businessobjective by competing for sizeable and profitable civil engineering projects throughexpanding our scale of operation through pursuing the following key strategies, details of which are set out in the sections headed “Business – Business strategies” and “Statement of business objective and use of proceeds” of this prospectus:

Acquisition of additional site equipment

Further strengthening our manpower

Adherence to prudent financial management to ensure sustainable growth andcapital efficiency.

SUMMARY

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SUMMARY OF FINANCIAL INFORMATION

The following tables present a summary of our financial information during the Track Record Period and should be read in conjunction with our financial information included inthe Accountant’s Report set forth in Appendix I to this prospectus, including the notesthereto.

Highlights of combined statements of comprehensive income

Year ended 31 March Percentagechange

Eight months ended30 November Percentage

change2014 2015 2014 2015 HK$’000 HK$’000 % HK$’000 HK$’000 %

(unaudited)

Revenue 159,963 271,949 70.0 186,325 154,641 (17.0)Gross profit 15,020 25,600 70.4 15,421 17,286 12.1Profit for the year/period 9,430 18,079 91.7 11,647 6,392 (45.1)

Our Group’s revenue decreased for the eight months ended 30 November 2015 ascompared to the eight months ended 30 November 2014 due to the completion of 16projects with an aggregate contract sum of approximately HK$137,700,000 during the year

ended 31 March 2015. A new project with contract sum of approximately HK$455,319,000was awarded in late August and had only commenced in September 2015 and is expected tobring an increase in revenue for the year ending 31 March 2016. Revenue increased for theyear ended 31 March 2015 as compared to the year ended 31 March 2014 due to theincrease in construction works to speed up the progress of two projects with an aggregatecontract sum of approximately HK$195,541,000 to meet completion deadlines during theyear ended 31 March 2015.

Our Group’s gross profit increased for the eight months ended 30 November 2015 ascompared to the eight months ended 30 November 2014 despite a decrease in revenue due toan increase in gross profit margin, which is determined on a project-by-project basis, mainlyas a result of a variation order received with a relatively higher gross profit margin. Grossprofit increased for the year ended 31 March 2015 as compared to the year ended 31 March2014, in line with our revenue. Our Group’s profit for the eight months ended 30 November

2015 decreased as compared to the eight months ended 30 November 2014 primarily due tothe Listing expenses incurred of approximately HK$7,883,000 for the eight months ended 30November 2015. Profit for the year ended 31 March 2015 increased as compared to the yearended 31 March 2014 primarily due to the increase in gross profit and scale.

Highlights of combined statements of financial position

As at 31 March Percentagechange

As at 30November Percentage

change2014 2015 2015 HK$’000 HK $’0 00 % HK$’0 00 %

Current assets 46,250 70,112 51.6 79,890 13.9Current liabilities 82,446 82,525 0.1 74,650 (9.5)Net current (liabilities)/assets (36,196) (12,413) (65.7) 5,240 (142.2)Net (liabilities)/assets (9,775) 8,304 (185.0) 14,696 77.0

Total assets 74,949 93,085 24.2 93,164 0.1

We had a net current liabilities position of approximately HK$36,196,000 andHK$12,413,000 as at 31 March 2014 and 2015, respectively, which are primarily attributableto (i) the amounts due to customers for contract work of approximately HK$39,891,000 andHK$39,980,000 as at 31 March 2014 and 2015, respectively. Such amounts representtemporary differences mainly arising from progress billings exceeding costs incurred plus(less) recognised profit (loss), which will cease to exist at completion of the relevantproject; and (ii) the mortgage loan, which is a current liability, drawn to fund the acquisitionof the investment property, located at Festival City, Tai Wai, a non-current asset as at 31March 2014 and 2015, which was disposed of in October 2015. We recorded a net currentassets of approximately HK$5,240,000 as at 30 November 2015. The improvement in our netcurrent liabilities/assets position is mainly attributable to (i) an increase in our construction

SUMMARY

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Our gross profit margin remained at similar levels of approximately 9.4% for each of the years ended 31 March 2014 and 2015 and increased to approximately 11.2% for theeight months ended 30 November 2015. Our Directors consider that our gross profit marginis a result of a combination of our pricing of each project and cost control. Our gross profitmargin was determined on a project-by-project basis and is generally (i) lower for contractswith a larger contract value due to scale as we set our tender prices based on lower expected

profit margins due to the larger absolute amounts of revenue and gross profit expected to bederived from a project with a larger contract value; and (ii) higher for projects which requiremore project management, greater level of highly skilled construction works and/or a higherstandard of quality and safety. Our other profitability ratios generally increased during theyear ended 31 March 2015 as compared to the year ended 31 March 2014 due to theincrease in revenue and the resulting scale and decreased during the eight months ended 30November 2015 due to the incurring of Listing expenses.

Our current ratio and quick ratio improved during the Track Record Period due to anincrease in construction activities and the disposal of an investment property as furtherdiscussed in the paragraph headed “Financial information – Summary of key financialratios” in this prospectus. The changes in our debtors’ turnover days during the Track Record Period is mainly attributable to the amount and timing of revenue recognised duringthe year/period. The changes in our creditors’ turnover days is attributable to thenon-recurring and project-by-project basis of our civil engineering works.

SHAREHOLDER INFORMATION

Immediately following completion of the Placing and the Capitalisation Issue,Blooming Union, which is beneficially owned as to 50% and 50% by Mr. CK Wong and Mr.WW Wong respectively, will hold 75% of the issued Shares of our Company. Mr. CK Wongand Mr. WW Wong have had a mutual understanding all along to actively cooperate witheach other to jointly control our Group and thus Mr. CK Wong and Mr. WW Wong arepresumed to be acting in concert (within the meaning of the Takeovers Code). Given theaforesaid and for the purpose of the GEM Listing Rules, Mr. CK Wong, Mr. WW Wong andBlooming Union are our Controlling Shareholders. Please refer to the section headed“Relationship with our Controlling Shareholders” in this prospectus for further details.

PLACING STATISTICS

Market capitalisationupon Listing (note 1)

HK$324,480,000

Offer size 25% of the enlarged issued share capital of the Company

Placing Price per PlacingShare

HK$0.26

Number of Placing Shares 312,000,000 Shares (comprising 208,000,000 New Sharesand 104,000,000 Sale Shares)

Board lot 10,000 Shares

Unaudited pro forma nettangible assets perShare (note 2)

HK$0.06 based on a Placing Price of HK$0.26 perPlacing Share

Note s:1. The calculation of the market capitalisation of the Shares is based on 1,248,000,000 Shares in issue

and to be issued immediately after completion of the Placing and the Capitalisation Issue and thePlacing Price of HK$0.26 per Placing Share.

2. For the calculation of the unaudited pro forma adjusted combined net tangible asset value per Shareattributable to the Shareholders, please refer to the section headed “Unaudited pro forma financialinformation” in Appendix II to this prospectus.

REASONS FOR THE LISTING AND USE OF PROCEEDS

Our Directors believe that the listing of the Shares on GEM will facilitate theimplementation of our business strategies. As stated in the section headed “Business –Business strategies” in this prospectus, we plan to expand our market share in the civilengineering construction industry in Hong Kong by competing for sizeable civil engineering

SUMMARY

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projects in Hong Kong through acquisition of additional site equipment and furtherstrengthening our manpower. The net proceeds of the Placing will provide financialresources to our Group to achieve such business strategies which will further strengthen ourmarket position and expand our market share. A public listing status will also enhance ourcorporate profile and recognition and assist us in reinforcing our brand awareness andimage. We believe that a public listing status on GEM could attract potential customers,suppliers and subcontractors who are more willing to establish business relationship withlisted companies. It will also generate reassurance among our Group’s existing customers,suppliers and subcontractors and strengthen our competitiveness in the market. The Listingwill also enable our Group to have access to capital market for raising funds both at thetime of Listing and at later stages, which would in turn assist us in future businessdevelopment of our Group. A public listing status on GEM may offer our Company abroader shareholder base which could potentially lead to a more liquid market in the tradingof the Shares. We also believe that our internal control and corporate governance practicescould be further enhanced following the Listing.

We will not receive any of the proceeds from the sale of the Sale Shares by the SellingShareholder in the Placing. We estimate that the aggregate net proceeds to be received by usfrom the Placing, after deducting related underwriting fees and estimated expenses inconnection with the Placing, based on the Placing Price of HK$0.26 per Placing Share willbe approximately HK$35.7 million. Our Directors presently intend that the net proceeds willbe applied as follows:

– approximately HK$18.0 million (or approximately 50.4% of the net proceeds) willbe used for acquisition of additional site equipment;

– approximately HK$7.6 million (or approximately 21.2% of the net proceeds), willbe used for further strengthening our manpower;

– approximately HK$6.8 million (or approximately 19.1% of the net proceeds), willbe used for the repayment of bank borrowings and a finance lease to reduce ourfinance cost. Specifically, (i) approximately HK$3.1 million will be used towholly prepay the bank loan to be drawn in April 2016 for settlement of theoutstanding indebtedness under the SME Financing Guarantee Scheme forfinancing our Group’s working capital bearing interest at 1% below the HongKong dollar prime rate per annum and an effective interest rate of 3.99% and isrepayable on a monthly basis over the loan term of 50 months up to April 2020;

(ii) approximately HK$1.6 million will be used to wholly prepay the bank loandrawn in March 2014 for acquisition of a site equipment bearing interest at 3%over the Hong Kong Interbank Offered Rate per annum and an effective interestrate of 3.23% per annum and is repayable on a monthly basis over the loan termof 5 years up to January 2019; (iii) approximately HK$1.0 million will be used towholly prepay the finance lease incurred since September 2013 which willbecome mature in 5 years from the date of occurrence bearing interest rate at afixed rate of 2.50% per annum and an effective interest rate of 6.05% per annum,which were incurred to fund our purchase of motor vehicle; and (iv)approximately HK$1.0 million will be used to wholly prepay the finance leaseincurred since September 2015 which will become mature in 4 years from thedate of occurrence bearing interest rate at a fixed rate of 2.25% per annum andeffective interest rate of 5.5% per annum, which were incurred to fund ourpurchase of motor vehicle; and (v) approximately HK$0.1 million will be used to

wholly prepay the finance lease incurred since January 2015 which will becomemature in 3 years from the date of occurrence bearing interest rate at a fixed rateof 2.25% per annum and effective interest rate of 5.58% per annum, which wereincurred to fund our purchase of motor vehicle; and

– approximately HK$3.3 million (or approximately 9.3% of the net proceeds), willbe used as general working capital of our Group.

The following table sets forth a breakdown of how the net proceeds to be received byus from the Placing are intended to be applied and the timing of application:

SUMMARY

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From the LatestPracticable

Date to30 September

2016

From1 October

2016 to31 March

2017

From1 April2017 to

30 September2017

From1 October

2017 to31 March

2018 Total HK$ mill ion HK$ mill ion HK$ mill ion HK$ million HK$ million

Acquisition of additionalsite equipment 17.3 − 0.7 − 18.0

Further strengthening ourmanpower 6.8 − 0.8 − 7.6

Repayment of bank loansand finance lease 6.7 0.1 − − 6.8

General working capital of our Group 3.3 − − − 3.3

LISTING EXPENSES

Our Directors estimate that the total amount of expenses in relation to the Listing isapproximately HK$20.9 million, which will be borne by the Selling Shareholder and ourGroup as to approximately HK$2.5 million and HK$18.4 million, respectively. The listingexpenses are non-recurring in nature and are mainly consisted of professional fees paid tothe Sponsor, the legal advisers, the reporting accountants and other professional parties for

the provision of their services in connection with the Placing. No significant listing expensewas incurred by our Group during the two years ended 31 March 2015. Of the aggregatelisting expenses of approximately HK$18.4 million, approximately HK$7.9 million wascharged to profit or loss for the eight months ended 30 November 2015 and approximatelyHK1.7 million is expected to be charged to profit or loss for the four months ending 31March 2016. Our Group expects to further charge approximately HK$3.9 million to profit orloss, while approximately HK$4.9 million is expected to be directly attributable to the issueof Shares and accounted for as a deduction from equity upon successful listing under therelevant accounting standards. The amount of listing expenses is a current estimate forreference only and the final amount to be recognised to the consolidated statement of comprehensive income of our Group for the years ending 31 March 2017 is subject to auditand the actual changes in variables and assumptions.

DIVIDENDS

No member of our Group had declared any dividend during the Track Record Periodand up to the Latest Practicable Date.

There is no expected dividend payout ratio after the Listing. The payment and theamount of any future dividends will be at the discretion of our Directors and will dependupon our Group’s future operations and earnings, capital requirements and surplus, generalfinancial condition, contractual restrictions and other factors which our Directors deemrelevant. Any final dividend for a financial year will be subject to Shareholders’ approval.Holders of the Shares will be entitled to receive such dividends pro rata according to theamounts paid up or credited as paid up on the Shares. Dividends may be paid only out of our Company’s distributable profits as permitted under the relevant laws. There can be noassurance that our Company will be able to declare or distribute in the amount set out inany plan of our Board or at all. The past dividend distribution record may not be used as areference or basis to determine the level of dividends that may be declared or paid by ourCompany in the future.

PRINCIPAL RISK FACTORS

There are certain risks involved in our operations which are beyond our control. Theycan be broadly categorised into risks relating to our business and risks relating to theindustry in which we operate. Potential investors are advised to read the section headed“Risk factors” in this prospectus carefully before making any investment decision in thePlacing. Some of the more particular risk factors include:

We rely on the availability of public sector civil engineering projects in HongKong and any failure of our Group to secure public sector projects wouldadversely affect our operations and financial results.

We have concentrated customer base and any decrease in the number of projectswith our five largest customers would adversely affect our operations andfinancial results.

SUMMARY

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Our business relies on successful tenders and any failure of our Group to securetender contracts would affect our operations and financial results.

Error or inaccurate estimation of project duration and costs when determining thetender price increase in construction costs may adversely affect our profitability orresult in substantial loss incurred by us.

Our performance depends on market conditions and trends in the civil engineering

construction industry and any deterioration in the prevailing market conditions inthe civil engineering construction industry may adversely affect our performanceand financial conditions.

We operate in a relatively competitive environment.

RECENT DEVELOPMENTS

Subsequent to the Track Record Period and up to the Latest Practicable Date, we havecontinued to focus on developing our business of undertaking civil engineering works inHong Kong. As at the Latest Practicable Date, we had a total of 20 contracts on hand.Please refer to the section headed “Business – Our civil engineering contracts – Contracts onhand” in this prospectus for a full list of our contracts on hand as at the Latest PracticableDate.

The aggregate contract sum of all contracts on hand is approximately

HK$1,384,140,000 and approximately HK$234,304,000 of revenue has been recognised forthe contracts on hand (with approximately HK$6,241,000 of revenue recognised exceedingthe original contract sum), representing approximately 16.9% of the aggregate contract sum,as at 30 November 2015. As at the Latest Practicable Date, all existing projects havecontinued to contribute revenue to our Group and none of them have had any materialinterruption. We expect to recognise revenue of approximately HK$285,367,000 for the yearending 31 March 2016 based only on our contracts on hand, which is higher than ourrevenue of approximately HK$159,963,000 and HK$271,949,000 for the years ended 31March 2014 and 2015, respectively. The amount of revenue expected to be recognised issubject to change due to the actual progress and commencement and completion dates of ourprojects. Based on the budget costs of each project, our Directors expect that our grossprofit margin for the year ending 31 March 2016 to be at similar levels to that recordedduring the Track Record Period. Accordingly, our Directors currently expect an increase inour revenue and gross profit for the year ending 31 March 2016. Our Directors also expectthat our financial performance will be affected by the Listing expenses to be recognised forthe year ending 31 March 2016.

Subsequent to the Track Record Period and up to the Latest Practicable Date, we havebeen awarded with two additional contracts with an aggregate contract sum of approximatelyHK$301,317,000. Our Directors consider that our Group is well-positioned to take on newcivil engineering projects and believe that the Government’s increasing public expenditureon infrastructure would favour the growth of our Group and the demand of our services.

To further strengthen our working capital position and enhance our financial resourcesfor our contracts on hand and newly awarded projects, we obtained a credit facility from abank in March 2016 of up to HK$20,000,000 which consists of: (i) a factoring facility of upto HK$10,000,000 by factoring of certain accounts receivable from our major customer(s) tothe bank; and (ii) a banking facility of HK$10,000,000. Our Directors considered that thisarrangement can provide a flexible alternative to increase our working capital and financeour liquidity requirement.

In addition, we expect that annual premium of approximately HK$1,060,000 for thepurposes of obtaining surety bonds for the due performance of our Group’s obligations undercertain contracts will be recognised as expenses commencing from April 2016 until theexpiry of the defects liability period of the relevant contracts. For further details of theguarantees of sureties, please refer to the section headed “Relationship with our ControllingShareholders – Independence of our Group – (i) Financial Independence” in this prospectus.

Save and except for the Listing expenses as disclosed above, our Group did not haveany significant non-recurrent items in our combined statements of comprehensive incomesubsequent to the Track Record Period. Our results of operations for the year ending 31March 2016 are expected to be significantly affected by the non-recurring Listing expensesas discussed in the paragraph headed “Listing expenses” in this section.

SUMMARY

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MATERIAL ADVERSE CHANGE

The impact of the Listing expenses on the profit and loss accounts has posted amaterial adverse change in the financial or trading position or prospect of our Group since30 November 2015 (being the date of the latest audited combined financial statements weremade up). Prospective investors should be aware of the impact of the Listing expenses onthe financial performance of our Group for the year ending 31 March 2016.

Save as disclosed above, our Directors have confirmed that, up to the date of thisprospectus, there had been no material adverse change in the financial or trading positionsor prospect of our Company or its subsidiaries since 30 November 2015 (being the date of which our Group’s latest audited combined financial statements were made up as set out inthe Accountants’ Report in Appendix I to this prospectus) and there had been no event since30 November 2015 which would materially affect the information shown in the Accountants’Report in Appendix I to this prospectus.

LITIGATION AND REGULATORY COMPLIANCE

During the Track Record Period and up to the Latest Practicable Date, there wereon-going litigation cases against our Group including employees’ compensation claims,personal injury claims and certain immaterial non-compliance incidents with the PredecessorCompanies Ordinance, the Companies Ordinance and the Employment Ordinance (Chapter57 of the Laws of Hong Kong). During the Track Record Period, we recorded one fatal

accident at the construction site where a worker employed by a subcontractor of our Groupwas fatally injured and certified dead in the course of unloading the water pipes. For detailsof the litigation claims, instances of non-compliance and the fatal accident, please refer tothe sections headed “Business – Litigation and potential claims”, “Business −Non-compliance” and “Business – Occupational health and safety – System of recording andhandling accidents and our safety compliance record” in this prospectus.

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (Chapter311Z of the Laws of Hong Kong)

The Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (the“NRMM Regulation”) came into effect on 1 June 2015 to introduce regulatory control onthe emissions of non-road mobile machinery (the “NRMMs”), including non-road vehiclesand regulated machines such as crawler cranes, excavators and air compressor. Our Directorsconfirmed that such regulated machines also include site equipment such as generators,hydraulic truck crane, vibrating rollers and aerial working platforms which are subject to theAir Pollution Control (Non-road Mobile Machinery) (Emission) Regulation. For furtherdetails of the NRMM requirements, please refer to the section headed “Regulatory Overview– B. Environmental Protection – Air Pollution Control (Non-road Mobile Machinery)(Emission) Regulation (Chapter 311Z of the Laws of Hong Kong)” in this prospectus. As atthe Latest Practicable Date, our Group has obtained approval or exemption for all of ourmachines that are subject to the NRMM Regulation.

On 8 February 2015, the Works Branch of Development Bureau issued the TechnicalCircular (Works) No. 1/2015 (the “Technical Circular”), pursuant to which the Governmenthas promulgated an implementation plan to phase out progressively the use of exemptedNRMM for four types of exempted NRMM, namely generators, air compressors, excavatorsand crawler cranes in new capital works contracts of public, including design and buildcontracts, with an estimated contract value exceeding HK$200 million and tenders invited onor after 1 June 2015. For further details of the Technical Circular, please refer to the sectionheaded “Regulatory Overview – B. Environmental Protection – Air Pollution Control

(Non-road Mobile Machinery) (Emission) Regulation (Chapter 311Z of the Laws of HongKong)” in this prospectus.

Our Directors confirm that none of the public projects which we participate in as at theLatest Practicable Date are subject to the phase out plan detailed in the Technical Circular.In addition, our Directors consider that we will remain able to participate in or tender forpublic contract with an estimated contract value exceeding HK$200 million by leasingsufficient approved NRMMs and factoring such additional costs in our tender applications.Thus, our Directors are of the view that the implementation of the Air Pollution Control(Non-road Mobile Machinery) (Emission) Regulation and the exempted NRMM phase outplan as detailed in the Technical Circular has no significant impact or adverse effect on ourGroup’s operation and financial results.

SUMMARY

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In this prospectus, unless the context otherwise requires, the following expressions have

the following meanings.

“Accountants’ Report” the accountants’ report prepared by Grant Thornton

Hong Kong Limited, the text of which is set out in

Appendix I to this prospectus

“Articles” or “Articles of

Association”

the amended and restated articles of association of our

Company as amended from time to time, a summary of

which is set out in Appendix IV to this prospectus

“associate(s)” has the meaning ascribed to it under the GEM Listing

Rules

“Blooming Union” Blooming Union Investments Limited

, one of our Controlling Shareholders, the Selling

Shareholder and a company incorporated in the BVIwith limited liability on 1 July 2015 and owned as to

50% by Mr. CK Wong and as to 50% by Mr. WW

Wong

“Board” the board of Directors

“business day” any day (other than a Saturday, Sunday or public

holiday) on which banks in Hong Kong are generally

open for normal banking business to the public

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“Capitalisation Issue” the issue of 1,039,990,000 Shares t o be made upon

capitalisation of certain sums standing to the credit of

the share premium account of our Company referred to

in the paragraph headed “A. Further information about

the Company and its subsidiaries – 3. Written

resolutions of our sole Shareholder passed on 24 March

2016” in Appendix V to this prospectus

“CCASS” the Central Clearing and Settlement System established

and operated by HKSCC

DEFINITIONS

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“CCASS Clearing Participant” a person permitted to participate in CCASS as a direct

clearing participant or general clearing participant

“CCASS Custodian Participant” a person permitted to participate in CCASS as a

custodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an

investor participant who may be an individual or joint

individuals or a corporation

“CCASS Part icipants” a CCASS Clearing Participant , a CCASS Custodi an

Participant or a CCASS Investor Participant

“China Harbour” China Harbour Engineering Company Limited, a

subsidiary of China Communications Construction

Company Limited (which has been listed on the Main

Board of the Stock Exchange)

“China State Construction” China State Construction Engineering (Hong Kong)

Limited, a subsidiary of China State Construction

International Holdings Limited (which has been listed

on the Main Board of the Stock Exchange)

“close associat e(s)” has the meaning ascribed to it under the GEM Listing

Rules

“Companies Law” the Companies Law (as revised) of the Cayman Islands,

as amended, supplemented and/or otherwise modifiedfrom time to time

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of

Hong Kong), which came into effect on 3 March 2014,

as amended, modified and supplemented from time to

time

“Companies (Exemption of

Companies and Prospectuses

from Compliance with

Provisions) Notice”

the Companies (Exemption of Companies and

Prospectuses from Compliance with Provisions) Notice

(Chapter 32L of the Laws of Hong Kong), as amended,

supplemented or otherwise modified from time to time

“Companies (Winding Up and

Miscellaneous Provisions)

Ordinance”

the Companies (Winding Up and Miscellaneous

Provisions) Ordinance (Chapter 32 of the Laws of

Hong Kong), as amended, supplemented or otherwise

modified from time to time

DEFINITIONS

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“Company”, “our”, “our

Company”, “we” or “us”

Luen Wong Group Holdings Limited

, a company incorporated in the Cayman Islands

as an exempted company with limited liability on 16

October 2015

“connec ted person( s)” has the meaning a sc ribed to it under the GEM ListingRules

“co nnected transaction ” h as the m eaning ascribed to i t un der the GEM L isting

Rules

“Controlling Shareholders” has the meaning ascribed to it under the GEM Listing

Rules and in the context of this prospectus refers to

Blooming Union, Mr. CK Wong and Mr. WW Wong

“co re conn ected p erso n” h as the m eaning ascribed to i t un der the GEM L isting

Rules

“Corporate Governance Code” the Corporate Governance Code as set out in Appendix

15 to the GEM Listing Rules

“CT Partners” CT Partners Consultants Limited, an independent

internal control adviser

“Deed of Indemnity” the deed of indemnity dated 24 March 2016 entered

into by our Controlling Shareholders in favour of our

Group as further detailed in the section headed “E.

Other information – 1. Tax and other indemnities” inAppendix V to this prospectus

“Deed of Non -Com petition ” the d eed o f n on -com petition u ndertak in g d ated 2 4

March 2016 entered into by our Controlling

Shareholders in favour of our Company (for itself and

as trustee for and on behalf of our subsidiaries) as

further detailed in the section headed “Relationship

with our Controlling Shareholders – Non-Competition

Undertakings” in this prospectus

“Director(s)” the director(s) of our Company

“GEM” the Growth Enterprise Market of the Stock Exchange

“GEM Listing Rul es” the Rules G overning the Listing of Securi ties on the

Growth Enterprise Market of the Stock Exchange, as

amended, modified and supplemented from time to time

“Government” the government of Hong Kong

DEFINITIONS

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“Gransing Securities” Gransing Securities Co., Limited, a c orporation

licensed under the SFO to engage in Type 1 (dealing in

securities), Type 4 (advising on securities), Type 6

(advising on corporate finance) and Type 9 (asset

management) regulated activities under the SFO, acting

as the joint bookrunner and the joint lead manager forthe Placing and an independent third party

“Group”, “we, “us” or “our” our Company and its subsidiaries at the relevant time

or, where the context otherwise requires, in respect of

the period prior to our Company becoming the holding

company of its present subsidiaries pursuant to the

Reorganisation, its present subsidiaries and the

businesses operated by such subsidiaries

“HKSCC” Hong Kong Securities Clearing Company Limited, a

wholly-owned subsidiary of Hong Kong Exchanges andClearing Limited

“HKSCC Nominees” HKSCC Nominees Limited

“HK$” or “HKD” and “cents” Hong Kong dollars and cents respectively, the lawful

currency of Hong Kong

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of t he

People’s Republic of China

“Hong Kong Branch ShareRegistrar”

Union Registrars Limited, the branch share registrarand transfer office of our Company in Hong Kong

“Hop Fung” Hop Fung Construction & Engineering Company

Limited , a company

incorporated in Hong Kong on 31 July 2002 with

limited liability and an indirect wholly-owned

subsidiary of our Company upon completion of the

Reorganisation

“independent third party(ies)” individual(s) or company(ies) who or which, to the best

of our Directors’ knowledge, information and belief,having made all reasonable enquiries, is/ are

independent of and not connected with (within the

meaning of the GEM Listing Rules) our Company or

its connected persons

“Inland Revenue Ordinance” the Inland Revenue Ordinance (Chapter 112 of the

Laws of Hong Kong)

“Ipsos” Ipsos Limited, an independent market research agency

DEFINITIONS

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“Ipsos Report” a market research report commissioned by us and

prepared by Ipsos on the overview of the civil

engineering construction industry in Hong Kong in

which our Group operates

“Joint Bookrunners” or “JointLead Managers”

Gransing Securities and Suncorp Securities

“Latest Practicable Date” 21 March 2016, being the latest practicable date prior

to the printing of this prospectus for the purpose of

ascertaining certain information in this prospectus prior

to its publication

“Legal Counsel” Mr. Chan Chung, barrister-at-law of Hong Kong, who

is an independent third party

“Listing” listing of the Shares on GEM

“Listing Date” the date, expected to be on or about Tuesday, 12 April

2016, on which dealings in the Shares first commence

on GEM

“Luen Hing” Luen Hing Construction & Eng. Limited

, a company incorporated in Hong Kong on

11 November 1998 with limited liability and an

indirect wholly-owned subsidiary of our Company upon

completion of the Reorganisation

“Memorandum of Association” or

“Memorandum”

the memorandum of association of our Company as

amended from time to time

“Mr. CK Wong” Mr. WONG Che Kwo , an executive

Director, the chairman of our Board and one of our

Controlling Shareholders

“Mr. WW Wong” Mr. WONG Wing Wah , an executive

Director, our chief executive officer and one of our

Controlling Shareholders

“New Shares” 208,000,000 new Shares to be offered by our Company

for subscription at the Placing Price under the Placing

“Placing” the conditional placing of the Placing Shares by the

Underwriters on behalf of our Company and the Selling

Shareholder for cash at the Placing Price as described

in the section headed “Structure and conditions of the

Placing” in this prospectus

DEFINITIONS

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“Placing Price” the final price of HK$0.26 per Placing Share in HK

dollars (exclusive of brokerage of 1%, SFC transaction

levy of 0.0027% and Stock Exchange trading fee of

0.005%) at which the Placing Shares are to be offered

under the Placing

“Placing Shares” the 312,000,000 Shares (comprising 208,000,000 New

Shares to be offered by our Company and 104,000,000

Sale Shares to be offered by the Selling Shareholder)

being offered for subscription or purchase at the

Placing Price pursuant to the Placing

“Predecessor Companies

Ordinance”

the predecessor Companies Ordinance (Chapter 32 of

the Laws of Hong Kong) as in force before 3 March

2014

“Reorganisation” the corporate reorganisation arrangements implementedby our Group in preparation for the Listing which is

more particularly described in the section headed

“History and development – Reorganisation” in this

prospectus

“Sale Shares” 104,000,000 existing Shares to be offered by the

Selling Shareholder for purchase at the Placing Price

under the Placing

“Selling Shareholder” Blooming Union, one of the Controlling Shareholders

which is expected to offer to sell the Sale Sharespursuant to the Placing

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of

the Laws of Hong Kong), as amended, modified and

supplemented from time to time

“Share(s)” ordinary share(s) with nominal value of HK$0.01 each

in the share capital of our Company, which are to be

traded in Hong Kong dollars and listed on GEM

“Shareholder(s)” holder(s) of the Share(s)

“Share Option Scheme” the share option scheme conditionally adopted by our

Company on 24 March 2016, the principal terms of

which are summarised in the section headed “D. Share

Option Scheme” in Appendix V to this prospectus

DEFINITIONS

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“Sponsor” or “TC Capital” TC Capital Asia Limited, a licensed corporation for

carrying on Type 1 (dealing in securities) and Type 6

(advising on corporate finance) regulated activities

under the SFO, acting as the sponsor of the Listing and

an independent third party

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning ascribed thereto in section 15 of the

Companies Ordinance

“Substantial Shareholder(s)” has the meaning ascribed thereto in the GEM Listing

Rules and details of our Substantial Shareholders are

set out in the section headed “Substantial Shareholders”

in this prospectus

“Suncorp Securit ies” Suncorp Securities Limited, a corporation l icensedunder the SFO to engage in Type 1 (dealing in

securities) regulated activity under the SFO, acting as

the joint bookrunner and the joint lead manager for the

Placing and an independent third party

“Super Pioneer” Super Pioneer Trading Limited, a

company incorporated in the BVI with limited liability

on 1 July 2015 which will become a direct

wholly-owned subsidiary of our Company upon

completion of the Reorganisation

“Takeovers Code” the Codes on Takeovers and Mergers issued by the

SFC, as amended, modified and supplemented from

time to time

“Track Record Period” comprises the two financial years ended 31 March 2014

and 2015 and the eight months ended 30 November

2015

“Underwriters” the underwriters of the Placing whose names are set

out in the section headed “Underwriting –

Underwriters” in this prospectus

“Underwriting Agreement” the conditional underwriting agreement relating to the

Placing entered into on 31 March 2016 among our

Company, the Selling Shareholder, the executive

Directors, our Controlling Shareholders, the Sponsor,

the Joint Bookrunners, the Joint Lead Managers and the

Underwriters relating to the Placing, particulars of

which are summarised in the sect ion headed

“Underwriting” in this prospectus

DEFINITIONS

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“US$” or “U.S. dollars” United States dollars, the lawful currency of the United

States

“sq.ft.” square foot

“sq.m.” square metre(s)

“%” per cent

DEFINITIONS

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This glossary contains explanations of certain terms used in this prospectus in

connection with the business of our Group. The terms and their meanings may not

correspond to the standard industry meanings or usage of these terms.

“bills of quantities” a list of i tems included in the civil engineering contractproviding description, quantity and the unit price of the

work to be performed to provide a means of valuing

the civil engineering work performed

“Building Authority” has the meaning ascribed to it under the Buildings

Ordinance and, as at the Latest Practicable Date, means

the Director of Buildings of the Government

“Buildings Department” the Buildings Department of the Government

“Buildings Ordinance” the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong)

“Census and Statistics

Department”

Census and Statistics Department of the Government

“Construction Industry Council” the Construction Industry Council in Hong Kong, a

statutory body established on 1 February 2007 pursuant

to the Construction Industry Council Ordinance

(Chapter 587 of the Laws of Hong Kong)

“Employees’ Compensation

Ordinance”

the Employees’ Compensation Ordinance (Chapter 282

of the Laws of Hong Kong)

“ISO” an acronym for a series of quality management and

quality assurance standards published by International

Organisation for Standardisation, a non-government

organisation based in Geneva, Switzerland, for

assessing the quality systems of business organisations

“ISO 9001” ISO 9001 is an internationally recognised standard for

a quality management system. It aims at the

effectiveness of the quality management system in

meeting customer requirements. I t prescribes

requirements for ongoing improvement of quality

assurance in design, development, production,

installation and servicing

GLOSSARY

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“ISO 14001” ISO 14001 is an internationally recognised standard for

the environmental management of businesses. It aims at

recognising the desirable behavior of businesses

concerning the environment. It prescribes controls for

an encompassing range of corporate activities which

include the use of natural resources, handling andtreatment of waste and energy consumption

“Labour Development” the Labour Department of the Government

“OHSAS 18001” OHSAS 18001 is an internationally recognised

specification for Occupational Health and Safety

Management Systems. It specifies requirements for an

occupational health and safety management system to

enable an organisation to develop and implement a

policy and objectives which take into account legal

requirements and information about occupational risks

and to improve their occupational safety and healthperformance

“private sector projects” works contracts that are not public sector projects

“public sector projects” works contracts that originate from the Government or

statutory bodies

“quotation” the type of contracts with our suppliers and/or

subcontractors secured by request for quotation from

the relevant suppliers and/or subcontractors

“roads and drainage works” in respect of our business, generally refer to

construction of transport interchange, carriageway and

walkway, road improvement and widening works, flood

prevention or improvement works and sewage

improvement works comprising construction of

drainage channel, outfall pipe, box culvert and pumping

station and drainage related infrastructures

“schedule of rates” a set of general regulations and special conditions

governing the execution of work and payment for

works performed

“site formation works” in respect of our business, generally refer to excavation

and/or filling works for forming a new site or

achi eving designed formation level for later

development

“structural works” in respect of our business, generally refer to the

construction of reinforced concrete structures for

bridges, retaining walls, etc.

GLOSSARY

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“subcontractor” in respect of a construction project, a contractor who is

appointed by the main contractor or by another

subcontractor involved in the construction and who

generally carries out specific work tasks of the

construction

“tender contract” the type of contracts with customers obtained by

tendering which usually require construction services

for a specific period and details of which are set out in

the section headed “Business – Customers – Major

terms of engagement” in this prospectus

GLOSSARY

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This prospectus contains forward-looking statements that are, by their nature, subject to

significant risks and uncertainties. In some cases the words such as “aim”, “anticipate”,

“believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “plan”,

“potential”, “predict”, “propose”, “seek”, “should”, “will”, “would” and other similar

expressions or the negative use of such words are used to identify forward-looking

statements. These forward-looking statements include, without limitation, statements relatingto:

our Group’s business and operating strategies and plans of operation;

the amount and nature of, and potential for, future development of our Group’s

business;

our Company’s dividend distribution plans;

the regulatory environment as well as the general industry outlook for the industry

in which our Group operate;

future developments in the industry in which our Group operate;

the trend of the economy of Hong Kong in general; and

other factors beyond our Group’s control.

These statements are based on several assumptions, including those regarding our

Group’s present and future business strategy and the environment in which our Group will

operate in the future.

Our Group’s future results could differ materially from those expressed or implied by

such forward-looking statements. In addition, our Group’s future performance may be

affected by various factors including, without limitation, those discussed in the sections

headed “Risk factors”, “Business”, “Financial information” and “Statement of business

objective and use of proceeds” in this prospectus.

Subject to the requirements of the applicable laws, rules and regulations, our Company

does not have any obligation to update or otherwise revise the forward-looking statements in

this prospectus, whether as a result of new information, future events or otherwise. As a

result of these and other risks, uncertainties and assumptions, the forward-looking events and

circumstances discussed in this prospectus might not occur in the way our Company expects,or at all. Should one or more risks or uncertainties stated in the aforesaid sections

materialise, or should any underlying assumptions to prove incorrect, actual outcomes may

vary materially from those indicated. Prospective investors should therefore not place undue

reliance on any of the forward-looking statements. All forward-looking statements contained

in this prospectus are qualified by reference to the cautionary statements as set out in this

section.

FORWARD-LOOKING STATEMENTS

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In this prospectus, statements of, or references to, our Group’s intentions or those of

any of our Directors are made as at the date of this prospectus. Any such intentions may

change in light of future developments.

FORWARD-LOOKING STATEMENTS

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You should carefully consider all of the information in this prospectus including the

risks and uncertainties described below before making an investment in the Placing

Shares. You should pay particular attention to the fact that the legal and regulatory

environment in Hong Kong may differ in some respects from that which prevails in other

countries. The business, financial condition or results of operations of our Group could

be materially and adversely affected by any of these risks and uncertainties. The trading

price of our Shares could decline due to any of these risks and unce rtainties, and you

may lose all or part of your investment.

We believe that there are certain risks involved in our business and operations. They

can be classified into (i) risks relating to our business; (ii) risk relating to the industry in

which we operate; (iii) risks relating to Hong Kong; (iv) risks relating to the Placing; and

(v) risks relating to this prospectus. You should consider our business and prospectus in light

of the challenges we face, including the ones discussed in this section.

RISKS RELATING TO OUR BUSINESS

We rely on the availability of public sector civil engineering projects in Hong Kong and

any failure of our Group to secure public sector projects would adversely affect our

operations and financial results

We have relied and will continue to focus on public sector civil engineering projects

which by their nature are only procured by our customers from a limited number of project

employers who are normally Government departments. For the two years ended 31 March

2015 and the eight months ended 30 November 2015, our revenue attributable to public

sector projects amounted to approximately HK$149,234,000, HK$255,484,000 and

HK$135,834,000 respectively, representing approximately 93.3%, 93.9% and 87.8% of our

total revenue respectively.

Our results of operations in relation to our civil engineering business will continue to

rely on the following: (i) our ability to continue to secure public sector projects from our

customers; (ii) the public policy in relation to infrastructure and civil engineering projects;

and (iii) other factors that generally affect the Hong Kong construction industry. Any

material delay, suspension, termination or reduction of number or contract value of public

sector projects may adversely affect our revenue, hence our results of operations.

Our civil engineering projects are non-recurrent in nature. There is no guarantee that

our existing customers will provide us with new business opportunities or that we will

secure new customers. During the Track Record Period, most of our revenue was derived

from civil engineering projects with Government departments in Hong Kong, and the main

contractors (i.e. our customers) of such projects do not have any long-term business

commitment with us. Our relationships with our major customers are non-exclusive and at

arm’s length. We may not be able to diversify the composition of our customer base due to

the nature of civil engineering works which are normally funded by the Government. If the

Government substantially reduces its expenditures on civil engineering works, we may not

be able to secure projects on similar terms from main contractors. If any such event occurs,

there may be a material adverse effect on our business, financial condition and/or results of

operations.

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Error or inaccurate estimation of project duration and costs when determining the

tender price or increase in construction costs may adversely affect our profitability or

result in substantial loss incurred by us

Construction contracts and in particular public projects are normally awarded through a

competitive tendering process. We determine a tender price by estimating the constructioncosts under the contract duration as specified in the tender invitation documents. There is no

assurance that tenders submitted by us contain no mistake and error. Such mistakes and

errors may be in the form of inaccurate estimation, oversight of important tender terms,

inadvertent typographical errors, errors in calculations, etc. Further, construction costs may

increase due to inflation of raw materials and labour costs. In case of contracts awarded to

us with mistakes or errors in the submitted tender or if there is a substantial increase in

construction costs, our profitability in a project might be adversely affected or we may be

bound by the contract to undertake the project at a substantial loss.

Inaccurate estimation on project schedule, project costs and technical difficulties in the

tendering process may result in cost overruns when we actually execute the awarded project.Many factors affect the time taken and the costs actually involved in completing

construction projects undertaken by us. Examples of such factors include shortage and cost

escalation of labour and materials, difficult geological conditions, adverse weather

conditions, variations to the construction plans instructed by customers, stringent technical

construction requirements, threatened claims and material disputes with main contractors,

subcontractors and suppliers, accidents, and changes in the Government’s policies. Other

unforeseen problems or circumstances may also occur during project implementation. If any

of such factors arises and remains unresolved, completion of construction works may be

delayed or we may be subject to cost overruns or our customers may even be entitled to

unilaterally terminate the contract.

Some of our contracts contain specific completion schedule requirements and liquidated

damages provisions (i.e. we may be liable to pay the customer liquidated damages if we do

not meet the schedules). Any failure to meet the schedule requirements of our contracts

could cause us to pay significant liquidated damages, which would reduce or eliminate our

profit expected from the relevant contracts.

A project may be delayed or its costs may be increased because of delays during the

process of obtaining any specific permits, approvals from relevant agencies or authorities of

the Government. Failure to complete construction according to specifications and quality

standards may result in disputes, contract termination, liabilities and/or lower returns than

anticipated on the construction project concerned. Such delays or failure to complete and/orunilateral termination of a contract by customers may cause our revenue or profitability to

be lower than we originally expected. We cannot guarantee that we will not encounter cost

overruns or delays on our current and future construction projects. If such cost overruns or

delays occur, we may experience increases in costs exceeding our budget or be required to

pay liquidated damages, hence reduction in or elimination of the profits on our contracts.

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Our past revenue and profit margin may not be indicative of our future revenue and

profit margin

For the two years ended 31 March 2015 and the eight months ended 30 November

2015, our revenue amounted to approximately HK$159,963,000, HK$271,949,000 and

HK$154,641,000, respectively; our gross profit amounted to approximately HK$15,020,000,HK$25,600,000 and HK$17,286,000, respectively (representing gross profit margin of

approximately 9.4%, 9.4% and 11.2%, respectively); while our net profit amounted to

approximately HK$9,430,000, HK$18,079,000 and HK$6,392,000, respectively (representing

net profit margin of approximately 5.9%, 6.6% and 4.1%, respectively).

However, such trend of historical financial information of our Group is a mere analysis

of our past performance only and does not have any positive implication or may not

necessarily reflect our financial performance in the future which will depend on our

capability to secure new business opportunities and to control our costs. Profit margins for

our civil engineering works may fluctuate from project to project due to factors such as the

type of construction techniques and site equipment employed and the amount of labourresources required. There is no assurance that our profit margins in the future will remain at

a level comparable to those recorded during the Track Record Period. Our financial

condition may be adversely affected by any decrease in our profit margins.

It is not uncommon in our industry to have numerous construction disputes and

litigation. Our performance may be adversely affected by such construction disputes

and litigation

It is not uncommon in our industry to have construction disputes and litigation. We

may be in disputes with our customers, subcontractors, suppliers, workers and other parties

in connection with our projects for various reasons. Such disputes may be in connectionwith late completion of works, delivery of substandard works, personal injuries or labour

compensation in relation to the works. Please refer to the section headed “Business –

Litigation and potential claims” in this prospectus for further information on material

disputes or litigation we encountered during the Track Record Period.

The handling of contractual disputes, litigation and other legal proceedings may

sometimes involve a high degree of our management’s attention and input. Handling of legal

proceedings and disputes can be both costly and time-consuming, and may significantly

divert the efforts and resources of our management.

In addition, the outcomes of legal proceedings or disputes are influenced by, amongothers, negotiation skills, knowledge and judgment of our management. Our Group, to a

large extent, relies on the relevant expertise and qualification of our management (including

our executive Directors) in dealing with contractual disputes, litigation and arbitration.

Should any claims against us fall outside the scope and/or limit of our insurance coverage or

monies retained from subcontractors, our financial position may be adversely affected.

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If progress payment or retention money is not paid to us in full as a result of disputes

over our work done, our liquidity position may be adversely affected

We normally receive progress payment from our customers. Progress payment is

generally made monthly by reference to the value of works done in that month. A portion of

contract value (which generally is subject to a maximum of 5% of the total contract value)is usually withheld by our customers as retention money. Please refer to the section headed

“Business – Customers – Major terms of engagement” in this prospectus for further details.

As at 31 March 2014 and 2015 and 30 November 2015, retention monies receivables of

approximately HK$17,957,000, HK$19,217,000 and HK$23,815,000, respectively, were

retained by our customers.

There is no assurance that progress payment will always be certified and paid to us in

full, or the retention money will be paid by our customers to us in full. Partial payment or

failure by our customers to make remittance at all as a result of disputes over our works

done may have an adverse effect on our liquidity position.

Any failure, damage or loss of our site equipment may adversely affect our operations

and financial performance

Our civil engineering services rely on site equipment. Market developments in and

demand for different construction techniques and different types of site equipment may

change continuously. If we fail to remain attentive to and invest in suitable site equipment to

cope with any latest development in such market trends or demands and to cater to different

needs and requirements of different customers, our overall competitiveness and thus our

financial performance and operation results may be adversely affected.

In addition, there is no assurance that our site equipment will not be damaged or lostas a result of, among others, improper operation, accidents, fire, adverse weather conditions,

theft or robbery. In addition, site equipment may break down or fail to function normally

due to wear and tear or mechanical or other issues. If any failed, damaged or lost site

equipment cannot be repaired and/or replaced in a timely manner, our operations and

financial performance could be adversely affected.

Furthermore, we plan to acquire additional site equipment by utilising a portion of the

net proceeds from the Placing so as to enhance our technical ability and to strengthen our

capability to cater to different needs and requirements of different customers. Please refer to

the section headed “Statement of business objective and use of proceeds” in this prospectus

for details of the types of site equipment to be purchased and the intended timing of deployment of the net proceeds in this regard. As a result of the purchase of additional site

equipment, it is expected that additional depreciation will be charged to our profit or loss

and may therefore affect our financial performance and operating results.

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There is no assurance that the Technical Circular (Works) No. 1/2015 issued by the

Works Branch of Development Bureau (the “Technical Circular”) or other similar

administrative promulgations issued by the Government will not have any negative

impact on our Group

The Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation wasgazetted on 23 January 2015 and came into effect on 1 June 2015 to introduce regulatory

control on the emissions of non-road mobile machinery. On 8 February 2015, the Works

Branch of Development Bureau issued the Technical Circular, pursuant to which the

Government has promulgated an implementation plan to phase out progressively the use of

exempted NRMM for four types of exempted NRMM, namely generators, air compressors,

excavators and crawler cranes in new capital works contracts of public, including design and

build contracts, with an estimated contract value exceeding HK$200 million and tenders

invited on or after 1 June 2015. For details of the Air Pollution Control (Non-road Mobile

Machinery) (Emission) Regulation and the Technical Circular, please refer to the paragraph

headed “Regulatory overview – Air Pollution Control (Non-road Mobile Machinery)

(Emission) Regulation (Chapter 311Z of the Laws of Hong Kong)” in this prospectus.

As at the Latest Practicable Date, our Group has 35 regulated machines and out of

which 31 machines were exempted and 4 machines were approved with a proper label in a

prescribed format issued by the Hong Kong Environmental Protection Department under the

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation. Of the 31

exempted machines, there are 20 exempted machines (4 generators, 4 air compressors and 12

excavators) to be phased out under the phase out plan as detailed in the Technical Circular.

The Technical Circular aims to require the relevant departments of the Government to

include specific terms of limiting the quantity of exempted NRMMs to certain percentage in

the contract made with the main contractors in the construction industry. It is neither binding

nor regulatory to our Group’s business operations and any breach of such terms shall onlyamount to a breach of contract by the respective main contractor under the contract made

with the relevant department of the Government to which our Group is not a party.

Nevertheless, we cannot assure that the Government will not extend the scope of the said

implementation plan or issue other similar administrative promulgations which may cause

any potential negative impact to our Group’s business operation and the construction

industry as a whole. If there is such extension of the scope and promulgations, our business

operation, financial status, results and prospect in the future may be materially and adversely

affected.

Cash inflows and outflows in connection with construction projects may be irregular,

thus may affect our net cash flow position

Cash flows from operating activities primarily consisted of our Group’s revenues from

civil engineering projects undertaken by us. For each of the two years ended 31 March 2015

and the eight months ended 30 November 2014 and 2015, we recorded a net operating cash

inflow of approximately HK$7,402,000, a net operating cash outflow of approximately

HK$3,687,000, a net operating cash outflow of approximately HK$1,169,000 and a net

operating cash inflow of approximately HK$5,228,000, respectively.

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In a construction project, net cash outflows to pay certain operating expenditures may

not align with progress payments to be received at the relevant periods. Progress payments

will be paid after our construction works commence and are certified by our customers (or

authorised persons employed by them). Accordingl