Summary of the report
Company overview
The company is an electromechanical engineering group located in Hong Kong, providing cross-disciplinary and comprehensive mechanical and electrical engineering and technical services to various types of projects and industries in Hong Kong, Macao and mainland China. The company also manufactures and sells elevators and escalators worldwide. According to Frost Sullivan, the company is the largest provider of mechanical and electrical services in Hong Kong, with a market share of about 9.1% by revenue in 2018.
FY2016-FY2018, the company's revenue is HK $4.41 billion, HK $4.97 billion and HK $5.97 billion respectively, gross profit is 12.5%, 18.6% and 14.9% respectively, net profit is HK $120 million, HK $430 million and HK $320 million, net profit is 2.7%, 8.7% and 5.3% respectively.
Industry status and prospects
Mechanical and electrical engineering is usually undertaken by construction or sub-contractor professionals. It is an important part of the construction supply chain. Electromechanical design is very important for design decision-making, accurate recording, performance and cost estimation, and construction planning. Electrical and mechanical engineering generally includes design and value engineering of building facilities, supply and installation, energy audit, testing and commissioning, operation and maintenance.
Driven by sustainable construction activities in infrastructure and building development, the market size in terms of the output value of the Hong Kong mechanical and electrical engineering market has grown steadily from about HK $35.7 billion in 2013 to HK $55.9 billion in 2018, with a CAGR of 9.4%. According to Frost Sullivan, the overall electromechanical engineering market is expected to have a CAGR of 7.6% over the next five years and reach HK $80.4 billion by 2023.
Advantages and opportunities
Have deep experience and good record, have the ability to seize market opportunities
Provide comprehensive mechanical and electrical engineering services to a wide range of industries, and have the ability to integrate these services, and have accumulated deep expertise in professional market segments.
Weakness and risk
May face charges, complaints or reports from customers, third parties or the public
Various approvals, licenses and permits are required to conduct a wide range of businesses.
Face claims resulting from potential defects that may have been caused by the company or its subcontractors in the past.
Investment valuation
Based on the IPO price (HK $1.20), the company has a reasonable valuation with a price-to-earnings ratio of 5.3x and a price-to-book ratio of 1.07x. Taken together, the IPO is given a special rating of "5".