In this era of rapidly advancing technology, the speed of updating future electronic products will continue to accelerate, while there is a significant market gap in the current domestic electronic waste recycling.

"China's White Paper on Recycling and Utilization of Waste Electrical and Electronic Products Industry 2023" data shows that the theoretical scrapping volume of the first batch of catalog products in 2023 is 0.26 billion units. At the same time, the standard recycling rate of electronic waste is only 37.2%. This means that there is still significant room for development in the recycling and utilization of electronic waste in China.

On November 26, Creative Global Technology Holdings Limited (hereinafter referred to as CGTL), a subsidiary of electronic waste recycler Smart Cycle Technology Co., Ltd. from Hong Kong, made its debut on the U.S. capital market. By the end of the first day of trading, CGTL.US closed at $3.91 per share, a 2.25% decrease from the IPO price of $4 per share, with a current market cap of $83.09 million.

Increased revenue without increased profits.

According to the Zhitong Finance APP, Creation Globe is an electronic product recycler from Hong Kong, founded in 2016, mainly conducting business through CGTHK, purchasing and reselling consumer electronics (currently mainly smartphones, tablets, and laptops) from suppliers in the USA, Japan, and some other developed countries, then selling the aforementioned products to Southeast Asia and other regions.

In comparison with players in the domestic market, its business is more similar to Zhuanzhuan and Aihuishou, which focus on the second-hand 3C circular business. According to a Frost & Sullivan report, the company belongs to the refurbishment service providers segment in the industry value chain, where they inspect, evaluate, grade, and repack purchased products. Based on the prospectus, the company rigorously tests and inspects the consumer electronics it purchases through more than ten projects, accurately categorizing them by grade and price. Additionally, the company further adjusts valuations based on proprietary databases and algorithms.

In terms of performance, in the past fiscal years 2022, 2023 (fiscal year ends on September 30 each year), and the first six months of 2024 (ending on March 31, 2024), Creation Globe Technology's revenue was $27.8592 million, $50.2789 million, and $20.5335 million respectively. The corresponding net income was $3.4068 million, $3.1553 million, and $1.5299 million. In summary, from 2022 to 2023 fiscal years, Creation Globe Technology significantly increased revenue without increasing net income.

Breaking down its business structure reveals that the majority of the company's income comes from wholesale business of recycled consumer electronics, accounting for 99.8% and 99.9% of total revenue in the fiscal years 2023 and 2024 respectively. In other words, all of the company's performance and business to date come from the wholesale of second-hand 3C electronics, currently and in the future, the largest source of revenue for the company and a symbol of the company's singular business.

Furthermore, as of March 31, 2024, the company's net inventory was $8.468 million, compared to $5.75 million in the same period last year. With plans to expand product supply further, it is expected that including more types of second-hand consumer electronics in inventory will make managing inventory more challenging. If inventory management is unsuccessful, the company will face higher risks of scrapping, declining inventory value, and significant inventory write-downs or write-offs.

Of note, the company also plans to expand its business globally; however, the complexity of cross-market operations and capital requirements may exceed expectations. Particularly challenging are the plans to build repair and refurbishment factories - whether there is sufficient funding and clear market demand presents significant challenges.

In addition, it is worth paying attention to whether the company's stock price can stand firm. The issuance price of $4 is not high, but for a small-cap stock, early trading may be accompanied by higher volatility. If the subsequent growth story cannot be realized, the market cap may come under pressure.

There is no shortage of competitors in the second-hand Apple product market, which accounts for 90% of the market.

As an important part of the circular economy, the development of second-hand idle items has been receiving much attention in recent years. On one hand, the trading of second-hand idle items can fully realize the residual value of goods, in line with the principles of reduction, resource utilization, and reuse in the circular economy; on the other hand, the potential carbon reduction benefits brought by second-hand trading are significant, thus creating a new industry chain for traded and circulated idle consumer electronics products in the international market.

However, upon closer examination of the initial public offering documents of Creative Smart Global, it seems that the revenue source is single, extending from business expansion to product branding. Further breakdown shows that the company's business mainly focuses on mobile phones and tablets. As of the six months ended March 31, 2024, and March 31, 2023, 82.4% and 92.5% of the revenue respectively came from sales of mobile phones and tablets.

For the six months ended March 31, 2024, and March 31, 2023, approximately 99.8% and 99.9% of the revenue of the company came from the sales of second-hand Apple products, including iPhone, iPad, MacBook, Apple Watch, etc. It is worth noting that the company's future growth and profitability largely depend on its ability to maintain close and mutually beneficial relationships with existing customers and expand its customer base. This concentration exposes the company to higher risks associated with Apple products. If there are interruptions in Apple's production or supply chain, or significant product quality issues, the business and operational results of Creative Smart Global Technology will be adversely affected.

Looking across the 3C product market, the shipment volume is closely related to the prosperity of the smartphone market. Up to now, the global smart phone market has not delivered a satisfactory answer. Data published by Canalys shows that in the first quarter of 2023, the global smart market fell by 13% year-on-year, marking the fifth consecutive quarter of decline. Market research firm DIGITIMES Research predicts that global smartphone shipments will decline by 6.4% year-on-year in the second quarter of this year.

In the still cold market, the second-hand mobile phone sector has drawn an upward curve. Since the beginning of this year, the domestic second-hand mobile phone industry has rebounded significantly, and second-hand mobile phone transactions have become increasingly popular. According to the financial report data released by Aihuishou, its performance has surpassed the traditional off-season expectations of the second-hand industry. The first-quarter performance rebounded by over 30% year-on-year, with total revenue reaching 2.872 billion yuan and non-GAAP operating profit of 44 million yuan.

However, according to the data released by Zhuanzhuan, top brands such as iPhone, Xiaomi, and Huawei have become consumers' first choice and occupy the vast majority of the market. The total market share of the top brands accounts for 93.94%, with iPhone continuing to be 'isolated' in the second-hand market.

In addition, Apple has upgraded and adjusted its Apple Trade In purchasing plan, Apple Care, and other services this year. In response to this, Apple's CEO Tim Cook expressed his hope that users could consider more about the fate of their phones, turning them from trash to treasure, enabling resources to be reused. In view of this, facing market contraction, intensified competition, and other challenges, the survival space and market share of IntelliGlobal may be further squeezed.