Gelonghui March 21st 丨$CH TREASURES NM (02439.HK)$According to the announcement, the company plans to sell 250 million shares globally, of which 25 million shares will be publicly sold in Hong Kong, China, and 225 million shares will be sold internationally, with 15% over-allotment rights; from March 21 to March 24, 2023, the expected pricing date is March 24; the sale price is HK$1.05-1.35 per share, with an entry fee of about HK$2,727 per lot of 2,000 shares; Dongwu Securities (Hong Kong) is the sole sponsor; it is expected that the shares will be listed on the main board of the Stock Exchange on March 31, 2023.
The group mainly manufactures biodegradable plastic products in Northeast China, and its production base is located in Changchun City, Jilin Province, China. The Group sells biodegradable masterbatches, which can be used to manufacture biodegradable plastic products (i.e. biodegradable roll bags, biodegradable shopping bags and biodegradable packaging wrap). The Group usually produces biodegradable masterbatches according to customer requirements. The Group does not trade masterbatches and their raw materials. In addition, the Group also sells non-biodegradable automotive plastic parts. These products accounted for only 5.4%, 10.0%, 7.0% and 7.1% of the Group's total revenue during the business record period. The group was founded in March 2014. At the beginning of its establishment, the Group was mainly engaged in the development and manufacture of non-biodegradable automotive plastic parts. China implemented incentive policies to restrict or ban the sale and use of non-degradable plastic bags and plastic tableware, and required shopping mall, store and market owners to monitor the implementation of the plastic ban, which may drive future demand and sales of biodegradable plastic products. The founders, controlling shareholders and executive directors, Ms. Zhang and Mr. Shan gradually expanded their business to develop and manufacture biodegradable plastic products in 2015. The director believes that biodegradable plastic parts will become a mainstream trend in the future, so the group maintains the non-biodegradable automotive plastic products division in case of possible transformation in the future.
With expertise in developing and producing biodegradable plastic products, the company participated in discussions and formulation of the national standard for biodegradable plastic shopping bags (“GB/T 38082-2019”). The State Municipal Supervision Bureau and the China National Standardization Administration promulgated the standard in October 2019. At the last practical date, “GB/T 38082-2019” is still the only national standard for biodegradable plastic shopping bags in China. In addition, the Group collaborated with the third party research institute Changchun Yinghua Institute to invest in the development of biodegradable plastic products. In this cooperation, the Group owns the copyright of the R&D results. The Group has joined the China Plastics Industry Association (including the Degradable Plastics Professional Committee of the China Plastics Processing Industry Association and the Changchun Mold Industry Association) so that the Group can keep abreast of market trends and seek other potential business opportunities.
The group has partnered with ZhongBaoNew Materials. Ltd entered into a Cornerstone Investment Agreement. According to this, under certain conditions, Cornerstone investors agreed to subscribe for a certain number of shares to be purchased for a total amount of approximately RMB 90 million at the sale price. Assuming that the offering price is HK$1.20 (that is, the median of the indicative offer price range set out in this prospectus), the total number of shares sold to be subscribed by the cornerstone investors will be 82.882 million shares offered. The cornerstone investor, ZhongbaoNew Materials, is a limited company incorporated under the laws of the British Virgin Islands in February 2023, to invest in the company's cornerstone. ZhongBaoNew Materials is wholly owned by Beijing Anji Fenghan (Limited Partnership).
The Group estimates that the total net proceeds received by the company from global offerings (assuming no overallotment rights are exercised and that the sale price is HK$120 per share sold (that is, the median of the indicative offer price range shown in this prospectus) will be approximately HK$181 million. The Group plans to use approximately 33.3% of net proceeds from global sales to expand the production line for biodegradable plastic products at the Changchun production site; approximately 33.2% will be used to establish a Huizhou production base in southeast China; approximately 25.7% will be used to further strengthen the Group's R&D capabilities, upgrade the Group's existing R&D equipment, fund R&D projects and expand the product portfolio to increase the value of the Group's business in the long term; approximately 3.0% will be used to upgrade, develop and integrate the Group's internal operating reporting system and cloud financial reporting system and the purchase and upgrade of the Group's hardware and IT-related equipment; and Approximately 4.8% will be used for working capital and other general corporate purposes.